Special CPI Prep | Market Rundown
GS, JPM, BOA
Market Rundown:
Good Morning. The dollar is down 60 bps. Bonds are stronger uniformly. Stocks are up about 65 bps so far. Gold is unchanged. Silver is down 4 cents after being up all night. Crude is up $1.35. Nat Gas is up 8 cents. Grains are stronger and Crypto is up about 1.1%.
CPI EXPECTATIONS
August CPI (consensus -0.1%; Prior 0.0%)
Core CPI (consensus 0.3%; Prior 0.3%)
To Be Released 08:30 ETSince September 8th
Many people are plowing back into stocks and out of Silver shorts in anticipation of the disinflation train leaving the station. Maybe it is, who knows. September 8th when Powell addressed the Cato institute is likely the event that coincided with stocks turning higher. The Fed chairman talked tough once again as he had done at Jackson Hole, but this time stocks did not seem to care as much.
Powell May Not Be Pivoting Yet, But Stocks Sure Did…
Where a week ago markets had decided to take the Fed at its word that they would fight inflation to the point of 401k extinction; Since Sept 8, stocks are no longer believers in the path currently taken. Instead they are now increasingly focused on the potential for an inflationary data point that comes in lower than expected and placing their hopes in that being the moment where Powell pivots from raising 75 bps to something significantly less.
We’ve stated our own opinion that it will take at least 2 major inflationary drops spaced out over a couple months among other triggers for a change of monetary heart for Powell to consider pivoting here. But there are shades of gray as far as how the market behaves leading up to that point for sure.
So, if CPI should come in softer than expected, assume stocks and Silver ( CTAs have been short as a stock market hedge believe it or not) and everything else that would benefit from a change in monetary policy will be bought by CTA participants and then some institutions. If CPI should come in hotter than expected, assume these CTA types will still be buyers, just less. What remains to be seen is if there are any sellers around today.
We do feel this is a redo of what happened in June through August where hope sprung eternal and stocks rallied into Jackson hole only to be crushed by tough talk. Hopes are being pinned on this CPI number above and beyond the norm for some sort of inflationary relief.
The market will remain volatile and trade-able for sure on a day to day basis, but macro views are foggy right now.
Also keep in mind the increasingly good news coming out of Ukraine as a factor driving things higher too. Stocks will ramp on an end to this war. But what Powell will do upon news like that is not so obvious. Stocks have discounted a recession and are now Since Sept 8th discounting a recovery as focus shifts away from inflation.
Read Zerohedge’s CPI Preview post for more specifics.
CPI Excerpts Below:
Goldman, JPM, and BOA
More at bottom 