Yesterday, the defense sector slipped, as Technology (XLK) retook the lead, but only 40% of the S&P 500 (SPX) traded higher. IBM’s CEO mentioned that all the money was being diverted into cybersecurity, and those names enjoyed strong discussions, along with optical and memory names.

Factors & Heat Map

Momentum led the way, but I was happy to see quality names as well.

Heat Map

I love seeing those big green squares and rectangles. Meanwhile, everyone’s favorite sector, Health Care, was red across the board.

Volume was light overall, but new lows on the NASDAQ stood out.

The inflation hawks were casting a large shadow over the market for weeks, but a pedestrian jobs report and a major Consumer Price Index (CPI) surprise may mean that threat will fade.

Today’s Session

Equity futures were already higher when the Producer Price Index (PPI) was released.  The June read came in much better than expected following an impressive (less inflationary) report on consumer prices yesterday.  

PPI doesn’t move markets as much as CPI in part because companies adjust and often absorb additional cost (I know there is a line about them always passing cost along, but that’s folly).

This is a great report on market reactions to PPI over the following 20 days.

There is a great sense that the economy is gliding into a “no landing” scenario, which means the Fed should not hike rates.

The Fed’s John Williams also suggested this morning that inflation has peaked.