It is surprising that the Webster Dictionary word of the year is gaslighting, considering how much attention inflation has received. It seems impossible to be anywhere without inflation being present, and therefore that may have been a more suitable word. With the next FOMC only 3.5 sessions away, there are two more datapoints that could sway the committee from their 50bp current leanings.
The consensus across the Redburn desk is that approximately 80% of corporate holiday parties likely take place this very evening (the last Thursday before Christmas/Hannukah obligations kick in). To that end, this View from 5th should have stellar readership (probably for the best). I’m confident in saying today felt like the holidays had truly arrived.
A lack of economic data during today’s session led to a choppy day in the markets as the S&P 500 closed down for the fifth day in a row. This will be the sixth time this has happened this year, as it holds just above the 100d avg. Making the biggest moves today were US treasury yields. The 10yr (-3.1%) closed at its lowest level since September.
Market causing you a bit of heartburn? Well do I have the drug for you…The afternoon perked up some on the ruling by the judge in the Zantac case to grant summary judgement ie dismiss the case.*** While not binding on the Ninth Circuit, it was a stunning rebuke of the plaintiffs case and unequivocally good news for the parties involved ie nearly everyone in the pharma/distribution channel.
Swimming amongst a ‘sea of red’ as they say.. A decidedly down day for almost everything the eye can see, that is unless you are the USD (DXY strengthening back above 105) or the VIX (+8.8%). Needless to say, breadth was heavily skewed to the negative with ~95% of SPX down on the day, which also means that the SPX is back below the 4k/200dma.
It’s complicated trying to slow down the economy, and therefore inflation, and the Fed is finding that. Investors/ Powell have received mixed signals this week from the busy economic data that has been released. While the ISM manufacturing print on Thursday fell below 50 for the first time since May 2020, amid a sequentially declining PCE, JOLTS and Nonfarm payrolls continue to show demand for workers.
Markets fought their way back from the lows today to hold onto the gains from yesterday’s post Powell rally. Another round of economic data was the focal point throughout the day as PCE and ISM reported for the month of October. PCE core data MoM, which Powell has stated is his main metric for current inflation, posted a sequential decline.
Was that Prince playing in the background during Powell’s appearance today or was my mind playing tricks on me? It was a tale of two sessions…pre-Jerome and post. One could also say it was a case of two Jeromes, the one we got back at Jackson Hole where he did his best Marcellus Wallace impression, and the far softer version we got today.
Markets were under water for the majority of the US session in Tuesday trading despite a rebound overnight as China re-opening speculation/fallout from unrest continues to unfold. There was little in the way of market impetus for today and, therefore, little conviction as well with breadth split ~55/45 up vs down.
While not the greatest of weeks for trading activity, the Thanksgiving holiday provides the Street a nice little mini-break before gearing up for the end of year home stretch. Equities have been “on one” as the saying goes since hitting their yearly low mid-October. Whether they can continue that momentum for what’s left of 2022 will depend on factors that have little to do with the fundamental health of the companies themselves.