Well, that was something.
Inflation came in a bit below forecast, and then the rockets came out — the best one-day percentage rise for the S&P 500
since April 6, 2020, and the best one-day percentage rise for the Nasdaq Composite
since March 24, 2020.
If inflation really has truly peaked, there’s really just two questions — how fast will inflation come down, and will the Fed hikes designed to tame high prices drag the economy into a recession. “CPI peak is in,” declared Warren Pies, the founder of 3Fourteen Research, on Twitter. “The question is whether the data cools quicker than earnings deteriorate.”
Strategists at Citi say the next few weeks could be quite enjoyable. “In truth, it’s difficult to find any bearish catalysts between now and the December payrolls, CPI and FOMC,” said a team led by Jamie Fahy.
The bank put together a chart of all the downside CPI surprises since 2008, showing that typically, the equity market tends to rally for the following 60 days.
Markets tend to rise after downward CPI surprises.
“This all doesn’t mean that we think equities are all of a sudden in a bull-market again. [Earnings per share] is a major risk in the first half of 2023, but over the next 2-6 weeks, the market can painfully squeeze for the bears,” they say.
Citi, it should be said, had been recommending investors short the S&P 500, so they missed out on Thursday’s fun, though the team says their put recommendation was bought at a price cheap enough to still be slightly profitable. They said their model suggests the bulk of shorts were initiated at 3760, meaning these positions are now heavily underwater.
Fahy and the Citi team also advise going long U.S. Treasurys
and shorting the dollar vs. the Norwegian kroner
The Australian dollar, the New Zealand dollar, the British pound and the Swedish krona also have tended to rise when the S&P 500 climbs and the yield on the 10-year Treasury falls.
The rally appears to have legs, with U.S. stock futures
higher. Crude-oil futures
climbed as China took a step to loosen its zero-COVID rules. The dollar
was sharply lower vs. rivals.
China said it’s reducing the amount of time passengers will be required to undergo quarantine in a relaxation of its strict zero-COVID rules. However, in Beijing, parks were closed as officials responded to a wave of COVID-19 cases.
It’s Veterans Day, so there are no economic releases from the government, though the University of Michigan’s consumer sentiment report for November is due at 10 a.m. Eastern. The holiday also means a break in the earnings release calendar.
There are still no calls made on House or Senate control. The New York Times says there are 222 districts where Republicans won or lead, which is more than the 218 needed for House controlled. In the Senate, there are indications Democrats will take both Arizona and Nevada, which will mean the Georgia runoff wouldn’t determine control of the upper chamber.
CEO Elon Musk raised the specter of bankruptcy for Twitter, the social-media service he bought for $44 billion.
JPMorgan resumed coverage on Intel
with an underweight rating and a $32 price target, as the broker said it would take several years before Intel is able to reclaim technology leadership.
Cryptocurrency lender BlockFi said it was pausing withdraws in the wake of the turmoil at FTX, which had provided BlockFi with a $400 million credit facility. The Bahamas securities regulator froze the assets of FTX Digital Markets.
The White House said President Joe Biden will announce at the 27th U.N. Climate Conference that the U.S. Environmental Protection Agency is strengthening the agency’s proposed standards to cut methane and other harmful air pollutants from the oil and natural gas industry
The U.K. economy weakened by 0.7% in the third quarter, though that was partly due to the mourning period for the death of Queen Elizabeth II. The European Union forecast two quarters of negative growth, meeting the technical definition of recession.
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