Coming into the week, the market was looking for answers to several questions.   

What would the outcome of the midterms look like and what would it mean for the market?

Well, when we thought we knew the outcome, the market surged because the Trump Agenda couldn’t be derailed, and the GOP margin of victory in the Senate could add pressure on Democrats to ditch their resistant efforts and come to the table and govern.  There was also hope of something from the Fed suggesting the central bank would avoid its own arrogance and not derail the economy and stock market.  I don’t think we got that yesterday.

Then, there was perhaps the biggest question of whether the broad market could rally without the coattails of surging growth names that power communication services and technology.  The answer is affirmative when those stocks are moving at a pedestrian pace. The answer is no when those names are plunging. 

Today, tech is getting hammered as chip stocks are lower on a Skyworks (SWKS) warning because of slower demand in China.  Disappointing earnings and greater competition concerns are hitting video game makers and Netflix (NFLX) in communications services.

Be that as it may, I’m impressed with the market this week because it has shown resolve and exposed to investors that there’s more to investing than Amazon and Apple (who just cut a deal for more Apple products on the Amazon platform).

PPI

This morning, the Bureau of Labor Statistics released its report on producer prices for the month of October. The report showed that producers are passing rising input costs on to consumers.  The Producer Price Index for final demand rose 0.6% (consensus 0.2%), while the core index, less food and energy, rose 0.5% (consensus 0.2%).  Year-over-year the index is up 2.9%, compared to 2.6% in September, while core, less food and energy, PPI is up 2.6% versus 2.5% in September.  The Fed has been gradually raising interest rates to keep inflation in check.  If inflation starts to spike, the concern is the Fed might speed up its pace.  

• Energy rose +2.7%
• Finished Goods +0.7%
• Trade +1.6%
• Processed Goods +0.8%
• Unprocessed Goods +3.6%
• Services +0.4%
• Motor Vehicles -0.7%

Investors will be paying close attention to the Consumer Price Index release on Wednesday.

Today’s move higher in natural gas, just as the winter heating season approaches, may hit the pocketbooks of American consumers.  Natural gas is trading higher by $0.22, 6.11%, at $3.77.  At the end of October, it was trading at $3.25.

However, consumer will see some relief in the form of lower gasoline prices.  In the past month, crude oil has fallen from a high of $71.20 to $60, a decline of 15.7%.  Gasoline has fallen from $2.91 to $2.72, a decline of 6.5%. 

Have a great weekend.