Soft PPI, Empire State Index Readings Send Futures Lower

Three key economic reports this were released this morning and for the most part, they showed persistent inflationary pressures and a slowing U.S. economy, seding futures into negative territory. The Producer Price Index, a gauge of wholesale prices, climbed an unexpected 1.3% in February according to the Labor Department. In terms of individual sector PPI performance, energy prices rose 3.5%, food prices rose 1.9%, and capital equipment prices rose 0.3%. Economists had on average forecast median PPI gains of just 0.5% (Bloomberg) to 0.6% (MarketWatch). Core PPI, which excludes food and energy, were up 0.4%, twice the expected gain. The unexpectedly large gain follows a 0.6% decline in January. According to PNC Financial Chief Economist Stuart Hoffman, "Core inflation is still a little higher than the Fed would like." Meanwhile, the Empire State Manufacturing index fell to 1.9 in March from 24.4 in February - a much sharper decline than expected. In some positive economic news, initial claims fell by 12,000 last week to 318,000, sending the four-week average lower by 10,250 to 329,250.

Sources: Bloomberg, MarketWatch (i), (ii), (iii)
Commentary: U.S. Current Account Gap Down to $195.8 Billion in Q4 • Delving Into Durables: Yesterday's Overreaction Doesn't Make up for Months of Underreacting • Fourth Quarter GDP, Core Inflation Revised Downward
Stocks/ETFs to watch: S&P 500 Index (SPY), Diamonds Trust Series 1 ETF (DIA), iShares Lehman Aggregate Bond (AGG)

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