Communicated Content – How has the market reacted to the recent economic reports from the government and corporations? Chief among them was September’s CPI (Consumer Price Index), which is one of the most important of all the official information to get released. In fact, as soon as the Index was published, the Dow Jones Industrial Average dropped by more than 1,200 points. The other two major indices in the US, the S&P 500 and the NASDAQ, suffered similar downturns.
One other effect of the release is that bargain hunters looking for low-priced stocks could begin a major buying spree if they assume the recent index declines represent a bottom or near-bottom for the securities markets. It’s noteworthy that the CPI went up even though fuel prices dropped last month. Likewise, the Index still reported an uptick even when energy-related and food components, two surging areas, were removed from the equation. In all, the economy is in bad shape as Q4 gets underway. Here is a roundup of pertinent facts gleaned from the most recent reports, along with the ways in which each one has or might affect the securities and other markets.
The Big Indices Are Down
The most recent reporting by corporations and government agencies had a direct effect on nearly all the pertinent stock market indices, including the S&P 500, DJIA, and NASDAQ. After a bump in early September, they’ve all dipped consistently since mid-August. The most discernible decreases, however, were immediately after the latest CPI data was reported. At a one-year low point of $3,665, the S&P 500 and the other popular indices are currently in one of their worst runs of the past several years.
Fed Rate Hikes Might Not Beat Inflation
The mid-September release of the CPI report was even worse than analysts expected it to be. The primary reason for worry was a higher than anticipated inflation number. That alone was enough to push stocks and all the major indices down. The Fed raised interest rates by 75 basis points in late September in an effort to stall inflation, but the organization has so far had little success with similar efforts.
What About Precious Metals?
Is the latest negative financial data a force for change in the precious metals sector? In past years, an ailing economy has had the potential to buoy the price of gold, silver, platinum, and palladium. Even though all the media attention goes to gold, it’s instructive to take a look at silver in the light of the CPI report, inflation rates, and other economic data releases. Gold reached a high for the year in early March and has steadily fallen since. Contrary to the yellow metal’s usual counter moves against securities and financial news, the most famous precious metal has hit an annual low of $1,630 since the round of reports came out from mid-September onward. Silver is more volatile than the other precious metals, but it has followed the same basic trajectory of not apparently responding to the negative financial headlines.
Retail Markets
Inflation is always bad news for consumers because it means their earnings are worth less in the real world, particularly when it comes to purchasing fuel, groceries, and other retail household items. With the gift-giving season about to begin, merchants will be forced to offer substantial bargains to bring shoppers into their stores, whether online or otherwise. Amid rising interest rates, record high inflation, and already high retail prices, consumers face a uniquely challenging situation in late 2022.
Already, sellers are offering discounts for early Christmas season items in tech, household, and apparel categories. Seasonal statistics don’t begin to come in until early December, at which time markets and individuals will have a chance to adjust to the new wave of information. With dollars worth less, retailers will have to work hard to preserve profits while also enticing consumers to make purchases. The year’s most active shopping season could be one in which sales are either neutral or decline, depending on how merchants position their advertising and promotional campaigns.
Gasoline
If there was a glint of hope in the mass of negative reports, it was that the price of gasoline fell for eight weeks in a row. But even though the one-month decline was a whopping 10%, the overall pump price of consumer fuel is still 25% above where it stood one year ago. Looking at futures contracts in the fuel market, it appears that the next few months could witness continued declines in the per-gallon rates charged by service stations. Whether that bit of positive action will be offset by other components of economic reporting is yet to be seen.
