Medicare Agent News: Pivot? More Like Plateau.

Tuesday, January 3, 2023

Pivot? More Like Plateau.

By Nicholas Jasinski | Wednesday, October 12

Stop the Chop. Stocks had a bumpy, directionless day, wavering around breakeven throughout the session. By the close, major indexes were slightly below water.

The S&P 500 and Nasdaq Composite both registered their sixth-straight declines, down 0.3% and 0.1%, respectively. It's the lowest close for the S&P 500 since November 2020 and for the Nasdaq since July 2020. The Dow Jones Industrial Average slipped 0.1% on the day.

Inflation and Federal Reserve policy dominated the conversation, ahead of tomorrow morning's release of the September consumer price index and the thick of third-quarter earnings season over the coming weeks.

The September producer price index came out this morning and was another scary release. The headline index was up 0.4% last month, good enough for a 8.5% annual increase and faster than the 0.1% monthly rise predicted by economists and August's 0.2% rise. The core PPI, which excludes food and energy components, was up 0.3% in September, matching both consensus and August's revised figure.

Barron's Angela Palumbo has more on the PPI release.

The minutes from the Fed's late-September monetary-policy meeting were released this afternoon, and they showed that officials remain squarely focused on fighting inflation and that a Fed pivot isn't imminent.

Here's Barron's Lisa Beilfuss writing today:

The minutes noted “broad-based and unacceptably high level of inflation,” and said risks to the inflation outlook are increasing. Many participants emphasized that the cost of taking too little action against inflation outweighed the cost of doing too much, and several underlined the need to maintain a restrictive stance for as long as necessary. A couple of those officials stressed that historical experience demonstrated the danger of prematurely ending periods of tight monetary policy designed to bring down inflation.

Those looking for signs of a pivot noted that the minutes said that monetary policy has moved into restrictive territory, meaning it is hindering economic growth, and that there was a risk of overtightening. They also seized on a single word in the minutes: "calibrate."

Lisa continues:

“Several participants noted that it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook,” the minutes said, which [Edward Moya, senior market analyst at OANDA] interprets to mean we are approaching the elusive Fed pivot. Many investors took that view and sent the S&P 500 and other major stock indexes up slightly after the minutes hit.

But there is a more important line that follows the one Moya highlights. “Many participants indicated that, once the policy rate had reached a sufficiently restrictive level, it likely would be appropriate to maintain that level for some time until there was compelling evidence that inflation was on course to return to the 2% objective,” which suggests a plateau, not a pivot, is the best investors can hope for now.

The next datapoint on the inflation front lands tomorrow morning, with the release of the consumer price index for September. More on that below.