Market 09/14: PPI higher than forecast - nothing can shake confidence in FED Pause

Technology, energy, and banking rally, SPX pushes through 4500

The market opened this morning's trading session with a strong gap up and strong confidence in the Federal Reserve pausing rate hikes next week despite this morning's higher-than-expected PPI report. August retail sales recovery also shows a "soft landing" outlook thanks to American consumer strength, fueling a rally across the entire S&P500 after a slight morning pullback.

Cash flow evenly distributed across the entire market with significantly improved liquidity helping SPX push through the important gamma level at 4500.

PPI monthly increase strongest since June 2022

The producer price index rose 1.6% in August year-over-year, exceeding the 1.2% forecast from 0.7% in July. This is the largest monthly increase since 06/2022.

Goods prices continue to rise strongly for the 3rd consecutive month while service costs cool.

Medium-term goods demand turns to recovery:

Both PPI and CPI inflation rose for 2 consecutive months, the first time since 07/2022. However, investors still strongly believe that the FED will continue to follow market wishes as it has for over a year.

August retail sales unexpectedly rebound

August retail sales surge with a 0.6% increase from the previous month (far exceeding 0.2% expectations), marking the 5th consecutive monthly gain. This equates to a 2.5% year-over-year increase.

Core retail sales (excluding autos and gas) up 0.2% from July.

Core goods sales group - used to calculate GDP - up 0.1%, beating consensus estimate of -0.1% but down from +1% last month.

The driver of August's gain was spending at gas stations, up 5.2% from July.

Non-store retail sales little changed after strong July increase from Amazon's Prime Day.

Initial jobless claims drop to near 12-month low

Initial jobless claims last week reached 220,000, close to the 225,000 forecast.

Total continuing claims rose slightly to 1.688 million, below 1.693 million expectations.

Under economic pressure, people return to the labor force, pushing labor force participation to the highest in over three years. This results in the unemployment rate at its highest since February 2022 despite stable jobless claims.

WTI crude reaches 90 USD/barrel for the first time since November 2022

Oil prices have surged 35% in just 3 months.

This price is 29% higher than the level the Biden administration targets for additional purchases into the Strategic Petroleum Reserve (SPR). Currently, SPR reserves are at only 46 days of use, the lowest since 1982.