Never before have we seen so much excitement over 7.7 percent inflation when the Fed's target is 2.0 percent.
The following charts courtesy of StockCharts.Com tell the story.
S&P 500 +5.54 Percent
Nasdaq 100 Index +7.49 Percent
ARKK +14.52 Percent
Kathie Wood's Ark fund rallied a whopping 14.52 percent. However those shares are so beat up the rally barely registers.
Gold +2.33 Percent
Gold has had three big days in the last five, the other two were flat. The last five days were as better for gold than the last five days for the S&P 500 or Nasdaq 100 index.
Heaven help anyone in leveraged short ETF
SQQQ Ultra Short Nasdaq -22.01 Percent
TZA Small Cap 3X Short -18.22 Percent
The CPI was unexpectedly good and stocks were beaten up looking for an excuse to rally. Short covering was massive.
I discussed the CPI this morning in CPI Jumps Another 0.4% in October Led by Shelter and Energy
Bloomberg Econoday Consensus
Economists at Bloomberg Econoday expected a 0.7 percent overall rise, and a 0.5 percent rise excluding food and energy.
The results were much better than expected, but not exactly great, or even good.
CPI up 0.4 percent is normally not good news. Nor is 7.7 percent year over year.
- Actual was 0.4 month over month vs 0.7 expected.
- Year over year was 7.7 vs 8.0 expected
- Core was 0.3 vs 0.5 expected.
Question of the Day
Q: Did the beat the street numbers put a Fed pivot back in play?
A: No, not really.
The odds of a three-quarter point hike fell from 43.2 percent to 14.6%. That's it. A half-point hike was expected by the Fed both before and after the CPI report, just a little more confidently now.
Bond Yields Crash
Bond yields crashed the most in over a decade.
- The yield on the two-year Treasury note fell to 4.32% from 4.63%, the biggest one-day decline since 2008
- The 10-year yield fell to 3.83% from 4.15%, the biggest one-day drop since 2009.
US Dollar Index
The US dollar index fell which in isolation is good for stocks and gold but bad for inflation because it makes imports more expensive.
Q: Has the dollar peaked?
A: Possible, and perhaps likely
I am still skeptical the Fed gets in all the hikes that it plans. We are marching not towards a soft landing but a recession.
And a recession rates to be a poor environment for stocks. So don't think today will have a lasting impact. It's highly unlikely the stock market bottom is in.
This post originated at MishTalk.Com.
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