The View from 5th Avenue – 11 August 2022

With tech (CCMP) starting the day well above its June lows, it’s no surprise that things slowed down a bit today. While the softer than expected PPI print this morning furthered the narrative that inflation has peaked, the markets seemed to realize that maybe the kneejerk reaction yesterday was a bit more than was merited. The PPI decline was the first in more than two years, due to a dip in the costs of goods (although services prices edged higher). Further, inflation is not the only thing cooling, as this morning we saw that the labor market is also beginning to ease. Any signs of cooling were received well, but with things still elevated, we are far from ok. There is still a long way to go and the S&P demonstrated this, starting in the green but losing confidence as the day wore on. Energy led for most of the day after the IEA said they saw little chance that OPEC+ will supply more oil, and as oil demand forecasts were raised – crude unsurprisingly outperformed. Yields were higher after this morning’s data (and realization the Fed is still targeting 3.9% end of year) brought Banks & Insurance to the front of pack as well. Tech was the day’s underperformer, although they remain far from undoing yesterday’s move. While the macro picture is the hot topic of debate in markets, earnings continue to dictate some single stock moves. Disney (DIS, 4.75%) last night reported better than expected subscriber growth, and said it would raise the price of Disney+ by 39%. Despite strong parks numbers from Disney, Six Flags (SIX, -18.19%) tumbled after its theme park attracted fewer visitors. Though it is worth noting that the US Dollar (DXY) is down for 4th day in a row, and the EURUSD is testing key res 1.034  - a break above this level would confirm rise towards 1.08. Tomorrow brings the latest University of Michigan data, and consumer sentiment is expected to rise. With markets drifting lower throughout the afternoon, we have to hope they don’t do the same into the end of week.