Mid-Day Recap: Stocks Regain Balance Despite Weak Data

News hasn’t been stellar this morning but markets are nonetheless recovering from the global sell-off yesterday. Three hours into the session, the S&P 500 has rebounded 1.05% to 990 (after tumbling 2.4% yesterday), while the Nasdaq has climbed 1.25% to 1,955, and the Dow has moved 0.92% higher to 9,217.

In earnings, Home Depot and Target each saw profits fall due to weakened demand, but cost cutting allowed both companies to beat analyst estimates. Home Depot said second quarter earnings fell 7.2% as sales slid more than 9%, but the nation’s largest home-improvement retailer also boosted its profit forecast for the remainder of the year.  

Target’s earnings fell 6.4% to mark its eighth consecutive quarterly decline. Subtracting further from weak sales, softness in its credit-card business hurt revenue, and looking ahead the discount retailer raised provisions for bad debt.

Macroeconomic data was no more supportive this morning. Tame inflation in the Producer Price Index is helpful to producers but is also indicative of weak demand.

Total PPI fell 0.9% in the month, triple what the market was expecting, as food prices fell 1.5% in the month and the energy index sunk 2.4%. In June, food prices had advanced 1.1% and energy prices has surged 6.6%.

Core PPI, which strips out those volatile components, slipped 0.1% in July, mirroring the consensus call that it would increase by the same amount. That’s good news, as core prices have advanced 2.6% over the past 12 months, while total PPI has fallen 6.4%.

Analysts at IHS Global Insight said “broad-based downward pressure on producer prices right through the production pipeline â€