Stock Market Shows Resilience in the Face of PPI Surge

Despite a surprising uptick in the Producer Price Index (PPI), stocks continued their ascent, marking the S&P 500's fourth consecutive session of gains. The bond market saw a noteworthy retreat, with ten-year Treasury yields dropping by six basis points to 4.59%. Simultaneously, the dollar registered its lengthiest losing streak since March. In the energy sector, oil prices stabilized after early-week volatility sparked by the Israel-Hamas conflict.

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September's PPI figure exceeded forecasts, largely driven by heightened energy expenses, underscoring the ongoing challenges in achieving sustainable lower inflation. Investors are now eagerly anticipating the release of the September Fed meeting minutes, seeking insights into the central bank's future policy trajectory. Additionally, Thursday's Consumer Price Index (CPI) report will be instrumental in shaping ongoing monetary policy discussions.

Mike Loewengart, Head of Model Portfolio Construction at Morgan Stanley Global Investment Office, emphasized the need for patience: "Today's PPI suggests we haven’t seen the end of sticky inflation—and high interest rates."

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Federal Reserve Bank of San Francisco President Mary Daly hinted that the neutral interest rate might be higher than pre-pandemic levels. However, she assured that borrowing costs would not remain elevated indefinitely. In the same vein, Governor Michelle Bowman suggested that rates might need to rise further and remain elevated for a more extended period, though her remarks were perceived as somewhat less hawkish compared to her comments earlier in October.

In the corporate arena, Exxon Mobil Corp. experienced a dip following its agreement to acquire Pioneer Natural Resources Co. for $59.5 billion. Conversely, Pioneer shares experienced an uptick. Birkenstock Holding Plc, in collaboration with its private equity owner, priced shares in its initial public offering within the middle range, raising $1.48 billion. Texas Instruments Inc. faced a drop as Oppenheimer downgraded the chipmaker's rating, citing margin pressures.

Key Events This Week:

• Japan Machinery Orders and PPI on Thursday

• Bank of Japan’s Asahi Noguchi speaks on Thursday

• UK Industrial Production on Thursday

• US Initial Jobless Claims and CPI on Thursday

• European Central Bank publishes account of September policy meeting on Thursday

• Fed’s Raphael Bostic speaks on Thursday

• China CPI, PPI, and Trade on Friday

• Eurozone Industrial Production on Friday

• US University of Michigan Consumer Sentiment on Friday

• Citigroup, JPMorgan, Wells Fargo, BlackRock results as the quarterly earnings season kicks off on Friday

• G20 finance ministers and central bankers meet as part of IMF gathering on Friday

• ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak on IMF panel on Friday

• Fed’s Patrick Harker speaks on Friday

Market Moves:

Stocks:

• S&P 500: +0.3% (as of 9:30 a.m. New York time)

• Nasdaq 100: +0.6%

• Dow Jones Industrial Average: +0.3%

• Stoxx Europe 600: +0.4%

• MSCI World index: +0.2%

Currencies:

• Bloomberg Dollar Spot Index: -0.1%

• Euro: +0.1% to $1.0620

• British Pound: +0.3% to $1.2319

• Japanese Yen: -0.1% to 148.92 per dollar

Cryptocurrencies:

• Bitcoin: -1% to $27,134.78

• Ether: +0.7% to $1,571.09

Bonds:

• 10-year Treasuries yield: -6 basis points to 4.59%

• Germany’s 10-year yield: -5 basis points to 2.73%

• Britain’s 10-year yield: -8 basis points to 4.35%

Commodities:

• West Texas Intermediate Crude: -1.2% to $84.92 a barrel

• Gold Futures: +0.5% to $1,885.50 an ounce