One could feel the tension mounting yesterday. But the Volatility Index (VIX), aka the “Fear Index,” barely nudged, although stocks seem anxious.

The market began the session hinting at a move higher, but soon gave up the ghost.

The move was led by mega-cap names, where the old rule of ‘selling begets selling’ was in full effect. Oil names were tremendous, and I’m intrigued by the action in banks that are coming to life and drug company stocks in the era of ‘fat’ drug mania.

The session saw major one-day losers, including some stocks that have been up big this year (profit-taking) and other names being talked up as potential havens (HCA Healthcare (HCA) and PulteGroup (PHM)).

On the NASDAQ Composite, two stocks were slammed more than 50%.

Key Charts include the following: Keep an eye on the NASDAQ-100 (NDX), which is still above its 50-day moving average.

Banks look intriguing, but the chart still says ‘stay away.’

Bond Yields

The ten-year bond auction saw the highest yield since 2007. However, close to $35.0 billion was accepted at a high yield of 4.289%. The shock was tempered by the bid to cover 2.52% versus the average of 2.40 %, and the indirect bid of 66.3% against the average of 64.8%.

The bottom line is bond buyers will continue to demand higher yields.

Inflation Read

All the key inflation gauges are moving in the right direction but still not at the Fed’s target.

Consumer Price Index (CPI) Consensus:

• (V) VISA: 3.5%
• (GS) GOLDMAN SACHS: 3.6%
• (JPM) JP MORGAN: 3.6%
• (MS) MORGAN STANLEY: 3.6%
• (RBC) ROYAL BANK OF CANADA: 3.6%
• (BNS) SCOTIA BANK: 3.6%
• (TD) TORONTO-DOMINION BANK: 3.6%
• (WFC) WELLS FARGO: 3.6%
• (BCS) BARCLAYS: 3.7%
• (NMR) NOMURA: 3.7%
• © CITI: 3.7%
• (HSBC) HSBC HOLDINGS: 3.7%
• (UBS) UBS GROUP: 3.7%

MEDIAN 3.6%

Portfolio Approach

There are no sector weighting changes in the Hotline Model Portfolio.

Today’s Session

The CPI report is out this morning and it’s got a little hair on it.  Yet, the stock market isn’t freaking out.

Yet.

Meanwhile, bond market yields are edging higher.

Core inflation grew stronger than expected as did the headline inflation year over year.  Core inflation eased from a year ago, but at 4.3%, it’s the highest since the early 1990s.

CPI Trend

We’ll comb through the report and offer more on the afternoon note.

 

This report was hotter than expected and doesn’t help the soft-landing thesis, but it wasn’t a disaster either.

Comments

If the idiots in charge would leave the energy markets alone and let the industry operate and plan, we'd have better CPI figures. Markets operate better than government, plain and simple! neil bradie on 9/13/2023 10:00:14 AM

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