Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Tuesday, Nov. 14. The Bottom Line segment of today’s podcast starts at (3:49) for listeners who want to skip ahead.
State of Play
Stocks treaded water yesterday, as can be expected on a day of little tangible news. As of 0620 all is dead quiet ahead of the inflation print at 0830:
Stock index futures are effectively unchanged, with no major index moving more than 0.2% from the break-even point;
Bonds are flat. The 2-year yields 5.04%, the 10year yield is 4.63%;
Commodities aren’t doing much either, with copper unchanged and WTI crude oil holding steady at $78.50/barrel;
Cryptos are dropping a bit with Bitcoin off 1.5% to trade around $36,400.
Known Events
The Consumer Price Index is the main event of the day, out at 0830. Economists expect a very small increase to the headline CPI, of just 0.1% month-over-month, which would drop the annualized figure to 3.3% from 3.7%. The Core CPI, which excludes food and energy, is expected to check in at 0.3% MoM, the same as last month, to leave the annualized Core CPI at 4.1%.
Some earnings to tell you about as well. Home Depot (HD 0.00%↑) just beat on top- and bottom-line estimates but crucially narrowed its outlook. The company is now expecting a drop in same-store-sales where an increase was previously expected.
Finally, Fed speakers:
Cleveland Fed President Loretta Mester provides opening remarks at a virtual event hosted by the Cleveland Fed at 1100;
Chicago Fed President Austan Goolsbee is giving a presentation on the economy and monetary policy at the Detroit Economic Club. This will be broadcast live on the Chicago Fed website.
The Bottom Line©️
So 0.3% Core CPI is what we’re looking for. If the number prints north of that it should lead to renewed fears of ‘higher for longer’ from the Fed. If it comes in below that, it means inflation is shrinking ahead of forecasts and the Fed can back off its more hawkish path — which presumably will lead to stocks and bonds to rally.
Friendly reminder that this CPI figure very rarely deviates from the expectations very much. Like 0.1% or 0.2% at the absolute most. When there are outliers it’s usually due to exogenous shocks like Covid stimulus checks or Russia invading Ukraine. Chances are, this thing hits bang on the nose.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Inflation Day