The Week On Wall Street Recession fears and concerns that the Fed may consider a longer rate-hike cycle sent stocks lower for the week. The Dow Jones Industrial Average dropped 2.77%, while the Standard & Poor’s 500 fell 3.37%. The Nasdaq Composite index lost 3.99% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dipped 1.09%. Stocks were under pressure much of the week due to resurgent recession fears and concerns that Fed rate hikes may go higher for longer than current expectations. There was some good news last week on the economic front and out of China, which started to loosen COVID restrictions. But it was a week where good news was considered bad news, as any signs of economic resilience stoked worries of a longer rate-hike cycle. Higher continuing jobless claims signaled economic softness, triggering a Thursday rally. But stock prices were under pressure Friday following a disappointing Producer Price Index (PPI) number. Producer Inflation Disappoints The Labor Department reported that the PPI rose 0.3% in November and 7.4% from a year ago. Though wholesale prices inflation rose at the slowest 12-month pace since May 2021, they exceeded market expectations. Price pressures were felt most in the services sector, where costs rose 0.4% after a 0.1% increase the month before. Goods inflation eased to a rise of 0.1%, a sharp drop from its October gain of 0.6%. Though the PPI number dented the optimism around cooling inflation, November’s PPI report represented an improvement from its 11.7% peak in March. This Week: Key Economic Data Tuesday: Consumer Price Index (CPI). Wednesday: Federal Open Market Committee (FOMC) Meeting Announcement. Thursday: Jobless Claims. Retail Sales. Industrial Production. Friday: Purchasing Managers’ Index (PMI) Composite. This Week: Notable Companies Reporting Earnings Thursday: Adobe, Inc. (ADBE). Friday: Darden Restaurants, Inc. (DRI). Final Thoughts Well, if you wanted to pack more into one week you couldn’t. Take a quick look below.
So, as I’ve been saying, the Superbowl of financial data is this week and you get a halftime show of the FTX crook Sam Bankman-Fried potentially testifying before Congress. Seems fitting, a room full of high horse charlatans grilling another charlatan. Should make for great memes and television. As if that isn’t enough Congress must agree on a budget by Friday to avoid a partial government shutdown. The most likely outcome of this is for the current Congress to punt to the new Congress in early January with a Continuing Resolution. Back to the markets. Everyone in the media is bearish and looking for a recession. So, most people are piled up on the bear side of the CPI and Fed events this week. If we see a cooler number than anticipated on inflation it will be off to the races for at least a short period of time. If the number is a little higher than expected I would expect some decline, but not a huge meltdown as a fair amount of negativity is already priced in. The data really doesn’t point to this, but any anomaly can happen over a one-month period. Even the former Fed chairwoman and current Treasury Secretary, Janet Yellen, told 60 Minutes last night inflation was coming down and she thought we would avoid a big recession. Current Fed chairman Jerome Powell will have to talk somewhat tough on Wednesday as he must make sure inflation continues its march downward and doesn't come back to life because they did 80% of the job. It will be a busy week ahead before the data slows down for the holidays. Stay tuned and have a great week as you prepare for the holidays ahead.
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THIS WEEK'S UPDATE
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December 12, 2022
