Stock traders are trading cautiously as they weigh more positive US inflation data against reports of Russian missiles straying into Poland and killing two people.
Inflation
On the inflation front, the Producer Price Index for October showed a steeper-than-expected pullback in wholesale prices with year-over-year headline PPI falling to +8% from a previous +8.5%. Particularly encouraging was the 0.2% monthly gain in core PPI (which strips out food and energy) as economists say this indicates a broad-based slowdown in consumer goods price gains thanks to easing supply chain disruptions.
The PPI read follows the also better-than-expected Consumer Price Index (CPI) last week and adds to Wall Street expectations that the Fed will begin issuing lower interest rate hikes as soon as its December 13-14 meeting.
Keep in mind, we also have some Fed speakers talking about slowing the pace of rate hikes. The big question on Wall Street is how long inflation will remain elevated with bears pointing out that the October CPI of +7.7% is still nearly quadruple the Fed’s target rate of around +2%.
There are also signs that relentlessly high prices are really stretching US consumer budgets.
Data yesterday showed total US household debt climbed +$351 billion to $16.5 trillion in the third quarter. At the same time, the share of current debt becoming delinquent increased a bit for nearly all debt types, but is still not yet to any major type of extremes.
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Investors will get more details about consumer spending and the economy today via Retail Sales, Business Inventories, Industrial Production, and Import/Export Prices.
Earnings
More retail earnings are also due today, including Bath & Body Works, Lowe’s, Target, TJX, and Victoria’s Secret. Walmart yesterday topped expectations but also noted shifting spending patterns as consumers downgrade to cheaper products and pull back on discretionary categories like clothing and electronics.
NVIDIA and Cisco also report earnings results today.
Russia headlines
Turning to Russia headlines, Polish authorities yesterday reported multiple explosions that hit a village and killed two people near the country’s border with Ukraine. Poland blames stray Russian rockets though Russia denies that it was responsible. US and NATO allies say they are investigating but have not yet confirmed Poland’s claims.
Most insiders believe the strike was purely accidental and doubt it will spark a wider conflict with the West as neither side really stands to gain from escalating the war in Ukraine.
Some think it could provide the US and other allies greater leverage as they try to pressure Russia into peace talks. However, most believe the incident will be loudly condemned but mostly brushed off as the West does not want to risk instigating a full blown global conflict.
Trump’s run
In the USA, former President Trump officially announced that he will again run for President of the United States. It will be interesting to see who from the Republican party will step up and run against the former President. Early odds makers have other potential Trump challengers as Florida Governor Ron DeSantis include Virginia Governor Glenn Youngkin; former Vice President Mike Pence; former Secretary of State Michael Pompeo; Senator Ted Cruz of Texas; Senator Tim Scott of South Carolina; Maryland Governor Larry Hogan, and Texas Governor Greg Abbott. Let the fireworks begin…
Traders Are Cautious After Inflation Data Release
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