Yesterday there was some post CPI follow-through with equities finishing broadly higher as breadth continued to expand. The narrative quickly shifted after this morning’s PPI report came in a lot hotter than expectations. Futures dropped and yields backed up. That being said, within the context of the recent moves and the magnitude of the PPI miss, the initial pullback (and backup in rates) was modest. While the S&P 500 opened lower, it managed to sneak into positive territory later in the morning. However in the flip to yesterday, the mega caps were the ones keeping things afloat. As we head to print the S&P 500 is down slightly while the equal-weight is down ~1% and the Russell 2000 is off ~2%. Both Headline and Core PPI were up 0.9% MoM, well ahead of the 0.2% estimates. On a YoY basis they were up 3.3% and 3.7%, respectively, also well above 2.5% / 2.9% estimates. The results stand in stark contrast to the CPI print on Tuesday, which was basically in line with estimates and the previous month. Treasury yields were modestly lower overnight but reversed course on the data but didn’t exactly see an explosive move. However they did continue to move higher across the curve throughout the morning, now up 5-6bp. Odds of a rate cut at the September meeting moved lower but remain >90% (down from 94% yesterday). The yield move triggered the Dollar to strengthen against the Euro, Yen and Swiss Franc. ICE Brent is up ~2% ahead of President Trump’s meeting with Putin tomorrow. Metals are mostly lower. Gold is down ~1% (on treasury yield backup), silver down ~2% and copper is lower as well.

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