Risk Assets Respond | Morning Express 10/14/2022

Bill Baruch joined the TD Ameritrade Network this morning.

• What a reversal! Stocks, treasuries, commodities, and most U.S. Dollar-denominated currencies spiked lower after yesterday’s CPI report but then reversed sharply. The S&P had lost as much as 2.4% before finishing the session at +2.6%, and the Dow had a range of 1,544 points.
• Why the comeback? Inflation was red hot, was it not? Inflation was much hotter than analysts anticipated but not really much firmer than the Cleveland Fed’s Inflation Nowcast. Sentiment shifted hands because of excessive negativity has taken hold for weeks; if everyone who wants to sell has sold, who is left to sell? Leading up to yesterday’s data, we wrote about the similarities between June’s CPI report that established a near-term bottom on July 14th.
  • An Extremely Bullish Parallel
  • The Stage Is Set, Down But Not Out
• K. Chancellor Kwarteng was let go, the lead author of the new government’s outrageous fiscal policy. The Cable slipped as much as 1.5% before paring to only -0.5%. The yield of the 30-year Gilt has gone as low as 4.244% after hitting as high as 5.10% this week.
• Core Retail Sales, excluding autos, stronger than expected at +0.1% v -0.1%, but headline missed at 0.0% v +0.2% exp.
• Earnings season is underway, UNH, JPM, WFC, C, PNC, and USB all beat top and bottom line estimates, MS and FRC beat EPS but missed Revenues.
• First look at October Michigan Consumer data at 9:00 am CT.
• Comments from Fed Governor Cook at 9:30 am CT and Fed Governor Waller, a known hawk, at 11:15 am CT.
• Russian President Putin has made comments on the war that have seemed to stoke risk-assets higher.
  • “No need for massive strikes on Ukraine right now.”
  • “Russia is not seeking to destroy Ukraine.”
  • “No regrets about the invasion.”
  • “Our actions are right and timely.”
  • “Do not see the need for talks with Biden.”
  • “Military mobilization is finishing.”