Yesterday’s whipsaw price actions is just a reminder of the extreme volatility we find ourselves in. There’s no doubt traders and investors are extremely anxious in trying to pick the bottom.

Economic health

Inflation is still running crazy hot, especially some of the stickier things like food inflation, which is running at levels we haven’t seen since the late 1970’s. It also feels like energy prices are trying to creep back higher, and I haven’t really seen any sizable drop in rents.

At the same time, wage growth remains strong, and we aren’t really seeing any massive layoffs or sizable reductions in the labor force. Meaning, the bulls might have just false started again.

Some bulls are again spinning the higher CPI read as “peak” inflation but a growing number seem to believe the Fed is going to reverse course sooner than expected over other economic concerns.

Fallout in the US job market would likely be the first area to raise alarms for the Fed. But with unemployment only at 3.5%, many economists believe there is room for the Fed to lift rates and keep them there for much longer than Wall Street is anticipating.

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Others believe that issues brewing in other financial markets or institutions are likely to convince the Fed to make smaller rate hikes or even pause them. That is coupled with the fear that a financial mishap ends up sparking a wider financial crisis that has a domino effect across global markets.

In case you are wondering, the markets are forecasting about a 95% chance that the Fed hikes rates another +75 basis-point at its upcoming November 2nd FOMC meeting. And about a 70% chance that they hike another 75 basis-points at the December 14th FOMC meeting.

Data to watch

Several key economic reports are out today, including Retail Sales, Import/Export Prices, Business Inventories, and Consumer Sentiment. Retail Sales and Consumer Sentiment are going to be of particular interest as positive trends there are not indicators of a cooling economy. 

Today’s real headline driver is going to be big bank earnings with Citigroup, JPMorgan Chase, Morgan Stanley, US Bancorp, and Wells Fargo all reporting results before markets open this morning.

Turning to next week, data is pretty light with Empire State Manufacturing on Monday; the NAHB Housing Market Index on Tuesday; and Housing Starts and Building Permits on Wednesday. By contrast, Q3 earnings significantly pick up the pace next week with Bank of America, Bank of New York Mellon, and Charles Schwab on Monday; Albertsons, Hasbro, Interactive Brokers, JB Hunt, Johnson & Johnson, Lockheed Martin, Netflix, and United Airlines on Tuesday; Abbott Laboratories, Alcoa, ASML Holdings, Baker Hughes, IBM, Kinder Morgan, Las Vegas Sands, Nasdaq, NextEra Energy, PPG, Procter & Gamble, Prologis, and The Travelers Companies on Wednesday; Alaska Air, American Airlines, AT&T, Barclays, Blackstone, CSX, Danaher, Dow, Ericsson, Freeport-McMoRan, Nokia, Nucor, Philip Morris, Robert Half, Snap, SnapOn, Tractor Supply, Union Pacific, and Whirlpool on Thursday; and American Express, Goldman Sachs, HCA Healthcare, Schlumberger, and Verizon on Friday.

Stock Investors Are Anxious In Trying To Pick The Bottom

Wishing you a great week!

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