What to know as October inflation data looms - and the Federal Reserve's next move.
Well, well, well, if it isn't another day of key economic data. Phil Rosen here, reporting from a chilly New York City that's showing signs of winter.
The Consumer Price Index reading for October is set to publish today at 8:30 a.m. ET, and economists expect it to still be hot, but hopefully cooling.
Year-over-year inflation for October is expected to have eased slightly to 7.9%, according to Bloomberg's median estimate, down from 8.2% September.
But here's a tidbit I did not find reassuring: The annual inflation rate came in above forecasts in six of the last seven months.
While it'd be a good sign if CPI comes in lower than September, that doesn't mean the economy is in the clear — far from it, actually.
Remember, the Fed's goal is to bring inflation all the way down to 2%. And don't forget the labor market, too, has yet to show any meaningful signs of cooling.
Effectively, whatever number comes out this morning, that's not going to change the reality that there are more interest rate hikes on deck.
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1. There's a high likelihood of a recession in 2023, but today's CPI print will determine just how aggressive the Fed stays with policy.
That's what Luke Tilley told me last night. He's the chief economist of Wilmington Trust, and he said his firm is expecting inflation to have eased more than consensus predictions.
Tilley said he'll be watching Core CPI in particular, which excludes food and energy prices.
"We have this week established a mild recession for next year as our baseline outlook, 55% probability," he said. "If Core inflation comes in greater than 0.5%, the Fed will raise rates more and we would be reevaluating the probability of a recession, and probably raising it higher."
Soaring inflation has put the Fed on its most hawkish campaign since the 1980s, and the longer it continues, the higher the risk of a policy mistake and a downturn.
Wall Street so far remains mixed on whether policymakers will opt for their fifth consecutive 75-basis-point rate hike in December, but traders are currently betting on greater odds of a half-point move.
"Last month [Core CPI] was 0.6%, tomorrow expected 0.5%, and anything below that is going to play toward reducing the Fed's hike at the next meeting," Tilley added. "So if it comes in below 0.5%, that encourages a 50-basis-point hike in December, and anything above that will push toward a 75-basis-point move."
Meanwhile, JPMorgan analysts said Wednesday they expect a 7.9% headline reading, but that any surprise drop in inflation could bode well for stocks.
"Seeing a stepdown in inflation of this magnitude likely pulls the 10-Year yield below 4% (currently 4.158%) and triggers a sharp rally in stocks," the firm's analysts wrote in a note. "This may also reset the yield curve lower with terminal rate expectations falling under 5%."
What's your prediction for the Federal Reserve's December rate hike?
A) 50 basis points
B) 75 basis points
Let me know on Twitter (@philrosenn) or email me (firstname.lastname@example.org).
In other news:
2. US stock futures rise early Thursday, as investors await today's CPI print. Meanwhile, Amazon made history as the first public company ever to lose $1 trillion in market value. Here are the latest market moves.
3. Earnings on deck: AstraZeneca PLC, Allianz, and more, all reporting.
4. UBS shared which indicators to watch out for to know whether stocks have bottomed. The analysts analyzed every bear market since the 1960s, and laid out 17 key indicators that can signal the end of the bear market — as well as how high stocks could climb next.
5. FTX has nosedived in spectacular fashion. After Binance scrapped its bailout of Sam Bankman-Fried's crypto exchange, we broke down how the company went from a $32 billion valuation to a fire sale in 11 months — and why one JPMorgan strategist thinks the whole fiasco could spark an industry meltdown that slashes bitcoin's price by 25%.
6. The Fed's jumbo-sized rate hikes will uncover more "skeletons in the closet" for the crypto industry. That's according to the Peterson Institute's Martin Chorzempa. "We can expect a lot more problems to come."
7. Retail investors are rushing in to buy the dip in crypto-linked stocks amid the FTX drama. Vanda Research analysts pointed out that net purchases of the long-positioned ProShares Bitcoin Strategy ETF jumped on Tuesday — even as bitcoin dropped to a 52-week low below $17,000.
8. This 34-year-old entrepreneur earns up to $42,000 a month selling socks and tights on Amazon. Most of it is passive income, and she says she never even sees the products she sells. She shared how she built her ecommerce business with $2,000 upfront.
9. The chief global strategist for JPMorgan's investing arm explained why the Fed will cause an unnecessary recession, even as inflation is fading away. David Kelly warned no matter how high the market bounces, policymakers are going to tip the US economy into a downturn. Get the full details.
10. Trump-linked SPAC dropped 20% on Wednesday. Some candidates the former president endorsed in the midterm elections didn't succeed in their races, which spurred a sell-off in Digital World shares.
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Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email email@example.com
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.
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