A negative credit downgrade from Moody’s but the bulls shrug it off to continue the straight-up rally with a pending CPI number just around the corner.  Investors seem very sure that the Fed inflation fight is over.  We may find out this morning when the inflation data is revealed so be prepared for significant price volatility as the market reacts.  Home Depot reported a beat of expectations but also issued a caution on the forward strength of sales as the consumer weakens.  Keep in mind that on Wednesday bring a PPI and Retail Sales report so plan your risk accordingly.

Asian markets closed modestly higher overnight with only the tech-heavy Hong Kong exchange experiencing some light selling ahead of the Biden-XI talks.  European markets trade mostly bullish this morning with only the FTSE slightly lower as they wait on the pending inflation data.  However, U.S. futures trade cautiously bullish heading into the CPI report which will likely create a significant price reaction.  The question on everyone’s mind is whether the reaction is up or down.  Buckle up we will soon find out.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include ALC, ARMK, CAE, CSIQ, ENR, HD, HUYA, IHS, OCSL, ON, PSFE, SBH, TME, VREX, VIPS, & WKME.

News & Technicals’

Home Depot, the largest home improvement retailer in the U.S., reported its third-quarter earnings and revenue on Tuesday, beating the analysts’ expectations. However, the company’s sales dropped by 3% compared to the same quarter last year, as the demand for home improvement products slowed down amid the easing of the COVID-19 pandemic and the rising inflation. Home Depot also issued a cautious outlook for the full year, saying that it expects its sales to grow by 4.9%, lower than the previous estimate of 6%. The company said that it faces uncertainty and volatility in the market, as well as supply chain challenges and labor shortages. Home Depot’s stock price fell by 4.3% on Tuesday, following the earnings release.

Stellantis, the parent company of Chrysler and other car brands, is offering buyouts to about half of its U.S. white-collar workers, as part of its plan to reduce costs and improve efficiency in its North American operations. The company said on Monday that it will offer voluntary separation packages to 6,400 of its 12,700 nonunion U.S. employees, who can choose to leave the company with a lump sum payment and other benefits. This is the second time this year that Stellantis has offered buyouts to its salaried workers, after a similar offer in March. The buyout offer comes after Stellantis reached a tentative agreement with the UAW, the union that represents its hourly workers, in October. The agreement includes wage increases, bonuses, profit sharing, and investments in U.S. plants. Stellantis is the fourth-largest automaker in the world, formed by the merger of Fiat Chrysler and PSA Group in January 2021. The company faces several challenges, such as the global chip shortage, the competition from electric vehicles, and environmental regulations. The company hopes that the buyout offer will help it streamline its workforce and optimize its resources.

The consumer price index (CPI), which measures the change in the prices of goods and services, is expected to show a slight increase of 0.1% in October 2023 from the previous month and a moderate increase of 3.3% from the same month last year, according to a Dow Jones poll of economists. The CPI is one of the main indicators of inflation, which is the general rise in prices over time. The CPI is released monthly by the U.S. Bureau of Labor Statistics (BLS) and will be released on Tuesday, November 14, 2023, at 8:30 A.M. Eastern Time.

Moody’s downgrades U.S. credit from stable to negative and the bulls shrug it off in a relentless straight-line rally heading into Tuesday’s inflation report. Bond yield showed little change yesterday with investors seemingly very confident that the Fed inflation fight has concluded despite the continued hawkish comments from FOMC members. Home Depot beat estimates but issued a caution about the softer sales ahead due to the weakening consumer. Target and Walmart will report later this week helping to clarify how the consumer is feeling amid record credit card debit.  Today investors will be looking for inspiration in the CPI figures.  Be prepared for volatility as the market reacts.

Trade Wisely,

Doug