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,
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).
Well, if you wanted to pack more into one week you couldn’t. Take a quick look
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.
THIS WEEK'S UPDATE
December 12, 2022|