Peak Inflation Finally? (Market Recap August 12)
Indices
- Dow 33,761 +958 or +2.9%.
- Nasdaq 13,047 +390 or +3.1%.
- S&P 4,280 +135 or +3.3%.
- USD10Y 2.849% +0.9bp or +0.32%.
- WTI Crude $91.88/bbl +3.2%.
Peak Inflation Finally?
The markets rallied strongly this week off the back of three phenomenal inflation reports which showed prices finally moderating. While many analysts predicted that the Headline CPI number would fall largely due to decreasing fuel prices, the fact that prices didn’t rise at all month over month (+0.0%) was a complete surprise. Adding to the good news was the Core number, which does not include food and energy prices. As a result of those omissions, Core was expected to rise, albeit at a slower rate than last month. However, Core CPI came in lower than expected and lower than June’s number as well. Finally, on Thursday, wholesale prices, in the form of the Producer Price Index (PPI) were also considerably below expectations. July PPI decreased 0.5% month over month. Expectations were for a 0.2% increase and June’s PPI was +1.0% for comparison’s sake.
While one month does not a trend make, the CPI and PPI numbers were welcome data points for the markets. Prior to the next Fed meeting, July PCE will be released August 26, July Non-Farm Payrolls will be released September 2, and August CPI will be released September 13. Any indication that the Fed may not need to raise rates as much as 0.75 bp during their mid-September meeting will send markets rallying. Continued moderation of the PCE and CPI numbers along with a benign August Non-Farm Payrolls may convince the Fed to revise their rate hike strategy. To be continued…
Where are the Indices YTD?
Last week the bounce from the June lows was noted in this space. While that bounce continued last week, it might be informative to check just how far off we still are from the highs…
Since mid-June Lows | From the Highs |
Dow +13% | Dow –8.3% |
Nasdaq +22.6% | Nasdaq –18.7% |
S&P +16.7% | S&P –10.8% |
Next Week
With earnings season largely over, next week’s most anticipated data point will be the release of the Federal Open Market Committee minutes from its last meeting in late July. Manufacturing numbers from both New York and Philadelphia will also be released.
Economic Calendar
- Monday – August Empire State Manufacturing.
- Tuesday – N/A.
- Wednesday – July Retail Sales. FOMC July Meeting Minutes.
- Thursday – Initial Jobless Claims, August Philadelphia Fed Manufacturing Index, July Existing Home Sales.
- Friday – N/A.
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.
Aug 12 Daily Trading Recap…
Monday – Dow +29 to 32,832, Nasdaq (13) to 12,644, S&P (5) to 4,140, USD10Y (7.5bp) to 2.765%.
- Seven of eleven S&P sectors traded higher today, led by Real Estate, Materials, and Energy.
Tuesday – Dow (58) to 32,774, Nasdaq (150) to 12,493, S&P (17) to 4,122, USD10Y +3.2bp to 2.797%.
- Seven of eleven S&P sectors traded down today, led lower by Consumer Discretionary, Technology, and Communication Services.
- Micron (MU) cut their forward guidance which on top of Nvidia’s (NVDA) warning on Monday, sent Technology and the Nasdaq lower.
- Earnings: Ralph Lauren (RL) beat earnings and revenue metrics but traded down 4.34%. Coinbase (COIN) missed both earnings and revenue metrics and traded down 3.5% post close. Roblox (RBLX) missed both earnings and revenue expectations and traded down almost 14% in the extended session.
Wednesday – Dow +535 to 33,309 Nasdaq +360 to 12,854, S&P +87 to 4,210, USD10Y (1.1bp) to 2.786%.
- All eleven S&P sectors traded higher today, led by Materials, Consumer Discretionary, and Communication Services.
- July Headline CPI was LOWER than expected; +0.0% MoM vs +1.3% last month and vs +0.2% expected. That also brought down the YoY number to +8.5% vs 9.1% last month and +8.7% expected.
- June Core CPI also beat expectations; +0.3% MoM vs +0.7% last month and +0.5 expected. YoY Core CPI remained the same at +5.9% vs +6.1% expected.
- Earnings: Walt Disney (DIS) beat earnings, revenue, and subscriber expectations. DIS popped 6.86% post-close.
Thursday – Dow +27 to 33,336, Nasdaq (74) to 12,779, S&P (3) to 4,207, USD10Y +10.2bp to 2.888%.
- Six of eleven S&P sectors traded lower today, led by Healthcare, Consumer Discretionary, and Real Estate. Energy staged a big comeback, leading all sectors, +3.19%.
- The July Producer Price Index was lower than expected at -0.5% vs +0.2% expected and last month’s +1.0% print.
- Jobless claims printed at 262,000 claims vs 263,000 expected and last week’s revised lower 248,000 print (originally was 260,000). Continuing claims rose to 1.43 million.
Friday – Dow +424 to 33,761, Nasdaq +267 to 13,047, S&P +72 to 4,280, USD10Y (3.9bp) to 2.849%.
- All eleven S&P sectors traded higher led by Consumer Discretionary, Technology, and Communication Services.
- August University of Michigan Consumer Sentiment (preliminary) beat expectations at 55.1 vs 52.5 and last month’s 51.5 print.
- August University of Michigan 5-year Inflation Expectations (preliminary) was up slightly to 3.0% vs July’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.