Wall Street piles back into bonds, stocks drop, no surprises with PPI, NFIB disappoints, cryptos ease off records

US stocks are drifting from record highs after producer pricing pressures moderate and treasuries rise on delayed Fed rate-hike expectations and uncertainty on how the board will look next year. Now that earning season is winding down, corporate America did OK given the wrath of pricing pressures.  Investors are not looking forward to the debt limit crisis that seems poised to go down to the wire in early December.  The S&P 500 index went on a relentless run and was ripe for a down day.

Tesla shares fell sharply for a second day as investors grow nervous risk aversion could be settling in.  Elon Musk’s brother sold 88,500 shares of Tesla on Friday, ahead of Musk’s Twitter poll that proposed the selling 10% of his stock.  Tesla shares are approaching the danger zone, the psychological USD 1000 level could easily trigger more panic-selling towards the 50-day SMA which trades around the USD865 level.

PPI

Prices paid to US producers remain elevated, but optimism is emerging as some components see relief. The BLS producer price index increased 0.6% month-over-month in October, matching the consensus estimate. To the surprise of no one who went shopping for food or filled up their gas tank last month, pricing pressures remain. The car industry is still battling over chip shortages and that is still a primary concern that suggests the inflation overshoot will get worse over the next couple of months.

All eyes will be on the upcoming CPI report which could show prices having their fastest increase since 1990.

NFIB

The October NFIB small business optimism index posted a large-than-expected decline as the labor shortage problem and low inventories dampened the near future outlook.  The headline index fell to 98.2, worse than the 99.5 estimate and 99.1 prior reading. The NFIB provided no reason to be optimistic about inflation pressures easing up and over a swift pickup in hiring.

Cryptos

The top cryptocurrencies are paring gains as the global market cap hovers around the USD 3 trillion level. Bitcoin and ethereum both made fresh record highs but are facing critical resistance. A fresh wave of institutional money is needed to help bitcoin reach USD 70,000 and for Ethereum to hit the USD 5,000 level. Cryptos could be ripe for a round of profit-taking if the bond market rally accelerates. If Treasuries rally and trigger some panic-selling on Wall Street, the top coins could dip around 3%.

Apple CEO Tim Cook noted that Apple has no plans to except crypto in Apple Pay, but he did disclose that he is invested in cryptos. Given the overextended rally with most risky assets, if a pullback in stock emerges, that could trigger more profit-taking in the cryptoverse.

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