There wasn’t much going on in equity futures this morning as the market awaited the release of the July CPI which came in right on target relative to expectations.

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Stocks in Asia were mixed with Japan up 0.6% while China was down 0.6%. Yields in China were also lower as the government auctioned off a 20-year bond at a record-low yield.  European stocks look more positive with slight gains across the board as GDP came in right in line with forecasts (0.3%) and UK inflation unexpectedly declined.

In financial markets, we almost always emphasize upcoming economic reports and/or Federal Reserve meetings too much. Invariably, the reality of the report rarely lives up to the energy of the anticipation that precedes it. Last month’s CPI report was one of those rare exceptions as market performance practically turned on a dime.

The chart below compares S&P 500 industry group performance on a YTD basis through 7/10 (the close before the June CPI report was released) versus how each group performed since then. Leading up to the report, the S&P 500 had rallied more than 18% on a YTD basis, and since then, it has declined over 3.5%. There has been a clear trend among industry groups where the best performers leading up to the report have been among the worst performers since then while the weakest groups on a YTD report have held up the best since the release.

As an example, the top five performing industry groups on a YTD basis through 7/10 all rank in the bottom ten in terms of performance since then, while three of the five worst performing groups YTD before the June PPI (Consumer Durables, REITS, and Real Estate Managment) rank as the top three performing groups since then.

On the upside, only two industry groups rank in the top ten in terms of performance for both periods – Insurance and Telecom Services.

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