2023/01/12 (147.010) Technical Analysis

US Inflation Rate Slows To 6.5% As Excepted, As Published Today
– That`s Why No Reason To Take Profits, Let Alone Switch To A Short Position

An Almost Boring Trading Day, After Today’s Publication Of The US Inflation Figures, Compared To The Previous Months
– So We May Be Able To Secretly Assume Yet That Lower US Inflation Data For 2023 Is, More And/Or Less, Already Priced In

The annual inflation rate in the US slowed for a sixth straight month to 6.5% in December of 2022, the lowest since October of 2021, in line with market forecasts. It follows a 7.1% reading in November. Energy cost increased 7.3%, well below 13.1% in November, as gasoline cost dropped 1.5%, following a 10.1% surge in November. Also, fuel oil cost slowed (41.5% vs 65.7%) while electricity prices rose slightly faster (14.3% vs 13.7%). A slowdown was also seen in food prices (10.4% vs 10.6%) while cost of used cars and trucks continued to decline (-8.8% vs -3.3%). On the other hand, the cost of shelter increased faster (7.5% vs 7.1%). Compared to the previous month, the CPI edged 0.1% lower, the first decline since May of 2020, and beating forecasts of a flat reading. Inflation seems to have peaked at 9.1% in June of 2022 but it still remains more than three times above the Fed’s 2% target.

Dow Hits A New Two-Month High On Thursday Today, So Everything Is Okay, Even If I Personally Had Secretly Unspokenly Expected An Higher Increase
– But Let’s Not Get Too Greedy During This 2nd Week 2023! We Still Have 50 Weeks To 1st Recapture 35000 Points Before We (Not) Trade New All-Time Prices

After eagerly awaited US inflation figures and a bumpy start to trading, investors acknowledged the data on Thursday with stock purchases. The sixth monthly decline in the US inflation rate in a row caused the leading index Dow Jones to rise to its highest level since mid-December at times. At the end of the day, the price board showed a plus of 0.6 percent to 34,189 points. The market-wide S&P 500 rose moderately by 0.3 percent to 3,983 points. The tech-heavy Nasdaq 100 improved 0.5 percent to 11,459 points.

The optimists on the market are now betting that the Fed will no longer raise interest rates as quickly and as sharply as in the past few months in view of the slacking in inflation. That would alleviate the pressure on corporate earnings from higher interest rates. In terms of individual values, American Airlines shares rose by almost ten percent. For the airline, the year-end spurt in 2022 went much better than expected. Thanks to surprisingly high proceeds, more profits are likely to have remained in the fourth quarter than expected in October.US CPI Falls For 1st Time Since May 2020, So That Treasury Yields Ease Following CPI

The Consumer Price Index in the United States decreased 0.1% month-over-month in December of 2022, the first decline since May of 2020 and beating market forecasts of a flat reading. Gasoline costs dropped 9.4%, more than offsetting a 0.8% increase in shelter prices. Food prices were up 0.3%, below 0.5% in the previous month. Other increases were also seen for household furnishings and operations (0.3%), motor vehicle insurance (0.6%), recreation (0.2%), and apparel (0.5%). In contrast, the indexes for used cars and trucks (-2.5%), and airline fares (-3.1%) were among those that decreased over the month.

The yield on the US 10-year Treasury note, seen as a proxy for global borrowing costs, held the decline from early January and hovered at a one-month low of 3.5% as investors digested the latest domestic price data for hints on the Federal Reserve’s incoming interest rate decisions. Inflation in the US slowed for a sixth month to 6.5% in December, as broadly expected, and challenged the Fed’s hawkish rhetoric that continuously pushes back against hopes of a dovish pivot. Recently, San Francisco Fed president Mary Daly noted that she expects interest rates to rise beyond 5% in 2023. Her Atlanta counterpart Raphael Bostic echoed a similar view by saying that policymakers should hike above 5% by early in the second quarter and hold rates there for a long time. Consistent with the central bank’s perception of a tight labor market, initial unemployment claims unexpectedly fell to a three-month low on the week ending January 6th.

US Energy Inflation Hits Near 2-Year Low And/Or US Food Inflation Hits 6-Month, So That DXY Falls To 7-Month Lows

The cost of energy in the US increased at a much slower 7.3% year-on-year in December of 2022, down significantly from a 13.1% rise in the previous month. It was the lowest reading since February of 2021, supported by a decrease in prices of gasoline (-1.5% vs 10.1% in November) and a slowdown for fuel oil (41.5% vs 65.7%). On the other hand, cost accelerated for electricity (14.3% vs 13.7%) and natural gas (19.3% vs 15.5%).

Food prices in the United States increased at a slower 10.4% from a year earlier in December of 2022, decelerating from a 10.6% rise in November and a peak of 11.4% in August. It was the lowest reading since June of 2022, as prices slowed down further for both food at home (11.8% vs 12% in November) and food away from home (8.3% vs 8.5%).The dollar index was approaching 102.5, the lowest since early June, after rising to 103.2 earlier in the session after another slowdown in the US inflation rate cooled down rate hike bets. Still, headline figures came in line with market expectations, and some investors were hoping for a lower reading. It comes after a drumbeat of Fed officials reiterated their hawkish stance this week, with Fed Chair Jerome Powell saying that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.” Meanwhile, another report showed weekly claims unexpectedly fell to a three-month low, underlining a still-tight labor market.

US Stocks Edge Higher In Afternoon Trade, While The Fact That US Budget Deficit Widens To $85 Trillion In December 2022 Nearly Went Under Today

The US government budget deficit nearly quadrupled to USD 85 billion in December of 2022 from USD 21.3 billion in the corresponding period of the previous year, compared to market expectations of a USD 70 billion shortfall. Outlays rose 6% to USD 540 billion, as interest on the public debt grew by $9 billion from a year earlier and Social Security outlays rose because of cost-of-living adjustments. Receipts shrank by 7 percent to USD 455 billion from December 2021 as individual withheld receipts from 2022 year-end bonuses dropped to zero. Major US stock indices booked slight gains on Thursday, glossing over initial disappointment as investors continued to digest December’s US CPI report. The Federal Reserve could further slow its aggressive tightening campaign. The Dow Jones advanced 200 points, while the S&P 500 and the Nasdaq added 0.3% each as Treasury yields retreated over 10bps. Energy shares benefitted from higher oil prices and led the gains for the session, followed by strong performances in real estate and communication services. Still, the CPI report pointed to a continued acceleration in prices for services, underscoring resilient consumer demand and backing the recent hawkish rhetoric from Fed policymakers. To add, initial unemployment claims unexpectedly fell to a three-month low last week, confirming the stubbornly tight labor market.