A negative GDP, hotter than expected jobs market, layoff reports, company downgrades, and currency fluctuations are just some of the issues creating the wide-ranging chop in the indexes. This morning we wait for the FOMC favored inflation report, the Core PCE, after learning the Eurozone hit a new 10% inflation record. Though we are oversold in the short-term and should watch for a possible relief rally, the uncertainty of the path forward will make it difficult for the bulls to find much inspiration and gives the bears very little reason to back off. Expect the challenging price action to continue in the days ahead with the 4th quarter earnings season rapidly approaching.
Asian markets closed mostly lower while we slept, reacting to the SP-500 new year low. However, with European inflation soaring to 10% and the BOE back on the QE train, the eurozone market see modest gains across the board. U.S. futures also point to a bullish open as we wait for the Personal Income and Outlays report. Plan for price volatility and watch out for those big point intraday whipsaws in this wide-ranging chop zone.
W have a very light day on the Friday earnings calendar with only one CCL with any noteworthiness.
News & Technicals’
Eurozone inflation spikes to a record 10%, adding pressure on the ECB to act. Moreover, the reading showed price increases broadening out from volatile food and energy prices into nearly all segments of the 19-member bloc’s economy. Energy prices rose 40.8% year-on-year, up from 38.6% in August, followed by food, alcohol, and tobacco at 11.8%, up from 10.6% last month. In addition, federal student loan borrowers whose loans are not held by the U.S. Department of Education will no longer be able to consolidate for forgiveness as of Thursday. Nike’s first fiscal quarter revenue was up 4% to $12.69 billion, beating estimates. However, Nike’s net income was down 22% to $1.5 billion. The sneaker giant said inventory on its balance sheet was up 44% to $9.7 billion, driven by ongoing supply chain issues.
British Prime Minister Liz Truss and Finance Minister Kwasi Kwarteng met the U.K.’s independent monetary watchdog for talks on Friday. The talks followed a turbulent week for the U.K. economy, including a slump in the pound and gilt yields soaring. The Senate voted 72 to 25 to pass a funding bill to avert a federal shutdown and fund government operations through mid-December. The bill now goes to the House, where it’s expected to pass later this week. It includes an additional $12 billion in aid for Ukraine, $1 billion in heating and utility assistance, and emergency aid for natural disasters.
A negative GDP reading and hotter-than-expected jobless claims quickly reversed the Wednesday rally as the wide-ranging chop filled with uncertainty plagues the indexes. While the FOMC works to reduce inflation, Congress continues to burrow and spend like drunken sailors. This morning Europe reported a new record high of 10% inflation as we wait here in the U.S. for the FOMC favorite indicator, the Core PCE numbers, before the bell. The downgrade of APPL put a lot of pressure on Nasdaq, and I suspect we will see more companies downgrades as we head for the 4th quarter earnings season. Though we remain oversold in the short-term, suggesting a relief rally is due to the pressure in bond yield, and currency fluctuations will likely keep volatility challenging in the days and weeks to come.
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