Two weeks into December and there’s still no sign of a Santa rally. Instead the stock market has been on the back foot most of the week, under a cloud of taper worries.
Buying into dips has been a common behaviour for investors in 2013, but it’s only today that we’re starting to see the first signs of that this week, as slightly cheaper prices have attracted some bargain hunters. By early afternoon in New York, the Dow Jones was up 0.24% or 37 points, while the S&P 500 index was up just 0.15% at 1778.1.
The magnitude of these rises aren’t significant enough to suggest that any of the wariness regarding next week’s FOMC meeting has waned, and the dollar’s performance today suggests that market expectations regarding a December taper could still be strengthening. The euro lost 0.25% against the dollar, while cable slipped 0.40%.
A report released earlier form the Bureau of Labor Statistics showed the Producer Price Index declined by 0.1% in November, in line with expectations. Following the 0.2% drop seen in October, the report suggests inflation remains very cool, with core prices climbing just 0.1%. The core rate is up 1.3% from a year ago, while the overall level has increased just 0.7% year-on-year.
At the producer level, there is pretty much no inflation, which agrees with yesterday’s soft import and export prices report. Inflation will be the key data point for the doves to use in their arguments at the FOMC meeting next week, while the hawks will point to advances in employment and rising retails sales.
While positive data of late has certainly increased the chances of a December taper, such an outcome would still be a surprise decision.