S&P500 back near 2800 handle; More bad news for Boeing

Summary:

  • US500 near 2800 after large day of gains

  • US consumer prices rise at slowest pace in 2 years

  • Boeing weighs on US30 as UK grounds planes

 

The US stock markets made a roaring start to the week with large gains seen across the board. Tech stocks were amongst the best performers and the boost has seen the US500 return to trade in the vicinity of the 2800 handle - an impressive recovery from the lows of 2720 seen on Friday afternoon. One interesting aspect of Monday’s trade was a notable divergence between the US500 and US30, largely due to the large weighting of Boeing in the latter.

While both the US500 and US30 have enjoyed a nice bounce in recent trade, the former has outperformed the latter - largely due to the drop seen in Boeing. Source: xStation

 

One of the surprising traits with Monday’s strong rally was the lack of any sound fundamental news behind it, with a rebound in retail sales pleasing, but hardly commensurate with the size of the rally. This afternoon we’ve had some more data which could be deemed mildly supportive, with the consumer price index rising at its slowest pace in over 2 years. The increase in the CPI was 1.5% Y/Y vs 1.6% expected, with the prior also 1.6%. The core reading Y/Y was 2.1% vs 2.2% expected. These declines are welcome because they come shortly after another pick-up in US wage data in the latest NFP report, and will go some way to allaying fears that inflation is in danger of rising significantly anytime soon. This will be welcomed by the Fed as it will buy them some more time and not force them into a position where they would have to tighten to reign in price pressures.   

There’s a growing divergence between core inflation and wages in the US, which is unusual considering the positive correlation usually seen between these metrics. Source: XTB Macrobond

 

Boeing shares begun yesterday sharply lower after regulators grounded the 737 Max 8 jets following an Ethiopian Airlines flights that crashed on Sunday and there’s been further weakness today. The UK has become the latest country to bar Boeing’s newest narrow-body jet, with the Civil Aviation Authority taking what it calls a “precautionary measure.”  The announcement follows similar moves by Australia, Singapore, Ethiopian Airlines, China, Indonesia, Aeromexico and Brazil’s Gol.

Boeing shares looked to recover yesterday after opening sharply lower, but they are under pressure once more this afternoon after the UK followed several other countries in grounding the 737 Max 8 jets. Source: xStation  

 

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Morning wrap (27.11.2020)
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