I had a lot of trouble trying to figure out why the stock market was up today. All the headlines read something like “Tame Inflation Boosts Stocks,” but inflation has been anything but tame lately. However, the Labor Department’s monthly report showed that the Consumer Price Index (CPI) only increased 0.2% and the core reading, which removes food and energy, only increased 0.1%. The average estimate was for a 0.3% increase.
The part that is really confusing to me is the break down of the report. “Energy expenses were unchanged after a 1.9 percent increase in March as gasoline prices dropped 2 percent. Fuel oil costs jumped 4.4 percent and natural gas prices climbed 4.8 percent.” How did gasoline prices drop? Prices at the pump have gone up nearly everyday. Here’s a sweet website that tracks local and national gas prices. According to gasbuddy.com, the average national price of gas was $3.778 today and one month ago it was only $3.386.
So why did the report say gasoline prices decreased? It is because the government tries to adjust the numbers for the different seasons. This CNBC.com article explains things very well. “Typically, gasoline prices rise sharply in April as the arrival of warmer weather encourages people to drive more. The government data is adjusted to reflect that pattern so that it can highlight variations from the trend. Because gas prices did not rise as much last month as they typically do in April, the seasonal adjustment showed that prices fell.”
Off of this report stocks rallied, but in reality, they should not have. People were just looking at the numbers and not what they meant. I was glad to see a pull back at the close.
At about 1:30 pm, stocks started to sell-off. Names like Apple, Research in Motion, and Google led the way lower. I’m not too sure why this happened because there was no news for these names. It was probably a combination of profit-taking because these stocks have been the relative winners lately and some sellers coming into the market realizing the rally off the CPI was not legitimate.
In earnings news, shares of Deere got crushed after its guidance missed analysts’ expectations. It ended the day down 10%. Caterpillar was also down off of this news. Deere said it expects Q3 profit to be no more than $575M which is well below the $654.6M estimate by analysts because of higher material prices, specifically steel.
Some big news came in after the bell regarding Carl Icahn’s proxy fight with Yahoo. He will attempt to get himself and other individuals elected to Yahoo’s board of directors at their next shareholder meeting. In the end, he’s looking to get the deal done with Microsoft.
Other news:
- Hewlett-Packard was up big after being slammed the last two days after announcing its buy out of EDS
- Macy’s beat earnings estimates and gave the retailers a boost
- Freddie Mac reported a much better than expected earnings report and shares were up about 10%. Freddie Mac plans on raising $5.5B worth of capital.
DJIA 12,898.38 +66.20 (+0.52%)
Nasdaq 2,496.70 +1.58 (+0.06%)
S&P 500 1,408.66 +5.62 (+0.40%)
NYSE Volume 3,957,674,000
2-Yr Bond 2.53% +0.06
10-Yr Bond 3.92% +0.02
30-Yr Bond 4.63% +0.01
Crude Oil (June) 124.22 -1.58
Nat Gas (June) 11.598 +0.176
Gold (June) 866.50 -3.10
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