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Markets Flattish Ahead of CPI, Jobless Claims, Q3 Earnings
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Markets were flattish this Hump Day ahead of an important Consumer Price Index (CPI) report tomorrow morning — arguably the single-most important data point ahead of the next Federal Open Market Committee (FOMC) meeting at the start of next month. With so much at stake and no discernible understanding of how strong or weak they will be, the Dow was -0.10% on the day, the S&P 500 -0.33%, the Nasdaq -0.09% and the Russell 2000 -0.30%.
These CPI numbers follow this morning’s Producer Price Index (PPI) figures for September, which came in +0.4% month over month, +8.5% year over year: disappointingly high considering we are looking for signs the Fed’s higher interest rates are successfully dimming economic growth in order to corral inflation. CPI headline month over month is expected to come in +0.3%, +8.1% year over year. The previous month’s +8.1% registered the highest food inflation metrics since May of 1979, back when Margaret Thatcher first became Prime Minister of the UK.
Core CPI (stripping out volatile food and gas costs) is expected to come down month over month to +0.4%, but higher year over year to +6.5% — an indication that “stickier” inflation is finding its way into the economy from “transitory” measures the core print removes. This would be… not terrible, because it’s already expected, but certainly not encouraging from a Fed interest rate move perspective.
Owners equivalent rent is one aspect of CPI data — a big one, at 1/3 the total — that does not show up in the PPI, so the hope is that this metric will bring down CPI numbers in a meaningful way, which PPI failed to do this morning. But even though economists do expect these figures to come down over a period of time, gauging when these numbers will hit the tape is a fool’s errand: too many variables to be accurate about.
The Fed, as we saw in today’s release of the minutes from the last FOMC meeting, is dead-set on hiking interest rate levels until it sees actual evidence that inflation is being brought down in a meaningful way, and not before. Fed Chair Powell’s Fed has always insisted it is “data dependent” in making monetary policy moves, although it managed to slash rates ahead of the Covid pandemic without waiting for damaging economic data to report, back in 2020. Perhaps it will also see the writing on the wall in terms of when to stop turning the screws on the Fed funds rate? Here’s hoping.
Thursday morning also brings us weekly Initial and Continuing Jobless Claims numbers, as well as Q3 earnings reports from myriad industries, from airlines (Delta [(DAL - Free Report) ]) to healthcare/retail (Walgreens Boots [(WBA - Free Report) ]) to semiconductors (Taiwan Semi [(TSM - Free Report) ]). This precedes reports from several of Wall Street’s biggest banks reporting on Friday. Which means for the first time in many weeks, quarterly company performances are expected to have material consequences for the market at large.
Image: Bigstock
Markets Flattish Ahead of CPI, Jobless Claims, Q3 Earnings
Markets were flattish this Hump Day ahead of an important Consumer Price Index (CPI) report tomorrow morning — arguably the single-most important data point ahead of the next Federal Open Market Committee (FOMC) meeting at the start of next month. With so much at stake and no discernible understanding of how strong or weak they will be, the Dow was -0.10% on the day, the S&P 500 -0.33%, the Nasdaq -0.09% and the Russell 2000 -0.30%.
These CPI numbers follow this morning’s Producer Price Index (PPI) figures for September, which came in +0.4% month over month, +8.5% year over year: disappointingly high considering we are looking for signs the Fed’s higher interest rates are successfully dimming economic growth in order to corral inflation. CPI headline month over month is expected to come in +0.3%, +8.1% year over year. The previous month’s +8.1% registered the highest food inflation metrics since May of 1979, back when Margaret Thatcher first became Prime Minister of the UK.
Core CPI (stripping out volatile food and gas costs) is expected to come down month over month to +0.4%, but higher year over year to +6.5% — an indication that “stickier” inflation is finding its way into the economy from “transitory” measures the core print removes. This would be… not terrible, because it’s already expected, but certainly not encouraging from a Fed interest rate move perspective.
Owners equivalent rent is one aspect of CPI data — a big one, at 1/3 the total — that does not show up in the PPI, so the hope is that this metric will bring down CPI numbers in a meaningful way, which PPI failed to do this morning. But even though economists do expect these figures to come down over a period of time, gauging when these numbers will hit the tape is a fool’s errand: too many variables to be accurate about.
The Fed, as we saw in today’s release of the minutes from the last FOMC meeting, is dead-set on hiking interest rate levels until it sees actual evidence that inflation is being brought down in a meaningful way, and not before. Fed Chair Powell’s Fed has always insisted it is “data dependent” in making monetary policy moves, although it managed to slash rates ahead of the Covid pandemic without waiting for damaging economic data to report, back in 2020. Perhaps it will also see the writing on the wall in terms of when to stop turning the screws on the Fed funds rate? Here’s hoping.
Thursday morning also brings us weekly Initial and Continuing Jobless Claims numbers, as well as Q3 earnings reports from myriad industries, from airlines (Delta [(DAL - Free Report) ]) to healthcare/retail (Walgreens Boots [(WBA - Free Report) ]) to semiconductors (Taiwan Semi [(TSM - Free Report) ]). This precedes reports from several of Wall Street’s biggest banks reporting on Friday. Which means for the first time in many weeks, quarterly company performances are expected to have material consequences for the market at large.
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