Initial claims for unemployment benefits unexpectedly dipped from a week ago, with little impact from DOGE-led layoffs of federal employees. S&P 500 futures are pointing slightly lower after Wednesday's moderate bounce, with Trump tariffs still in focus.
Separately, soft headline readings for the producer price index may be a bit deceptive. Underlying PPI data suggest a firmer reading for the Fed's key inflation rate, the core PCE price index.
As investor attention shifts from inflation to an economic slowdown, a potential government shutdown at week's end is looking possible. Reports also have emerged about potential mass layoffs at the Social Security Administration.
9:37 a.m. ET
Market Reaction
The S&P 500 fell 0.3%. Markets are reacting to the data as well as the possibility of a government shutdown and President Trump's latest tariff threat: a 200% tariff on European wine and champagne.
The 10-year Treasury yield was 4.34%, up from 4.32% on Wednesday.
9:20 a.m. ET
Analysts React To PPI
Renaissance Macro Research posted on social media that, following the PPI, it now expects a 0.32% rise in the core PCE price index.
Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote that he expects a 0.36% rise in the core PCE price index. In addition to hospital prices and air fares, he noted a 1.2% rise in auto insurance prices.
Given the 0.24% increase in the core PCE in February 2024, the 12-month core PCE inflation rate could round up to 2.8% vs. 2.6% in January, he says.
PPI Impact On Key Fed Inflation Rate
Despite the cool headline PPI readings, the report suggests a firmer reading for the Fed's key inflation rate, the core PCE price index, which will be released on March 28.
On a seasonally adjusted basis, airline passenger services prices were unchanged. That compares to a CPI air fares reading of -4%.
Health care services prices also appeared firmer, with prices for hospital inpatient care up 1% and outpatient care up 0.3%.
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8:43 a.m. ET
Producer Prices Flat
The producer price index for final demand was unchanged in February, well below forecasts for a 0.3% increase. The core PPI, excluding food and energy, unexpectedly fell 0.1% vs. +0.3% forecasts, according to Econoday. PPI inflation was 3.2% vs. a year earlier, down from 3.5% and below forecasts for 3.4%. Core PPI inflation was 3.4%, down from January's 3.6%.
The Bureau of Labor Statistics said that margins for final demand trade services fell 1%, meaning distributors earned less of a profit, which held down the overall PPI.
8:32 a.m. ET
Jobless Claims Fall
New claims for unemployment benefits dipped to 220,000 in the week through March 8 from a revised 222,000 the prior week. Data for federal civilian employees available through March 1 showed 1,580 initial claims, down 54 from the prior week.
Initial Claims For Unemployment Benefits
Economists expect Labor Department data to show 230,000 initial claims for unemployment benefits in the week through March 8, up from 221,000 the prior week.
Initial claims from federal civilian employees are only available through the Feb. 22 week, when 1,634 workers filed for jobless benefits, up 1,020 from the prior week.
However, Challenger layoff data suggests the impact of Department of Government Efficiency job cuts will hit soon. Challenger said last week that U.S. employers announced 172,017 planned layoffs in February, the highest since July 2020. The monthly layoff tracker credited 62,242 cuts to the DOGE effect, with cuts across 17 federal agencies.
Government Shutdown, More DOGE Layoffs Loom
Federal government discretionary funding is set to run out on Friday at midnight. The GOP-controlled House passed a bill to fund federal agencies through the end of the fiscal year.
However, the bill will need support from Senate Democrats to reach the 60-vote threshold needed to pass. Democrats appear united in opposing the bill and have offered a clean 30-day funding extension. House Republicans adjourned and went home, putting the ball in Democrats' court. Where it goes from here isn't clear.
A shutdown would be an additional blow to the economy that President Trump might prefer to avoid. He presided over a long shutdown in his first term that ended when some air-traffic controllers called in sick, grounding commercial flights.
Fed Rate-Cut Odds
Ahead of today's data, markets see virtually no chance of a rate cut at next week's Federal Reserve meeting. Rate-cut odds for the May 7 Fed meeting stand at 29%, but markets see 77% odds of a quarter-point rate cut on June 18.
S&P 500
S&P 500 futures are pointing down 0.3% in early Thursday stock market action. The S&P 500 rose 0.5% on Wednesday, following a two-day 3.4% sell-off.
Through Wednesday, the S&P 500 is 8.9% below its all-time closing high on Feb. 19.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
