After a confusing CPI number that showed the largest monthly increase in inflation in a year while still producing a slight decline in the core figures, equity markets continued to chop with frustrating uncertainty.  Focus today shifts to Jobless Claims, Producer Price Index, Retail Sales, and Business inventory numbers to try and find direction.  With a UAW strike looming, next week’s Fed meeting, and the possibility of a government shutdown on the horizon the market has a lot of uncertainty on its plate to digest.  Watch for whipsaws and be ready for just about anything as the data is revealed.

Asian markets didn’t seem to mind the higher inflation reading closing with green across the board overnight.  European markets are also bullish this morning as they wait on an ECB rate decision and auto sales fall 1.2%.  U.S. futures point to a bullish open ahead of several potential market-moving economic reports that could easily improve or quickly reverse the premarket pump.  Buckle up for a morning where anything is possible.   

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ADBE, KFY & LEN.

News & Technicals’

Arm, the chip design company that powers most of the world’s smartphones and tablets, priced its long-awaited initial public offering on Wednesday. The company, which was acquired by SoftBank in 2016 for $32 billion, will list its shares on the London Stock Exchange and the Nasdaq under the ticker symbol ARM. The company set its IPO price at $25 per share, valuing it at about $40 billion. SoftBank will retain about 90% of the company’s ownership after the offering while selling 10% to the public and some of Arm’s customers. Some of the customers that have agreed to buy shares in the IPO include Apple, Google, Nvidia, and Samsung, which are also some of the biggest users of Arm’s chip designs. The IPO is expected to raise about $4 billion for Arm and SoftBank, which will use the proceeds to invest in other technology ventures. The IPO is also seen as a vote of confidence in Arm’s business model, which licenses its chip designs to other manufacturers rather than making its chips. Arm’s chip designs are widely used in mobile devices, cloud computing, artificial intelligence, and the Internet of Things.

Many Americans’ retirement confidence has been shaken due to high inflation, a survey finds. The survey, conducted by Natixis in June 2023, found that 69% of Americans are concerned about inflation eroding their retirement savings, and 62% are worried about rising healthcare costs. The survey also found that only 54% of Americans have a financial retirement plan, and only 37% have calculated how much income they will need in retirement. The survey results come as the consumer price index (CPI), a measure of inflation, posted its biggest monthly gain in 2023 so far. The CPI rose by 0.7% in August, driven by higher prices for gasoline, food, and rent. The annual inflation rate was 5.3%, well above the Federal Reserve’s target of 2%.

Italy’s Prime Minister, Mario Draghi, has hinted at a possible withdrawal from China’s Belt and Road Initiative (BRI), a massive infrastructure project that aims to connect Asia, Europe, and Africa. Draghi told reporters on Sunday at a press conference after the Group of 20 nations leaders’ summit in Delhi that a final decision to leave the BRI was still to be taken. Italy remains the only Group of 7 industrialized countries that is a signatory of Beijing’s signature BRI that President Xi Jinping launched a decade ago. Rome is coming under pressure to recast its relationship with Beijing amid growing concerns over China’s human rights record, trade practices, and geopolitical ambitions. Draghi said that Italy’s participation in the BRI was not consistent with its values and interests and that he would seek a more balanced and transparent approach to China. He also said that Italy would align itself with its European and transatlantic partners on China-related issues. Draghi’s remarks signal a shift in Italy’s foreign policy from the previous government, which joined the BRI in 2019 in a controversial move that angered its allies and raised doubts about its commitment to the Western alliance.

Equity markets continued to chop Wednesday after the CPI recorded a 0.6 monthly inflation increase the strongest increase in more than a year.  However, the core number declined slightly delivering a confusing result to investors that delivered another directionless and frustrating low-volume day of price action.  Today we will have Jobless Claims, Producer Price Index, Retail Sales, Business Inventories, and Natural Gas numbers to provide the bulls or bears inspiration. Perhaps today we pick a direction but watch for substantial whipsaws if the data produces a morning gap.  The indexes are coiled up tightly so be prepared for the possibility of a big point move but still in question is which way.  Plan carefully my friends.

Trade Wisely,

Doug