Futures vs FV: SP -8.53; DJ -140.74; NASDAQ -20.50
Futures gapped lower with DJ30 futures -300. A steady recovery from 5:00ET, picking up speed at 7:30ET, has cut a lot of those losses. That is unfortunate. It would have been best for the market to open down those 300 points. With the recovery into the bell, the open is suspect.
CPI, Sept: 0.1 vs 0.2 vs 0.2 prior; Year/year 2.3% vs 2.7% prior
Core: 0.1 vs 0.2 vs 0.2 prior; year/year 2.2 vs 2.2 prior
Down: housing rents, energy (-0.5%), used cars (-3%).
Up: Everything else
The lower housing rents are a first in a long time, a flashing light to the Fed that indeed the housing market is fading and time to lighten up. At least that is the standard line today. As I discussed a month ago, however, housing cools as a recovery matures. That is normal so it is not an indication necessarily of the economy faltering. It does show, however, that the economy is not just surging and surging and that should have the same effect on the Fed: when an economy cools a bit, the LAST thing you want to do is tighten up and stall supply -- THAT would CERTAINLY spike inflation. That is how it always starts, not from demand but from lower supply as producers face more difficulty making those incremental products thanks to tighter money.
China: Stocks at 4 year lows with Shanghai off 5.22%
Sears: BR filing imminent
Earnings season: Getting started and it is thus far disappointing. TSE, PPG, and today WBA missed on the TL. Should have been a slam dunk for this company, but instead it is down at 69 to open from 72.31. Many are looking for earnings to save the market, but the early returns are not good. DAL did report a TL, BL beat.
COST: reports Sept sales growth at 8.4% vs 5.5% exp.
Bonds: 3.176% 10 year. Yields off marginally
EUR/USD: 1.1575 vs 1.1518
USD/JPY: 112.26 vs 112.28
Oil: 72.26, -0.91
Gold: 1213.10, +19.70
Futures are off the lows, holding near morning recovery highs toward the bell. Again, coming off the lows is not the best action for this kind of market that needs to finish the job. What happened in the first Iraq war? Didn't finish the job and had to come back later -- or not; was it really necessary? -- to get rid of Hussein. Got to get the job done or it is harder (or more painful) later.
Thus, the open may be a lot of head faking. Perhaps there is a subsequent selloff on the session that finishes the job. We will see how stocks holding support trade around that support and what kind of selling, recoveries, and/or bounces they show.
Jon Johnson, Chief Market Strategist
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