S&P500

Market update on 13.03

Snapshot of benchmark US stock indices on Wednesday:

• Dow -0.2%,
• NASDAQ +1.2%,
• S&P 500 +0.5%,
• S&P 500 at 5,599, range 5,400 – 6,000

The S&P 500 (+0.5%) and Nasdaq Composite (+1.2%) closed higher, driven by interest in buying on the dip in the mega-cap space. The rise in NVIDIA (NVDA 115.74, +6.99, +6.4%) played a significant role in this regard. However, buyers were cautious elsewhere. The Invesco S&P 500 Equal Weight ETF (RSP) closed 0.5% lower, and five S&P 500 sectors closed in the red.

Market participants were digesting the Consumer Price Index (CPI) for February, which showed inflation rising slower than expected, providing some relief to the markets after higher-than-expected figures last month.

On a year-over-year basis, the headline CPI increased by 2.8% compared to 3.0% in January, and the core CPI rose by 3.1% compared to 3.2% in January.

Inflation is still above the Federal Reserve's 2.0% target. So, uncertainty regarding US trade policy, potentially putting pressure on prices, somewhat dampened enthusiasm for the report. The US tariffs on steel and aluminum imports led to retaliatory measures, with Canada and the EU announcing counter-tariffs.

Market expectations for a Fed rate cut were little changed in light of the inflation data. There is an 80.0% probability of at least a 25 basis point rate cut to 4.00-4.25% at the June FOMC meeting, compared to an 84.2% probability the previous day and 78.7% the week before, according to the CME FedWatch Tool.

The Treasury market also reacted cautiously to the data. The 10-year Treasury yield rose by three basis points to 4.32%, and the 2-year yield increased by five basis points to 3.99%. As a result, a reissue of $39 billion in 10-year bonds saw steady demand.

Year-to-date:

• Dow Jones Industrial Average: -1.5%
• S&P 500: -4.5%
• S&P Midcap 400: -6.4%
• Nasdaq Composite: -9.5%
• Russell 2000: -9.5%

Economic calendar yesterday

• MBA Weekly Mortgage Applications Index 11.2%; previous 20.4%
• February CPI 0.2% (consensus 0.3%); previous 0.5%,
• Core CPI for February 0.2% (consensus 0.3%); previous 0.4%

The key takeaway from the report is that overall inflation remains above the Fed's 2.0% target. With rising tariff measures—and the "retaliatory tariffs" that will take effect on April 2—confidence that future inflation reports will provide undoubtedly favorable inflation data has waned.

The Treasury's February budget showed a deficit of $307.0 billion compared to a deficit of $296.3 billion in the same period last year. The February deficit was due to expenses ($603.4 billion) exceeding revenue ($296.4 billion).

Treasury budget data is not seasonally adjusted, so the February deficit cannot be compared to the January deficit of $128.6 billion.

The main takeaway from the report is that the deficit now stands at a record $1.15 trillion for the first five months of the fiscal year, partly due to increased Medicare spending and higher interest payments on government debt.

Looking ahead, market participants will receive the following economic data on Thursday:

• 8:30 ET: February PPI (consensus 0.3%; previous 0.4%),
• Core PPI (consensus 0.3%; previous 0.3%),
• Weekly initial jobless claims (consensus 228,000; previous 221,000) and continuing claims (previous 1.897 million)
• 10:30 ET: Weekly natural gas inventories (previous value -80 billion cubic feet)

Energy market

Brent crude oil is now trading at $70.70 per barrel. The price bounced by about $1 - forming support at $69. Oil rose due to a halt in the US market decline.

Conclusion

The US stock market is trading quietly, but the correction targets have likely been reached. A new bullish wave may be possible. Current market quotes are favorable for buying.