The market seemed to shrug off geopolitical concerns and hurricane worries, focusing instead on economic data and Fed policy. As Benjamin Graham once said, “The investor’s chief problem – and even his worst enemy – is likely to be himself.” This week proved that keeping a level head amid various distractions is crucial for successful investing.
The September Consumer Price Index (CPI) report came in hotter than expected, with core CPI ticking up to 3.3% year-over-year. However, there was a silver lining – the shelter component, which has been driving core inflation, saw its smallest increase since June.
The Producer Price Index and consumer sentiment data supported the idea that the Fed will continue cutting rates. Speaking of which, the FOMC meeting minutes revealed that most participants see diminished upside risks to inflation and increased downside risks to employment.
In the financial sector, JPMorgan Chase, Wells Fargo, and BlackRock all received positive responses to their earnings results, setting a promising tone for the upcoming earnings season.
US Market Highlights
- Inflation remains a challenge, with headline CPI at 2.4% and core CPI at 3.3%.
- Goldman Sachs cut U.S. recession odds to 15%, citing strong job growth and a lower unemployment rate.
- Fed officials were split on the size of the next rate cut, with a 25 basis point reduction now more likely.
- Boeing announced 17,000 job cuts and delayed its 777X aircraft launch until 2026.
- The Department of Justice is considering breaking up Google after a monopoly ruling.
- Roblox shares fell 9% following allegations from Hindenburg Research about inflated user metrics.
Global Highlights
- German recession fears deepened as manufacturing output dropped 2.4% in July.
- The U.K. economy showed signs of life with 0.2% growth in August, driven by retail and industrial output.
- The Bank of Korea cut rates for the first time in four years, lowering its benchmark to 3.25%.
- Tesla’s China-made EV sales rose 19.2% last month, marking a 12% growth for Q3.
- China hinted at increasing its deficit to provide more fiscal support for the economy.
Commodities & Crypto Corner
Oil prices have been particularly volatile due to Middle East tensions. Brent crude is trading at $78.60, while WTI is at $74.80. In the metals market, copper lost ground, trading at $9,723 per metric ton on the LME.
Gold is facing headwinds from rising bond yields, trading around $2,650.
As for cryptocurrencies, Bitcoin is down over 3% this week, approaching the $60,000 mark. Interestingly, Bitcoin is still below its halving price of $64,700, an unprecedented situation in its history.
Calendar
Next week, all eyes will be on the retail sales and industrial production reports. These will be crucial in gauging the economy’s health ahead of the Fed’s November 7 meeting. Options trading suggests a 90% probability of a 25-point rate cut.
Earnings season will be in full swing, with tech giant Netflix, consumer goods behemoth Procter & Gamble, and semiconductor powerhouse Taiwan Semiconductor set to report. The healthcare sector will also be in focus, with UnitedHealth, Johnson & Johnson, and Abbott Laboratories on deck.
