Mid-Morning Recap: Stocks Struggling Ahead of Obama's Announcement

The S&P 500 fell 3.6% on Monday and Tuesday, and with a new regulatory framework being introduced this afternoon markets are hesitant to go against the herd, as losses extend across the board. Ninety minutes into the session, the S&P has fallen another 0.63% to 906, the Dow has shed 0.36% to 8474, and the Nasdaq is 0.20% below yesterday’s close at 1793.

The morning’s data was mild, as consumer prices were softer than expected and an improvement was seen in the current account deficit.

The all-items headline for consumer prices advanced just 0.1%, two-tenths below expectations and following a flat reading in April. Core prices, which exclude volatile food and energy items, also rose 0.1% in the month, following a 0.3% gain in April.

DeutscheBank’s Joseph LaVorgna said the release was evidence of economic slack in most areas of consumption. “The May CPI results corroborate our belief that until there is a meaningful pick-up in household spending, inflation will remain quite tame and edge very closely to deflation,” he added.

On a yearly basis, the all-items CPI is in deflationary mode at -1.3%, which is the largest decline since April 1950. The Bureau of Labor Statistics is quick to point out that energy prices are the main culprit here, having fallen 27.3% since May 2008. Meanwhile, core prices have advanced 1.8% over the past 12 months, two-tenths below the unofficial target rate from the Federal Reserve.

Also at 8:30, the Bureau of Economic Analysis said the current account deficit improved to $101 billion in the first quarter, based on preliminary estimates, which puts the quarterly deficit as its smallest since the final quarter of 2001. Compared to Q4 2008, the deficit was reduced by 34.5%, and as a share of GDP it was at a decade low of 2.9%.

“U.S. demand for imports is much more sensitive to domestic income changes than is foreign demand for U.S. exports, which causes the trade balance to improve when America and its major trading partners slip into synchronized recession,” said Michael Gregory from BMO Capital Markets.

In the months ahead, rising oil prices could reverse this trend, however.

Outside of data, a major headline was a poor earnings report from FedEx. The logistics service company reported a decline in Q4 earnings, and predicted weaker earnings than analysts had expected.

The main event of the day has still yet to happen though. President Barack Obama will announce at 12:50 pm EDT his proposal for broad-based financial regulation reform.

Though many of the details have already been leaked, investors will want to read the official report in all its details.