On Wall Street futures under pressure after what some are labeling as a historic comeback, yes, but just as insane. The reference is to the strong rebound yesterday that saw the US stock market close in strong rally after the thud following the publication of the US inflation data relating to the consumer price index.
The S&P 500 index fluctuated particularly during the session within the broadest trading range since March 2020, while the Dow Jones rebounded more than 1,300 points from the intraday lows tested in the previous hours.
Wall Street’s staggering recovery was the fifth strongest in the history of the S&P 500 and the fourth most sustained for the Nasdaq, according to SentimenTrader data reported by CNBC.
The Dow Jones thus closed in a rally of 827.87 points (+ 2.83%), at 30,038.72 points, after having slipped by more than 500 points during trading; the S&P 500 jumped 2.60% to 3,669.91, breaking a six-session negative streak, while the Nasdaq Composite gained 2.23% to 10,649.15.
Today a crucial appointment with the US quarterly season: the big giants of Wall Street will make the third quarter accounts known: JPMorgan Chase, Wells Fargo, Morgan Stanley and Citigroup will release all the financial results before the start of the Wall session Street.
At about 12 noon Italian time, the futures on the Dow Jones lost 0.33%; those on the S&P 500 fall by 0.40% and those on the Nasdaq fall by 0.60%.
A few days ago IG Italia presented the outlook on the financial statements that will be disclosed by the large US banks, based on the consensus estimates:
JP Morgan: Revenue of $ 31.99 billion and EPS of $ 2.88.
Morgan Stanley: Revenue of $ 13.23 billion and EPS of $ 1.51.
Citigroup: $ 18.23 billion and EPS of $ 1.55.
Goldman Sachs: $11.53 billion in EPS of $7.60.
On the macroeconomic front, the numbers relating to US retail sales for September (14.30 Italian time) and, later, the consumer confidence index drawn up by the University of Michigan will be released.
Returning to the historic comeback of Wall Street Adam Sarhan, founder and CEO of 50 Park Investments, explained the incredible recovery with the fact that Wall Street was in an oversold condition. “After the sharp decline (of the previous sessions), he explained, it is normal for the market to go down, move up, test a new high, and then go down again.”
In his opinion, the trend on the US stock market was the result of a combination of short-covering operations and the entry of value investors.
That said, according to Sarhan, Wall Street’s historical recovery does not change the fact that the US stock market is going through a bear market phase.
“It seems that investors who focus on equities have decided that the US inflation data does not negate the expectations of sharp price drops, going forward,” commented in a note reported by the CNBC, Rodrigo Catril, strategist of the forex market. at National Australia Bank. Catril also explained the rally with short-covering deals.
The initial sell-offs that hit the indices were triggered by the publication, before the start of the session, of the CPI consumer price index for the month of September.
The acceleration of year-on-year core inflation, in particular, has led markets to fear new anti-inflation rate hikes from Jerome Powell’s Federal Reserve.
After the release of the inflation data, the markets have in fact priced the arrival of a fourth monetary tightening by the Fed of 75 basis points, in the next meeting on 1-2 November, with a probability of 98%. The probability of a fifth consecutive rate hike of 75 basis points also increased to 62%.
Traders are now betting on a round of monetary tightening from Powell & Co that will bring rates to close to 5% before the central bank ends the hikes in the spring of 2023. Expectations are on fed funds rates up to 4.9% by next April, compared to 4.65% priced the day before yesterday.
Returning to the data, in September the US consumer price index rose on a monthly basis by 0.4%, double compared to expectations, accelerating the pace compared to the previous + 0.1%. The core component – net of the prices of energy and food goods – jumped by 0.6% on a monthly basis, over the estimated + 0.5% and as in September.
On an annual basis, inflation measured by the CPI index jumped by 8.2%, slowing the pace compared to the 8.5% growth of the previous month, but climbing at a rate higher than the expected + 8.1%.
Core inflation also accelerated its pace, from + 6.3% in August to + 6.5%, in line with expectations. It is the 28th consecutive month that the core CPI index has risen, now reaching a record since August 1982.
Expectations of a more hawkish Fed still put pressure on the euro, which falls by 0.47% against the US dollar, around $ 97.97. US Treasury rates, on the other hand, have turned around after yesterday’s surge, which brought 10-year Treasury rates back above the 4% threshold and two-year US government bond yields to 4.5% for the first. time since 2007. Today rates are turning around, with 10-year rates dropping to 3.095% and two-year rates falling to 4.424%.