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“My business is hurting people.” – Sugar Ray Robinson
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
For much of the last three years now in a week with both CPI and PPI, these would easily be the most important reports of the week. Now that the Fed has shifted focus from inflation to employment, though, yesterday’s CPI report had much less than normal fanfare, and most traders probably didn’t even know there was a PPI report today. The flavor of the week now is weekly jobless claims. After trending higher for most of the year and hitting the highest levels in nearly a year in late July, the market (and the Fed) became concerned about jobless claims, so any additional increases raise concern about the economic outlook causing a sell-off in equities and buying in the treasury market.
Leading up to today’s PPI and jobless claims report, equity futures were trading modestly higher and holding on to Wednesday’s gains while treasury yields moved slightly higher. These equity gains follow a positive overnight session in Asia and morning gains in Europe where the ECB just announced a 25 bps cut in the benchmark rate to 3.5% which was in line with expectations.
Getting back to the economic data, PPI came in higher than expected on both a headline (0.2% vs 0.1%) and core basis (0.3% vs 0.2%), but the y/y readings were both in line with forecasts as July’s report was revised lower. Jobless claims, meanwhile, were largely in line with forecasts. Initial claims came in 4K higher than expected (230K vs 226K) while continuing claims were right in line.
What looked like a potentially gruesome day in the morning yesterday took a turn for the better as the day progressed. After trading down 1.6%, the S&P 500 finished the day up by 1.1%. Not only that, but the reversal also took what looked like a downside break of the 50-day moving average (DMA) and turned it into a successful test of that level. In terms of just days where the S&P 500 finished the day higher by over 1% after trading down over 1% earlier in the session, it was the first such positive reversal since 10/13/2022. For you market historians, 10/13/22 was the day after the 2022 bear market closing low.
For these types of 1% positive reversals in general, yesterday was the 52nd such day since 1990, and in the chart below we indicate each prior occurrence with a red dot. While most of these occurrences took place during periods of an upwardly trending market, they weren’t exclusive to that type of environment, and there were more than a handful of them during the bear markets associated with the dot-com crash and the Financial Crisis.
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