Market Drama

Welcome to your weekly dose of Market Drama.

• October CPI numbers are much better than expected. The headline inflation number, which includes energy and food prices, came in at 7.7% and was expected to be 7.9%.
• The core inflation number that excludes energy and food (which is stickier) is at 6.3%, better than the 6.5% that the market expected. 
• We are seeing encouraging signs:
  • U.S. vehicle prices dropped 2.4%.
  • Medical care services were down 0.6%.
  • The Dow is up 4% on a weekly basis.
  • Nasdaq is up almost 6%. 
• The S&P is up almost 5%. Most importantly, the S&P was up 5.5% on one day. There have only been 23 trading days since 1950, where we saw a 5% up move.
• The Federal Reserve is trying to hike interest rates to squash inflation. When you get a better than expected inflation number it means the market is pricing. The Fed is not going to have to hike interest rates as much, meaning that stock valuations are not going to hit as hard.

What to look out for this week? 

• Historically, gridlock in Washington tends to be good for stocks.
• We get producer price index (PPI) numbers on Tuesday. That gives us another inflation reading for October from the seller’s perspective rather than the consumption perspective.
• We also get housing stats on Thursday and listing home sales on Friday. These give us another reading on the outpouring housing market, one of the areas we’re keeping a close eye on – considering it’s such a bellwether for the overall economy.

– Andres