Progress in disinflation is reinforced by the 'official' CPI report, which this market loved, and which we anticipated. However, I dispute both the influence of health insurance (The Government says 0.5% of influence on consumers) and who are they kidding, it's major higher than that, even with Medicare or whatever.

Freepik

Nevertheless, we're starting to get enough data-points that it's almost a trend, in harmony with our view that internal core prices were softening well before the Fed acknowledged it, and thus the 5+% yields were the topping process. Tuesday's robust rally included an awaited breakout by the NY Comp., that's as resounding engagement of mid-and-small caps helped that Average a lot. In a sense favorable breadth here means more than the Index price moves.

I also need to mention the IDF unveiling what they found when capturing quite a number of terrorist 'brigade' members and this really indicates how they had planned the attack while pretending to be 'needy' for many years to build this, well before Netayahu came to be Prime Minister again, 'or' the Settler issues. It is important because the depth of preparation denies arguments relating to feeling repressed, or because of the West Bank issues, or anything.. although some of that may have influenced the timing of attack they planned all along.

Market 'X-ray' 

Consumers are resilient, the CPI number was 'massaged' a bit but worked well to help the S&P upside, and resulting lower rates help overall.

Most eyes will now focus on (cleaned-up as ideally always be) San Francisco, and the APEC Conference. As POTUS will not want to sound alarming, and it is already obvious from the Chinese 'press' as they totally changed their tune ahead of the Meeting, there should be progress. Minimum will be restoring the 'hotlines' or deconfliction software and live military 'clash' precautions, with an effort (contrived or otherwise) as rebuilding or reinforcing economic aspects of the relationship, so superficially companies will be more at ease (unlikely, but it will sound good). China and the Mideast are the focus for tomorrow. And of course a nod to 'other' countries who will feel slighted by this aspect of APEC.

Flash: 

At press-time Israeli Forces are moving-in on the Shifa Hospital. They call on all Hamas terrorists to surrender. Notably the Israelis are including the Arabic-speaking 'medical teams'. I suspect this is an effort to free the hospital and deliver incubators, and also rescue hostage 'if' any are at the location.

This development coming just hours after -when asked on-behalf of American hostage families- our President Biden responded: 'don't worry too much, we're coming soon'. We? Sounds like IDF ground forces, medical teams, and if the President's saying 'we', perhaps infers US hostage rescue teams. We'll see.

'Rational Exuberance' 

Indeed, a good term to describe today's market surge to the upside, pretty much across-the-Board. Yields pulled-back sharply (since I indicated you were looking at peak-yields and peak VIX too.. weeks ago), and it's possible the CPI will increase next time, but it will be part of the process. A lot of discussion focuses on the reported 'healthcare' drop, which we won't try to calculate, but obviously is a 'bridge too far' for costs of personal care.

Portfolio allocation 'experts' probably are contemplating allocating more cash to equities and even bonds, than in defensive ways they have been doing already. It's likely we're already in the so-called 'Santa Claus' rally ahead of even Hanukah.

More By This Author: