* Nasdaq, S&P down; Dow advances
* Industrials lead S&P sector gains; healthcare lags most
* STOXX 600 reverses, down ~0.0.5%
* Dollar, gold, Bitcoin lower; crude gains
* U.S. 10-yr Treasury yield ~1.72%
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RETAIL INVESTORS PILE INTO STOCKS AT RECORD LEVELS (1155
When Wall Street rebounded this week after last week's
weakness, strategists and money managers pointed to a boost from
retail investors who decided to buy the dip.
Peng Cheng, who works on global quantative and derivatives
strategy at JPMorgan, put out some numbers behind the story in a
research note released.
"This past week saw the strongest retail order imbalance in
cash equities on record, totaling $5.9 billion," Cheng wrote
late Wednesday. "The $1.7 billion inflow on Tuesday was the
highest single-day observation in history."
With 65% of the buying focused on exchange traded funds
(ETFs), interest in S&P 500 ETFs was particularly noticable, he
added. And while growth sectors have had a comeback this week,
Cheng said a number of value ETFs were in the top 10 names
bought by retail investors. These included the Energy Select
Sector SPDR fund, the Financial Select Sector SPDR fund
and the Vanguard Value Index fun.
Besides long-time retail favorites such as Tesla,
which saw $193 million in in-flows, financials had a strong run
with Bank of America bringing in $131 million and Citi
taking $74 million. In energy, Chevron saw a
strong $92 million inflow.
Still, it's worth noting that retail volume is a relatively
small part of the market overall, according to Cheng. Retail
market orders for large cap stocks was 8.3% of the market last
week compared with 11.6% for small cap stocks.
"While large-cap volumes are roughly in line with activity
at the same time last year, small-cap volumes are ~2% lower," he
PPI, JOBLESS CLAIMS TELL A TALE OF TWO WAVES: OMICRON AND
INFLATION (1030 EST/1530 GMT)
A data duet released on Thursday provided another glimmer of
hope that the inflation wave has crested and supply chains are
right-sizing, even if swelling Omicron infections are leading to
longer unemployment lines.
The prices U.S. companies get for their goods at the factory
door grew at a decelerated pace in December, with
the headline 'final demand' print showing a monthly gain of
0.2%, comfortably lower than the 0.4% consensus.
On an annual basis, PPI shed 0.1 percentage point to a
The slowdown adds to slowly gathering evidence (notably PMI
data) that the hobbled global supply chain is gradually finding
So-called 'core' PPI, which strips out volatile food, energy
and trade services, cooled down as well, rising 0.4% compared
with November's 0.8% gain.
Year-on-year, while core PPI growth didn't budge from 6.9%,
it remains hotter than consumer gauges (CPI, PCE), which
suggests companies aren't quite done passing price increases
along to the consumer.
"Persistent supply disruptions will pin producer prices near
record levels in the near term, especially given a rapidly
spreading Omicron variant that will fan inflation pressures,"
writes Mahir Rasheed, U.S. economist at Oxford Economics. "The
PPI data adds to growing evidence that the Fed will commence
rate lift off in March and undergo balance sheet reduction
Indeed, as evidenced by last week's FOMC policy meeting
minutes and Federal Reserve Chairman Jerome Powell's words
before Congress this week, the central bank has removed its
gloves and called out inflation, with at least three interest
rate hikes now in the cards this year.
The graphic below shows core PPI and other indicators, all
of which continue to sail well above the Fed's average annual 2%
The number of U.S. workers filling out first-time
applications for unemployment benefits unexpectedly
rose last week to 230,000, defying the slight decline to an even
200,000 economists predicted.
It was the highest reading in two months, and sits
comfortably within the range associated with healthy labor
But healthy churn unfortunately is not the likely culprit,
as rise probably reflects surging infections of the Omicron
COVID variant rather than increased willingness on the part of
employers to hand out pink slips amid the ongoing worker
"We expect some noise in the data owing to a surge in virus
cases which may push up claims temporarily," says Rubeela
Farooqi, chief U.S. economist at High Frequency Economics.
"Beyond weekly moves, filings will likely remain low given
businesses will be reluctant to reduce their workforce amid a
Continuing claims, reported on a one-week lag,
provided the bigger surprise, dropping to 1.559 million and
dipping below the 1.7 million level for the first time since
mid-March 2020, when mandated lockdowns to contain the pandemic
sent the economy into a tailspin.
The jobless claims data jibes well with the Labor
Departments December employment report, which showed the newly
unemployed's slice of the total jobless pie increasing, while
the share of long-term unemployed is shrinking.
Wall Street initially greeted the data warmly, opening
solidly in green territory but slipping into reverse as the
session got under way.
At last glance the Dow was the sole gainer among the major
U.S. stock indexes, while cyclicals and economically sensitive
chips, transports and small caps were
having a good day.
WILL FED BLUNDER AS CONSUMER CONFIDENCE SLIDES? (1000
A major policy error may be in the works as the Federal
Reserve prepares to raise interest rates with consumer
confidence in sharp decline, observes Joe LaVorgna, chief
economist for the Americas at Natixis in New York.
Consumer confidence in the past 40 years has never been as
depressed as it is now before a looming rate hike, LaVorgna
says. A sharp slowdown is in the offing because last year's
econmic boom was largely due to fiscal stimulus, he says.
Unlike the time prior to past rate hikes, consumer
confidence is on the wane instead of rising.
"In fact, the Fed has never increased rates with confidence
so low," LaVorngna said in a note.
In March 1983 when the Fed nudged the federal funds rate
higher, the University of Michigan's consumer sentiment index
was at 80.8 had risen 15 points from seven months earlier, he
In January 1987, a rate liftoff began with the sentiment
index at 90.4. After cutting rates following the stock market
crash in October 1987, the Fed raised rates in March 1988 with
confidence at 94.6 and it was about the same in 1994, when rates
were hiked and confidence was 93.2, LaVorgna said.
Confidence was 107.3 when a hiking cycle began in June 1999,
and at the beginning of the last two hiking cycles in June 2004
and December 2015, the index was at 95.6 and 92.6, respectfully.
The average starting value for consumer confidence over the
past eight cycles was 94.3, with the trend moving higher. The
final December reading was 70.6.
"Today's low and falling level of confidence hints of a
policy error if the Fed acts so soon," LaVorgna warned.
STOCK INDEX FUTURES ADVANCE AFTER PPI (0910 EST/1410 GMT)
U.S. stock index futures are higher early on Thursday, with
the S&P 500 e-minis up about 0.3%, after the latest
batch of economic data, including a report showing U.S. producer
price inflation slowed in December.
It showed other hopeful signs that inflation has probably
peaked. Equity investors have been concerned about
inflation, with minutes from the Federal Reserve's December
meeting released last week signaling the central bank may have
to raise rates sooner than some had expected to curb inflation.
The morning data also included a Labor Department report
showing that the number of Americans filing new claims for
unemployment benefits unexpectedly rose in the first week of
January amid raging COVID-19 infections.
The number remained at a level consistent with rapidly
tightening labor market conditions, however.
Wall Street ended higher on Wednesday as U.S. consumer
prices data roughly met economists' expectations, easing some
investor anxiety about inflation.
Friday brings earnings reports from some of Wall Street's
biggest banks, including JPMorgan Chase, to kick off the
quarterly reporting period for U.S. companies.
Here is the U.S. premarket snapshot:
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