Now we’re worried about rates? Most of 2023 has been characterized by the market’s willingness  (cognitive dissonance?) to move past the how high and how long narrative from the Fed. Even as prognostications were proven wrong time and again, equities have largely kept calm and carried. But we are in a brave new world as yields continue to climb and the light summer schedule is taking advantage.  One curious development is the Street’s seemingly sudden appreciation for the Fed’s sticktoitiveness. A week that’s already seen strong economic data fired another salvo with a jobless claims figure that saw a slight uptick but hardly suggested a labor market that’s softening. Throw in some positive earnings report and an increasingly bearish sentiment (see below) and the die was cast. Indices toyed with going better to start but per usual this week any strength was sold and that only picked up steam as the day progressed.

The forecast in markets today was mostly cloudy with a chance of showers as markets are stuck in choppy summer sideways trading with a moody bias.  Despite early gains, US indices were unable to hold in the positive and slipped below the breakeven line by the early lunch hour as volumes and activity remained depressed.  Afternoon trading saw barely an uptick in excitement as indices bounced around in modest loss territory and ultimately closed on the lows after July FOMC minutes release that saw headlines run rampant with a more hawkish commentary that “*MOST FED OFFICIALS SAW ‘SIGNIFICANT’ UPSIDE RISKS TO INFLATION.”  In reality, the minutes were a bit more measured than headlines would suggest.  And to that end, the CME probability for the September meeting barely budged holding tight around 88% that are expecting the Fed to hold next month.  Insert healthy debate and bringing it back to the hawks that Redburn Atlantic’s resident economist, Melissa Davies, continues to shout her belief that inflation will remain sticky in the 3-4% range, with rising energy prices a key driver, and that this will lead to two additional hikes (to 6%) yet ahead. 

Another case of good news is bad news today for stocks as retail sales came in strong with all metrics beating estimates. Today’s data confirms the US consumer remains strong and willing to spend, supporting a more restrictive Fed policy. This was reiterated by Fed Kashkari today, during a townhall where he would not commit to stopping rate hikes. However, he does see “positive signs” and will rely heavily on the data leading up to the next Fed meeting. Despite this move in retail sales, CME data still showing an 88% chance of a pause in September.

In the mid-August lull, when many families (and by association, investors) are on holiday, market action can be painfully scarce. However, today there was one major headline that got us excited and kept us engaged. “Rothschild and Co. is pleased to announce the completion of the merger of Redburn Ltd and Atlantic Equities.” Well, then. We were paying attention…..was it just us?!

Part two of the inflation data came today via the PPI and University of Michigan Sentiment (after yesterday’s CPI), and investors were made uncomfortable by more than just the heat of the summer sun. This week’s economic data pitted the two sides of the inflation argument against each other. Inflation bulls looked at the shelter component of CPI yesterday, which is turning negative, and implies downside inflation pressure. Meanwhile, bears were watching drivers of disinflation turning higher (S…

It’s the middle of August (or almost) and the next FOMC is still 41 days away but that has not deterred investor interest in inflation. Of course that has been a major driver of participant analysis, as well as Chairman Powell’s, and each CPI print is diagnosed for future probability of Fed action. Today’s datapoint was helpful in that it increased 0.2% m/m (inline with estimates) while the y/y increased 3.2% (better than expected while higher sequentially). Markets cheered the improvement and…

It was a ho hum sort of day, with limited eco data and no major earnings to report. China stole most headlines this morning as they continue to wade deeper into disinflation. China’s CPI and PPI decreased 0.3% and 4.4%, respectively, in July but limited reaction from markets make it seem like these moves are already priced in. Despite concerns over China’s economy, oil markets continue to push higher. WTI crude has made another 9m high and closed above $84 for the first time since November. EIA…

After a healthy rebound yesterday, stocks were back in the red this morning, weighed down by a multitude of macro headlines and earnings disappointments. Around midday a few “buy the dippers” showed up but it was too late to rescue the day completely. That said, the selling never got that strenuous. The SPX and CCMP both finished below the line in tandem with yields, which also retreated throughout the day. With yields reversing course, despite a large issuance this week and a stronger 3yr auct…

Markets decided to start off on a positive note today and orchestrated a drift higher as the summer doldrums seem to be kicking into high gear on this fine Monday. As earnings have taken a step back, Fed speakers have stepped forward. This morning began with the release of a NYT interview with NY Fed’s John Williams where the prominent takeaway was that while he sees the need to keep rates restrictive for some time, cuts may be warranted next year as inflation cools. A more hawkish-sounding B…

August is officially off to a bit of a wobbly start after conceding more than two percentage points of gains in its first week. One week certainly does not make a month, and surely we have not forgotten so quickly that we are coming off of three consecutive weeks of gains prior. However, despite the market’s better efforts to shake off the negative tone from the days preceding, Friday trading ultimately succumbed to the move lower across all major indices into the final bell. AMZN’s impressiv…