US stock futures turn negative despite CPI drop

July 11, 2024 2:47 pm


US equity futures jumped on the CPI report but are now back in positive territory, with S&P 500 futures slightly lower ahead of the open.

A couple thoughts:

1) The index jumped yesterday on no news, climbing 1.0%. There will be talk that CPI was leaked and this was a ‘sell the fact’ trade. I don’t think the data leaked but there’s plenty of reason to sell the fact and I believe the market moved beyond inflation awhile ago.

2) The Fed is behind the curve. It’s increasingly clear that growth is the main worry, not inflation. The ISM surveys are both below 50 and many economic data points have stumbled. The market may start to worry that the Fed isn’t cutting as the economy slows, or isn’t going to cut enough to stave off a recession.

3) Some equities are crowded and this could be rotation. Russell 2000 futures are comfortably higher on this and that’s what you would expect with bonds strongly bid. We might be seeing a rotation out of a megacap tech to the rest of the market and that could be skewing the index.

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