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T3's Take 3: Weak Inflation Data Calls December Rate Hike Into Question


Today's financial recap and tomorrow's financial outlook.


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Economic Data Misses. Again.

The Fed caught investors off guard on Wednesday with its hawkish commentary, but weak inflation data today called into question the possibility of a December rate hike.

The PCE Deflator, which is the Fed's preferred inflation indicator rose 1.3% year-over-year, missing the 0.2% consensus.

On Wednesday, the Fed once again said it expects inflation to head to 2% in the medium term, but the data shows that we are nowhere near that target.

Personal Income and Spending data also came in below expectations.

On the positive side, the ISM Milwaukee and Chicago PMI beat consensus, but overall, economic data was on a clear downtrend this week.

The market used the weak data to drive a mild sell-off, with the S&P 500 falling 0.5% and the NASDAQ dropping 0.4%.

Valeant Drama Continues

Troubled pharmaceutical giant Valeant Pharmaceuticals (VRX) fell 15.9% to $93.77 today as the bad news piled on.

Bloomberg reported that Valeant-related specialty pharmacy Philidor Rx altered doctor's orders to boost reimbursements from insurance companies.

Recently, Citron Research attacked Valeant's accounting practices as related to its business with Philidor, which set off the recently collapse in the stock. Citron said today that it plans to release more damning information about Valeant next week.

This morning, in reaction to the Bloomberg report and the existing controversy, Valeant ended its relationship with Philidor, which will presumably negatively impact Valeant's revenues.

High-profile hedge fund manager Bill Ackman, one of Valeant's largest shareholders, held a conference call to defend the stock.

But obviously, investors were not impressed with his arguments.

Bank of Japan Signals Stimulus at the Ready

Last night, the Bank of Japan lowered its economic outlook, though its board voted 8-1 to keep the current stimulus plan in place.

The Bank said it expects to hit its 2% inflation target in late-2016 or early 2017, rather than the previous expectation of mid-2016.

The Japanese economy is also now expeected to grow just 1.2% this year, down from 1.7% previously.

At the press conference Bank of Japan Governor Kuroda "I don't think there are limits to our policy options" and that "we won't hesitate to make necessary policy adjustments if we judge that there is a change in the broad price trend."

This is very, very reminiscent of the ECB's renewed "whatever it takes" stance towards boosting inflation and growth. 

Monday's Financial Outlook

On Monday morning, the Markit Manufacturing PMI, Construction Spending, and ISM Manufacturing numbers will be released.
Global Economics.

Overseas, the Reserve Bank of Australia's rate decision will be the biggest data point. Swiss Retail Sales, UK Markit PMI, and Canadian RBC Manufacturing PMI, will also be released.

In earnings, Cardinal Health (CAH), Dominion (D), Sysco (SYS), and Visa (V) will be released before the open.

After the close, Allstate (ALL), AIG (AIG), and Tenet Healthcare (THC) will deliver their numbers.

No positions in stocks mentioned.
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