Mid-Week Market Minute 10.12.22

Stocks Trend Lower; CPI Report Coming Thursday

Stocks trended lower this week in a volatile trade ahead of key inflation data on Thursday. In the U.S., the Dow Jones Index was essentially flat, while the S&P 500 was lower by about 1% mid-week. Overseas, international developed and emerging market stocks were both lower by about 2.5%. Oil prices trended lower this week, with a barrel of WTI crude settling around $88 on Wednesday morning.

On the inflation front, the September Producer Price Index (PPI), a gauge of final-demand wholesale prices, came in higher than expected. The PPI showed producer prices increased 0.4% month over month, while the core PPI, which excludes the more volatile food and energy prices, remained unchanged from August’s 0.3% monthly gain. The headline figure showed an 8.5% annual rise in prices, softer than August’s 8.7% year-over-year figure. Investors will get more inflation data on Thursday, when the September Consumer Price Index (CPI) report is released. The CPI number is a measure of price changes in a basket of common consumer goods and services. In this report, headline inflation is expected to fall to 8.1% for September, down from 8.3% in August. However, many economists expect to see core inflation reach record highs for this cycle. Thursday’s CPI report is arguably the most important individual piece of data between now and the next Federal Reserve meeting on Nov. 2, where markets are anticipating another 0.75% (75 basis point) rate hike.

In other data, the International Monetary Fund lowered their global growth forecast for 2023 to 2.7%, down 0.2% from their July prediction. Separately, a September Survey of Consumer Expectations reported consumers expected their spending to rise by 6% over the year, down from the 7.8% rise predicted in August.In housing, MBA mortgage applications for the week ending Oct. 7 fell 2%, marking their third consecutive week of declines. Regarding sentiment, the NFIB Small Business Optimism Index unexpectedly climbed in September. It is the third consecutive month of gains, though the index remains near historically low levels. Across the pond, the U.K.’s Gross Domestic Product (GDP) came in lower than expected for August. In Asia, South Korea’s central bank hiked rates by 50 basis points (0.50%), a move largely in line with expectation.

Source: GSAM, CNBC, JPMorgan

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