Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, Dec. 22 (not 21st as erroneously referred to in the podcast intro). The Bottom Line segment of today’s podcast starts at (3:15) for listeners who want to skip ahead.
State of Play
Stocks rallied yesterday, all but recapturing their losses from the previous day. After the close Nike (NKE 0.00%↑) served up a disappointing earnings report, slashing sales guidance. That stock has gotten bludgeoned overnight, down some 12%. There was also bad news out of China, as new curbs on online gaming hit shares of that country’s tech companies. As we look at our board of indicators at 0635, things are mixed:
Stock index futures in the US are flat, with no major index moving more than 0.1% from the break-even point;
Commodities are gaining ground, with WTI crude oil up 1% to trade close to $75/barrel. Gold and silver are up 1% each but copper prices are unchanged;
Bonds are seeing a few bids, with the yield on the 2-year down 2 basis points to 4.33% and the 10-year yield down 3bps to 3.87% (yields move inversely to prices).
Known Events
The PCE Deflator, the Fed’s preferred inflation gauge is out at 0830. Economists who were surveyed expect no change to the headline PCE on a monthly basis, the same as last month. That would drop the annualized figure to 2.8%. The more closely-watched Core PCE, which excludes food and energy, is expected to rise by 0.2% month-over-month, the same as last month, to drop the year-over-year figure to 3.4% from 3.5%.
The question is, does anybody still care about this now that the Fed has all but declared victory over inflation?
The Bottom Line©️
This would be the eighth straight positive week for stocks. Yes, even after Wednesday’s sell off the S&P is due to finish the week in the green. That would be the first time since 2017 that the S&P moved higher eight weeks in a row.
Nike earnings aren’t a great sign. It’s already taking its toll on derivative companies like Foot Locker (FL 0.00%↑), down 7% overnight. Fortunately, a lot of the talk from Nike’s call was about a stronger dollar and slowing sales in Europe and China. No word about the US consumer, who remain buoyant. No secret that China is in a bit of a pickle. How much will Chinese consumers affect western companies? We may be about to find out…
As you hopefully know by now, markets will be closed Monday for Christmas Day. So no podcast that day. And probably not for the other days of the week either, unless something unexpected happens to jolt markets. We will otherwise be back here on Tuesday, Jan. 2, 2024.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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PCE Deflator