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LIVE MARKETS-The supply chain follies: Jobless claims, PPI

Thu, 14th Oct 2021 15:49

* Wall Street rallies: major U.S. indexes up >1%

* All major S&P sectors green; materials up most

* Euro STOXX 600 index up ~1.2%

* Dollar, bitcoin ~flat; gold, crude rise

* U.S. 10-Year Treasury yield ~1.53%
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Thursday's data followed the Fed's "taper tap-dance" routine
with an up-tempo duet about unemployment and inflation.

The number of U.S. workers filing first-time applications
for unemployment insurance fell last week to 293,000
beating consensus and dipping below the 300,000 mark for the
first time since the onset of the pandemic in March 2020.

Any impulse to pop the champagne cork should be tempered
with a reminder that this decrease occurred amid an ongoing
worker shortage, which likely has employers thinking twice
before handing out pink slips.

That labor drought - evident in Friday's dismal September
employment report - is adding to woes from the supply chain
logjam, and is a major impediment to a full economic recovery
from the shortest and steepest downturn ever.

It's also causing wage growth to accelerate as business
owners sweeten the pot to attract and retain workers, adding
more spice to the inflation stew, which continues to gather

Still, weekly claims are edging closer to the upper limits
of the range associated with healthy labor market churn and
suggest that the "economic recovery remained largely on track,"
the condition set by the Fed before it can begin tightening its
COVID era monetary policy.

"The data support the narrative that businesses are
increasingly reluctant to let go of workers amid a severe supply
shortage," writes Rubeela Farooqi, chief U.S. economist at High
Frequency Economics, who adds that "claims are likely to
continue to decline over coming weeks."

Ongoing claims, reported on a one-week lag,
also came in below expectations at 2.593 million.

Still, that's high.

For context, more Americans have been collecting
unemployment for two weeks or more than live in Houston.

The Labor Department also delivered some inflation news in
the form of its Producer Prices (PPI) report for September

PPI, or the prices U.S. companies get for their goods at the
warehouse door, rose 0.5% in September, marking 0.2 percentage
point deceleration from the previous month and coming in a hair
below the 0.6% projected by economists.

"Worsening supply-chain dynamics and the recent acceleration
in commodities prices will keep price pressures elevated well
into next year," says Mahir Rasheed, U.S. economist at Oxford
Economics. "But the latest data confirms our view that PPI
inflation will moderate from about 10% y/y in Q4 to 7.2% in Q1
and 4.6% in Q2 2022."

So-called "core" PPI, which excludes food,
energy, and trade services, decelerated on a monthly basis but
posted a year-over-year print of 5.9%.

Notably, headline PPI notched a record high year-over-year
jump of 8.6%, running hotter than the previous month's 8.3%
annual growth but a tad cooler than analyst expectations.

The graphic below shows core PPI, along with other major
indicators, all of which continue to sail well above the Fed's
average annual 2% inflation target and appear to be confirming
worries that "transitory" price growth could stretch the
definition of the word:

Wall Street is in a jovial mood in morning trading, with the
S&P 500 on the verge of delivering its best daily performance
since July.

All three major U.S. stock indexes are bright green, with
materials and tech leading the parade.

(Stephen Culp)



Wall Street's main indexes opened higher on Thursday after
big banks reported better-than-expected quarterly results,
helping investors to look away from inflation concerns.

That said, shortly after the open, the S&P 500, Dow
and Nasdaq Composite are all gaining around 1% or
more, although the S&P Banks index is slightly red.

Of note, the SPX and IXIC ended three-day losing streaks on
Wednesday, while the Dow fell for a fourth-straight day.

All major S&P 500 sectors are higher early Thursday with
tech and healthcare the leading gainers.
Financials, however, are lagging to the upside.

Indeed, with the U.S. 10-Year Treasury yield on
track to fall for a third-straight day, growth is
outperforming value.

Here is where markets stand early in the session:

(Terence Gabriel)


EDT/1255 GMT)

With the fourth quarter of 2021 just underway, the Nasdaq
Composite is on track to do something it has never done
before: its entire trading range so far this year has been above
its upper yearly Bollinger Band (BB):

Bollinger Bands (BB) are envelopes, or trading bands,
plotted at a level of standard deviation above and below a
simple moving average of price. Given that the bands are based
on standard deviation, they adjust to swings in volatility. The
bands can help answer the question of whether price is high or
low on a relative basis.

Using Refinitiv data, the IXIC has ended a year above its
upper yearly BB - or more than two standard deviations above its
20-year moving average - nine times, or about 41% of the time.
This includes a current eight-year streak from 2013 to 2020.

What has been unique about this year, however, is that the
Composite's 12,397.05 low is above is upper yearly BB, which now
resides at 11,918.34.

When looking at the greater histories of the Dow, and
S&P 500, these index's entire yearly ranges have only
been above their upper yearly BB once (~1% of the time), and
twice (~3% of the time), making it a relatively rare event.

The Composite may yet accomplish this feat in 2021, but
given that the bands adjust to volatility, we can calculate the
minimum upside level at which the IXIC would need to end the
year in order to pull the upper yearly band above the current
low. That level is anything above 16,003.

Action on the downside is trickier, given that we can't know
its exact path. For example, a deep decline, followed by a big
upward reversal could solve the issue. One thing we can know
under a downside scenario, however, is that at some point before
year-end, the IXIC would, at a minimum, need to break below the
year's current low at 12,397.053.

Therefore, based on this analysis, in order to not register
the "rare" event, the IXIC must now either end the year at least
10% higher than Wednesday's close, or, at some point, it has to
fall more than 15% from yesterday's finish.

Thus, there appears to be potential for one wild ride
through the rest of 2021.

(Terence Gabriel)



(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)

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