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Stock futures slip as consumer prices fall

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Stock futures have slipped to their lowest levels of this morning's session as April's consumer price index fell 0.3%, largely due to a reversal in oil prices.

Why would stock futures slip on such a number? Aren't falling consumer prices good for the consumer? Not necessarily say some economists in what some believe is the early stages of an economic recovery where some type of inflation helps build in some corporate profitability as prices rise.

Excluding food and energy, the core CPI was unchanged. Economists had forecasted April's CPI at -0.1%, and for a fractional 0.1% rise in the core rate.

Today's CPI data, combined with yesterday's PPI (producer price index) shows that while manufacturers paid less for materials to make product, much of those savings were passed on to consumer in the form of prices paid (CPI) and begins to have economists fearing deflation.

Additional economic data released this morning has the Commerce Department reporting that housing starts fell 6.8% in April to a seasonally adjusted annual rate of 1.630 million units, which was below the 1.743 million unit rate economists had forecasted. The Commerce Department also reported that March's starts were revised lower to 1.748 million from the previously reported 1.78 million. Meanwhile, building permits for construction of new homes was estimated at an annual rate of 1.708 million, a rise of 1.2% from March's 1.688 million in March. Here too, March's 1.688 million was revised downward from a previously reported 1.692 million.

On the cover and perhaps within, this morning's economic data still shows what appears to be an economy that has corporations rather unwilling to apply any type of pricing pressure to the consumer. The lower interest rate environment still finds a rather firm housing market as lower rates appears to continue to bring in new home buyers and has builders applying for more permits. While March's building permits were revised lower, the March to April rise of 1.2% was the strongest pace for building permits since February 2002.

S&P futures (sp03m) continue to slide and currently trade down 3.3 points at 943. NASDAQ futures (nd03m) are falling 5.5 points to 1,158, while Dow futures (dj03m) are down 32 points at 8,665.

Fair value for the S&P 500 today is $-0.32. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.02 and set for program selling at $-1.22.

Later this morning at 09:45 PM EST, traders will get a look at the preliminary May University of Michigan Sentiment report. Economists are forecasting a reading of 87.0, which would be up from April's 86.0 reading. Some traders cite this as being the most important economic report of the day!

Jeff Bailey

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