A little tidbit of information you may have missed on Friday was that the Vice-Chair of the Fed, Rich Clarida, made mention in an appearance that the Fed could accelerate their tapering schedule as inflation is running too damn high. This is a very notable comment as this is the number two person at the Fed and it wouldn’t be something said casually – this was planned. The most recent PPI/CPI inflation reads this month have forced the Fed to reconsider their tapering schedule and this is how they gently let the market know that a policy shift is imminent. My guess is after Thanksgiving.
The S&P has closed around the same price level (4690) for three weeks in a row. The intra-day swings have been very sharp as overhead resistance at 4713 has kept the market from advancing. Various sectors have been rotating leadership with the semiconductors being the only reliable group of stocks pushing higher for the month of November.
If we look at the chart of the NASDAQ below provided by Elliott Wave International, the lower portion of the chart shows that more stocks are making one-year lows despite the new high achieved this week. This means that fewer stocks are pushing the indices higher and the market is thinning out which leaves it vulnerable to a pullback.
However, the market still has enough gas in the tank to push higher into the holiday season as the retail sector signals good demand and the economy continues to heal from the pandemic. Next week there will be some key economic news as the Fed’s preferred inflation measure, the personal consumption expenditure is released on Wednesday along with durable goods orders. Trading around the Thanksgiving holiday is normally quiet and the last five days of November have brought positive returns from equities since 1950 so any pullback may be short-lived.
Best wishes to you and your family this holiday week – Happy Thanksgiving!
Chart of the Week!
The lockdowns in Europe are back as Austria and Germany are seeing a spike in COVID cases. However, we seem to be following the same path as the Spanish Flu from over 100 years ago as you can see in the chart below from Elliott Wave International. The kids can get vaccinated now so this pandemic chapter in history looks to be coming to a close.
Economic & Central Banking Snippets
- The next chair of the Federal Reserve could be decided by next week. President Joe Biden has interviewed both current chair Jerome Powell and Fed Governor Lael Brainard for the position. Compared to Powell, Brainard is considered slightly more dovish among Fed Officials and is said to favor waiting longer to wind down the Fed’s bond-buying stimulus program. On Wednesday, the Fed will also release minutes from the two-day FOMC meeting earlier this month. (Investopedia)
- The German October Producer Price Index (PPI) rose +3.8% m-o-m which was twice as high as the estimates while the annual comparison is up +18.4%.
- Japan plans to spend nearly $500 billion on a stimulus plan to jump start its economic recovery. The plan includes cash payments to most families and some businesses. (Boockvar)
- The November NAHB home builder sentiment index rose to 83 from 80 and matches the highest read since February of this year. The NAHB said “In addition to well publicized concerns over building materials and the national supply chain, labor and building lot access are key constraints for housing supply. Lot availability is at multi decade lows and the construction industry currently has more than 330,000 open positions.”
- Import prices in October rose 1.2% compared to September as robust price increases of industrial supplies continue to lead the price moves.
- The Biden administration pressed ports in Southern California to open 24 hours a day to help ease supply-chain bottlenecks. The move has barely made a ripple. One terminal at the Port of Long Beach flung open its gates around the clock for truckers in mid-September, from Monday to Thursday. But no trucks showed up. In late September, it said it would open during overnight hours only if 25 trucks made appointments. Since then, those criteria were met only one night, and only five big rigs showed up to haul containers. (WSJ)
- Big retailers are raising expectations for a solid finish to the year:
- Ford and Rivian have decided to go their separate ways rather than collaborate on future electric vehicles, backing away from an earlier strategic pact that led to a multibillion-dollar windfall for Ford. (WSJ)
- Ford and General Motors plan to step into the computer chip business. Ford said it has entered an agreement with U.S.-based chipmaker GlobalFoundries, while GM said it is also trying to forge deeper ties with chipmakers after the automakers have been stung by the global shortage of computer chips. (Investopedia)
- Coal power plants are running at full blast in parts of Europe and enjoying a rare bout of profitability. Under Europe’s climate policies, this shouldn’t be happening. (WSJ)
- Oil-and-gas companies have logged record amounts of private-sector financing since the Federal Reserve’s 2020 interest-rate cuts and corporate bond-buying programs.
That is all for now and thank you for being a subscriber!
President – Kisco Capital