Stock investors have all eyes on the Consumer Price Index due out this morning. Indexes have been mostly trending upward this week in anticipation of a softer inflation read that bulls believe could justify a near-term pause in the Federal Reserve's interest rate hikes.

Headline CPI for December is expected to come in at +6.6%, down from +7.1% in November, while the "core" rate (strips out food and energy) is expected to fall to +5.7% from +6.0% previously.

In particular, investors will be looking at the month-over-month change with some economists thinking the headline rate could actually decline by as much as -0.2%.

This is the final CPI report before the Fed's next meeting at the end of January.

Other key inflation data between now and then includes the Producer Price Index next Wednesday and the PCE Prices Index on January 27. Several Fed officials are also scheduled to speak today so investors will be listening closely to any thoughts on how December's CPI read may influence the central bank's upcoming policy moves, as well as more details on what the Fed wants to see before declaring that inflation has been "defeated."

Bulls believe numerous other areas of softening in the economy are signals that disinflation is happening more rapidly than the Fed has been anticipating and "peak" Fed hawkishness is in the rearview mirror.

Bears don't necessarily argue that point but do continue to argue that even if the Fed decides to issue lower rate hikes, or even stop them altogether, it doesn't mean that rate cuts are going to happen anytime soon. Bears, along with Fed officials, anticipate both interest rates and inflation will remain high for most if not all of 2023.

That is a very difficult combination for companies to operate under and is a key reason bears believe we are set for an earnings "recession" through at least the first half of the year.

Bulls see hope for better results stemming from other areas, particularly the decline of the US dollar. The US dollars impact is greatest on tech stocks with over half sectors sector’s sales coming from overseas.

Keep in mind, the US dollar is down about -10% in the past 90-days. Bulls are also pointing to weaker commodity prices, moderating wages, and the resolution of supply chain snags as reasons that earnings could surprise to the upside. Q4 2022 earnings kick off tomorrow with Bank of America, BlackRock, Citigroup, JPMorgan-Chase, and Wells Fargo.

Ford, GM, and Google Partner to Promote 'Virtual' Power Plants: Companies including GM, Ford, Google and solar energy producers said on Tuesday they would work together to establish standards for scaling up the use of virtual power plants (VPPs), systems for easing loads on electricity grids when supply is short. Virtual power plants pool together thousands of decentralized energy resources like electric vehicles or electric heaters controlled by smart thermostats. With permission from customers, they use advanced software to react to electricity shortages with such techniques as switching thousands of households' batteries, like those in EVs, from charge to discharge mode or prompting electricity-using devices, such as water heaters, to back off their consumption. Source Reuters

Barclays Estimate That Home Prices Could Fall by Another -10%: Home prices could decline by between -4% and -10% before hitting bottom, per a new note from analysts at Barclays, who say that the likelihood of a sharp house price correction has intensified. Analysts are emphasizing that the uncertainty in the market right now is around the trajectory of interest rates. After shooting up like a rocket since the beginning of the pandemic, now the key question is whether they'll crash and burn, or just gently drift a bit downward. Home prices soared an astonishing +42% between February 2020 and their peak in June 2022. Since then prices have fallen month over month Source Barclays and Axios

Lumber Rally Expected to Fizzle Amid Housing Market Funk: The chill in North America’s housing market has lumber traders saying the commodity’s recent rally may not have much more room to run. Benchmark futures in Chicago rose as much as 6.1% to $418.80 per 1,000 board feet Wednesday, heading for the longest rally in two weeks. The bounce comes after prices slumped to the lowest in more than two years last week. While major producers are slashing production, buyers are still spooked by rising interest rates and passing up cheap supplies. Lumber’s plunge in 2022 made it the worst-performing commodity last year. Canadian producers West Fraser Timber Co. and Canfor Corp. already have announced output reductions from British Columbia sawmills this year, and further curtailments are expected, said John Cooney, an analyst with ERA Forest Products Research. US homebuilders buy more than a quarter of their lumber from Canada. “Homebuilders have all battened down the hatches,” Cooney said in an interview. “I think there’s a couple of quarters of pain coming up.” A glut of European lumber has also buoyed supplies in North America despite the production cuts, and wood inventories remain high Source Bloomberg

BlackRock Adds to Wall Street Layoff Tally: BlackRock Inc., the world’s largest asset manager, is laying off 500 employees, or around 3% of its total workforce, according to a memo sent to employees Wednesday morning. A BlackRock spokesman cited “an unprecedented market environment” as the reason for the layoffs. Following the layoffs, the company said it will still have more employees than it did a year ago. BlackRock grew its workforce by more than +20% over the last three years, joining other Wall Street firms in hiring aggressively during a market boom. Other Wall Street firms are also trimming headcount. Goldman Sachs Group Inc. this week began laying off some 3,200 employees, about 7% of its employees, while Morgan Stanley is cutting about 2% of its global workforce. Source Barrons

Freight Forwarder Flexport Laying Off 20% of Its Workforce: Freight forwarder Flexport Inc. is cutting about 20% of its global workforce, or more than 600 workers, as the digital-focused business copes with falling shipping demand and repositions its operations to offer more supply-chain services. The San Francisco-based company raised $935 million nearly a year ago in a funding round valuing the business at $8 billion. The company, whose backers include venture-capital giant Andreessen Horowitz, MSD Partners and SoftBank Group Corp.’s Vision Fund, has about 3,200 employees across 19 offices and six warehouses around the world. The note to employees said the company has lowered its volume forecasts through 2023 but didn’t provide specifics. Flexport said it would continue to hire in certain areas of its business, including adding some 350 to 400 software engineers with a goal of doubling that department. Source WSJ

Universal Plans New Theme Parks In Texas And Las Vegas: Universal Parks & Resorts announced plans on Wednesday to construct two new theme parks, including a “one-of-a-kind” family-friendly park outside Dallas and a horror-themed park in Las Vegas, adding to Universal’s portfolio of massive parks as it competes with Disney. Universal’s planned park in Frisco, Texas, just north of Dallas, is tailored for “younger audiences,” with attractions on nearly 100 acres of land, Universal Parks—a subsidiary of NBCUniversal, which is owned by Comcast—said in a statement on Wednesday. The company did not say when construction would begin in Frisco’s $10 billion Fields development, where several other projects are planned, including a $500 million Omni hotel and the PGA headquarters. The company is also planning to open a significantly smaller 110,000-square-foot horror park on the Las Vegas Strip based on a Halloween-themed series of events at its flagship park in Orlando, Florida, Universal announced Source Forbes

Is the US Headed For a "Richcession"? Economic downturns are usually horrible for poor people, bad for the middle class and an inconvenience for the rich. But if the economy enters a recession in 2023, or even if it manages to narrowly evade one, it might be the well-heeled who take a bigger hit than usual. In the earliest days of the pandemic, the super-rich got richer, amassing more wealth as the health crisis worsened. Meanwhile, food banks were stretched thin from the unprecedented demand resulting from widespread layoffs. Wall Street Journal reporter Justin Lahart argues that a richcession could be brewing because household wealth for those at the top didn't grow as much as it did for those at the bottom, percentage-wise, over the course of the pandemic. Wealth on the bottom grew as a result of stimulus checks and other government stimulus money as well as wage increases to try to keep up with inflation and attract workers in a historically-tight labor market. Wealth at the top, meanwhile, is stagnating because paychecks aren't rising and the stock market's decline over the past year is hitting the wealthier especially hard. Source USA Today

We have alternatives that are low in correlation to traditional stock & bond portfolios. They are liquid and transparent. Minimums and fee structures vary and some are performance based only. Returns we can share are NET of Fees.

If you want to learn more, just let me know what works to learn more about your needs.

Schedule A Call Now

Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.

Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.

CTG Daily Commentary is published by Capital Trading Group, LLLP and Nell Sloane is the editor of this publication. The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.

It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.

Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.