Good morning, this is Jason Ma in Los Angeles, where gas prices are falling — but still above $6 a gallon in most places. Fuel costs will be a key part of consumer price data for September coming from the Labor Department on Thursday and may signal where the Federal Reserve and the stock market are headed.
Analysts expect the headline Consumer Price Index rate to cool further, this time to an 8.1% annual pace from 8.3% in August, 8.5% in July and 9.1% in June. Investors should brace for a 5% stock market decline if the reading comes in above 8.3%, JPMorgan's trading desk said in a note this week.
Even a reading of 8.1% to 8.3% would also be negative for stocks, with the note estimating that the S&P 500 would fall about 2% in that scenario.
But a CPI print below 7.9% would likely generate a 2%-3% rally, "though if we see CPI gap down more than 60 basis points the move could be larger," JPMorgan added.
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1. Investors should wait to get bullish on the falling stock market as inflation and rate-hike concerns continue to roil the valuation norms of the past two decades, according to Bank of America.
The bank said it's waiting for three key factors to suggest that it's safe to buy stocks, and so far none of them have happened.
The three missing pieces "to turn bullish" on the stock market include corporate earnings falling at least 9% from current levels, consumer savings falling while the unemployment rate rises, and outflows from equity ETFs, the bank said in a Wednesday note.
Based on those metrics, there's still a long way to go. For example, there has been $531 billion of inflows into equity ETFs year-to-date, representing the second best year on record, according to BofA.
One prominent ETF is still seeing robust investor inflows despite a massive sell-off. Cathie Wood's flagship ARKK ETF has seen $1.3 billion in inflows year-to-date, according to data from VettaFi.
That's despite that fact that it has dropped 77% from its peak, outpacing the decline of the dot-com bubble burst. And the sell-off could get worse as the ETF is different from tech stocks 20 years ago in two key ways, DataTrek Research said in a Wednesday note. First, unlike during the dot-com bust, interest rates are rising, not falling. And second, ARK Invest is an actively managed ETF while the Nasdaq is passive and much more diversified.
Stocks overall have seen some bullish action lately, suggesting investors think a bottom may be near. BofA clients poured $6.1 billion into US stocks last week, marking the third largest inflow seen since the bank began tracking the data in 2008 and the fifth consecutive week of inflows.
What do you think? Has the stock market found a bottom yet? Email jma@insider.com.
In other news:
2. US stock futures rise early Thursday, ahead of the eagerly awaited US inflation data due later this morning. Meanwhile, cryptocurrencies were down, with bitcoin trading around the $19,000 level. Here are the latest market moves.
3. Earnings on deck: Delta Air Lines, BlackRock, Walgreens Boots Alliance and more are all reporting.
4. Morgan Stanley says many companies are solving their supply chain woes. But they are also building up inventories while consumers are cutting back because they're fearful about the economy. That could be a devastating combination, though the bank named nine companies that could dodge it.
5. The US faces a "perfect storm" of debt, political strife, and an overseas war, billionaire investor Ray Dalio said. The founder of Bridgewater Associates warned the Fed will have to hurt markets and the economy to conquer stubborn inflation. He also offered portfolio advice.
6. Russian fuel shipments to troops fighting in the Ukraine war hit the highest level since the invasion began. A report from Bloomberg said fuel deliveries to military units in and around Ukraine reached nearly 220,000 tons in September. The increase comes as Moscow mobilizes more troops after a series of stunning defeats.
7. China's demand for oil is collapsing as OPEC now sees it dropping by 60,000 barrels per day this year, after forecasting an increase of 120,000 only a month ago. The cartel cited the extension of zero-COVID policies in some areas of China, which is the world's top oil importer. OPEC also revised down its projections for global demand growth in 2022 and 2023.
8. A stock trader who is up 42% so far this year explained how he navigated the rough market. Matthew Caruso is a position trader, which means he holds his stocks for weeks or even months at a time. He shared five key adjustments he made to his trading strategy that have helped him beat the market and remain profitable.
9. Grammy-nominated DJ Steve Aoki has made more money from NFTs than royalties. The 44-year-old celebrity producer told Insider how he "dived head first" into Web3. Here's how he says he's profited $10 million — and how Web3 can disrupt the multi-billion-dollar music industry.
10. Twitter stock remains below Elon Musk's offer price of $54.20 a share, suggesting the market has doubts that both sides can clinch a deal on those terms. But shares are outperforming the broader market as well as the Nasdaq so far this year. Billionaire investor David Einhorn revealed Twitter is his biggest long bet in 2022.
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Curated by Jason Ma in Los Angeles. Feedback or tips? Email jma@insider.com.
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.