Citi said investors have up to six weeks to continue squeezing bears after the inflation surprise

Well, that was something.

Inflation falls slightly below forecast and then rockets – best one-day gain for S&P 500 SPX
The best one-day percentage gain since April 6, 2020 and for the Nasdaq Composite since March 24, 2020.

If inflation has indeed peaked, there are really two questions – how fast inflation will fall, and whether the Fed’s intended hikes to tame high prices will push the economy into recession. “CPI has peaked,” Warren Pies, founder of 3Fourteen Research, tweeted. “The question is whether data is cooling faster than earnings are deteriorating.”

Citi strategists say the next few weeks could be quite pleasant. “In fact, it’s hard to find any downward catalyst between now and December wages, CPI and the FOMC,” said a group led by Jamie Fahy.

The bank has put together a chart of all downward CPI surprises since 2008, usually indicating that the stock market is headed higher over the next 60 days.

Markets tend to rally after downside CPI surprises.


“All of this doesn’t mean we think stocks are suddenly back in a bull market. [Earnings per share] A big risk in the first half of 2023, but the market could squeeze painfully for bears in the next 2-6 weeks,” they say.

Citi, it should be said, was advising investors to short the S&P 500, so they missed out on Thursday’s fun, though the team said their offering was still priced cheap enough to be somewhat profitable. They said their models show most of the shorts started at 3760, meaning those positions are already underwater.

Fahy and the Citi team also recommend going long US Treasurys BX:TMUBMUSD10Y
and shorting the dollar against the Norwegian krone USDNOK.
The Australian dollar, New Zealand dollar, British pound and Swedish krone also tended to rise when the S&P 500 rose and the 10-year Treasury yield fell.


The rally has legs, US stock futures ES00

higher. Crude oil futures CL
China rose as it took a step toward easing zero-covid-19 regulations. Dollar DXY
was sharply lower compared to its competitors. Follow MarketWatch’s live blog.


China has reduced the length of time passengers are exposed to quarantine to relax strict zero-Covid regulations, it said. However, parks have been closed in Beijing as officials respond to a wave of COVID-19 cases.

It’s Veterans Day, so there are no economic releases from the government, although the University of Michigan’s consumer sentiment report for November is due at 10 a.m. Eastern. The holiday also means a break in the earnings release calendar.

There are still no calls for House or Senate control. The New York Times says there are 222 districts where Republicans won or led, more than the 218 needed to control the House. In the Senate, there are indications that Democrats will pick up both Arizona and Nevada, meaning that the Georgia runoff will not determine control of the upper chamber.

Tesla TSLA
CEO Elon Musk has raised the possibility of bankruptcy for Twitter, the social media service he bought for $44 billion.

JPMorgan resumed coverage on Intel INTC
with an underweight rating and a price target of $32, the broker said it will take several years before Intel regains its technology leadership.

Cryptocurrency lender BlockFi says it has stopped withdrawing money following the turmoil at FTX, which provided BlockFi with a $400 million loan facility. The Bahamas securities regulator has frozen the assets of FTX Digital Markets.

The White House said President Joe Biden would make an announcement on the 27thc The U.N. Climate Conference is strengthening the U.S. Environmental Protection Agency’s proposed standards to reduce methane and other harmful air pollutants from the oil and natural gas industry.

The UK economy weakened by 0.7% in the third quarter, although this was partly due to the mourning period following the death of Queen Elizabeth II. The European Union forecasts two-quarters of negative growth, which meets the technical definition of a recession.

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