dec 14  welcome to the home for realtime coverage of markets brought to you by reuters reporters you can share your thoughts with us at marketsresearchthomsonreuterscom welcome to fed tuesday where inflation is hot and the federal reserve is feeling the heat and with the polar icecaps melting the mercury is also on the rise at santas workshop in the north pole according to novembers ppi print the labor departments producer prices report ppi usppfdeci a gauge of the prices us goodsproducers get for their wares at the factory door came in significantly hotter than analysts expected unexpectedly accelerating to 08 from 06 and well above the 05 consensus read more yearoveryear the headline print jumped to a sweltering 98 while the core number which strips out food energy and trade services gained 06 percentage points to 69 price metrics have been running well above target for much longer than anticipated says rubeela farooqi chief us economist at high frequency economics these data support the fed’s switch to a faster taper that will likely precede a quicker tightening of policy next year as seen in the graphic below core ppi along with other major indicators has been launched into orbit sailing well above the federal reserves average annual 2 inflation target the picture it paints provides a rather clear rationale for the fed to stop batting the word transitory around like a shuttlecock in its monetary policy game of badminton and increasingly us businesses are planning on passing those prices along to the consumer while the national federation of independent business nfib optimism index usopineci inched up 02 points to a reading of 984 last month youd never know it from accompanying nfib press release the outlook for business conditions is not encouraging to small business owners as lawmakers propose additional mandates and tax increases writes bill dunkelberg nfibs chief economist owners are also pessimistic as many continue managing challenges like rampant inflation and supply chain disruptions that are impacting their businesses right now and the typical respondent is putting their money where their mouth is namely on the consumers plate as lydia boussour lead us economist at oxford economics points out small firms continue to pass along higher prices onto consumers boussour says the share of firms raising prices – a leading indicator of core inflation – jumped 6 points to a new record 59 and in a sign that high inflation is not going away any time soon the share of firms planning to raise prices climbed to a new record the uptick in the optimism index was attributable to a slight easing in the inability to find qualified workers and an increase in inventories it should be noted that the nfib is a politically active membership organization wall street fluctuated in morning trading with the marketleading tech associated stocks weighing on all three major us stock indexes the dow flipped nominally into negative territory its losses mitigated by financials value stocks ivx are a pale green while growth stocks igx are resolutely lower and then it was tuesday sp 500 extends its selloff 1001 est1501 gmt us stocks wobbled in early trading on tuesday as the latest in a string of hot inflation reports appeared to raise concerns over just how soon the fed will whisk the punch bowl away that said all three major stock indexes are off initial lows with the bluechip dow flipping green as producer prices came in well above consensus read more  just as the federal reserve is convening its twoday monetary policy meeting during which inflationary concerns were likely to take center stage value stocks ivx are off to a better session than growth igx and the biggest drags on the sp 500 and the nasdaq once again are the market leading techplus megacaps apple inc aaplo is the exception resuming its trudge toward reaching the 3 trillion market cap milestone meanwhile in washington lawmakers were expected to vote on raising the federal governments debt limit ending a monthslong stalemate read more despite a stellarstart to the 2021 microcaps have struggled to keep pace for much of the year the ishares microcap etf iwcp peaked in midmarch and is posting a 15 yeartodate gain vs the spdr sp 500 etf trusts spyp 25 rise of note on a weekly basis the iwcspy ratio peaked in midmarch just shy of a 15year resistance line perhaps not surprisingly it was also around this time that the retaildriven memestock mania was its most intense highly speculative stocks like microcaps tend to have greater volatility and are thus inherently riskier than largercap shares they can therefore be especially sensitive to the key drivers of liquidity and psychology recently the performance disparity between the iwc and spy has been particularly acute since november 8 the iwc has lost more than 13 while the spy is off just 06 having just recorded a fresh record close last friday with this the iwcspy ratio has plunged to its lowest level since november 2020 meanwhile the severity of the ratios decline from its peak has been especially sharp in fact in the time since the iwc topped in relative strength vs the spy the ratios 40week rateofchange has collapsed to an alltime low it now remains to be seen if the microcap ship can be righted in the midst of taxloss season and building fearofthefed however of concern for the sp 500 from 2007 to 2020 the five biggest spy declines from recordhigh territory were all preceded by protracted iwcspy ratio divergence for tuesdays live markets posts prior to 0900 est1400 gmt  click here read more terence gabriel is a reuters market analyst the views expressed are his own