Article published at 9:15 a.m. CT
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Inflation rises 3.4%, hitting expectations
- Oil prices pull back
- Mortgage rates rise – ahead of Fed meeting
As we’ve said for 25 years, never forget how the events of 9/11 affected us all. Please take a moment today to remember and honor those who lost their lives or were injured.
Oversold markets are getting a reprieve in early trading today as inflation expectations hit the mark and oil prices pulled back moderately after reaching fresh peaks throughout the shortened week.
The headline Consumer Price Index (CPI) rolled in at a 3.4% year-over-year increase, meeting Wall Street’s estimates and further raising prospects of a 25-basis point hike in interest rates next week when the Federal Open Meeting Committee (FOMC) meets. The CME FedWatch tool climbed to 90.4% likelihood of an interest rate trek to 3.75% to 4.0% after the CPI report was released. Just ahead of it, it stood at 69.2%, with the sharp turn upward reflecting the swiftly changing sentiment. Expectations for another 25-basis point increase sits at 48.9% in December.
The Cboe Volatility Index® (VIX®) also is falling nearly 11% on today’s upward momentum, standing at 15.88.
The Nasdaq Composite is higher by 1%, while the S&P 500 Index is adding 1.04% and the Dow Jones Industrial Average, which was down earlier this week, is gaining 1.2%. Still, the three major indices are on track to finish the last four sessions lower after a week dominated by macroeconomic and geopolitical headwinds.
WTI Crude Oil is tracking just below $99 per gallon after rolling past $103 per barrel Thursday – the highest since May. Diesel, which is primarily used to power semi-trucks, delivery vans and heavy equipment, as well as buses, trains, and boats, hit $6 per gallon Thursday. That’s the highest ever, according to GasBuddy.
Many of us already know how higher WTI crude prices hit us at the pump. But to get a better feel on how diesel prices impact the costs of consumer goods, consider this: The food available at your local supermarket and the van used to bring Amazon products to your front door or the bus you jump on to get to work are fueled by diesel, and those rising costs are mostly pushed down the line to you.
As mentioned recently, housing is getting hit with rising mortgage rates, even before the CPI numbers were released. The 30-year fixed mortgage topped 7%, up 18 basis point in this shortened week alone. That, of course, could impact buying opportunities, but the housing shortage nationwide might be having a bigger bearing on availability. Plus, soaring housing prices in tandem with higher borrowing costs is not exactly a prescription for strength.
Elsewhere, investors boosted Oracle shares some 7% in early trading after the software and hardware maker handily beat Wall Street’s estimates thanks to its expansion into the data center arena.
Adobe shares are moving 2.1% lower after turning in profits and revenues that outpaced expectations, buoyed primarily by a rise in subscriptions. However, the firm offered a guidance range with a high end that just met projections.
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