1. Moving the markets

An initial bounce caused by strong October retail sales, as well as better-than-expected earnings report cards from Home Depot and Walmart, ran into some resistance mid-day, but the major indexes still managed to eke out a gain.

Leading the pack was the Nasdaq with a solid 0.76% advance, while the Dow lagged and barely stayed in the green. Traders took the above data as a sign that consumers are still in spending mode, however, their motivation may have been to buy now to avoid higher prices later.

The latest retail data showed that consumers increased their spending, as sales jumped 1.7%, a considerable increase from the prior month’s meager 0.8%. Online sales took top billing with an increase of 10.2% YoY, even though the CPI surged 6.2% YoY.

Despite the recent rut in the averages, MarketWatch noted that the Dow sits away from his record by 1.4%, while the S&P and Nasdaq hover within 1% of theirs.

Today’s rebound was again helped by a short squeeze, which provided the much needed fuel to keep the markets on track for a green close, because bond yields continued their run. The 30-year again climbed above the 2% level but did not break out of November’s trading range—yet.

The US Dollar followed suit and touched a level last seen in September. None of these events proved beneficial to gold, so the precious metal slipped 0.79% but managed to successfully defend its $1,800 level.   

1. Moving the markets

One look at the chart above tells the entire story, namely that the markets were aimlessly wandering, as bond yields reversed and spiked, which kept any bullish meme in check. On deck, and awaited with some anxiety, are the quarterly reports from the big box retailers due out later this week.

Inflation remains the elephant in the room and will affect bond prices negatively (higher yields), as various data points and more Fed speak scheduled throughout the week, may push interest rates around, despite the Central Bank’s announcement of their policy going forward.

It’s almost amusing to watch Tesla trade like a penny stock. Down 20% off its highs today, then a sudden mysterious buying ramp, exactly like last week, pushed the stock back up, as ZeroHedge elaborated.

Back to bond yields. The 30-year spiked above the 2% level but stayed below its recent high. Not to be outdone, the US dollar followed suit and gained 0.45% for the session.

Rising yields and a rallying dollar are the recipe for lower gold prices, and that’s what happened today. However, gold’s retreatment of 0.20% was minor and did not disturb its current bullish rebound.

In the end, it was a session during which the major indexes did nothing but tread water.

1. Moving the markets

Following yesterday’s eye-popping Producer Price report, it came as no surprise to me that today’s soaring CPI release confirmed what I have been pouncing on all year, namely that inflation is here is to say and likely will get worse.

US Consumer prices soared at their fastest rate in 40 years, as ZH reported, by increasing 6.2% YoY in October, thereby blowing by expectations of 5.9% YoY and accelerating from September’s 5.4% YoY. The Core CPI spiked to its highest since August 1991, which confirms another non-transitory surge in inflation.

Added ZeroHedge:

Real weekly earnings are down 1.6% YoY.

The gap between PPI and CPI continues to run at record highs, meaning either consumers are about to be crushed or margins are going to collapse.

As a result, the markets retreated from their lofty levels, assisted by a spike in bond yields, with the 10-year exploding almost 12 basis points higher to end the session at 1.563%. Traders dumped the high-flying tech sector and rotated into bank stocks and gold, the latter of which closed at 5-month highs.

The precious metal surged and gained 1.27% on the day and is now moving towards the $1,900 level, while the US Dollar rallied almost 1%. It was crunch time on Wall Street, as neither spiking bond yields nor a rising dollar were able to prevent gold from levitating.   

The “clueless comment of the day” award goes to MSNBC, who lectures us as to why the inflation we are seeing is a good thing, as this picture tries to explain.

Go figure…