Stocks Rally as CPI Comes in Below Expectations

Morning Markets

September S&P 500 futures (ESU22) this morning are up sharply by more than +1%. Today’s CPI report was weaker than expected and fostered hopes that inflation may be peaking and that the Fed may be able to ease up on its rate-hike regime before long.  The 10-year T-note yield dropped -8 bp this morning to 2.695% after the CPI news.

The July CPI report of unchanged m/m and +8.5% y/y was weaker than expectations of +0.2% m/m and +8.7% y/y, and eased from June’s report of +1.3% m/m and +9.1% y/y.  Meanwhile, the July core CPI report of +0.3% m/m and +5.9% y/y was weaker than expectations of +0.5% m/m and +6.1% and compared favorably with June’s report of +0.7% m/m and +5.9% y/y.

On a year-on-year basis, today’s July CPI report of +8.7% y/y was down by 0.4 points from June’s 40-year peak of +9.1%.  The July core CPI of +5.9% y/y was unchanged from June and was 0.6 points below the 40-year peak of +6.5% y/y posted earlier this year in March.

Taiwan tensions eased today after China said that its Taiwan military drills are over, but that regular patrols are now planned.  China’s statement said the Chinese military plans to “regularly organize patrols in the direction of the Taiwan Strait,” which raises the possibility that China plans to frequently cross the median line in the Taiwan Strait, which it previously refrained from doing.

Sep WTI crude oil futures prices this morning are down -0.8% on news that the flow of Russian crude oil through the southern leg of the Druzhba pipeline through Ukraine to Hungary, Slovakia, and the Czech Republic will be restarted by later today after a Hungarian refinery made good on the need for Ukraine to pay transit fees.  The flow of crude oil in that pipeline had been shut down since last week because sanctions prevented the payment of the transit fee by Ukraine's oil pipeline company.  That pipeline carries about 250,000 bpd of oil and supplies key refineries. However, the crude oil flows in the northern leg of the pipeline through Belarus to Poland and Germany were not affected.

Oil prices are also lower today after the late-Tuesday API report that U.S. oil inventories rose +2.16 million barrels last week.

Overseas stocks are mixed. The Euro Stoxx 50 today is up +0.20%. China’s Shanghai Composite index today closed down -0.54%, breaking a string of four consecutive rises.  The Nikkei index today closed down -0.65%.

Pre-Market U.S. Stock Movers

Elon Musk sold $6.9 billion of Tesla stock in what he said was an attempt to avoid an emergency sale of Tesla stock if a court forces Mr. Musk to go through with his purchase of Twitter.  Mr. Musk said he was done selling shares in Tesla and that he would buy stock if the Twitter deal doesn’t close.  In pre-market trading, Tesla (TSLA) is up +1.9%.  Meanwhile, Twitter (TWTR) is up +3.4% in pre-market trading due to Mr. Musk’s apparent opinion that there is a chance he may be forced by a court to proceed with his purchase of Twitter.  Tesla has seen strength in the past two weeks as the Senate moved towards this past Sunday’s passage of the Inflation Reduction Act, which contains significant electric vehicles tax credits. 

Coinbase (COIN) is down -6% in pre-market trading after a disappointing quarterly earnings report that included a $1.1 billion loss and weaker-than-expected revenue.  Bitcoin (^BTCUSD) this morning is trading slightly lower by -0.06%, adding to yesterday’s loss of -3.85%.  In pre-market trading, Marathon Digital (MARA) is up +1.7%, while Riot Blockchain (RIOT) is down -1.8%.

CF Industries (CF) is up +2.3% in pre-market trading after Barclays upgraded the stock to over-weight and raised its price target to $120 from $103.

Rackspace (RXT) is sharply lower by -18% in pre-market trading after disappointing revenue guidance.

Plug Power (PLUG) is up +2.9% in pre-market trading despite a disappointing earnings report.

Array (ARRY) is up +9% in pre-market trading after a positive earnings report.

Today’s U.S. Earnings Reports (8/10/2022)

Fox Corp (FOXA), Walt Disney Co/The (DIS).

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