Morning Briefing
December 14, 2022 | Daily JAM, Morning Briefing |
If as expected the Federal Reserve raises interest rates today by just 50 basis points, many investors–and perhaps the entire stock market–will see that as a sign that the Federal Reserve is poised to begin a pivot from its policy of aggressive interest rate increases. And that it will pause those interest rate increases relatively soon. Perhaps after another two 25 basis point increases in February and March. Will Fed chair Jerome Powell try to talk the market out of this belief?
December 13, 2022 | Daily JAM, Morning Briefing |
Today the Bureau of Labor Statistics reported that headline CPI inflation in November climbed at a 7.1% annual rate. Month-to-month inflation rose by just 0.1% from October. Core inflation, that is inflation without energy or food prices, rose at a 6.0% annual rate with a 0.2% increase in November from October. Both the headline and core inflation numbers were better than economists had projected before this morning’s data release. Economists surveyed by Bloomberg had projected that headline Cpi inflation would climb by a 7.3% annual rate and 0.3% month over month. Core inflation was projected to move higher by 0.3%. The news certainly shows inflation on the decline. And that was good news for stocks ahead of tomorrow’s meeting of the Federal Reserve’s interest rate-setting body the Open Market Committee.
December 12, 2022 | Daily JAM, Morning Briefing |
Tomorrow, Tuesday, December 13, the Bureau of Labor Statistics will report November CPI inflation. Economists surveyed by Bloomberg estimate headline CPI to increase by 0.3% for the second consecutive month, with year-over-year CPI falling from 7.7% to 7.3%. Core CPI inflation, which excludes food and energy prices, is projected to climb at a 0.3% monthly rate or 6.1% year over year. (I would note that economists have underestimated the inflation rate in five of the last seven months.) Yes, inflation is slowing and it looks like we have seen a peak in the inflation rate. But, and it’s a big BUT, inflation is falling at a very slow rate.
December 7, 2022 | Daily JAM, Morning Briefing |
Stocks are struggling again today with the Standard & Poor’s 500 near the breakeven mark for most of the session. As of 1:15 p.m. New York time today, the S&P 500 was up 0.09%. It closed down 0.19%. What’s weighing on stocks?
December 5, 2022 | Daily JAM, Morning Briefing |
As of 12:45 p.m. on Monday, December 5, U.S. benchmark crude West Texas Intermediate was down 1.63% to $76.68 a barrel. International benchmark Brent crude was down 1.39% to $84.38 a barrel. Brent is now up 11% this year but down from $120 a barrel in June. The market is a battleground today between cuts to supply and worries about a slump in global demand.
December 2, 2022 | Daily JAM, Morning Briefing |
Nonfarm payrolls increased by 263,000 in November, the Labor Department said today. (And the October jobs total was revised upward to a gain of 284,000.) The unemployment rate held steady at 3.7%. Average hourly wages rose 0.6% in November from October. That was the biggest increase since January. Wages are now up 5.1% year-over-year. Economists surveyed by Bloomberg were looking for the economy to add 200,000 jobs in November and an unemployment rate of 3.7%. All of this shows a labor market that remains in top gear when the Federal Reserve has been looking for weakness in the jobs data as a sign that higher interest rates are slowing the economy enough to reach the Fed’s inflation rate goal.
December 1, 2022 | Daily JAM, Morning Briefing |
Inflation progress in October but painfully slow. PCE–personal consumption expenditure–in inflation, the Federal Reserve’s preferred inflation index, rose at a 6% rate year over year rate through October. That was down from a 6.3% rate in September. The core PCE index, which strips out food and energy costs, rose at a 5% rate, roughly where it’s been for most of 2022.
November 30, 2022 | Daily JAM, Morning Briefing |
In a speech today Federal Reserve Chair Jerome Powell clearly confirmed what other Fed officials have said this week: 1. The Fed will raise interest rates at its December 14 meeting by 50 basis points and not 75. That would follow on four straight 75 basis point interest rate increases. 2. The Fed will moderate the pace of its interest rate increases going forward. 3. The peak for the Fed’s benchmark interest rate will be “somewhat higher” than estimated in September. The Fed’s estimate in September was for a peak of 4.6% in 2023. The current benchmark rate is 3.75% to 4.00%. The Fed Funds futures market sees rates peaking at about 5% in the second quarter of 2023. What he didn’t clarify is what that peak rate might be or when the financial markets might see it.
November 30, 2022 | Daily JAM, Morning Briefing |
Okay, at some point in 2023 or 2024, we get a big rally stock market when the Federal Reserve ends its current cycle of interest rate increases. And then what? The biggest reason to believe in modest stock market gains in any post-bounce Bull Market is the strong possibility that corporate profits will slip from their near-record highs. Today, the Commerce Department reported that after-tax profits as a share of gross value added for non-financial corporations, a measure of aggregate profit margins, shrank in the third quarter to 14.9% from 16.2% in the second quarter.
November 29, 2022 | Daily JAM, Morning Briefing |
Today, November 29, U.S. crude benchmark West Texas Intermediate traded at $78.45 a barrel. International benchmark Brent crude was at $83.26 a barrel. A month ago on October 28, West Texas Intermediate closed at $88.11 a barrel and Brent at $95.94. That price plunge is the background for Sunday’s regular meeting of OPEC+ oil ministers. Market speculation points to a strong chance of another cut in production following on the cut announced at the group’s October meeting. At the least, oil analysts say, OPEC+ will extend the October production cuts through the end of 2023.
November 28, 2022 | Daily JAM, Morning Briefing |
In-store traffic at brick-and-mortar retailers grew by a modest 2.9% on Black Friday weekend from 2021, preliminary numbers from Sensormatic Solutions show. (The figure isn’t adjusted for inflation. CPI inflation ran at a 7.7% rate in October.) Online sales during the biggest U.S. shopping day of the year rose 2.3% to $9.12 billion, Adobe Analytics said Saturday. That was slightly ahead of the company’s initial projection of $9 billion. (This number isn’t adjusted for inflation either.)
November 22, 2022 | Daily JAM, Morning Briefing |
On Monday China reported 28,127 new domestically transmitted Covid cases on Monday as the country neared its April peak. Infections in the southern city of Guangzhou and the southwestern municipality of Chongqing accounted for about half the total. In Beijing, cases have hit new highs every day, prompting calls from the city government for more residents to stay in place and show proof of a negative COVID test, not more than 48 hours old, to get into public buildings. Beijing shut parks and museums on Tuesday. Late on Tuesday, Shanghai announced that from Thursday people may not enter venues such as shopping malls and restaurants within five days of arriving in the city, although they can still go to offices and use transport. Earlier, the city of 25 million people ordered the closure of cultural and entertainment venues in seven of its 16 districts after reporting 48 new local infections. So much for hopes of a quick reopening of China’s economy.
