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US earnings Season Begins
JPMorgan Chase is set to report third-quarter earnings – here’s what the Street expects
https://www.cnbc.com/2022/10/14/jpm-jpmorgan-chase-earnings-3q-2022-.html
Morgan Stanley is set to report third-quarter earnings —here’s what the Street expects
https://www.cnbc.com/2022/10/14/ms-morgan-stanley-earnings-3q-2022.html
Stock futures are lower ahead of Friday’s big bank earnings
Stock futures ticked down early Friday as investors turned their attention to big bank earnings after the major averages staged a historic turnaround rally.
Futures tied to the Dow Jones Industrial Average dropped 110 points, or 0.37%. S&P 500 futures dipped by 0.4%, and Nasdaq 100 futures fell 0.7%.
JPMorgan Chase, Wells Fargo, Morgan Stanley and Citigroup are all scheduled to report before the bell. U.S. Bancorp and PNC Financial are also on the schedule, along with UnitedHealth.
The reports will come a day after the market staged a massive comeback. The Dow ended Thursday’s session up 827 points after being down more than 500 points to start the day. The S&P 500 rose 2.6% to break a six-day losing streak, and the Nasdaq Composite jumped 2.2%.
The moves followed the release of the consumer price index, a key U.S. inflation reading that came in hotter than expected for the month of September. Initially, this weighed on markets as investors braced themselves for the Federal Reserve to continue with its aggressive rate-hiking plan. Later, however, they shrugged off those worries.
“The best excuse for today’s bounce is ‘sell the news’ paired with highly negative sentiment/positioning,” said Ross Mayfield, investment strategy analyst at Baird. “The market had already fallen six straight days, de-risking the report a bit, and September CPI likely doesn’t change the near-term path of the Fed (which was already quite hawkish).”
Still, persistent inflation remains a problem for the Fed and for investors’ worries around the central bank’s policy tightening.
“The turnaround is a welcome respite for investors, but the market still requires greater clarity on the extent of tightening still ahead,” said Brian Levitt, global market strategist at Invesco. “The focus remains on the pace of inflation and the underlying strength in the jobs market. A market rally will likely commence when the market believes that a Fed tightening pause is in the offing.”
There’s still more economic data this week, too. September’s retail sales will come out at 8:30 a.m. ET. Later in the morning, investors are looking forward to the latest consumer sentiment figures from the University of Michigan.
https://www.cnbc.com/2022/10/13/stock-market-futures-open-to-close-news.html
Japan stocks up more than 3%, Asia markets gain after Wall Street’s rally
Shares in the Asia-Pacific jumped on Friday, taking the lead from Wall Street overnight as investors shook off a strong inflation report.
The Nikkei 225 in Japan was 3.25% higher at 27,090.76, while the Topix gained 2.35% to 1,898.19. Japan’s yen plunged to its lowest levels against the U.S. dollar since 1990 overnight before paring losses, and is still trading at 147-levels.
The Hang Seng index in Hong Kong was 1.93% higher in the final hour of trade after climbing 3.9% earlier in the session, and the Hang Seng Tech index was up 2.16%. In mainland China, the Shanghai Composite was up 1.84% at 3,071.99 and the Shenzhen Component rose 2.81% to 11,121.72.
In Australia, the S&P/ASX 200 gained 1.75% to 6,758.80. South Korea’s Kospi advanced 2.3% to 2,212.55 and the Kosdaq climbed 4.09% to 678.24. MSCI’s broadest index of Asia-Pacific shares outside Japan was 2.15% higher.
Singapore’s GDP grew 4.4% in the third quarter and is expected to further tighten its monetary policy
Dow slumps more than 500 points after key consumer inflation reading is hotter than expected
Stocks fell Thursday morning, erasing earlier gains, after a key consumer inflation report came in hotter than expected, signaling that the Federal Reserve will likely continue with aggressive interest rate hikes.
The Dow Jones Industrial Average fell 500 points, or 1.73%. The S&P 500 slipped 2.10% and the Nasdaq Composite slumped 2.80%. The yield on the 10-year U.S. Treasury spiked above 4% as bonds sold off – yields are inverse to price.
The reversal in early gains came after the September consumer inflation report was higher than economists expected. The consumer price index increased 0.4% for the month, more than the 0.3% estimate from Dow Jones. On an annual basis, inflation was up 8.2%.
The report signals that inflation is a persistent problem even amid large interest rate hikes from the central bank. Going forward, the Fed will likely have to keep delivering increases and keep rates high until there are signs that inflation is cooling off.
“A lot of times you can try to find a silver lining in some of the numbers – I can’t. I think that’s why you’re seeing this truly atrocious reaction right now,” said Steve Sosnick, chief strategist at Interactive Brokers.
Stock futures had surged as the British pound gained more than 1% versus the U.S. dollar on a report that the government there may be rethinking a tax cut plan that had exacerbated a decline in the currency to the lowest in decades at the end of September, putting global markets on edge.
Thursday’s CPI report comes a day after the government said the producer price index, another inflation gauge, rose more than expected.
Investors also digested minutes from the September Federal Reserve meeting, released Wednesday. The minutes showed the central bank expected to keep hiking interest rates until it sees receding inflation. But one comment made some think the Fed might instead slow the rate hikes, if not roll them back, if financial markets tumult continued.
U.S. inflation higher than expected in September, boosting expectations for another big Fed rate hike
U.S consumer prices increased more than expected in September and underlying inflation pressures continued to build up, reinforcing expectations that the Federal Reserve will deliver a fourth 75-basis points interest rate hike next month.
The consumer price index rose 0.4 per cent last month after gaining 0.1 per cent in August, the Labor Department said on Thursday. Economists polled by Reuters had forecast the CPI climbing 0.2 per cent.
In the 12 months through September, the CPI increased 8.2 per cent after rising 8.3 per cent in August. The annual CPI peaked at 9.1 per cent in June, which was the biggest advance since November 1981.
Despite the continued moderation as supply chains ease and oil prices retreat from the highs seen in the spring, inflation is running way above the Fed’s 2 per cent target.
Gasoline prices have likely bottomed following last week’s decision by the Organization of Petroleum Exporting Countries and allies to cut oil production. Russia’s war against Ukraine poses an upside risk to food prices.
Stubbornly high inflation and a tight labor market allow the U.S. central bank to maintain its aggressive monetary policy stance for a while. The government last week reported solid job growth in September, with the unemployment rate falling back to a pre-pandemic low of 3.5 per cent from 3.7 per cent in August.
Financial markets have almost priced in another three-quarters of a percentage point rate increase at the Fed’s Nov. 1-2 policy meeting, according to CME’s FedWatch Tool.
The Fed has since March hiked its policy rate from near zero to the current range of 3.00 per cent to 3.25 per cent. Minutes of the Fed’s Sept. 20-21 meeting published on Wednesday showed policymakers “expected inflation pressures to persist in the near term.”
Excluding the volatile food and energy components, the CPI climbed 0.6 per cent in September after rising 0.6 per cent in August. The so-called core CPI jumped 6.6 per cent in the 12 months through September. The core CPI rose 6.3 per cent year-on-year in August.
Underlying inflation is being largely driven by higher costs for rental accommodation. Government data on Wednesday showed the weakest reading in producer core goods prices in nearly 2-1/2 years in September. The pass through from producer to consumer inflation could, however, probably take a while.
Some of the inflation pressures are coming from the tight labor market. A second report from the Labor Department on Thursday showed the number of Americans filing new claims for unemployment benefits increased moderately last week. Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 228,000 for the week ended Oct. 8.
Economists had forecast 225,000 applications for the latest week. The labor market remains tight. There were 1.7 job openings for every unemployed person on the last day of August, and layoffs also remain low.
The Fed’s September meeting minutes also showed policymakers “anticipated that the supply and demand imbalances in the labor market would gradually diminish,” and “that the transition toward a softer labor market would be accompanied by an increase in the unemployment rate.”
Inflation increased 0.4% in September, more than expected despite rate hikes
The consumer price index was expected to increase 0.3% in September, according to Dow Jones estimates.
This is breaking news. Please check back here for updates.
https://www.cnbc.com/2022/10/13/consumer-price-index-september-2022-.html
Wholesale prices rose 0.4% in September, more than expected as inflation persists
Wholesale prices rose more than expected in September despite Federal Reserve efforts to control inflation, according to a report Wednesday from the Bureau of Labor Statistics.
The producer price index, a measure of prices that U.S. businesses get for the goods and services they produce, increased 0.4% for the month, compared with the Dow Jones estimate for a 0.2% gain. On a 12-month basis, PPI rose 8.5%, which was a slight deceleration from the 8.7% in August.
Excluding food, energy and trade services, the index increased 0.4% for the month and 5.6% from a year ago, the latter matching the August increase.
Food prices helped boost the increase in goods inflation, with a 1.2% monthly increase. Energy rose 0.7% after posting massive gains the previous two months.
Inflation has been the economy’s biggest issue over the past year as the cost of living is running near its highest level in more than 40 years.
The Fed has responded by raising rates five times this year for a total of 3 percentage points and is widely expected to implement a fourth consecutive 0.75 percentage point increase when it meets again in three weeks.
“Inflationary momentum has built up in the U.S. economy and will persist near-term, keeping the Fed hiking aggressively,” said Bill Adams, chief economist for Comerica Bank.
https://www.cnbc.com/2022/10/12/producer-price-index-september-2022.html
Oil prices rise on tight supplies, as IEA warns of global recession
Oil prices firmed on Thursday, finding continued support from an OPEC+ decision last week to cut supplies, as the International Energy Agency warned that those cuts may push the global economy into recession.
Brent crude futures rose 21 cents, or 0.2%, to $92.66 a barrel. U.S. West Texas Intermediate crude was up 14 cents, or 0.2%, at $87.36 a barrel.
Last week, the producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia pushed prices higher when it agreed to cut supply by 2 million barrels per day (bpd).
“The OPEC+ … plan … has derailed the growth trajectory of oil supply through the remainder of this year and next, with the resulting higher price levels exacerbating market volatility and heightening energy security concerns,” the IEA said on Thursday.
The IEA downgraded its oil demand growth estimates slightly for this year to 1.9 million bpd and by 470,000 bpd in 2023 to 1.7 million bpd.
This comes after OPEC on Wednesday cut its outlook for demand growth this year by 460,000 bpd to 2.64 million bpd, citing the resurgence of China’s COVID-19 containment measures and high inflation. It lowered its 2023 oil demand forecast by 360,000 bpd to 2.34 million bpd.
“The prospect of sustained growth is deteriorating fast because of entrenched inflationary pressure, quantitative tightening, continuous hikes in borrowing costs, a strong dollar, and COVID-related constraints in the world’s second biggest economy, China,” PVM analyst Tamas Varga said.
Worsening demand for crude oil is contributing to inventory builds. U.S. crude oil stockpiles rose by about 7.1 million barrels for the week ended Oct. 7, according to market sources citing API data.
The energy market is under pressure as well from the U.S. dollar, which has rallied broadly, including against low-yielding currencies like the yen.
The Federal Reserve’s commitment to keep raising interest rates to stem high inflation has boosted yields, making the U.S. currency more attractive to foreign investors.
Oil Futures Settle Lower For 2nd Straight Day On Demand Concerns
Oil futures settled lower on Tuesday, extending losses from the previous session, on concerns about outlook for energy demand amid rising possibility of a global recession.
World Bank President David Malpass and International Monetary Fund Managing Director Kristalina Georgieva both warned of recession risks, raising concerns over global demand.
A surge in Covid-19 cases in China, and fears of further monetary policy tightening also weighed.
Chicago Fed president Charles Evans said there is a strong consensus at the Federal Reserve to raise the target policy rate to around 4.5% by February and hold it there for most of 2023.
Separately, Fed Vice Chair Lael Brainard laid out a case for exercising caution, saying that previous rate increases were starting to slow the economy and the full brunt of tighter policy would not be felt for months to come.
West Texas Intermediate Crude oil futures for November ended lower by $1.78 or about 2% at $89.35 a barrel.
Brent crude futures settled at $94.29 a barrel, down $1.90 or about 2%.
According to reports, Shanghai and other big Chinese cities, including Shenzhen, ramped up testing following a surge in coronavirus infections. Some local authorities have reportedly closed schools, entertainment venues and tourist spots.
Markets look ahead to weekly crude inventory reports from the American Petroleum Institute (API) and U.S. Energy Information Administration (EIA). The API data is due later in the day, while EIA is scheduled to release its report Wednesday morning.
