Rising inflation in China spooked the market this morning but stocks are rebounding off their worst levels of the session. Investors are also digesting the latest trade numbers in the U.S. and the weekly initial jobless claims. The U.S. dollar is still drifting sideways in a narrow range. Crude oil is off about 11 cents near $81.98 a barrel. Gold futures are trading near unchanged just under $1,108 an ounce.
Asian markets were mostly higher. The main headline today was February inflation numbers. Economists were expecting a gain of +2.5% for February consumer prices. The National Bureau of Statistics said inflation hit a 16-month high with a rise from +1.5% in January to +2.7% in February. The big concern here is that rising inflation could force China to raise interest rates, which would slow down their economy, which happens to be one of the biggest drivers of growth for the global rebound. This inflation news sent mining stocks lower in Asia and Europe since slower growth would mean less demand. Analysts suggested the above average inflation reading is not out of line since inflation tends to spike over the Chinese Lunar New Year holiday, which fell in February this year. The real test will be March's CPI numbers to see if inflation remains high. The Chinese Shanghai index rose +0.8%. The Hong Kong Hang Seng fought back from its morning lows to close in positive territory with a +0.09% gain. Meanwhile the Japanese NIKKEI rose +0.9% on a weaker yen.
Stocks were edging lower in Europe after hitting new relative highs yesterday. Greece was back in the headlines as the country's transportation system came to a standstill due to a widespread strike. Workers were striking in opposition to the significant budget cuts the country is trying to enforce to bring down their debt. Tens of thousands of protestors clashed with police. At the end of the day the German DAX lost 0.14%. The French CAC-40 fell 0.37%. The English FTSE closed down 0.41%.
Here in the U.S. one of the big stories was the trade deficit. The Commerce Department said our deficit surprisingly shrank in January with a 6.6% drop to $37.3 billion. A big decline in imported oil and imported cars fueled the move. American exports also fell 0.3%.
The weekly initial jobless claims continue to disappoint. The Labor Department announced that new claims for unemployment fell 6,000 to 462,000. Economists were expecting a drop to 460,000.
In other news mortgage rates remain low. Freddie Mac said the average 30-year fixed mortgage rate remained 5% for the second week in a row. The all-time low was last December at 4.71%. Currently rates are hovering around 4.95%.
Currently the major indices are sliding sideways and virtually unchanged on the session. If you're an optimist then the lack of profit taking is a good sign and suggests the market is trying to build up steam for another push higher. The best performers today are railroads (+0.88%), banks (+1.2%), networking (+0.5%) and gold miners (+0.5%). The worst performers are homebuilders (-1.5%), and biotech (-1.0%).
Chart of the S&P 500:
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Chart of the Russell 2000 index:
A quick glance at the OptionInvestor.com play list shows PNRA showing relative strength with a 2.5% gain.