Eyes on incredible Earnings!
US jobless claims, in both initial and continuing claims, increasing and increasing Oil prices also increasing the risk of higher inflation. On the other hand, earnings reports were incredibly amazing and supporting the market bulls. Let's review the data and then analyze them.
For the week ended October 8, Initial claims with a 36K decrease for the first time fell under 300K, down to 293K. Continuing claims also fell sharply to 2,593K from 2,727K.
On the earnings front, after yesterday's amazing reports from Delta airline and JPMorgan, today UnitedHealth, Bank of America, Wells Fargo, Morgan Stanly, and City Group all have beat the market estimates. In the bank's reports, the common point was the asset and wealth management that had the most profits for them showing that Retails Investors still are in the market and become an important part of it.
Another economic data that we have to check is the US inflation numbers. After Chinese PPI numbers in the Asian season that pointed out the rapid growth of producer inflation, the US producer price index also had worrying signals. According to the US labor department data, the producer price index increased 0.5% in September and less than 0.7% rise in August. The annual number of PPI also accelerated 8.6%, the largest year-on-year increase since November 2010, and more than surging 8.3% in August. Even if both of them increased less than market expectations, however, both showing a sharp increase and worrying the market participants.
Thursday's PPI data pointing that producer prices in China grew at their fastest pace on record in September, and US producer inflation printed the largest annual increase since November 2010. These data coming after Wednesday's numbers that showing another solid increase in consumer inflation in September, along with FOMC meeting minutes which showing policymakers in FED also now are more worried about inflation than before.
So, now we can understand what happened in the market. While FED meeting minutes telling us that FOMC members most probably will start rate hikes late in 2022, and the market already has priced on tapering, so current policy means that they sit on their hands for a while and holding the supports with the lower interest rate for a bit longer time. For now, FED will react by tapering the asset purchases amount, which was priced already in the markets. So lower interest rates will be supportive for the markets. Add the great earnings reports also to that, so bulls have enough encouragement to grow more!
