There was a modest experience of the bears yesterday as the inflation worries increased with increased producer prices.  Today that worry continues with a reading on consumer prices before the bell.  Economists expect CPT to increase to its highest level in nearly 30 years, so buckle up the stage is set for some price volatility at the open.  With Bullard suggesting two rate hikes next year and the Fed warning investors of potential sharp market declines, it’s understandable traders are a little on edge this morning.

Asian markets mostly declined overnight, with the Chinese developer Fantasia prices plunging by nearly half as the real estate crisis worries investors.  European market trade mixed and near the flatline with all eyes focused on U.S. inflation data.  Ahead of CPI, Jobless numbers and another big round of earnings futures point to lower open, but anything is possible by the open as we react to the inflation data. So prepare for an extra dose of price volatility that could easily include head fakes and whipsaws.

Economic Calendar

Earnings Calendar

We have another busy mid-week earnings calendar with more than 230 companies listed, with a number of them unconfirmed.  Notable reports include DIS, ADDYY, AER, AFRM, AWH, ATO, BZH, BYND, BMBL, TAST, HLTH, ENR, GSL, DGRX, HGBL, IFNNY, KGC, LZ, LX, NGMS, PRGO, PTE, RRGB, RSI, SIEN, SMRT, SOFI, TCEHY, WEN, WWW, & ZIP.

News & Technicals’

Central banks would usually push up rates to tame inflation, and the Fed has started to normalize policy after the economic fallout from the coronavirus pandemic.  It said last week that bond purchases would start to taper “later this month.”  The Fed also acknowledged that price increases had been more rapid and enduring than central bankers had forecast.  Economists expect the consumer price index to rise 0.6% in October and 5.9% on a year-over-year basis, the most since 1990.  The CPI is hotter than economists initially expected, and they now see it staying elevated into next year.  “What we’re seeing is there’s this second wave of inflation that appears more broad-based, and it’s also backed up with a sharp increase in wages,” said one economist.  This is not the first time the EU’s General Court has ruled on an antitrust case brought by the European Commission and directed at a tech giant Google.  Wednesday’s verdict can be appealed and taken to the EU’s highest court.  The EU is currently discussing how to toughen its rulebook to ensure fairer competition across the 27 member nations. Rivian had previously raised its expected price range to between $72 and $74, up from an initial range of $57 to $62.  The company, which Amazon and Ford back, recently began production on its electric pickup, the R1T, and plans to deliver 10,000 as soon as next year.  Rivian expects to lose up to $1.28 billion this quarter while generating no more than $1 million in revenue for the period.  Treasury Yields moved higher this morning, with the 10-year trading up to 1.4796% and the 30-year rising to 1.8519%. 

With inflation worries on the mind of investors, the market broke its record-setting streak yesterday with some modest selling.  Inflation weighs on the market this morning as well, with the pending CPI report before today’s bell.  Economists expect the number to come in at its highest level in nearly 30 years. In addition, the Fed late afternoon yesterday warned that the recent rally in the market has the potential to trigger an abrupt crash.  That will make a person wonder if the Fed thinks the CPI might come in higher than expectations?  Because there is little in the way of price support for the recent rally, a substantial selloff is undoubtedly within the realm of possibility.  However, with the current bullish energy, it is also possible we could experience a sharp rally today if the number comes in better than expected.  Plan your risk carefully as the price volatility could be high, and intraday whipsaws have the room to be quite punishing to those rushing into the fray this morning.

Trade Wisely,

Doug