December 9, 2022
Good morning,
The light eco-data week that I suggested might translate into a quiet market week this week was clearly wrong. The light data part was right, but the S&P 500, Nasdaq Composite, and Russell 2000 are down, so far this week, -2.64%, -3.30%, and -3.92%, respectively. International Indexes are off too, but by well less than half that of their U.S. counterparts.
The light data part of this week ended at 8:30 am ET this morning when the PPI (Producer Price Index) for November was published. The PPI and CPI (Consumer Price Index) are inflation indicators, and the Fed uses CPI specifically to measure inflation. Back in the day, CPI used to be published first and PPI was a bit of an afterthought. About 4yrs ago, their release schedules reversed (I have no idea why), and the less important PPI has led. The two numbers are loosely correlated and move in parallel usually, but they are not mimics.
Next week’s CPI will be released the day ahead of the Fed meeting. It is a highly anticipated number that will likely move markets. Traders seem to be looking at today’s PPI as a hint of what might come next week. Before today’s print, Futures were up +0.5%. The headline PPI number was +0.3% vs. expected +0.2% – a tad hot (translation: higher inflation indication than hoped for). Future fell 1% on the print.
Thirty minutes later, Futures are off -0.25% and the event is in the rear-view mirror. I wouldn’t be surprised to see prices crawl back to unchanged on the day. Next week awaits. Have a good weekend.
Be well,
Mike