Monday, September 12, 2022
The rally continues into the pre-market futures of a new week, following a strong trading week that closed with a bullish Friday overall. Belief in the Fed threading the needle without drawing blood of a recession (though technically we’re in a recession now, with two straight quarters of negative GDP growth), combined with a growing understanding that the tide may have turned in Ukraine, with the invaded country having snapped Russian supply lines ahead of what may be a difficult winter.
The Ukraine situation is very important on two levels: one, the relative safety of European countries (and the euro) with a six-month-long war on its doorstep, and the supply of crucial oil and gas to the EU. Should these rosy scenarios bear out, we may be looking at the bottom of the euro’s valuation, which would be a positive to the global economy as a whole.
The big economic data expected this week here at home is tomorrow’s Consumer Price Index (CPI) report for August, which has become shorthand for “inflation” in the U.S. Peaking (hopefully) at a 42-year high in June at +9.1% year over year CPI, July pulled back to +8.5% and expectations are for a further roll-over, to something around +8.0%. If we can see some surprise to the downside, this may be the best indicator yet that high inflation is finally being corralled successfully.
Core CPI — that which strips out volatile food and oil prices — has actually ticked up over the past couple months, from +5.7% in June to +5.9% in July. It’s possible that, even with a dropping CPI number overall, core continues its slow creep northward, as “transitory” inflation such as fuel costs makes its way into stickier areas of the economy, such as Transportation or Travel & Leisure. Thus, even a decent CPI number tomorrow may not be enough to change the Fed’s mind from upping interest rates another 75 basis points (bps) next week.
In any case, we see the Dow is up another +110 points at this hour, while the S&P 500 is +20 and the Nasdaq +60 points. Prior to this latest rally, we were skidding back into bear-market conditions, leading analysts to openly consider whether the yearly lows — mid-June — were to be tested again. There are too many variables to consider to cross this off the list of possibilities, but as long as our data shows a controlled, measured come-down from early-80s inflation, we should be sitting pretty.
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Pre-Markets Keep Rally Alive, a Day Ahead of CPI
Monday, September 12, 2022
The rally continues into the pre-market futures of a new week, following a strong trading week that closed with a bullish Friday overall. Belief in the Fed threading the needle without drawing blood of a recession (though technically we’re in a recession now, with two straight quarters of negative GDP growth), combined with a growing understanding that the tide may have turned in Ukraine, with the invaded country having snapped Russian supply lines ahead of what may be a difficult winter.
The Ukraine situation is very important on two levels: one, the relative safety of European countries (and the euro) with a six-month-long war on its doorstep, and the supply of crucial oil and gas to the EU. Should these rosy scenarios bear out, we may be looking at the bottom of the euro’s valuation, which would be a positive to the global economy as a whole.
The big economic data expected this week here at home is tomorrow’s Consumer Price Index (CPI) report for August, which has become shorthand for “inflation” in the U.S. Peaking (hopefully) at a 42-year high in June at +9.1% year over year CPI, July pulled back to +8.5% and expectations are for a further roll-over, to something around +8.0%. If we can see some surprise to the downside, this may be the best indicator yet that high inflation is finally being corralled successfully.
Core CPI — that which strips out volatile food and oil prices — has actually ticked up over the past couple months, from +5.7% in June to +5.9% in July. It’s possible that, even with a dropping CPI number overall, core continues its slow creep northward, as “transitory” inflation such as fuel costs makes its way into stickier areas of the economy, such as Transportation or Travel & Leisure. Thus, even a decent CPI number tomorrow may not be enough to change the Fed’s mind from upping interest rates another 75 basis points (bps) next week.
In any case, we see the Dow is up another +110 points at this hour, while the S&P 500 is +20 and the Nasdaq +60 points. Prior to this latest rally, we were skidding back into bear-market conditions, leading analysts to openly consider whether the yearly lows — mid-June — were to be tested again. There are too many variables to consider to cross this off the list of possibilities, but as long as our data shows a controlled, measured come-down from early-80s inflation, we should be sitting pretty.
Questions or comments about this article and/or its author? Click here>>