As we approach today’s opening bell, stock futures have surged, indicating a very strong start for the major U.S. indexes. Most of the jump reflected another report showing inflation might be easing. Specifically, the Producer Price Index (or PPI, which tracks wholesale prices) was up 0.2% in October, versus expectations of a 0.4% increase. On a 12-month basis, the PPI increased 8%, versus an 8.4% rise in September, and well off the 11.7% pace reported back in March. Also, although earnings season is winding down, investors received more positive news when Walmart (WMT) and Home Depot (HD) released better-than-expected financials earlier today.
Stocks posted impressive gains after last Thursday’s Consumer Price Index for October came in better than anticipated. The favorable report rekindled hopes that the Federal Reserve could ease up on its restrictive monetary policy. However, Fed Governor Christopher Waller, during a conference in Sydney, Australia, commented that the central bank would need to see more evidence of inflation coming down before it even starts to consider letting up on the brakes. He added that “This isn’t ending in the next meeting or two.” On the other hand, Fed Vice Chair Lael Brainard, regarded as more of a “dove” on tough interest rate policies, has indicated she sees a slowing of the pace of hikes in the near future.
Equities moved lower Monday, with the Dow Jones Industrial Average down 211 points, or 0.6%, the S&P 500 lost 35 points (0.9%), and the tech-focused NASDAQ fell 127 points (1.1%). Nearly all of the major market sectors ended in the red, with the largest losses sustained by consumer discretionary (-1.7%), financials (-1.5%) and utilities (1.3%). The only group to emerge unscathed was healthcare stocks, which ended the day just above breakeven.
Looking ahead to the rest of the week, retail sales data for October are due to come out Wednesday morning. There, the consensus is looking for a 1.2% increase versus September’s reading, which came in flat. The same day, last month’s industrial production report is also due, where a slight decrease is expected. Also, the National Association of Home Builders’ index for November will be released, which will also likely show a decrease. Further news from the housing market will arrive Thursday, with building permits and home starts widely anticipated to show declines in the wake of higher mortgage rates. The same goes for October’s report on existing home sales due out Friday. – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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