Quick Market Note

Heading out for a week’s vacation, but, again, I’ll stay connected enough to comment herein if I think readers could use some perspective on anything that crops up

In the meantime, here’s my note to our team after seeing this morning’s market reaction to CPI:

Very interesting reaction to hotter than expected CPI this morning. Particularly in precious metals. Although you would not have expected stocks to rally on the news either (which they are). Granted, this is all premarket stuff.

So, my thought at this point is that there’s some underlying data there that provides some comfort, or perhaps more likely, the 3% drop in oil is what the market is trading on this morning.

There’s also the possibility that the market is interpreting a fed rate hike as actually being necessary to quell the longer end of the curve. That’s not normally how the market reacts to fed rate hikes, but this is the environment where a hike actually could lead to lower 10 and 30-year yields... If that's the case the Fed may be comfortable hiking next week, which may have me sympathizing with the consensus after all... Although there's still the mid-term election and federal debt issues I mentioned yesterday for the Fed to contend with.

Listening to Bloomberg this morning, there’s like virtually no chance that they’re not gonna hike next week. I’m on the record as saying that they indeed will not (although now with the above caveat). That said, the pressure is hugely on them to do so if only for credibility reasons. That would be their underlying (unspoken) reason if they do (although same caveat applies here as well), I would nevertheless expect them to couch it in the most dovish fashion possible.

For now we can invoke the old "sell the rumor, buy the news" adage... But, again, it's very early in the session.

We’ll see