D&D Note (7.13.2022) ~ CPI Report is Hotter than Expected with Inflation Rising 9.1% in June ~ #stockmarket

D&D Note (7.13.2022) ~ CPI Report is Hotter than Expected with Inflation Rising 9.1% in June ~

The CPI Report on Inflation came out this morning higher-than-expected at 9.1% compared to estimates of 8.8%. This was the fastest pace for inflation since November 1981.

After the spike in gasoline and rents last month it is likely this is the peak CPI reading we’ll get. Core Inflation (which excludes food and energy, and is the FEDs preferred reading on inflation) came in this month at 5.9% and peaked at 6.5% in March.

The Hot Inflation report is causing the Fed Funds Futures to increase towards a full 1% or 100 basis point rate hike for the July 26-27 FOMC meeting. The Fed Funds Futures rate is what the “market” expects the Fed to hike rates by at the next meeting.

The 2-10 Year Spread was biggest since 2000, meaning the curve is the most inverted in 22 years. The ‘recession is coming‘ signal is flashing bright. However the job market remains strong, company earnings while down are still growing, and economic activity is just barely negative.

All that means we should have a mild recession. Although that doesn’t mean we can’t have another ‘double dip‘ harsher recession in late 2023 to 2024.

Oil price decline might be short lived according to Chevron CEO Michael Wirth saying “The tightness in supply hasn’t gone away. I think it’s great for the economy that prices have moderated, but I also see the risks remaining skewed towards the upside.”

Stock Specific News:

Unity Software maker of gaming software fell 17% after announcing a merger with ironSource which surged 45% on the news.

Stich Fix advanced 18% after company board member Bill Gurley of Benchmark Capital announced he bought 1 million shares.

Advanced Micro Devices was an outperformed on the day up 1.47%

Taiwan Semiconductor reports earnings tomorrow and was an outperformed today up 2.78%

Tonal the home gym company cuts 35% of workforce in an effort to become profitable to go public in an IPO.

Netflix announced a partnership with Microsoft for ad-supported subscription plan.

Closing Markets (as of 1:15pm PST)

DOW down -0.67%

S&P 500 down -0.45% (3,9801.78)

NASDAQ down -0.15%

VIX down -1.72% to 26.82

2 Year Note up 8.80bp to 3.14%

10 Year Note down -5.26bp to 2.92%

Oil up 0.063% to $95.90 a barrel.

Gold up 0.331% to $1730.50 an ounce.

Bitcoin up 1.47% to $19,664.30

Ethereum up 3.24% to $1,077.65

~ Dave James / Principal Trader and Market Strategist