Markets hold steady with more signs of inflation cooling down

Dow was off 42, advancers over decliners 2-1 & NAZ went up 76.  The MLP index added 3+ to the 285s & the REIT index fell 1+ to the 435s.  Junk bond funds were little changed & Treasuries had a little selling which let yields ease higher.  Oil gained 1+ to the 69s after the hurricane landfall & gold soared 39 to 2581 for a new record!

Dow Jones Industrials

Wholesale prices rose in Aug about in line with expectations, the final inflation data point as the Federal Reserve gets set to lower interest rates.  The producer price index (PPI), a measure of final demand goods & services costs that producers receive, increased 0.2% on the month, the Bureau of Labor Statistics said, matching the estimate.  Excluding food & energy, PPI increased 0.3%, slightly hotter than the 0.2% consensus estimate.  The core increase was the same when excluding trade services.  On a 12-month basis, headline PPI rose 1.7%.  Excluding food, energy & trade, the annual rate was 3.3%.  In other economic news, the Labor Dept said initial filings for unemployment benefits totaled 230K last week, up 2K from the previous period & higher than the 225K estimate.  On the PPI measure, services prices pushed much of the gain, with a 0.4% monthly increase driven by a rise in services less trade, transportation & warehousing.  Another big contributor was a 4.8% jump in guestroom rental.  Goods prices were flat on the month, reversing a 0.6% gain in Jul.  Fed officials of late have turned their attention more to a slowing labor market.  The jobless claims report indicated that layoffs have not spiked, though the weekly number has risen slightly over the past several months.  Continuing claims, which run a week behind edged just higher to 1.85M, an increase of just 5K from the previous period.

Wholesale prices rose 0.2% in August, in line with expectations

Microsoft (MSFT), a Dow stock, said it is cutting 650 roles at its Xbox gaming division, in the latest major round of layoffs to hit the video game industry.  It marks the 3rd series of redundancies in MSFT's video game unit since its blockbuster acquisition of Activision Blizzard, the publisher behind the Call of Duty franchise, for $69B in cash.  The tech giant confirmed that it is cutting hundreds of roles at Xbox, in “mostly corporate and supporting functions.”  In a memo, Phil Spencer, CEO of Microsoft Gaming, told employees that the firm had taken this “difficult” decision to align its post-acquisition team structure & “organize our business for long term success.”  “We are deeply grateful for the contributions of our colleagues who are learning they are impacted,” Spencer added.  “In the US, we’re supporting them with exit packages that include severance, extended healthcare, and outplacement services to help with their transition; outside the US packages will differ according to location.”  MSFT's gaming chief added that there would be “some impacts to other teams as they adapt to shifting priorities and manage the lifecycle and performance of games.”  He stressed that no games, devices or gaming experiences were being canceled, & that no studios are being closed as a result of the redundancies.  The stock rose 3.90.

Microsoft to cut 650 jobs at its Xbox gaming unit — read the full memo 

Treasury yields were modestly higher as investors reacted to the latest economic data & considered the outlook for interest rates.  The yield on the 10-year Treasury was up by less than 1 basis point at 3.659% & the 2-year Treasury yield was last at 3.648% after adding less than 1 basis point.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Today's economic readings come after the consumer price index yesterday showing that prices rose 0.2% on a monthly basis, in line with expectations.  But core inflation, which excludes food & energy prices, came in slightly higher than expected from the previous month at 0.3%, above the forecast 0.2%.  That comes ahead of the next Federal Reserve meeting on Sep 17-18, when the central bank is widely expected to cut interest rates.  Traders are however split on how big the rate cut will be, with some arguing in favor of a bigger 50-basis-point cut, while others say this could be risky for markets & that a 25-basis-point cut would be the better option.  Elsewhere, the European Central Bank cut its benchmark rate by 25 basis points, the 2nd reduction of its key rate this year.

Treasury yields edge higher as investors weigh latest inflation data

Investors are digesting fresh inflation & labor data testing high-running expectations for a qtr-point interest-rate cut next week.  The market is regrouping after a seesaw yesterday that saw revived enthusiasm for techs pull stocks out of a slide.  Those losses came as the latest consumer inflation reading knocked hopes for a 0.5% rate cut by the Federal Reserve.  Meanwhile gold is in heavy demand.