This week’s worse than expected US inflation data and retail sales report, which suggested an emerging period of stagflation (high inflation and low economic growth) appears to have rattled momentum investors and dampened risk appetite. While headline US indices fell about 0.3% yesterday, some the highest-flying sectors year to date like Semiconductors and Homebuilders were hit particularly hard along with small caps (the Russell 2000 dropped 2.0% yesterday) and cryptocurrencies.

Selling pressure continued through Asia Pacific trading overnight, where the Hang Seng fell 1.4% and the Nikkei dipped 0.25%. Equities have stabilized this morning with US index futures trading up 0.1%-0.2%, while in Europe, the FTSE is steady and the Dax is up 0.25%. The US 10-year treasury note is consolidating this week’s gains just below 4.30%.

Cryptocurrencies are getting pounded again today with Bitcoin and Ether both down about 2.25%. Energy action is mixed today with US Crude Oil down 0.7% (but still above $80.00/bbl), while Natural Gas is up 1.0%. In metals action, Copper is up 1.00%, while Gold is up 0.3%.  

Investors continue to react negatively to the combination of taking profits against positive earnings reports and punishing soft guidance. This morning it’s Adobe’s turn to sell off, falling 11.7% premarket, despite better-than-expected EPS ($4.48 vs street $4.38).

In economic news, Canada housing starts (253K vs street 230K) came in well above expectations, US Empire Manufacturing (street -7.0 and previous -2.4), US industrial production (street 0.0%), and U of Michigan Consumer Sentiment are all coming out over the course of the morning. Next week brings another round of central bank meetings headlined by the Fed on Wednesday.