Core Inflation proves hard-core for… Bears!

Core Inflation proves hard-core for… Bears!

Kristal.AI Kristal.AI

Kristal.AI

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发布日期: 2022年10月14日
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  • A day that we can tell our grandkids about!
  • Core CPI (ex- fuel and food) inflation print of +0.6% for September (against an expected 0.4%), came out at 0830 EDT, sending the US equity markets down more than 500 points to a new 52-week low at the open.
  • But at 1100 EDT markets staged a recovery and the Dow finished the day 853 points higher. There have been days with greater intraday moves but none in history when the Dow went both more than 500 points down and more than 800 points up on the same day.
  • And, “curiouser and curiouser”, despite these gyrations, VIX was lower than the previous day and stocks gained even though 2-year US Treasury yields increased.
  • Some of the reasons cited by market participants were excessive short positioning, SPX options covering action and a bounce off the support level of 3500 on the S&P, which is a 50% retracement of the post-Covid run.
  • Do note that the biggest increase in CPI was in the Shelter component. The shelter index works with a significant lag because leases are negotiated once a year. This could lead to high core CPI numbers for a few more months even though high frequency shelter indices like the Zillow rent index have decreased sharply over the last few months.
  • Friday’s is heavy with bank earnings and it will be interesting to see if the rally is sustained.

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