Morning Minutes

Pre-Thanksgiving Data Deluge and an Interest Rate Increase




Following another divergent day for US indices that saw the Dow rally 0.5% and the NASDAQ dive 0.5%, US index futures are down 0.2% to 0.3% this morning. It’s getaway day for the US Thanksgiving holiday weekend, one of the busiest travel days of the year in the US. Historically, US markets have tended to go quiet after about noon EST on the Wednesday of Thanksgiving week remained that way through to the following Monday.

For the second meeting in a row, the Reserve Bank of New Zealand increased its benchmark interest rate by 0.25%, this time to 0.75%. This move appears to have increased speculation that high inflation may force other central banks to accelerate their plans for tapering stimulus and/or raising interest rates. The US Dollar in particular is benefitting from this, gaining 0.3% against the Canadian Dollar and the Euro and rallying 2.0% against Bitcoin, while gold is steady.

Retail sales heading into Black Friday and retailer earnings remain in the spotlight. Nordstrom is getting crushed in premarket action plunging 20.5% in premarket action after missing expectations badly on earnings ($0.39 vs street $0.56). Management blamed higher labor costs and product shortages for the shortfall. With other retailers blaming recent shortfalls on higher transport costs, it appears that the clothing sector is getting hit first by supply chain and inflation issues, it remains to be seen how long it may take for these sector-wide problems to hit other retail groups. In Canada, convenience store operator Couche-Tard missed street estimates for its EPS by a penny ($0.65 vs street $0.66) but raised its dividend by 26%.

Computer makers posted positive earnings overnight with Dell ($2.37 vs street $2.18) and HP ($0.94 vs street $0.88) both beating expectations. HP is up 4.9% in premarket trading today. The other notable US earnings report today is farm equipment maker Deere ($4.12 vs street $3.90).  

In what appears to be a case of “sell on rumor, buy on news” WTI crude oil bounced back a bit yesterday and is holding steady near $78.50/bbl this morning. Yesterday the US and several other countries including China, India, Japan, South Korea and the UK announced a coordinated plan to release supply into the market from their stockpiles in order to keep a lid on prices. The rebound suggests that perhaps the amount or timing of the new oil supply may not be as much as the street has speculated.

It’s a huge day for economic news with three days of reports crammed into one. Notable reports out so far include: US durable goods orders (-0.5% vs street +0.2%), and the US Q3 GDP update (2.1% vs street 2.2%) both of which were disappointing.

Another round of reports is scheduled for 10:00 am EST today headlined by core PCE inflation, a favorite of the Fed, (street 4.1% vs previous 3.6%). New home sales (previous 14.0%), personal income (street 0.2% vs previous -1.0%) and personal spending (street 0.9% vs previous 0.6%). US weekly crude oil inventories (street -0.9 mmbbls) are due at 10:30 am EST, followed by weekly natural gas storage (previous 26 BCF build) is due at noon, with the day wrapping up at 2:00 pm EST with minutes from the last FOMC meeting.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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