By the end of Thursday, we had an interesting mix with tech shares sliding south and the defensive names holding their ground. So the question is that a sign of trouble or just another choppy session as we hurry up and wait on the CPI number?  If estimates are correct, we could see an inflation rate at nearly a 40 year high!  If true, will it inspire the bears, or will the market choose to ignore as it did with the big miss on job data last week?  Expect some volatility price action as we react and follow up with a reading on consumer sentiment.

Asian markets finished the week with selling across the board during the night. Likewise, European markets are taking a wait-and-see approach with muted price action and modest gains and losses as they wait.  Here in the U.S., however, the morning pump has begun pointing to a gap up open ahead of the CPI. So the wait is about over, but will it inspire the bulls or the bears?

Economic Calendar

Earnings Calendar

We have a very light day on the Friday earnings calendar with 14 companies listed, but only two confirmed.  Notable reports include ASO and JOUT.

News and Technicals’

Elon Musk sold 934,091 Tesla shares, according to filings with the Securities and Exchange Commission published Thursday.  Musk sold a total of $9.85 billion in Tesla stock last month.  Some of the shares were sold in part to satisfy tax obligations related to an exercise of stock options.  Last week, Chinese ride-hailing app Didi announced that it would delist from the New York Stock Exchange and pursue a listing in Hong Kong.  Delisting means a Chinese company traded on an exchange — like the Nasdaq or New York Stork Exchange — would lose access to a broad pool of buyers, sellers, and intermediaries. In addition, rising political pressure in the U.S. and China is increasing the chance that Chinese stocks listed in New York might be forced off exchanges there.  While the Chinese government has yet to ban foreign listings outright, new rules announced this summer have discouraged what was once a rush of Chinese IPOs in the U.S.  Late Thursday; Fitch Ratings said Evergrande had not confirmed payment of its latest debt obligation, triggering a default. As of Friday afternoon, S&P Global Ratings did not have a statement and referred CNBC to its report Tuesday that said: “default looks inevitable for Evergrande.” Moody’s, another rating agency, did not respond to a request for comment.  “We should have been calling this a technical default for a long time already, but nobody dared,” Alicia Garcia-Herrero, Natixis’ chief economist for Asia-Pacific, said Friday.  Treasury yields moved slightly higher in early Friday trading, with the 10-year rising to 1.5145% and the 30-year moving up slightly to 1.8811%.

Yesterday we had another choppy morning session, but tech shares began to slide later in the day while defensive names held their ground.   However, it was nothing more than a hurry up and wait for the CPI number coming out before the bell today.  Economists expect the index to climb 0.7% from the previous month bringing the number up to a 6.7% inflation rate.  To put that in perspective, if estimates are correct, it will be the highest reading in nearly 40 years!  We will then check the temperature of the consumer with a reading on the sentiment, which estimates suggest declined slightly.  The numbers, of course, are important, but to traders, the only thing that matters is how the market reacts to the data.  On that measure, your guess is a good as mine. Of course, we have been able to ignore bad data lately, so who knows, we could set new records as we head into the weekend.

Trade Wisely,

Doug