Never before have we seen so much excitement over 7.7 percent inflation when the Fed’s target is 2.0 percent.
The following charts courtesy of StockCharts.Com tell the story.
S&P 500 +5.54 Percent
Nasdaq 100 Index +7.49 Percent
ARKK +14.52 Percent
Kathie Wood’s Ark fund rallied a whopping 14.52 percent. However those shares are so beat up the rally barely registers.
Gold +2.33 Percent
Gold has had three big days in the last five, the other two were flat. The last five days were as better for gold than the last five days for the S&P 500 or Nasdaq 100 index.
Heaven help anyone in leveraged short ETF
SQQQ Ultra Short Nasdaq -22.01 Percent
TZA Small Cap 3X Short -18.22 Percent
What Happened?
The CPI was unexpectedly good and stocks were beaten up looking for an excuse to rally. Short covering was massive.
I discussed the CPI this morning in CPI Jumps Another 0.4% in October Led by Shelter and Energy
Bloomberg Econoday Consensus
Economists at Bloomberg Econoday expected a 0.7 percent overall rise, and a 0.5 percent rise excluding food and energy.
The results were much better than expected, but not exactly great, or even good.
CPI up 0.4 percent is normally not good news. Nor is 7.7 percent year over year.
- Actual was 0.4 month over month vs 0.7 expected.
- Year over year was 7.7 vs 8.0 expected
- Core was 0.3 vs 0.5 expected.
Question of the Day
Q: Did the beat the street numbers put a Fed pivot back in play?
A: No, not really.
The odds of a three-quarter point hike fell from 43.2 percent to 14.6%. That’s it. A half-point hike was expected by the Fed both before and after the CPI report, just a little more confidently now.
Bond Yields Crash
Bond yields crashed the most in over a decade.
- The yield on the two-year Treasury note fell to 4.32% from 4.63%, the biggest one-day decline since 2008
- The 10-year yield fell to 3.83% from 4.15%, the biggest one-day drop since 2009.
US Dollar Index
The US dollar index fell which in isolation is good for stocks and gold but bad for inflation because it makes imports more expensive.
Q: Has the dollar peaked?
A: Possible, and perhaps likely
I am still skeptical the Fed gets in all the hikes that it plans. We are marching not towards a soft landing but a recession.
And a recession rates to be a poor environment for stocks. So don’t think today will have a lasting impact. It’s highly unlikely the stock market bottom is in.
This post originated at MishTalk.Com.
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link to zerohedge.com
To measure labor market slack, economists have long relied on the number of job openings divided by the number of unemployed people. that this ratio outperforms the traditional unemployment rate when it comes to forecasting inflation. A higher ratio of job openings to unemployment makes it more challenging for employers to find workers and easier for workers to find jobs, thus indicating that the labor market is tighter. The ratio of job openings to unemployment is over 1.85 today, suggesting that there are nearly two job openings for every unemployed individual looking for a job. This ratio is considerably higher than its pre-pandemic level and higher than the historical norm of about 0.7 since 2000.
But if the job openings to unemployment ratio is indicative of a very tight labor market, then why does real wage growth continue to be so tepid? One potential reason for this anomaly is that the labor market is not actually that tight — that is, the standard measures of slack might not be telling the whole story. There may be several reasons why the conventional measure may be a poor proxy for the degree of labor market tightness. For example, when looking to hire workers, employers often do more than post a job vacancy. They can alter their hiring standards for a given position by adjusting specific requirements for a particular job, or they can fill their positions faster by varying the amount of resources they dedicate to recruiting. Hence, simply looking at job openings may be problematic. Existing evidence suggests that the intensity with which employers fill their job openings varies over the business cycle. That is, employers tend to put in the most effort into filling their vacancies when the economy is expanding and less during downturns and in times of economic uncertainty.
Another reason the traditional economic metric may fail to capture the true degree of labor market tightness is that the number of unemployed people may be a poor proxy for the availability of workers to fill vacant jobs. For example, many applicants to job openings are already employed. Yet the standard metric does not take this into account. Thus if there is a significant number of these workers, then the standard metric would overestimate the tightness of the labor market. Indeed, LinkedIn’s data on active job seekers suggest this to be the case.
By John Butters | November 7, 2022
The (blended) earnings growth rate for the S&P 500 for the third quarter is 2.2%, which would mark the eighth consecutive quarter of (year-over-year) earnings growth reported by the index. Looking at the fourth quarter (Q4 2022), what are analyst expectations for year-over-year earnings? Do analysts believe earnings growth will continue in the fourth quarter of 2022 also?
The answer is no. Over the past week, the aggregate earnings growth rate for Q4 2022 changed from slight year-over-year earnings growth on October 28 (+0.2%) to a year-over-year earnings decline today (-1.0%).
However, expectations for earnings growth for Q4 2022 have been falling over the past few months. On June 30, the estimated earnings growth rate for Q4 2022 was 9.1%. By September 30, the estimated earnings growth rate had fallen to 3.9%. Today, the estimated earnings decline is -1.0%.
that wrote “The Riddle of Money Finally Solved”.
M.S. Statistics, Syracuse, model. They said the same thing about money demand,
like Scott Grannis explained.
Residential Financing 1961 Proceedings, United States Savings and loan league,
Chicago, 1961, 42, 43.
not loan out deposits, they create deposits. Bank-held savings have a zero
payment’s velocity. It’s Stock vs. Flow. The expansion of interest-bearing saved deposits makes no contribution
to gDp.