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Qilai Shen / Bloomberg
The continuing fall in oil prices and the disappointing news from China seem to have highlighted fears about global economic growth, even as investors seem to be concerned about the Fed's reaction to inflation in recent years. United States.
Concerns contributed to lower US stocks on Friday as the three leading US indexes ended in red, although they rebounded from the lows of the session.
US producer price data, which rose more than expected, contributed to bearish sentiment as rising inflation could help the Fed to adopt a more hawkish stance. Separate data showed that producer inflation in China had declined and the number of auto sales in the Asian nation had fallen. In the face of the economic slowdown and the trade dispute with the United States, China has also decided to strengthen lending to its private sector, which has helped to put pressure on the country's banks.
China being a key driver of global economic growth, any sign of a weakening economy in this country can thrill investors.
Large series of losses for crude
Meanwhile, oil prices continued to fall sharply, likely due to worries about global economic growth. (See more below). It was the tenth consecutive session of losses for US crude, the worst series in more than 34 years. The decline comes before the meeting of OPEC members and their allies this weekend. Investors may want to see the results of the meeting to see if there is any news of planned changes in production that could affect oil prices.
The brightest area for the US market Friday came from the consumer goods sector. This may not be too surprising because of the defensive nature of these actions. These actions tend to do better when other stocks falter because people still have to buy things like toothbrushes, as economic conditions or inflation increases.
We have also recently seen data suggesting that the US consumer is in good health, perhaps offering a bullish backdrop to these companies.
There has been a lot of noise around interest rates, market volatility, and mid-term elections in the United States. However, investors may want to pay attention to some international issues that persist even though they do not dominate market-related securities everyday. It seems likely that market players will continue to monitor the Brexit negotiations and Italy's fiscal situation.
Of course, trade and tariff issues between the United States and China have received more attention. Investors continued to monitor the conflict between the world's two largest economies, as some believe that a trade war could dampen global economic growth. The frequency of headlines surrounding the issue could increase as the G20 summit approaches the end of the month and early December. Trump and Chinese President Xi Jinping are expected to meet at the rally.
The week ahead
Closer to home, this week, we expect to get consumer price data for the United States, which is an essential measure of inflation. (See more below.) Jerome Powell, Fed Chairman, is expected to make some public comments over the coming week, which could give investors a better insight into the Fed's current thinking. It might be useful to check his comments to see if he has anything to say about inflation, oil prices or tariffs. The tightly monitored 10-year benchmark Treasury yield fell below 3.2% on Friday, as worries over weak foreign markets may have overtaken worries about rising consumer prices. United States.
The new week should also provide us with retail sales data for October. Sales are expected to increase 0.5%, according to a consensus of Briefing.com. Also in the new week, Home Depot and Macy's, as well as Wal-Mart, Nordstrom and J.C. Penney, are expected to garner results. Many large retailers have surpassed the S & P 500 broadly since their October trough.
Figure 1: stable as and when: Despite the stock market flop Friday, volatility, as measured by the VIX (candlestick), remained rather moderate, not far from the lows of the week. This could be a sign that investors are not predicting the kind of sudden movements seen last month. At the same time, the dollar index (purple line) has begun to move closer to the recent highs, probably a weight on the shares on Friday. Data sources: Cboe, ICE. Cartographic source: TD Ameritrade thinkorswim® platform. For illustration purposes only. Past performance does not guarantee future results.thinkorswim
Is the porridge too hot? The scenario called "Goldilocks" for the economy is a factor that helped the stock market. Basically, we have seen strong economic growth while inflation figures have been relatively moderate. In other words, if the economy was Goldilocks' porridge, it would be neither too hot nor too cold. In recent weeks, rising interest rates and resulting market volatility have overshadowed the optimism generated by the Goldilocks scenario. So we thought the time would be right to review it. Investor worries about Friday's inflation as a result of a higher-than-expected reading of producer prices raise the question of whether we have experienced a tipping point or whether we will see a neighbor.
Upcoming Consumer Price Report: Consumer prices are the cousins of producer prices because producers often pass on their rising costs to end-buyers. On Wednesday morning, we expect to receive a report on consumer prices in October, and it may be interesting to pay attention to this sensitivity after reading producer prices stronger than expected. The two reports are not the only factors that provide a picture of inflation, but they are both an important part of the picture. And if the reading of consumer prices is higher than expected, it could strengthen fears to see the Fed become more hawkish. Recall that a recent October employment report indicated an annualized increase of 3.1% in hourly earnings – the highest rate since 2009.
More new beards on oil: Part of the market at least points to a decline in inflation. US oil prices entered a bear market on Thursday and fell on Friday for the 10th consecutive trading session. The weakness comes amid concerns that slower global economic growth will dampen the demand for black gold even though production from major producers is high. Tightening tensions over the Iranian supply, as the Trump government granted exemptions to major oil buyers in the Persian Republic, has also helped drive down prices. On Wednesday, the data showed that US crude inventories rose. On Friday, the US market received more bearish information as Baker Hughes, an oil services company, announced an increase in the number of oil rigs in the United States. We wonder if oil prices will continue to decline. If consumers pay less at the pump, they could spend money elsewhere, which would be a potential benefit for consumer discretionary companies. Manufacturers and transport companies that use a lot of fuel could also benefit. But of course, energy producers would probably suffer the consequences.
Comment TD Ameritrade® for educational purposes only. ISPC Member.
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The continuing fall in oil prices and the disappointing news from China seem to have highlighted fears about global economic growth, even as investors seem to be concerned about the Fed's reaction to inflation in recent years. United States.
Concerns contributed to lower US stocks on Friday as the three leading US indexes ended in red, although they rebounded from the lows of the session.
US producer price data, which rose more than expected, contributed to bearish sentiment as rising inflation could help the Fed to adopt a more hawkish stance. Separate data showed that producer inflation in China had declined and the number of auto sales in the Asian nation had fallen. In the face of the economic slowdown and the trade dispute with the United States, China has also decided to strengthen lending to its private sector, which has helped to put pressure on the country's banks.
China being a key driver of global economic growth, any sign of a weakening economy in this country can thrill investors.
Large series of losses for crude
Meanwhile, oil prices continued to fall sharply, likely due to worries about global economic growth. (See more below). It was the tenth consecutive session of losses for US crude, the worst series in more than 34 years. The decline comes before the meeting of OPEC members and their allies this weekend. Investors may want to see the results of the meeting to see if there is any news of planned changes in production that could affect oil prices.
The brightest area for the US market Friday came from the consumer goods sector. This may not be too surprising because of the defensive nature of these actions. These actions tend to do better when other stocks falter because people still have to buy things like toothbrushes, as economic conditions or inflation increases.
We have also recently seen data suggesting that the US consumer is in good health, perhaps offering a bullish backdrop to these companies.
There has been a lot of noise around interest rates, market volatility, and mid-term elections in the United States. However, investors may want to pay attention to some international issues that persist even though they do not dominate market-related securities everyday. It seems likely that market players will continue to monitor the Brexit negotiations and Italy's fiscal situation.
Of course, trade and tariff issues between the United States and China have received more attention. Investors continued to monitor the conflict between the world's two largest economies, as some believe that a trade war could dampen global economic growth. The frequency of headlines surrounding the issue could increase as the G20 summit approaches the end of the month and early December. Trump and Chinese President Xi Jinping are expected to meet at the rally.
The week ahead
Closer to home, this week, we expect to get consumer price data for the United States, which is an essential measure of inflation. (See more below.) Jerome Powell, Fed Chairman, is expected to make some public comments over the coming week, which could give investors a better insight into the Fed's current thinking. It might be useful to check his comments to see if he has anything to say about inflation, oil prices or tariffs. The tightly monitored 10-year benchmark Treasury yield fell below 3.2% on Friday, as worries over weak foreign markets may have overtaken worries about rising consumer prices. United States.
The new week should also provide us with retail sales data for October. Sales are expected to increase 0.5%, according to a consensus of Briefing.com. Also in the new week, Home Depot and Macy's, as well as Wal-Mart, Nordstrom and J.C. Penney, are expected to garner results. Many large retailers have surpassed the S & P 500 broadly since their October trough.
Figure 1: stable as and when: Despite the stock market flop Friday, volatility, as measured by the VIX (candlestick), remained rather moderate, not far from the lows of the week. This could be a sign that investors are not predicting the kind of sudden movements seen last month. At the same time, the dollar index (purple line) has begun to move closer to the recent highs, probably a weight on the shares on Friday. Data sources: Cboe, ICE. Cartographic source: TD Ameritrade thinkorswim® platform. For illustration purposes only. Past performance does not guarantee future results.thinkorswim
Is the porridge too hot? The scenario called "Goldilocks" for the economy is a factor that helped the stock market. Basically, we have seen strong economic growth while inflation figures have been relatively moderate. In other words, if the economy was Goldilocks' porridge, it would be neither too hot nor too cold. In recent weeks, rising interest rates and resulting market volatility have overshadowed the optimism generated by the Goldilocks scenario. We therefore thought that it would be appropriate to re-examine it. Investor worries about Friday's inflation as a result of a higher-than-expected reading of producer prices raise the question of whether we have experienced a tipping point or whether we will see a neighbor.
Upcoming Consumer Price Report: Consumer prices are the cousins of producer prices because producers often pass on their rising costs to end-buyers. On Wednesday morning, we expect to receive a report on consumer prices in October, and it may be interesting to pay attention to this sensitivity after reading producer prices stronger than expected. The two reports are not the only factors that provide a picture of inflation, but they are both an important part of the picture. And if the reading of consumer prices is higher than expected, it could strengthen fears to see the Fed become more hawkish. Recall that a recent October employment report indicated an annualized increase of 3.1% in hourly earnings – the highest rate since 2009.
More new beards on oil: Part of the market at least points to a decline in inflation. US oil prices entered a bear market on Thursday and fell on Friday for the 10th consecutive trading session. The weakness comes amid concerns that slower global economic growth will dampen the demand for black gold even though production from major producers is high. Tightening tensions over the Iranian supply, as the Trump government granted exemptions to major oil buyers in the Persian Republic, has also helped drive down prices. On Wednesday, the data showed that US crude inventories rose. On Friday, the US market received more bearish information as Baker Hughes, an oil services company, announced an increase in the number of oil rigs in the United States. We wonder if oil prices will continue to decline. If consumers pay less at the pump, they could spend money elsewhere, which would be a potential benefit for consumer discretionary companies. Manufacturers and transport companies that use a lot of fuel could also benefit. But of course, energy producers would probably suffer the consequences.
Comment TD Ameritrade® for educational purposes only. ISPC Member.
