Indices
- Dow 43,828, -814 or -1.82%.
- Nasdaq 19,926, +67 or +0.34%.
- S&P 6,0951, -39 or -0.64%.
- MSCI EAFE 2319.05, -35.91 or -1.53%.
- USD10Y 4.399%, +24.8bp or +5.97%.
- WTI Crude $71.09/bbl, +$3.93 or +5.85%.
Markets Consolidate, Digest Inflation
It was a slow week as markets consolidated and examined retail and wholesale inflation data, neither of which demonstrated progress in the battle to slow the growth of prices. The headline Consumer Price Index ticked up a tenth of a percent month-over-month and the Core data (ex-food and energy) was unchanged from the month prior. However, a major improvement was seen in shelter inflation, which has a 35% weighting in the CPI index and fell below 5% for the first time in over two and a half years. On the wholesale side, the headline Producer Price Index number increased more than expected, up 2 tenths month-over-month, yet the Core PPI decreased month-over-month as well as year-over-year. In summary, November inflation data was a mixed bag, and the data is demonstrating the difficulty of attaining the desired 2% goal. The stunted progress on inflation, however, is not expected to deter the Fed from cutting interest rates by 25pb when they complete their meetings this Wednesday; the CME Fed Watch Tool currently assigns a 95.3% probability of a quarter point cut.
Mentioned in this space last week as something to monitor; the narrow breadth of the market. That trend continued last week as for the second consecutive week the majority of S&P sectors traded down each trading session.
The Upcoming Week: Dec 16 – Dec 20
The headline event this week is the Fed’s interest rate decision on Wednesday. The futures markets have priced in a 96% probability of a 25bp cut. However, due to recent strong/inflationary economic data the chances for another cut at the end of January have decreased to only 18.5%.
In addition to the FOMC decision, East Coast manufacturing data is on the docket along with U.S. S&P Flash Services and Manufacturing PMIs for December. The second revision of Q3 GDP will be released and on Friday, the Fed’s preferred gauge of inflation, the Personal Consumption Expenditure report will be published.
Economic Calendar
- Monday – December Empire State Manufacturing, December Flash Manufacturing and Services PMIs. Earnings: N/A.
- Tuesday – November Retail Sales. Earnings: N/A.
- Wednesday – FOMC interest rate decision, Fed Chair Powell Press Conference. Earnings: Micron Technology (MU), General Mills (GIS).
- Thursday – Initial Jobless Claims, Q3 GDP (second revision), December Philadelphia Fed Manufacturing Survey. Earnings: FedEx (FDX), Nike (NKE).
- Friday – November Personal Consumption Expenditure, December Consumer Sentiment Earnings: N/A.
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