Daily Market Notes: 12-14-2022

In one of the more bizarre sessions lately, the various stock index futures went berserk on the upside after the November C.P.I. report came in lower than expected, with futures on the Dow indicating a potential advance of 900 points to begin, would you believe it?

Ditto the S&P futures, which indicated gains in excess of 120 points while the Nasdaq futures showed a potential advance of more than 500!

But when things actually started to trade, the various indices opened more modestly than that with the Dow “only” being able to get as high as 707 to the upside before actually having the nerve to go NEGATIVE around 1pm while the S&P gave back a gain of 110 to be only ahead by 3 while the Nasdaq turned a 428 point advance to be only ahead by 16 at that time. The Dow went lower because of a negative weighting from UNH, the highest price stock in this index while the S&P was only ahead by this small amount because AAPL and that awful TSLA went down again.

But then some buying came in, apparently by those who did not jump on the extended early gains and the averages were able to fight their way back to end with more modest closing advances of 103 for the Dow up to 34,108 while the S&P gained 29 to 4019.

The Nasdaq ended 113 higher to 11,256 while the Russell 2000 Index of small stocks tagged along for a 13 point gain to 1832.

The VIX returned back down to earth with a decline to 22.55 after its strange gain on Monday despite the market doing really well on that day.

The encouraging inflation data raised hopes for easing pressure on the economy ahead of today’s interest rate raising decision after the November C.P.I. showed that inflation slowed to 7.1% last month from 7.7% in October and more than 9% in the summer. Even though inflation remains painfully high, and shoppers continue to pay prices well above levels from a year ago, yesterday’s report offers hope that the worst of inflation really did top out during the summer.

More importantly for markets, the slowdown bolstered investors’ expectations that the Federal Reserve will downshift to an increase of 50 basis points this afternoon at 2pm.

Bond yields fell sharply after the report with the yield on the 10-year Note down to 3.51% from 3.62% late Monday while the 2-year dropped to 4.22% from 4.39%.

Other central banks around the world, including the European Central Bank, are also likely to raise their own rates by half a percentage point tomorrow.

Despite the encouraging data, there is still the perception that the Fed’s fight against inflation and further interest rate hikes still has further to go. Even if the Fed is moving at smaller increments each time, it may still ultimately take rates higher than markets expect.

Earnings this week will see: yesterday – ORCL lower; today – LEN higher ; Thursday – ADBE, JBIL; Friday – WGO, DRI and ACN.

Economic reports will have: yesterday – the all-important November C.P.I. came in lower than expected with a monthly gain at 0.1% and the core rate excluding food and energy was higher by 0.2%. This equates to 7.1% year over year for the overall number and 6% year over year for the core rate; today – November import prices fell by 0.6% while export prices eased by 0.3%, Fed interest rate raising decision at 2pm followed by the press conference at 2:30pm; Thursday – November retail sales, November industrial production and capacity utilization, December Philadelphia Fed Manufacturing Survey, weekly jobless claims.

Donald M. Selkin

Chief Market Strategist


Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, and Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds or other instruments in the companies mentioned in this report.