Connect with us

Economics

Inflation Is On Today’s Docket As Fed Gears For Taper

Today we will get the latest reading on inflation as the Fed tapering QE in November seems to be a foregone conclusion by the markets…

Share this article:

Published

on

This article was originally published by Real Investment Advice

Today we will get the latest reading on inflation as the Fed tapering QE in November seems to be a foregone conclusion by the markets. At this point, today’s CPI report, tomorrow’s PPI release, and other inflation data, along with continuing improvement in the labor markets are key factors for investors to watch. It is these economic stats that will help guide the Fed’s pace of reducing QE. JOLTS information, discussed below, provides more evidence the labor market is healing nicely.

What To Watch Today

Economy

  • 7:00 a.m. ET: MBA Mortgage Applications, week ended Oct. 8 (-6.9% during prior week)
  • 8:30 a.m. ET: Consumer price index, month-over-month, September (0.3% expected, 0.3% during prior month)
  • 8:30 a.m. ET: CPI excluding food and energy, month-over-month, September (0.2% expected, 0.1% during prior month)
  • 8:30 a.m. ET: CPI year-over-year, September (5.3% expected, 5.3% during prior month)
  • 8:30 a.m. ET: CPI excluding food and energy, year-over-year, September (4.0% expected, 4.0% during prior month) 
  • 8:30 a.m. ET: Real Average Hourly earnings, year-over-year, September (-1.1% during prior month)
  • 8:30 a.m. ET: Real Average Weekly earnings, year-over-year, September (-1.4% during prior month)
  • 2:00 p.m. ET: FOMC meeting minutes

Earnings

  • 6:15 a.m. ET: BlackRock (BLK) is expected to report adjusted earnings of $9.39 per share on revenue of $4.84 billion
  • 7:00 a.m. ET: JPMorgan Chase (JPM) is expected to report adjusted earnings of $2.97 per share on revenue of $29.86 billion
  • 7:00 a.m. ET: First Republic Bank (FRCis expected to report adjusted earnings of $1.84 per share on revenue of $1.27 billion 
  • 8:25 a.m. ET: Delta Air Lines (DALis expected to report adjusted earnings of 17 cents per share on revenue of $8.45 billion 

Market Loses Support Yesterday On Weak Trading

Yesterday, the market traded sloppily all day eventually losing the support at the 100-dma. Such keeps the market at risk of a retest of recent lows. As noted yesterday, with weekly and monthly “sell signals” in place, a longer, and potentially deeper, correction period is possible.

If the market is going to maintain its bullish bias, it needs to hold support at the recent lows and rally back above current resistance by next week. A failure to do so, and we will likely see the recent lows taken out and a test of the 200-dma becomes a high probability event.

Some caution is advised until we get through “options expiration” this Friday.

JOLTs

Per the JOLTs report, the number of job openings fell for the first time since April. The number of openings in August was 10.43 million versus expectations of over 11 million. This may be a signal the labor market is getting better, or at least less bad, at matching workers with openings. The quits rate rose to a record 2.9% of the workforce. Typically workers quit jobs when they have confidence in finding a better, higher-paying job. Prior to Covid, the quit rate was around 2.2%.

As shown below the number of openings is still well above normal levels. The second graph below, the Beveridge Curve, highlights the anomaly. At the current unemployment rate of 5.2%, we should expect a job openings rate of about half of what it is. The million-dollar question is whether employers truly have as many job openings as advertised or are there too many unemployed workers either not trained for certain jobs or not willing to accept offered wages.

Can Markets Maintain Support?

Is The 50DMA Trying To Tell Us Something?

As we show below circled in red, the 50dma is turning lower for only the second time since the market rebounded in April of 2020. In late October and early November of last year, the 50dma turned lower for six days on a relatively steep 7.5% decline. The current market decline causing the 50dma to fall is only a 4% decline but its duration is almost twice as long as the prior one.

Used Car Prices En Fuego

After a brief rest bit, used car prices rose again in September back to all-time highs as shown in the Manheim Used Vehicle Value Index below. The accompanying report notes: “According to Cox Automotive estimates, total used vehicle sales were down 13% year-over-year in September.”  Prices rising with sales falling clearly points to a lack of supply.

Per the report: “Using a rolling seven-day estimate of used retail days’ supply based on vAuto data, we see that used retail supply peaked at 114 days on April 8, 2020. Normal used retail supply is about 44 days’ supply. It ended September at 37 days, which is below normal levels. We estimate that wholesale supply peaked at 149 days on April 9, 2020, when normal supply is 23. It ended September at 18 days.”

 

The post Inflation Is On Today’s Docket As Fed Gears For Taper appeared first on RIA.

Share this article:

Economics

US markets scale fresh highs on upbeat earnings, housing data

S P 500 and Dow Jones closed at record highs for the second consecutive day on Tuesday October 26 while Nasdaq rallied as quarterly results kept the…

Share this article:

S&P 500 and Dow Jones closed at record highs for the second consecutive day on Tuesday, October 26, while Nasdaq rallied as quarterly results kept the markets in high spirits.

The S&P was up 0.18% to 4,574.79. The Dow Jones Industrial Average rose 0.04% to 35,756.88. The NASDAQ Composite Index gained 0.06% to 15,235.71, and the small-cap Russell 2000 was down 0.72% to 2,296.08.

Traders were further encouraged by the Commerce Department’s positive economic data, which showed new home sales jumped 14% to 800,000 units in September, the highest level since March. However, higher home prices still remained a major worry.

Energy and utility stocks led gains on the S&P 500 index, while industrials and communication services stocks were the bottom movers. Nine of the 11 sectors of the index stayed in the positive territory.

General Electric Company (GE) stock rose 2.19% in intraday trading after reporting its third-quarter earnings. Its adjusted profits were 57 cents per share, above the analysts’ estimates of 43 cents a share. However, its revenue fell by 1% YoY to US$18.4 billion in the quarter.

Shares of United Parcel Service, Inc. (UPS) were up 7.38% after reporting better-than-expected results. Its revenue increased by 9.2% YoY to US$23.2 billion in Q3, FY21.

Lockheed Martin Corporation (LMT) stock tumbled 12.48% after it trimmed its revenue forecast. Its net sales fell to US$16.02 billion in Q3 from US$16.49 billion in the year-ago quarter. In addition, it lowered its revenue forecast for FY2021 due to supply woes.

In the energy sector, Exxon Mobil Corporation (XOM) surged 2.30%, EOG Resources, Inc. (EOG) rose 1.39%, and Occidental Petroleum Corporation (OXY) gained 1.28%. Devon Energy Corporation (DVN) and Baker Hughes Company (BKR) rose 2.37% and 2.88%, respectively.

In utility stocks, NextEra Energy, Inc. (NEE) increased by 1.57%, Southern Company (SO) jumped 1.03%, and Exelon Corporation (EXC) rose 1.10%. DBA Sempra (SRE) and AES Corporation (AES) advanced 1.24% and 1.59%, respectively.

In the communication sector, Alphabet Inc. (GOOGL) rose 1.33%, Facebook, Inc. (FB) fell 4.52%, and Twitter Inc. (TWTR) declined 1.27%. Match Group, Inc. (MTCH) and News Corporation (NWS) plummeted 2.51% and1.17%, respectively.

Also Read: General Electric Co (GE) revises guidance upward after Q3 profits

Also Read: Raytheon (RTX) raises sales guidance, 3M (MMM) narrows EPS outlook

Nine of the 11 sectors of the S&P 500 index stayed in the positive territory.

Also Read: Eli Lilly (LLY), Novartis (NVS) profits up on robust sales growth

Futures & Commodities

Gold futures were down 0.70% to US$1,794.10 per ounce. Silver decreased by 1.55% to US$24.212 per ounce, while copper fell 0.71% to US$4.4958.

Brent oil futures traded flat at US$85.44 per barrel and WTI crude was up 0.85% to US$84.47.

Bond Market

The 30-year Treasury bond yields were down 2.06% to 2.042, while the 10-year bond yields fell 1.55% to 1.610.

US Dollar Futures Index increased by 0.15% to US$93.953.






Share this article:

Continue Reading

Economics

Failure To Bury “Transitory” Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Failure To Bury "Transitory" Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Authored by Tom Ozimek via The…

Share this article:

Failure To Bury “Transitory” Inflation Narrative Risks Sparking Biggest Fed Error In Decades: El-Erian Warns

Authored by Tom Ozimek via The Epoch Times,

Failure on the part of the Fed to toss its stubbornly-held “transitory” inflation narrative and act more decisively to rein in persistently high price pressures raises the likelihood the central bank will need to slam on the brakes of easy money policies much more forcefully down the road, risking avoidably severe disruption to domestic and global markets, according to Queen’s College President and economist Mohamed El-Erian.

In stark contrast with the mindset of corporate leaders who are dealing daily with the reality of higher and persistent inflationary pressures, the transitory concept has managed to retain an almost mystical hold on the thinking of many policy makers,” El-Erian wrote in an Oct. 25 op-ed in Bloomberg.

“The longer this persists, the greater the risk of a historic policy error whose negative implications could last for years and extend well beyond the U.S.,” he argued.

Consumer price inflation is running at around a 30-year high and well beyond the Fed’s 2 percent target, to the consternation of central bank policymakers who face increasing pressure to roll back stimulus, even as they express concern that the labor market hasn’t fully rebounded from pandemic lows.

The total number of unemployed persons in the United States now stands at 7.7 million, and while that’s considerably lower than the pandemic-era high, it remains elevated compared to the 5.7 million just prior to the outbreak. The unemployment rate, at 4.8 percent, also remains above pre-pandemic levels.

At the same time, other labor market indicators, such as the near record-high number of job openings and an all-time-high quits rate—which reflects worker confidence in being able to find a better job—suggest the labor market is catching up fast. Businesses continue to report hiring difficulties and have been boosting wages to attract and retain workers. Over the past six months, wages have averaged a gain of 0.5 percent per month, around twice the pace prior to the pandemic, the most recent jobs report showed.

Besides measures of inflation running hot, consumer expectations for future levels of inflation have hit record highs, threatening a de-anchoring of expectations and raising the specter of the kind of wage-price spiral that bedeviled the economy in the 1970s. A recent Federal Reserve Bank of New York monthly Survey of Consumer Expectations showed that U.S. households anticipate inflation to be 5.3 percent next year and 4.2 percent in the next three years, the highest readings in the history of the series, which dates back to 2013.

El-Erian, in the op-ed, argued that the Fed has “fallen hostage” to the framing that the current bout of inflation is temporary and will abate once pandemic-related supply chain dislocations will abate.

“It is a framing that is pleasing to the ears, not only to those of policy makers but also those of the financial markets, but becoming harder to change,” he wrote.

“Indeed, the almost dogmatic adherence to a strict transitory line has given way in some places to notions of ‘extended transitory,’ ‘persistently transitory,’ and ‘rolling transitory’—compromise formulations that, unfortunately, lack analytical rigor given that the whole point of a transitory process is that it doesn’t last long enough to change behaviors,” he wrote.

El-Erian said he fears that Fed officials will double down on the transitory narrative rather than cast it aside, raising the probability of the central bank “having to slam on the monetary policy brakes down the road—the ‘handbrake turn.’”

“A delayed and partial response initially, followed by big catch-up tightening—would constitute the biggest monetary policy mistake in more than 40 years,” El-Erian argued, adding that it would “unnecessarily undermine America’s economic and financial well-being” while also sending “avoidable waves of instability throughout the global economy.”

His warning comes as the Federal Open Market Committee (FOMC)—the Fed’s policy-setting body—will hold its next two-day meeting on November 2 and 3.

The FOMC has signaled it would raise interest rates sometime in 2023 and begin tapering the Fed’s $120-billion-a-month pandemic-era stimulus and relief efforts as early as November.

Some Fed officials have said that, if inflation stays high, this supports the case for an earlier rate hike. Fed Governor Christopher Waller recently suggested that the central bank might need to introduce “a more aggressive policy response” than just tapering “if monthly prints of inflation continue to run high through the remainder of this year.”

“If inflation were to continue at 5 [percent] into 2022, you’ll start seeing everybody potentially – well, I can’t speak for anybody else, just myself, but – you would see people pulling their ‘dots’ forward and having potentially more than one hike in 2022,” he said in prepared remarks to Stanford Institute for Economic Policy Research.

The Fed’s dot plot (pdf), which shows policymakers’ rate-hike forecasts, indicates half of the FOMC’s members anticipate a rate increase by the end of 2022 and the other half predict the beginning of rate increases by the end of 2023.

For now the market is pricing in a more hawkish Fed response in 2022

Tyler Durden
Tue, 10/26/2021 – 16:49









Author: Tyler Durden

Share this article:

Continue Reading

Economics

Kimberly-Clark Forecasts Price Increases as Inflationary Pressures Accelerate, Supply Chain Disruptions Worsen

In yet another sign that inflation pressures are proving to be a lot more than just transitory, Kimberly-Clark (NYSE: KMB)
The post Kimberly-Clark Forecasts…

Share this article:

In yet another sign that inflation pressures are proving to be a lot more than just transitory, Kimberly-Clark (NYSE: KMB) — the maker of staple household goods such as Kleenex tissues, Huggies diapers, tampons, and toilet paper— has sounded the alarm over impacts of rapidly accelerating prices and supply chain headaches.

Shares of Kimberly-Clark tanked to a six-month low after the company cut its annual forecast due to rising inflation and supply chain disruptions. Third quarter net income stood at around $469 million, which equates to approximately $1.39 per share, against the $472 million— or $1.38 per share reported during the same period one year ago. The company reported an adjusted earnings per share of $1.62, which failed to meet consensus estimates calling for $1.65.

“Our earnings were negatively impacted by significant inflation and supply-chain disruptions that increased our costs beyond what we anticipated,” said Kimberly-Clark CEO Mike Hsu. As a result, Hsu warned that the company will be implementing price increases across a variety of goods in an effort to offset implications of supply chain woes and subsequent acceleration in commodity costs. “We are taking further action, including additional pricing and enhanced cost management, to mitigate these headwinds as it is becoming clear they are not likely to be resolved quickly,” he added.

However, Kimberly-Clark is far from being the only households goods company to sound the alarm over the effects of global supply chain disruptions and a persistent inflationary macroeconomic environment. Recall, General Mills, P&G, among others, have all issued warnings about impending cost-push inflation, as companies contend with margin compression that is further exasperated by ongoing labour shortages.


Information for this briefing was found via Kimberly-Clark. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Kimberly-Clark Forecasts Price Increases as Inflationary Pressures Accelerate, Supply Chain Disruptions Worsen appeared first on the deep dive.



Author: Hermina Paull

Share this article:

Continue Reading

Trending