On Wednesday, inflation was the theme of day, with President Biden making moves to ease the supply chain issue. I must admit I do not have a lot of faith that it will not be enough to really make a difference. Getting stuff unloaded at ports is a step in the right direction. But America needs more qualified truck drivers, and I’m not sure there are enough dock workers to fill the new 24/7 period of operations.

It’s a shame the administration didn’t move sooner on this, and now to suggest this whole episode of supply chain bottlenecks and inflation was inevitable only adds insult to injury. Big companies are taking matters into their own hands with many leasing their own cargo ships. And yesterday, Amazon announced it was shopping for its own cargo planes to fly to China and back (that revelation didn’t help shares of FedEx (FDX) or United Parcel Service (UPS)).

Despite intense public scrutiny and handwringing over inflation (only the ‘Squid Game’ is getting more attention), the market seemed to be looking past it yesterday.

The CBOE Volatility (VIX) declined 6.10% and settled at the bottom of a nascent upward trading channel (top chart).

The yield on the 10-year bond eased, which was a strange reaction to a Consumer Price Index (CPI report that came in hotter than expected (bottom chart).

The Federal Open Market Committee (FOMC) minutes didn’t sway the market one way or the other. But the plot thickens for sure. If they decide to taper at the next meeting, it could commence in mid-November or mid-December.

Powell made it clear that the committee’s “substantial further progress” standard regarding asset purchases differs from the criteria needed to change federal fund rates.

Inflation basket investments are edging higher for the most part, making drastic changes to one’s portfolio to account for inflation has been tantamount to rearranging the chairs on the Titanic.

Market Breadth & Daily Swoon

Yeah, market breadth improved, but volume was still light, and there were still more 52-week lows than highs on the NASDAQ Composite.

Market Breadth	NYSE	NASDAQ
Advancing	2,026	2,604
Declining	1,236	1,868
52 Week High	71	67
52 Week Low	35	72
Up Volume	2.07B	2.52B
Down Volume	1.41B	1.45B

Although the market closed off the low and above the bottom 25% of the intraday trading range, it wasn’t the magic strong closing rally I’ve been looking for to help spark a big reversal higher. A great chart from Bespoke highlights the average path of the market since the S&P 500 peaked on September 2^nd, framing the piece (tongue-in-cheek) around the idea that perhaps the market should close at 3 PM.

https://www.bespokepremium.com/interactive/posts/think-big-blog/a-case-for-the-shorter-trading-day

Portfolio Approach

We took profits in Materials this morning in our Hotline Model Portfolio.

Today’s Session

PPI came in below consensus on headline and core, +0.2% was significantly below consensus of +0.5%.

 

The yield on the ten year yield was already lower before the release.

The markets are higher this morning as growth and technology are leading the way. We are pounding the table on Nucor Corporation (NUE), a current open position in our Hotline Model Portfolio.  If you are not a current subscriber to our premium Hotline service, email Info@wstreet.com to get started today.

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