Markets Overview

  • ASX SPI 200 futures up 0.5% to 7,178.00
  • Dow Average up 0.6% to 33,905.36
  • Aussie up 0.3% to 0.6912 per US$
  • U.S. 10-year yield fell 6.4bps to 3.5558%
  • Australia 3-year bond yield rose 1.2 bps to 3.34%
  • Australia 10-year bond yield fell 0.1 bps to 3.72%
  • Gold spot little changed at $1,877.56
  • Brent futures up 3.4% to $82.86/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 133-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 70-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 147-Day Bills
  • 11:30: (AU) Nov. Imports MoM, prior -1%
  • 11:30: (AU) Nov. Exports MoM, prior -1%
  • 11:30: (AU) Nov. International Trade Balance, est. A$11.3b, prior A$12.2b

Wall Street traders betting that further inflation softening could bolster the case for a Federal Reserve downshift drove a rally in both stocks and bonds.

Investors looked beyond the drumbeat of hawkish Fedspeak, a potentially miserable stretch of earnings and the specter of a recession to focus on the upcoming consumer price index. It should probably come as no big surprise that tech, one of the most-beaten down groups during the Fed’s tightening campaign, led gains Wednesday. That advance also reflected the drop in US yields.

Suffice to say that Thursday’s CPI will be scrutinized top to bottom, with the big focus on the core inflation — which excludes food and energy and is seen as a better indicator than the headline measure. While a projected 5.7% increase is well above the Fed’s goal, helping explain its intention of keeping rates higher for longer, the year-over-year price growth would also show moderation.

A survey conducted by 22V Research showed that 67% of respondents expect core CPI to come in lower than consensus — with 63% betting the report will be “risk-on” for markets.

“An in-line or softer-than-expected CPI will likely result in a rally, whereas a hotter number could easily tip over the applecart,” said Arthur Hogan, chief market strategist at B. Riley Wealth. “Good news for the economy can become good news for markets.”

Now the caveat is that if the headline number drops, but core CPI doesn’t, the report won’t be that positive, wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Another aspect is that Wall Street’s focus on the change in prices rather than the level of inflation could be problematic as far as monetary policy goes, according to Torsten Slok of Apollo Global Management.

The market would conclude that “inflation is coming down, so everything is fine and we can trade stocks higher and credit spreads tighter,” Slok added. “But this is a problem for the Fed because the Fed is worried that easier financial conditions will delay further the move in inflation back to 2%.”

Other News

It took nearly a decade, but Molly Sampson found what she’d been searching for her whole life.

It happened Christmas morning, when the 9-year-old girl was out searching for shark teeth with family in Calvert Beach, Maryland.

It was there Molly waded into the cold waters of the Chesapeake Bay and pulled out the once-in-a-lifetime find: A 5-inch megalodon tooth.

“She was over the moon excited,” Molly’s mother, Alicia Sampson, told USA TODAY Wednesday. “It was something she dreamt about finding. She’s been shark tooth hunting since age 1 when she would crawl along the beach.”

A homeschooled student from Prince Frederick, Molly has collected more than 400shark teeth since before she could walk. But the Dec. 25 discovery marked the fourth-grade girl’s biggest find yet.

Stephen Godfrey, curator of paleontology at the Calvert Marine Museum where the girl took her find, confirmed the tooth belonged to the extinct shark the Megalodon (Otodus megalodon), which disappeared millions of years ago.

The meg is believed to be one of the largest predators that ever lived until its extinction, and scientists think it could have grown up to 50 to 60 feet long. For a long time, scientists believed the megalodon’s closest relative was the great white shark, but research shows it is most closely related to the mako shark, according to the Smithsonian.

Molly said she put the tooth into a beach bag and went to the museum to have experts check it out.

“They were really excited,” Molly said.

“Megalodon teeth are found on a fairly regular basis along Calvert Cliffs, however one that large are rare indeed. Perhaps a few each year,” Godfrey said.

Because of its large teeth, experts think it feasted on whales and large fish, and probably other sharks. From the size of the tooth, Godfrey said, it would have come from a fish between 45-50 feet long. He also said that based on where the tooth was found and the age of the sediments from which it most likely originated, the tooth is likely some 15 million years old.

(USA Today)