Baker Market Update – wk211112

Happy Friday wherever you may be reading this today! Veteran’s Day was yesterday, but I wanted to start off by saying Happy Veteran’s Day and we thank you for your service. This week’s economic calendar release was rather light, given the fact that no economic releases came out yesterday during the holiday. The major market moving news this week was the latest Consumer Price Index (CPI) release for the month of October. The higher-than-expected increase in CPI had markets once again questioning whether or not inflation is or will be transitory as the Fed continues to preach. Equity and bond markets sold off Wednesday as investors digested the higher inflation numbers and their potential impact on the global economy.

Let’s take a look into the details of this week’s CPI release. The CPI increased in October by 6.2% from a year ago. The core price index, which excludes food and energy, climbed 4.6%, up from September’s 4% rise and the largest increase since 1991. On a monthly basis, CPI increased a seasonally adjusted 0.9% in October versus an expectation of 0.6%, and a sharp acceleration from September’s 0.4% rise. Core CPI was up 0.6% for the month of October versus an expected 0.4% increase. Used vehicle prices again were a big contributor, rising 2.5% on the month and 26.4% for the year. New vehicle prices were up 1.4% and 9.8% respectively.

This morning brought updated JOLTS report as well as the preliminary University of Michigan Consumer Sentiment Index. U.S. job openings edged lower in September at 10.4 million job openings but remained well above pre-pandemic levels as employers continue to struggle to find workers. Additionally, the level of people quitting their jobs increased by 164,000 to 4.4 million, a record high. The preliminary estimate of the University of Michigan Consumer Sentiment index released this morning fell to 66.8 in November from 71.7 in October. Americans’ sentiment worsened due to escalating inflation despite a reduction in COVID cases across the nation.

Bond and equity market activity this morning is rather muted after the volatility we saw earlier in the week. The Dow Jones Industrial Average is up 35 points in early trading. The 10-Year Treasury Yield is hovering around 1.55% with the 30-Year Long Bond Yield at 1.93%.

Next week’s economic release calendar brings us monthly retail sales, industrial production and capacity utilization and housing starts. Until next time… have a great weekend!

Consumer-price Index, percent change from a year ago (1990 to Present)

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