[Chart courtesy of MarketWatch.com]

1. Moving the markets

Today’s Producer Price Index (PPI) was a mixed bag and turned out to be a yawner for the stock market. While the PPI climbed 0.4% in September, which was twice the forecast of 0.2%, year over year, however, it rose 8.5%, which was an improvement from August’s 8.7% increase.

The major indexes interpreted that as inconclusive and spent the session chopping around their respective unchanged lines with not much gained or lost. The S&P 500 was the worst performer sporting a negative -0.33% and notched its 6^th day of losses.

The Fed’s September meeting notes were released, as MarketWatch reported:

The minutes showed that the central bank expects to keep hiking interest rates and keep them high until inflation shows signs of cooling off.

On the other hand, one comment in the minutes led to optimism that the Fed might slow its tightening campaign or even walk it back if there was more financial market turbulence.

Of course, traders are always looking for optimism in Fed Statements, but today that hope was dampened somewhat when Chicago Fed President Charles Evans suggested that job losses were an acceptable circumstance:

If unemployment goes up, that’s unfortunate. If it goes up a lot, that’s really very difficult. But price stability makes the future better.

Bond yields slipped, the US Dollar dipped, while Crude Oil dropped for the 3^rd straight session to end at $87. Gold gained moderately but has a way to go to reclaim its $1,700 level.  

Right now, nothing is more on traders’ minds than tomorrows CPI report. As JP Morgan pointed out, consensus expects to see inflation increase 8.1% from a year ago in September. Anything above the prior reading of 8.3% could put the stock market at risk of a quick 5% tumble.

It promises to be an interesting day, but I think whatever magnitude the initial market reaction may be, it likely will be limited in duration.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

An early morning ramp-a-thon pushed equities into the green, with the Dow at one moment sporting a 400-point gain but, things turned sour quickly, and the major indexes dove into the close.

Only the Dow managed to cling to its unchanged line, while the S&P and Nasdaq ended solidly in the red with the former now scoring a 5-day losing streak. For sure, key inflation data caused uncertainty with the PPI due out tomorrow, followed by the CPI on Thursday. Rounding out week will be retail sales on Friday and the beginning of earnings season.

Causing late dive in the markets was a report from the Bank of England indicating that its intervention will be over soon and that pension funds have just three days to rebalance positions. For sure, that was tough talk, now we’ll have to wait and see if it was simply a bluff with the bailout scheme scheduled to continue.

Bond yields were mixed and slipped a tad, but the 10-year kissed its 4% level again before backing off into the close. The US Dollar rode a roller coaster and scored only a slight gain.

All eyes are now on tomorrow’s Producer Price Index report, which could create much volatility by pushing markets in either direction.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

While the major indexes closed off their intra-day lows, they nevertheless scored another loss, as several rally attempts did not hold, and south we went.

As I pointed out last week, the massive rebound, that propelled the Nasdaq some 6.5% higher on Monday and Tuesday turned out to be another head fake with the index surrendering all gains over the next 3 trading days:

The baseball term “Going, going, gone…” clearly applies here, as bear market bounces can be fast and furious, but they usually tend to fall apart quickly, as we witnessed.

Adding more insult to injury was today’s session, which pushed the index down by another -1.04% to its lowest in over 2 years, as tech shares continue to be hardest hit in this environment of spiking interest rates.

As a result, we saw more of the same weakness, despite the US bond markets being closed. However, bond futures traded and added more pain to equities via higher yields, the continuation of which we may see tomorrow. Fortunately, during the end of the session, yields came off their highs.

Despite the BoE recent attempt to bail out their bond markets, and efforts to present a new plan, their market broke again with their 30-year Gilt (bond) yields racing higher by a stunning 29bps and almost reaching last month’s high, when the bank slammed on the emergency brake.

Since all Central Banks are tied at the hip, some of England’s issues could very well travel across the Atlantic and affect markets here in the US. My point is that bonds are no longer the ‘safe haven’ they were advertised to be and not being exposed to them is a wise investment decision.

The Fed’s Brainard offered these words of wisdom:

Fed is attentive to risks of further adverse shocks, aware that [market] moves could interact with financial vulnerabilities.” However, she also noted that the “1970s taught [policymakers] that there are risks to easing prematurely”.  

In other words, there was no “dovish pivot” present in these remarks, which was disappointing to the always hopeful bullish crowd.

The US Dollar continued its 4-day comeback to one-week highs, as ZeroHedge noted, which caused gold to get hit, with the precious metal dropping below its $1,700 level.

High volatility will remain with us, as Wednesday’s monthly Producer Price Index (PPI) and Friday’s CPI could wreak havoc with markets—in either direction.