Traders Market Weekly: CPI and PPI Inflation

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    U.S. Treasuries higher start with issues in the belly expected to show relative strength in the early going.

    Treasury futures began climbing in early evening trade, maintaining their evening gains through the night. U.S. Treasury will sell $35 bln in 10-yr notes this afternoon. President Biden delivered the State of the Union address last night, calling for taxes on billionaires and higher taxes on corporate buybacks.

    Crude oil is seeking its third consecutive advance while the U.S. Dollar Index is down 0.2% at 103.18.

    2-yr: -1 bp to 4.45%
    3-yr: -3 bps to 4.09%
    5-yr: -4 bps to 3.80%
    10-yr: -3 bps to 3.64%
    30-yr: -1 bp to 3.70%


    Some SELLING into the afternoon … as NASDAQ had a great run in JAN-2023 where I made 12% gains 🙂


    Dow 33,949.01 -207.68 -0.61%
    S&P 500 4,117.86 -46.14 -1.11%
    Nasdaq 11,910.52 -203.27 -1.68%
    VIX 19.66 1.00 5.36%
    Gold 1,888.00 3.20 0.17%
    Oil 78.40 1.26 1.63%


    Equity indices in the Asia-Pacific region were on the softer side of things Thursday with the exception of markets in China, pressured in part by growth concerns tied to worries about ongoing rate hikes by central banks around the world.

    —Equity Markets—

    Japan’s Nikkei: -0.1%
    Hong Kong’s Hang Seng: +1.6%
    China’s Shanghai Composite: +1.2%
    India’s Sensex: +0.2%
    South Korea’s Kospi: -0.1%
    Australia’s ASX All Ordinaries: -0.6%


    The Hang Seng drew some support from its casino stocks following earnings reports from Wynn Resorts and MGM Grand; meanwhile, the Shanghai Composite continued to be underpinned by reopening enthusiasm. On that score, there were reports of record inflows into Chinese equities by foreign investors in January.

    There was also a report in China’s Securities Times that regulators are warning companies and investors against speculation in ChatGPT-type technology plays.

    Japan’s M2 Money Supply +2.7% yr/yr (expected +3.0%; last +2.9%); Machinery Tool Orders -9.7% yr/yr (last +1.0%)


    Major European indices are exhibiting a bullish bias in Thursday’s trade, underpinned by the recognition that Germany’s preliminary January CPI was better than feared on a year-over-year basis and showed deceleration from peak inflation, as well as a better-than-expected 2023 outlook from industrial company Siemens.

    —Equity Markets—

    STOXX Europe 600: +0.9%
    Germany’s DAX: +1.2%
    U.K.’s FTSE 100: +0.7%
    France’s CAC 40: +1.4%
    Italy’s FTSE MIB: +1.5%
    Spain’s IBEX 35: +0.5%


    A positive bias in the U.S. equity futures market has also helped trigger some renewed buying interest.

    Sweden’s Riksbank raised its key interest rate by 50 basis points to 3.00%, as expected, and said further rate hikes are likely.

    BOE Governor Bailey testified before Parliament’s Treasury Committee that he thinks inflation will come down sharply this year, but that risks remain, according to Bloomberg. EUR/USD +0.5% to 1.0761.

    Germany’s January preliminary CPI +1.0% m/m (expected +0.8%; last -0.8%) and +8.7% yr/yr (expected +8.9%; last +8.6%)


    Disney (DIS 118.78, +7.00, +6.3%): beats by $0.20, reports revs in-line, Disney+ subscribers down 1% sequentially to 161.8 mln; Reaffirms guidance for revenue and operating income growth in high-single-digit range for FY23; Targeting $5.5 bln in cost savings and announces workforce reduction of 7,000 roles; intends to reinstate dividend by year end, and announces new corporate structure
    Mattel (MAT 18.34, -2.16, -10.5%): misses by $0.11, misses on revs; guides FY23 EPS below consensus
    Wynn Resorts (WYNN 109.05, +5.43, +5.2%): misses by $0.07, beats on revs
    PepsiCo (PEP 174.20, +3.04, +1.8%): beats by $0.02, beats on revs; guides FY23 EPS below consensus; raises dividend
    Duke Energy (DUK 100.51, +1.33, +1.3%): beats by $0.04, beats on revs; reaffirms FY23 EPS guidance
    AppLovin (APP 16.54, +3.86, +30.4%): reports Q4 (Dec) results, beats on revs; guides Q1 revs above consensus
    Sonos (SONO 20.47, +2.61, +14.6%): beats by $0.20, beats on revs; reaffirms FY23 revs guidance
    Affirm (AFRM 13.16, -2.86, -17.9%): misses by $0.11, misses on revs; guides Q3 revs below consensus; guides FY23 revs below consensus; also announces 19% workforce reduction; downgraded to Sector Perform from Outperform at RBC Capital Mkts

    Robinhood Markets (HOOD 10.92, +0.45, +4.3%): misses by $0.07 on GAAP EPS, misses on revs; Q1 likely to be another quarter of net interest revenue growth
    O’Reilly Auto (ORLY 802.00, +14.64, +1.9%): beats by $0.63, beats on revs, Q4 comps +9.0%; guides FY23 EPS below consensus, revs above consensus
    Digital Turbine (APPS 13.28, -2.93, -18.1%): misses by $0.08, misses on revs; guides FY23 EPS below consensus, revs below consensus; downgraded to Perform from Outperform at Oppenheimer


    Initial claims for the week ending February 4 increased by 13,000 to 196,000 (consensus 194,000). Continuing jobless claims for the week ending increased by 38,000 to 1.688 million.

    Key takeaway is that claims remain below 200,000, which is indicative of a very tight labor market and a reluctance on the part of most companies to cut their workforce.

    The 2-yr Treasury note yield climbed off an overnight low of 4.39% to 4.46%.
    The 10-yr note yield is down six basis points to 3.59%.


    Lower rates are also contributing to the better tone:

    two year 4.437% -1.6 basis points
    10 year 3.589% -4.6 basis points
    30 year 3.646% -6.6 basis points


    S&P index moving further away from the 4100 level which was the swing highs from December.

    The 50% midpoint of the move down from the all-time high from early January 2022 comes in at 4155.10.
    The high price so far today has reached 4156.23 backed off.


    Worth watching next week’s CPI

    from BMO fixed income strategist Ian Lyngen.

    There is a growing sense that there is an upside bias versus the consensus of +0.4% for the core measure. The wildcard for the series is used car prices – which the anecdotes suggest surged in January. It’s an open question as to how the proxies translate into the CPI data during this particular release; as is often the case. An upside surprise of the magnitude required to shift the trajectory of the yearly pace is unlikely; so, the peak inflation narrative will most likely survive the week ahead. That said, an upside surprise would rekindle the debate regarding whether the structural rate of inflation has shifted higher in the wake of the pandemic. More relevantly for near term market pricing is the degree to which a stronger print would shift market pricing more in favor of a 5.50% upper bound as the pendulum of sentiment has swung hawkishly in the wake of the January payrolls report.

    One of the anecdotes he’s referring to is the 2.5% m/m increase in the Manheim used vehicle index. The index only makes up about 4.5% of the entire core CPI report so it will need to punch above its weight to move the index.


    Dow 33,699.88 -249.13 -0.73%
    S&P 500 4,081.50 -36.36 -0.88%
    Nasdaq 11,789.58 -120.94 -1.02%
    VIX 20.71 1.08 5.50%
    Gold 1,873.60 -17.10 -0.90%
    Oil 77.64 -0.83 -1.06%

    In honor of passing of 94 year old song writer Burt Bacharach who wrote some all-time FAVs 🙂


    Equity indices in the Asia-Pacific region ended the week on a mostly lower note.

    —Equity Markets—

    Japan’s Nikkei: +0.3% (+0.6% for the week)
    Hong Kong’s Hang Seng: -2.0% (-2.2% for the week)
    China’s Shanghai Composite: -0.3% (-0.1% for the week)
    India’s Sensex: -0.2% (-0.3% for the week)
    South Korea’s Kospi: -0.5% (-0.4% for the week)
    Australia’s ASX All Ordinaries: -0.8% (-1.8% for the week)


    The U.S. government is reportedly looking to implement restrictions on U.S. investment in Chinese advanced technology.
    Komatsu reported that excavator demand in China decreased on a yr/yr basis for the eleventh month in a row.
    Bank of Japan Deputy Governor Amamiya reiterated that current easing should continue and that there is still a way to go until stable inflation is reached.
    Nominees for the next BoJ governor will be submitted to parliament early next week with hearings in the lower house expected to take place on February 24.
    China’s January CPI 0.8% m/m (expected 0.7%; last 0.0%); 2.1% yr/yr (expected 2.2%; last 1.8%). January PPI -0.8% yr/yr (expected -0.5%; last -0.7%). January new loans CNY4.90 trln (expected CNY4.00 trln; last CNY1.40 trln) and outstanding loan growth 11.3% yr/yr (expected 11.0%; last 11.1%). January total social financing CNY5.98 trln (expected CNY5.40 trln; last CNY1.31 trln)
    Japan’s January PPI 0.0% m/m (expected 0.3%; last 0.7%); 9.5% yr/yr (expected 9.6%; last 10.5%)
    New Zealand’s January Electronic Card Retail Sales 2.6% m/m (last -2.3%); 2.7% yr/yr (last 4.8%). January Business PMI 50.8 (last 47.2)

Viewing 15 posts - 46 through 60 (of 67 total)
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