Producer prices soared past expectations in September, reviving concerns about inflation. However, a large amount of that worry is already priced into stock and bond prices, and markets largely took the news in stride. The producer price index jumped 1.9% last month, the biggest jump since January 1990 and above the consensus estimate of 1.1%. Even removing energy costs, the core PPI rose 0.3% in September, above economists' expectations for a 0.2% gain. Inflation worries have consumed the market ever since Hurricane Katrina hit Gulf Coast energy production. Majors averages opened slightly lower on the PPI news but was recently trading in a mixed fashion as the inflation data were offset by positive earnings from firms such as IBM ( IBM), Merrill Lynch ( MER) and Johnson & Johnson ( JNJ). The Dow Jones Industrial Average was recently up 7.92 points, or 0.08%, at 10,356.02, off a morning low of 10,325, and just below its daily high of 10,361. Besides getting a boost from IBM, the blue-chip average was also lifted by 3M ( MMM), which posted better-than-expected earnings, and by Intel ( INTC), which will post results after the close. The tech-heavy Nasdaq Composite was recently up 0.86 points, or 0.4%, at 2071.16, off a morning low of 2064 and just under its high 2072. The S&P 500, however, remained stuck under water, trading down 2.04 points, or 0.17%, at 1188.06 vs. its morning low of 1184. The index was weighed down by weakness in energy stocks and homebuilders, the latter hurt by American Standard's ( ASD) disappointing results and some cautious comments by NVR ( NVR). Bonds pits, meanwhile, halted a five-day slide. The price of the benchmark 10-year Treasury was recently up 5/32, its yield falling to 4.47%, on news that foreign buying of U.S. Treasuries had increased in August. In addition, while investors have been used to very hawkish rhetoric from Federal Reserve officials lately, there was relief that a speech by Fed Chairman Alan Greenspan didn't add fuel to the fire of inflation concerns.
Sucking in the '70s
Greenspan, who delivered a speech to a business association in Tokyo overnight, highlighted that soaring energy prices present a risk for global growth. "Although the global economic expansion appears to have been on a reasonably firm path through the summer months, the recent surge in energy prices will undoubtedly be a drag from now on," he said.