Impressive Economic Data

The latest Consumer Price Index (CPI) report hit the tape early this morning, coming in-line with expectations of +0.1% for the month of October. Minus volatile food & energy costs, we see this number go +0.2%. Year over year, CPI hit 2%, a scad beneath the 2.2% analysts were looking for; the core read of 1.8% is also in-line with estimates.

Following yesterday’s hotter-than-expected Producer Price Index (PPI), these numbers are a bit of a disappointment, as can be seen by sinking futures in today’s pre-market after the results were released. A tepid attitude among consumers does not trend the desired narrative of a new leg up on consumer spending appetites ahead of the all-important holiday shopping season.

Retail Sales for October also came out this morning, with a read of +0.2% from the 0.1% expected. Subtracting costs of auto sales, the number comes in a little light at 0.1%.

Empire State Manufacturing missed expectations this morning, posting a read of 19.4 from the 25.1 expected. In September, Empire Manufacturing hit a much-higher 30.2.

All of these new econ results are working against a robust bull-market narrative, which is what market participants were hoping to see in order to wipe out the recent slump over the last few trading days, led by softer economic news out of Asia. All three major U.S. indexes are currently in the red again, with the Dow leading the bear charge, down more than 100 points.

The takeaway from this, at a quick early-morning glance, is that these data points — especially CPI — did not disappoint enough to gouge market activity, nor did they surprise to the upside enough to staunch the mild sell-off from yesterday. Traders and investors now begin to ask questions whether or not the “slam dunk” interest rate hike next month is even a genuinely good idea anymore. That this generates a question is itself a mild negative for today’s pre-market.

We are still very likely to see a quarter-point rate hike at the Fed’s December meeting, but odds are about 10% slimmer than they were. Also, looking into 2018, the market has only priced in one additional rate hike, whereas the Fed itself has indicated three. So there will be plenty to sort out in the waning months of calendar 2017, and combined with some quite understandable profit taking following a stronger (and less volatile) trading year than expected, it will be hard for the markets to regain their recent traction of continually hitting new all-time highs.

A tax reform/cut passage through Congress would do the trick. But is that likely before the end of the year anymore? There is a House vote scheduled for tomorrow, so stay tuned...

Target Beats Q3 Estimates

Target Corp. (NYSE:TGT) reported fiscal Q3 earnings numbers ahead of the opening bell today, beating estimates on both top and bottom lines. Earnings of 91 cents per share topped the Zacks consensus by 5 cents, whereas quarterly sales of $16.67 billion outpaced the $16.61 billion estimated. Comps were +0.9%, double analyst estimates, but a weaker outlook for holiday sales has sent Target shares trading down in today’s pre-market.

Shares are -4.8% ahead of the opening bell following the cautious holiday season comment, and Target was already down nearly 17% year to date. The company had been a Zacks Rank #3 (Hold) with a Style Score of A ahead of its latest earnings report.