Mid-Week Market Minute 11.16.22

Market Updates

Inflation Data, Retail Sales Beat Expectations

Stocks in the U.S. were mostly unchanged in early trading this week following an impressive rebound the week prior. Fourth-quarter earnings season is winding down with more than 90% of S&P 500 companies reporting results over the past few weeks. In aggregate, corporate profits have modestly exceeded expectations but clearly are slowing down from near-record levels as margins deteriorate.

Inflation and interest rates remain key areas of focus for investors, and Tuesday’s better-than-expected Producer Price Index (PPI) report helped quell inflationary fears for the time being. The report showed wholesale inflation rising 0.2% in October versus expectations for a 0.4% gain. This comes on the back of lighter than expected CPI inflation data last week, which put downward pressure on interest rates across the board. Going forward, we expect inflation data to continue to improve, allowing the Federal Reserve to slow the pace of interest-rate hikes. The markets now are pricing in a 0.50% (50 basis point) rate hike at the next Federal Reserve meeting in December, which would leave the federal funds rate around 4.50% by year-end.

On the data front, retail sales climbed 1.3% in October compared to expectations for a 1% increase. Separately, import prices declined by less than expected in October. In housing, the National Association of Home Builders (NAHB) housing index dropped for the 11th consecutive month, reaching its lowest level since 2012. On Thursday, investors will get a look at new housing starts and building permits for October, followed by existing home sales on Friday.

Source: GSAM, CNBC, JPMorgan

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