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Markets Surge Off Strong CPI Report; Crypto Faces Volatility Following FTX Fallout

Friday, November 11, 2022 04:45 PM | Neal Farmer
Markets Surge Off Strong CPI Report; Crypto Faces Volatility Following FTX Fallout

Stocks enjoyed a very strong week with the S&P 500 rising nearly 6% over the week and the tech-heavy NASDAQ jumping more than 8%. Most of those gains came on Thursday following a stronger than expected Consumer Price Index (CPI) report that led to optimism that the Federal Reserve will cool down its monetary tightening efforts to fight against inflation.

Highlights of the Week

Major storylines this week were the FTX fallout being compared to crypto’s Lehman moment and China seemingly easing its zero-COVID regulations.

Sam Bankman-Fried has seen his two major businesses, FTX and Alameda Research, deal with major controversies. Binance is not going through with its plan to bail out FTX after signing a letter-of-intent to acquire the platform. As of Friday, Bankman-Fried resigned as CEO and FTX filed for bankruptcy in its rapid downfall.

Meanwhile, China has decided to shorten its coronavirus quarantines and scrapped a major restriction on international travel as the country looks to ease some of its aggressive zero-COVID policies.

Finally, earnings season rolled on with less major names reporting this week but some giants such as Disney (DIS) and Fidelity (FNF) releasing results.

Inflation Cooling Down

The October CPI report came in lower than projected with consumer prices rising 0.4% for the second straight month, analysts expected an increase of 0.7%. Core prices (excluding food and energy) meanwhile rose just 0.3% following a 0.6% hike in September, analysts expected an increase of 0.5%.

The monthly change left overall consumer prices up 7.7% year-over-year and core prices 6.3% higher over the past year. The inflation rate of core consumer prices was cut in half as energy prices rose 1.8% to push the overall number higher while vehicles and medical care prices fell 0.9% and 0.5% respectively after rising each of the past four months.

The recent report backs thoughts that inflation has peaked and that the Fed may be compelled to ease its interest rate hikes going forward after a series of 75 basis point increases. Traders are now currently expecting a 50 basis point hike in rates for the central bank’s December meeting with some betting on a smaller 25 rate jump. The expectation of lowered rate increases going forward led to the S&P 500 rising more than 5.5% on Thursday alone.

Earnings

The peak of earnings season may be over but there still remain some highlights with big names such as Disney or trendy investments such as AMC Entertainment (AMC) and its preferred equity (APE) units.

Disney in particular saw its shares fall over 13% following an earnings and revenue miss while also warning investors that its growth in its Disney+ streaming platform could taper going forward. Meanwhile, AMC shares rose over 15% on Thursday with it continuing its rise on Friday as the stock rose over 27% on the week following its earnings and revenue beat. AMC’s APE units rose just over 6% on Thursday and stayed mostly flat during the week overall as sentiment moves the units and it remains relatively uncorrelated to AMC stock.

Other highlights included Take-Two Interactive (TTWO) shares falling 13.68% after its earnings and revenue miss while Performance Food Group (PFGC) stock rose 5.1% following the firm’s earnings beat. Lastly, Astrazeneca (AZN) stock jumped 6.57% following its earnings and revenue beat and news that it is no longer pursuing United States approval for its coronavirus vaccine.

All in all, the S&P 500 rose 5.9%, the Dow Jones Industrial Average gained 4.15%, and the NASDAQ jumped 8.1%.

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