In addition to advance retail sales at 8:30, traders and investors will also closely be watching the 8:30 release of the October PPI. Many of you may recall the market’s sell-off last month following this report when even though the headline PPI came in lower than expected, the core reading showed a larger than expected gain (see table below). Although the S&P 500 only finished 5 points lower that day, on an intra-day basis, the market was down by nearly 1% before rallying back.
Last month’s report also illustrates the difference between the investors and emotional money. When the report came out, emotional investors blindly sold positions on fears that inflation was too high which is bad for stocks. Investors, on the other hand, combed over the report and saw that most of the gain was due to seasonal adjustments in new car price component. Seeing that the upside surprise was more of a statistical anomaly than runaway inflation, they took advantage of the weakness and are now sitting on a nice gain of over 2%. Keep that in mind this morning. Before making any quick decisions, make sure your logic is sound.