Pre-markets open red on last day of largely bullish week
Today is Veterans Day, formerly Armistice Day which marked the end of the First World War over 100 years ago. It has since become a celebration of those who have served in the US Armed Forces, especially those who have died in service (the same recognition behind Memorial Day in late May). It’s also 11/11, and in China four straight lines means “singles”, so “Singles Day” is also today. For the 14th consecutive year, companies like Ali Baba (BABA) offer discounts on goods and services, and are generally a bargain for retail.
We’ll see how it goes this year. China has seen record singles day sales every year since – including during the Covid era, which exists in China to this day. With the mandatory Chinese central government shutdowns underway, not only have e-commerce opportunities in the People’s Republic diminished, but retail and the economy in general have also shrunk. So while Alibaba brought in $38.4 billion in 2019, $74.1 billion in 2020, and $84.5 billion in 2021, we’ll get an eye on how this year’s numbers stack up. accumulate. Maybe this impressive trajectory will continue, maybe not.
Of course, we are seeing a tightening of headroom in the US economy – not just from the Fed’s interest rate hikes, but also from headline inflation taking a big chunk of everything , not just food and gas prices. We know from yesterday’s CPI report that core consumer prices are down month-over-month, albeit slightly (30 basis points). Are American consumers using these record savings accounts to pay for everyday goods? They most likely are.
Of course, this is all good news for those of us waiting for the Fed to rein in drastic interest rate hikes. We are currently hovering at 4% for the fed funds rate with another hike to come in a month. Will this rise take us to a range of 4.50-4.75%, or will it be lower than that? Yesterday’s rally firmly affirmed the possibility of it being the latter. And if a 50 basis point (bp) rise in December indicates a decline in increases through 2023 – perhaps even stopping at the next Fed meeting – then that’s positive for the market.
This wave of optimism faded at the start of today’s trading session. All major indexes are down, but not significantly. We may experience a drop in volume due to the Veterans Day holiday, but part of that could well be the markets self-sustaining ahead of the next potential market catalyst. What could it be? Next week will bring us a wide range of economic impressions, including retail sales, the producer price index, housing starts, home sales, and more. But none have the magnitude we saw with this week’s CPI or last week’s payroll reports.
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