Marin Wealth Advisors, LLC.

Registered investment Advisor

November 12, 2022

Inflation Finally Shows Signs of Receding, Markets Rip Higher (November 11 Market Recap)

Indices 

  • Dow 33,747 +1,344 or +4.1%. 
  • Nasdaq 11,323 +848 or +8.1%. 
  • S&P 3,992 +222 or +5.9%. 
  • USD10Y 3.813% -34.5bp or –8.3%. 
  • WTI Crude $91.80/bbl -$0.78 or –0.84%.  

Inflation Finally Shows Signs of Receding 

Headline inflation finally dropped materially in October at +7.75% year-over-year (YoY) vs last month’s +8.2% print. Month-over-month (MoM) headline inflation rose +0.44% vs last month’s +0.39% and last year’s +0.87% print. YoY core inflation (ex food and energy) was also materially lower at +6.31% vs +6.66% last month. MoM core inflation was up +0.27% vs last month’s +0.58% print and last year’s +0.60% print. Additionally, a large component of the recent inflation, used car prices, also fell considerably last month, down –10.6% YoY and down –2% MoM. Shelter accounted for half of the monthly increase in the headline number with gasoline and food prices also contributing to the increase. Shelter, motor vehicle registrations, and recreation were the largest contributors to the Core number. The probability of a 50bp rate hike (rather than a 75bp hike) in December rose considerably from 61.5% last Friday to 80.6% yesterday. 

Markets Rip Higher 

All three indices ripped higher on the good inflation news but the embattled Nasdaq, with its exposure to growth and technology, outperformed the Dow and the S&P by 400 bp and 220 bp respectively. Importantly, the S&P has broken through resistance at 3912 (set during an early rally this month) and the next important level lies at 4,083, the 200-day moving average.  

Another Big Week 

Earnings season is petering out, but the retailers will have their time in the sun this week with Home Depot (HD), Lowe’s (LOW), Gap (GPS), Kohl’s (KSS), Target (TGT) all reporting. Manufacturing numbers from New York and Philadelphia will be reported as well. The highlight of the week will be the next inflation data points, wholesale prices (PPI) on Tuesday and Retail Sales on Wednesday. 

Economic Calendar 

  • Monday – October NY Fed 1-year and 5-year Inflation Expectations. 
  • Tuesday – October Producer Price Index (PPI), November Empire State Manufacturing Index. Earnings: Walmart (WMT), Home Depot (HD). 
  • Wednesday – October Retail Sales. Earnings: TJX Companies (TJX), Nvidia (NVDA), Target (TGT), Lowe’s (LOW). 
  • Thursday – Initial Jobless Claims, October Housing Starts, November Philadelphia Fed Manufacturing Index. Earnings: Kohl’s (KSS) and Gap Stores (GPS). 
  • Friday – October Existing Home Sales.

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

November 11 Daily Trading Recap… 

Monday – Dow +423 to 32,827 Nasdaq +89 to 10,564, S&P +36 to 3,806, USD10Y +5.8bp to 4.214% 

Tuesday – Dow +333 to 33,160, Nasdaq +51 to 10,616, S&P +21 to 3,828, USD10Y –8.8bp to 4.126%. 

  • Inflation News: the Mannheim Used Vehicle Value Index fell 10.6% year over year in October. MoM prices fell 2%. It is the fifth consecutive month of declines for the index. 
  • Earnings: Disney (DIS) missed on all their metrics; DIS traded down 6.82% post close. AMC Entertainment (AMC) beat revenues but lost more than expected; AMC traded down 4.09% after hours. Lyft (LYFT) beat earnings but missed on revenues and traded down 22.91% during the regular session. 

Wednesday – Dow –646 to 32,513, Nasdaq -263 to 10,353, S&P –79 to 3,748, USD10Y +2.5bp to 4.151%. 

  • All eleven S&P sectors traded down today, led lower by Energy, Consumer Discretionary, and Technology. 
  • Earnings: Lucid Motors (LCID) missed revenues, earnings, and announced a stock sale; LCID traded down 16.96% during the regular session. 

Thursday – Dow +1201 to 33,715, Nasdaq +760 to 11,114 S&P +207 to 3,956, USD10Y -32.2bp to 3.829% 

  • All eleven S&P sectors ripped higher today led by Technology, Real Estate, and Consumer Discretionary.  
  • October Headline CPI finally moved decisively lower to 7.7% YoY vs expectations of 7.9% and vs last month’s print of 8.2%. Month over month (MoM) CPI was +0.4% vs expectations of +0.6% but flat vs September’s 0.4% increase. 
  • October Core CPI was also lower than expectations at +6.3% YoY vs expectations of +6.5% and last month’s +6.6%. MoM Core CPI was +0.3% vs expectations of +0.5% and last month’s +0.6% print. 
  • The probability of a 50bp rate hike in December increased from 56.8% to 80.6% upon the release of the CPI data. 
  • Jobless claims rose to 225,000 claims vs 220,000 expected and last week’s revised higher print of 218,000 (originally 217,000 claims). Continuing claims ticked up to 1.4 million. 
  • Earnings: Toast (TOST) beat their numbers and raised current quarter and full-year guidance; TOST traded up 8.5% in after-hours trading. 

Friday – Dow +32 to 33,747, Nasdaq +209 to 11,323, S&P +36 to 3,992, USD10Y -1.6bp to 3.813%. 

  • Six of eleven S&P sectors traded higher today led by Energy, Communication Services, and Consumer Discretionary. 
  • November initial University of Michigan Consumer Sentiment was considerably below expectations at 54.7 vs 59.5 and last month’s print of 59.9. 
  • November initial University of Michigan Consumer 5-year Inflation Expectations came in higher at 3.0% vs last month’s 2.9%. 

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA.