Approaching the Holidays and a Pause
This Monday morning, markets are marginally higher on the back of technology and energy stocks rallying. Last week’s bond-friendly data included a decline in retail sales ahead of the holiday shopping season. This should cause a sharp deceleration in Q4 real GDP growth to the 1-2% level from the grossly overstated almost 5% in the third quarter. A friendly, but not unexpected by the OHFG team, U.S. CPI report that sent the S&P 500 up +2.2% last week and +18% so far in 2023 off a very depressed 2022 level.
Interest rates dropped -21 bps last week to near two-month lows. The 2-year rate at 4.90% is below 5% on speculation of Fed rate cuts next year. Oil prices are up this morning although still below $77. OPEC+ will meet on November 26 to discuss possible output cuts with the price down nearly -20% since September to four-month lows.
Last week’s data showed US seasonally adjusted consumer price index, a closely followed measure of inflation, slowed to a flat reading in October, missing expectations for a 0.1% gain. Core CPI (excludes food and energy prices) rose by 0.2%, smaller than the consensus estimate for a 0.3% increase.
The US producer price index, meanwhile, fell -0.5% sequentially last month on a seasonally adjusted basis when a 0.1% increase was expected. Excluding food and energy, monthly PPI was flat month over month after rising 0.2% in September and was below the 0.3% gain analysts had modeled.
Chipmaker Nvidia’s earnings on Tuesday are a focal point of this Holiday shortened week. The Fed Minutes for the last policy meeting, due Tuesday, are likely to message that the FOMC: isn’t wanting to raise rates again; but it’s more likely to lift rates than cut them if need be; and, it’s unlikely to cut them for some time.
The S&P 500 ended the week at 4,514, up from last Friday’s closing level of 4,415. The index is now up +8.7% for the month of November, putting the S&P 500 on track for its largest monthly gain this year. Recall it fell hard into the end of October.
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