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Pre-Markets Set Up for a Green Week

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Friday, September 9, 2022

Pre-markets are up again today, with a perhaps unexpected positive spin on futures, which are now poised to finish the week in the green for the first time all month. The Dow is +200 points, the S&P 500 +30 and the Nasdaq +100 points. We’re post-Labor Day, but still with relative summer trading volume.

Overnight, cooler inflation reads from China — Producer Price Index (PPI) +2.3% from +4.2% earlier — mark the first time in a while that PPI figures are coming in lower than Consumer Price Index (CPI). Rolling shutdowns, which continue to this day, are clearly hampering productivity, and we saw just yesterday China cut its interest rate 2%, at a time when most large economies in the West are raising rates. Anything to achieve some equilibrium on the global markets, right?

Next week we have a couple days where there are clusters of fresh, important data — none moreso than Tuesday’s U.S. CPI print for August. This will be the final CPI report before the next Fed meeting on monetary policy, and a significant pullback from +8.5% (headline, year over year) might be the last chance to change the Fed’s mind to increase the Fed funds rate 50 basis points (bps) instead of 75. Therefore, the weaker the headline CPI numbers, the better the chance for a Tuesday rally.

We’ll also see new Retail Sales, Philly Fed and Empire State surveys, Import/Export Prices, Industrial Production and Weekly Jobless Claims numbers, all on Thursday of next week. Like last month’s CPI, July Retail Sales were unchanged month over month. Imports and Empire State both wallowed in negative territory a month ago. No single one of these data points are as important as CPI, but they do offer more tea leaves to read.

Ahead of today’s opening bell, supermarket giant Kroger (KR - Free Report) posted a strong beat-and-raise for its fiscal Q3 report: earnings of an even $1.00 per share outpaced the 83 cents expected in the Zacks consensus, while sales of $34.64 billion surpassed the $34.41 billion, for +9.3% full-year growth. Current-year earnings guidance has been bumped up a full dime, to a range of $3.95-4.05 per share.

Same-store sales came in stronger than expected: +5.8% from +4.6% expected, with guidance now upped 100 bps to a 4-4.5% range. Kroger took a Zacks Rank #2 (Buy) into its earnings release, and shares immediately sprang +4% in early trading. Shares have cooled a bit, but remain +7% year to date.

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