Daily Market Color

Stocks Resume Selloff Despite Cooling Inflation


Another Day, Another Drop

US equity markets had themselves another volatile day as the S&P 500 and DJIA each declined more than 2%, while the tech-heavy Nasdaq (-1.25%) managed to limit losses to some extent.  Today’s worst performers were in the energy sector, where stocks slid 3%. 



Corresponding with the drop in energy shares, WTI crude futures settled 3% lower to below $71.00/barrel.  Weighing on crude prices was a larger than expected build in US inventories last week, as the EIA reported a +6 million-barrel increase vs. estimates of +2.6 million.  In bond markets, US Treasurys fluctuated throughout the day, rallying earlier in the session, following weaker than expected consumer price data, before paring gains to finish near unchanged for the trading session.  The 10-year note yield finished slightly lower on the day at 3.15%. 



Inflation Cools

This morning a report released by the Labor Department alleviated some concerns of accelerated inflationary pressures in the US.  The headline consumer price index recorded a seasonally adjusted 0.1% MoM rise (+0.3% expected) during September.  The modest increase corresponded with a 2.3% annualized uptick – the lowest YoY reading in the past eight months.  The core CPI index climbed 0.1%, also missing median forecasts of a 0.2% rise.  Compared to a year earlier, core consumer prices increased 2.2% (2.3% expected).  Much of the softness in the report was attributed to the decline in energy prices last month.  Despite this being the second consecutive month of tepid CPI metrics, the Fed is still expected to move ahead with a quarter point hike at its December meeting, the probability of which currently hovers near 74%, as per Fed Funds futures.  



Speaking of the Fed, President Trump continues to ignore Presidential precedent and provide direct guidance / commentary on the Fed’s policy decisions.  In an interview this morning, Trump vented his discontent with monetary policy in stating, “I’m paying interest at a high rate because of our Fed. And I’d like our Fed not to be so aggressive because I think they’re making a big mistake”.  In other comments, Trump used the adjectives “crazy”, “too cute”, and “loco” to describe both the recent and anticipated actions by the Fed.  

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