Despite a surprising rally in the Producer Price Index (PPI), stocks continued their rise, marking the S&P 500’s fourth consecutive session of gains. The bond market saw a notable pullback, with 10-year Treasury yields falling six basis points to 4.59%. At the same time, the dollar recorded its longest losing streak since March. In the energy sector, oil prices stabilized after volatility earlier in the week caused by the conflict between Israel and Hamas.
The September PPI figure exceeded forecasts, driven largely by rising energy expenditures, underscoring the ongoing challenges to achieving lower, sustainable inflation. Investors are now eagerly awaiting the release of the minutes of the Federal Reserve’s September meeting, seeking information on the central bank’s future policy path. Additionally, Thursday’s Consumer Price Index (CPI) report will be critical in shaping ongoing monetary policy debates.
Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office, emphasized the need for patience: “Today’s PPI suggests that we have not seen the end of persistent inflation and high interest rates.”
Federal Reserve Bank of San Francisco President Mary Daly hinted that the neutral interest rate could be higher than pre-pandemic levels. However, he assured that borrowing costs would not remain high indefinitely. Along the same lines, Governor Michelle Bowman suggested that it may be necessary to raise rates further and remain elevated for a longer period of time, although her comments were perceived as somewhat less aggressive compared to her comments in early October.
On the business front, Exxon Mobil Corp. experienced a decline following its agreement to acquire Pioneer Natural Resources Co. for $59.5 billion. By contrast, Pioneer shares saw a rebound. Birkenstock Holding Plc, working with its private equity owner, priced shares in its initial public offering in the mid-range, raising $1.48 billion. Texas Instruments Inc. faced a slide when Oppenheimer downgraded the chipmaker, citing margin pressures.
This week’s key events:
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Machinery orders from Japan and IPP on Thursday
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Bank of Japan’s Asahi Noguchi speaks Thursday
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UK industrial production on Thursday
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US Initial Jobless Claims and CPI on Thursday
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The European Central Bank publishes the report of its September monetary policy meeting on Thursday
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Federal Reserve’s Raphael Bostic speaks Thursday
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CPI, PPI and China trade on Friday
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Eurozone industrial production on Friday
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US University of Michigan Consumer Sentiment on Friday
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Results from Citigroup, JPMorgan, Wells Fargo and BlackRock as quarterly earnings season begins Friday
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G20 finance ministers and central bankers meet on Friday as part of IMF meeting
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ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak at an IMF panel on Friday
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Federal Reserve’s Patrick Harker speaks Friday
Market movements:
Stocks:
Coins:
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Bloomberg Dollar Spot Index: -0.1%
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Euro: +0.1% to $1.0620
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British Pound: +0.3% to $1.2319
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Japanese yen: -0.1% to 148.92 per dollar
Cryptocurrencies:
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Bitcoin: -1% to $27,134.78
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Ether: +0.7% to $1,571.09
Captivity:
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10-year Treasury bond yield: -6 basis points to 4.59%
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German 10-year yield: -5 basis points to 2.73%
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10-year UK yield: -8 basis points to 4.35%
Basic products:
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West Texas Intermediate crude oil: -1.2% to $84.92 a barrel
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Gold futures: +0.5% to $1,885.50 per ounce