The highest PPI on record kept the bear engaged yesterday, but surprisingly, the bull worked pretty hard, trying to convince us that inflation doesn’t matter.  Today we turn out attention to retail sales figures and the FOMC decision. Finally, we will learn how big the Taper will be and when the U.S. could expect interest rate increases as the Fed finally moves to fight inflation.  Expect price volatility!  Keep in mind we have several potentially market-moving events Thursday and a quadruple witching on Friday to keep us guessing.

Asian markets traded mixed overnight as investors digested a slew of economic data.  European markets trade mostly bullish this morning as they monitor the Fed decision with modest gains and losses.  Facing a big day of market-moving data U.S. Futures trade flat to mixed as we wait. So let’s get ready to rumble.

Economic Calendar

Earnings Calendar

This Wednesday, we have a bit more activity on the earnings calendar, with 20 companies listed through several remaining unconfirmed.  Notable reports include ABM, BLBD, HEI, LEN, NDSN, REVG, & TTC.

News & Technicals’

Congressional Democrats voted to raise the debt ceiling just before the deadline to mark the first U.S. default.  The Senate passed a borrowing cap increase late Tuesday afternoon, and then the House followed suit early Wednesday.  The bill headed to President Joe Biden’s desk when the Treasury Department estimated the U.S. could run out of tools to pay its bills.  The Biden infrastructure bill included $65 billion to build broadband internet access.  Commerce Secretary Gina Raimondo told CNBC she is confident that every household will have a connection by the end of the decade – if not sooner.  But some experts believe it will cost much more to close the broadband gap. In addition, Chinese companies listed on Wall Street will likely be cut off from U.S. capital markets in the next three years as tensions between Beijing and Washington persist, according to David Loevinger from the TCW Group.  He predicted that by 2024, most Chinese companies listed on U.S. exchanges would no longer be listed in the United States.  Many of China’s top internet companies listed in the U.S. have already undertaken dual listings in Hong Kong. Some high-profile names include e-commerce giant Alibaba, its rival JD.com, search engine giant Baidu, gaming firm NetEase and social media giant Weibo.  Treasury yields rose slightly in early morning trading, with the 10-year climbing to 1.4445% and the 30-year moving up to 1.8301%.

The highest PPI on record kept the bears active yesterday, raising the stakes for the big day of data today.  Before the bell, we have a significant economic data dump, including the highly watched holiday retail sales figures.  Will, the Santa Clause rally make an appearance this year, or will the Grinch sneak in to steal all the goodies?  We will soon find out.  After that, everyone will brace for the uncertainty of the FOMC decision on Taper, future rate decisions, and the chairman’s press conference.  I think it’s fair to say anything is possible, so prepare for more price volatility.  With the VIX elevated and index chart price patterns showing uncertainty, there is a reason for caution as traders and investors digest the data.  As you plan forward, notice several potential market moving reports Thursday morning and a Quadruple Witching this Friday that typically creates unusual price gyrations. 

Trade Wisely,

Doug