Placing A Bet On Inflation - Markets This Morning

  • Oil futures rose, and stocks followed
  • A big beer merger was the day’s highlight
  • Now we wait for the Federal Reserve interest rate decision

The Federal Reserve may or may not raise interest rates tomorrow. Most traders think they won’t, but Wednesday’s actions promoted the idea that inflation will make a raise inevitable.

Oil, not stocks, led the way. WTI crude oil futures for October shot up 5.9%, to $47.22/barrel, even while the cash price of the commodity rose only 59 cents to $44.59. Brent futures for November delivery rose 4.46%, or $2.13/barrel, to finish at $49.88.

The cash price for the commodity, however, rose just 26 cents, .53%, to finish at $46.63. Oil is priced at less than it is costing to bring to the surface, less will be brought to the surface as a result, so traders expect prices to start rising soon, and keep rising.

On Wall Street, meanwhile, stocks rose fairly steadily, with small dips around 11 AM and 2 PM, with the Dow Jones (INDEX:INDU) finishing up .84% or 140.10 to 16,739, the S&P (INDEX:SPAL) finishing up .87% or 17.22 to 1,995, and the Nasdaq (INDEX:NASDAQ) rising 28.72 or .59% to 4,889.

International Markets Rose

Shanghai got the day started off well, rising 4.67% while Japan’s Nikkei was up .81% and Hong Kong’s Hang Seng was up 2.33%. The Indian Sensex was up 1%, and the good news continued in Europe, where the German DAX rose .38%, the French CAC-40 was up 1.67% and the English FTSE was up 1.49%.

Even the main Latin American markets, in Mexico and Brazil, were up, Mexico by 1.03% and Brazil by 2.51%. The latter may be a 3G bounce, as the Brazilian private equity firm controls brewer AB InBev, which made the day’s biggest news.

The Big Beer Deal

The big news was about something that didn’t happen, that wasn’t even formally proposed, the possible merger of AB Inbev (NYSE:BUD) and SAB Miller (OTC:SBMRY), which would put almost half the world’s biggest beer brands under one corporate roof.

After both stocks rose sharply in early trading, SAB Miller put out a statement admitting that the Brazilian-led brewer has told SAB Miller that it intends to table a bid. By the end of the day SAB Miller was up a whopping 20.8%, or $9.72, to $56.45, and Bud was up 6.41%, or $6.05 to $100.50 indicating there are a lot of new shareholders who would welcome a deal.

GE Gets Into Gear, FedEx Falls

General Electric (NYSE:GE), which still has yet to recover the heights it reached before current CEO Jeff Immelt began transforming it in 2001, from a financial to an industrial power, seemed to finally get some momentum. It was up 2.45%, or 62 cents, to $25.92, after finally getting approval to buy Alstom’s turbine business and moving jobs out of the country in protest of the closing of the U.S. Export-Import Bank by Congressional Republicans.

FedEx (NYSE:FDX), previously known as Federal Express, went the other way. Its earnings disappointed the Street by two cents/share, after it posted a loss in the previous quarter owing to its acquisition of GENCO, a logistics firm. Anticipating bad news, investors put FedEx shares in a dreaded “death cross,” the short-term moving average falling below the long-term average, and when the smoke cleared on trading yesterday the shares were down 2.95%, $4.54, to $149.46.

More Rising on the Tech Front

Technology shares generally moved upward. Apple (NASDAQ:AAPL) was up just 13 cents, .11%, to finish at $116.41. That’s still more than 10% below its July high of $130, but fairly close to the $120/share it was at as the August correction got rolling. Amazon.Com (NASDAQ:AMZN) rose $5.02/share, but that was just .96%, finishing at $527.39. But Netflix (NASDAQ:NFLX)  was up nearly 5% to $104.08, Hewlett Packard (NYSE:HPQ) was up 5.02% or $1.36 to $28.47, after CEO Meg Whitman said on TV the November split-up of the company was going well, and Starz (NASDAQ:STRZA) after CEO Chris Albrecht was also interviewed, rose 4.25% or $1.65 to finish at $40.44.

So What Happens In The Markets This Morning?

Now, we wait. The Federal Reserve decision is expected at 2.15 PM Eastern Time. Whatever it is, markets will move, possibly in relief if rates don’t move, possibly in frustration if rates do rise. Traders have done all they could to mute the size of those moves in the last three days, but somehow that never works when the time comes.

For a quick roundup of key news and events before the bell, check the daily news section - Markets This Morning.

Dana Blankenhorn Dana Blankenhorn   on Amigobulls :
Author's Disclosures & Disclaimers:
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
  • My retirement account holds shares in GE, AAPL and AMZN
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