Wake Up Wall Street (SPY) (QQQ): CPI shocks again, so is it time for a 100bps rate hike?
Here is what you need to know on Thursday, October 13:
Yet another CPI shocker, and off we go again! We are stuck in an inflationary environment. Thus far that environment looks fine for companies that can pass on price rises. Pepsi (PEP), Delta (DAL) and others are beating earnings. Bank of America (BAC) has said the consumer still looks strong, so the Fed has to keep pushing rate higher and for longer.
Now we will begin to hear calls for 100bps in November. That may be the correct call. Inflation just will not come down. Employment is strong. Delta said it sees strong consumer demand. Dominos (DPZ) also saw continued strong consumer demand. Pepsi and Dominos are at the lower end of consumer spending so can react well and initially see a limited downturn. The higher end will be more interesting. Will consumers still splash out on big-ticket items?
This move will see equities collapse again, yields moving to highs not seen since 2008 and the dollar powering ahead. USD/JPY once again looks to tempt the Bank of Japan back in. Gold once again is lower as it offers no yield, so the comparison widens as rates rise. Gold at $1,650 and the dollar index at 113.60. US 2-year yields are now at 4.5%, and 10-year has broken 4%. This will lead to equity cash flow valuations on the lower end. Bitcoin is lower by 4% at $18,300. Oil is also lower at $85.90.
European markets are lower: Eurostoxx -1.5%, FTSE -1.5% and DAX -15.
US futures are lower: S&P and Dow -2% and Nasdaq -3%.
Wall Street top news (SPY) (QQQ)
US CPI hits 40-year high on the core, higher than expected.
Rumors of UK backing down on some tax cut plans.
Delta (DAL) gives strong earnings and strong Q4 guidance.
DWAC: Truth Social accepted on the Play Store.
Victoria's Secret (VSCO) said sales will be at the top end of forecasts.
Dominos Pizza (DPZ) has strong earnings, up 7% premarket.
BlackRock (BLK) sees a decline in AUM as EPS beats.
Walgreens Boots Alliance (WBA) earnings beat estimates.
Applied Materials (AMAT) said export restrictions to China would result in $250m to $550m loss in net sales losses in quarter ending in October.
Taiwan semiconductor (TSM) cuts annual investment budget.
Bank of America (BAC): CEO says US consumers still in good shape.
Honda and Sony joint venture by the two companies aims to have first EV by 2026.
Upgrades and downgrades
Source: WSJ.com
Economic releases
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Author
Ivan Brian
FXStreet
Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.
