Futures Moving Higher After Slightly Weaker-Than-Expected CPI

Just a tick cooler than expected, this morning's friendly Consumer Price Index convinced the market that all is clear and that the Federal Reserve can just say no to more interest rate hikes at its June 28 meeting.

In a repeat of yesterday's action on a cool retail sales report, futures lurched upward into the green right after the data was released at 8:30 a.m. EDT. They then flipped into the red but were lately solidly back in the green.

At 9:16 a.m. EDT, the S&P 500 futures were up 2.6, just about 5 points above fair value and an indication of some positive sentiment for the open. The Nasdaq 100 futures were up 27.5 points, an indication of some strength for large-cap tech stocks in the early going.

The Treasury market was barely changed, with the 10-year note up 1/32 at 102 26/32 and yielding 6.107%.

"I think we'll be higher today," said Bill Meehan, chief market analyst at Cantor Fitzgerald. Meehan said the market had everything going for it, including yesterday's and this morning's data, what he called a pretty a "bullish" speech from Fed chairman Alan Greenspan, as well as good news on Microsoft(MSFT).

Meehan explained erratic action in the futures early as being mostly due to thin volume. "I was kind of surprised at the response in the futures on Globex trading this morning, but I imagine it was on pretty thin volume. Someone made a big trade, and then when he saw there wasn't a lot of follow through, he bailed," he said.

In terms of upside, Meehan said "we should break through the recent trading range."

The most anticipated economic data since the June 2 employment report, May's headline CPI was reported at a 0.1% gain, while the core number came in at a 0.2% rise, vs. expectations of a 0.2% gain for both numbers, according to Reuters consensus poll estimates. In April the headline CPI was unchanged while the core number was at a 0.2% gain.

There may be a little push and pull on these numbers today, as investors weigh optimism over a slowing economy and a nearing end to interest rate hikes against worries that a slowdown is going to hurt corporate profits. What's more, a little rally yesterday afternoon may have partly priced in expectations that the Fed will not raise rates on June 28.

After weeks of cool data, yesterday's softer-than-expected Retail Sales number fueled confidence that the economy is finally responding to the Fed's interest rate program. But fears that corporate earnings would suffer as a result swung stocks around on light volume early in the day. Not until Greenspan issued a relatively benign speech in the early afternoon, saying he thought it possible for the economy to grow without inflation, did the market decide that the day's news was good news. An afternoon rally pumped the major indices higher into the close.

In any case, no new interest rate hikes this time around doesn't mean there won't be more in August.

For more on corporate earnings and the Fed's interest rate plans see these recent stories.

Meanwhile, some great news for Microsoft rolled out after the market's close yesterday. The court of appeals said it will hear Microsoft's(MSFT) appeal to Judge Penfield Jackson's recent ruling, an important step in Mr. Softee's direction, as this court has previously ruled in favor of the behemoth. Judge Jackson wants to take the case directly to the Supreme Court, and must now certify the appeals court to hear Microsoft.

Another thing weighing on stocks is Friday's futures and options expiration, which could inject a little volatility into the market as institutions begin to roll over their contracts. The September contract started trading on Thursday.

European markets were firm but tame at midsession after the U.S. CPI report.

The Paris CAC was up 24.34, or 0.37%, to 6557.18, while Frankfurt's Xetra Dax was 40.76, or 0.56%, to 7309.67.

London's FTSE was 55.4, or 0.86%, to 6502.5.

The euro was shoring up recent strength, recently trading at $0.9638.

Most Asian markets closed higher overnight on optimism that a slowdown in the U.S. means interest rates hikes will slow or stop.

Hong Kong's Hang Seng index was up 164.13, or 1.05%, to 15857.07.

South Korea's Kospi index rose 14.82, or 1.84%, to 819.27.

Only Japan was not responding well to the news and Tokyo,'s Nikkei 225 index fell 260.53, or 1.54%, to 16654.42.

The greenback barely moved against the yen and fetched 106.49 yen. It was recently just barely higher at 106.53 yen.

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