Tag: PPI

Yields Ease, Markets Steady as Investors Await Key Inflation Data

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– U.S. Treasury yields declined slightly after lower-than-expected December producer price index (PPI) data.
– Stock markets showed minimal movement as focus remained on upcoming consumer price index (CPI) data and policy uncertainty tied to President-elect Donald Trump.
– Oil prices fell from recent highs, while the dollar index softened.

Treasury yields in the United States edged down on Tuesday following a report showing that producer prices increased just 0.2% month-on-month in December, underperforming the expected 0.3% rise. This marks a slowdown from November’s 0.4% gain. While the PPI data eased immediate inflation concerns, market attention remains fixed on the consumer price index (CPI) report due on Wednesday.

CPI figures are anticipated to reveal consistent monthly inflation at 0.3% for December, with an annual increase to 2.9%, up from 2.7% in November. Market sentiment has been shaped by fears of persistent inflation, amplified by uncertainty surrounding President-elect Trump’s proposed trade and tax policies. Speculation about tariffs ranging from 2% to 5% monthly has added to concerns about potential inflationary pressures.

Market Performance
Stock market activity was muted as traders digested the PPI data. The Dow Jones Industrial Average added 0.10%, closing at 42,339.90, while the S&P 500 and Nasdaq Composite slipped 0.15% and 0.21%, respectively. The Russell 2000 index, a key indicator for smaller U.S. companies, has seen a decline of roughly 11% since its peak in November.

Internationally, MSCI’s global stock index inched up by 0.14%, while Europe’s STOXX 600 index dipped by 0.11%. With U.S. corporate earnings season kicking off, major banks are expected to report strong quarterly results, driven by increased dealmaking and trading activities.

Treasury Yields and Dollar Movement
The yield on the 10-year Treasury note eased slightly to 4.790%, staying close to its recent 14-month high of 4.805%. Higher yields have weighed on equities, as they make bonds more attractive and raise borrowing costs for companies.

In currency markets, the dollar index fell by 0.1% to 109.31. The euro gained 0.46% to $1.0292, while the dollar strengthened against the yen, rising 0.25% to 157.87.

Oil and Asian Markets
Oil prices retreated after reaching multi-month highs earlier this week. U.S. crude dropped 1.23% to $77.84 per barrel, while Brent crude declined 0.93% to $80.27 per barrel. In Asia, Japan’s Nikkei index fell 1.8%, dragged down by chip stocks and speculation about a potential interest rate hike by the Bank of Japan (BoJ). Deputy Governor Ryozo Himino hinted at a possible rate increase during the central bank’s next policy meeting on January 24, adding to market uncertainty.

With inflation and policy concerns dominating the narrative, investors are likely to remain cautious. The upcoming CPI data and the direction of Trump’s economic agenda are poised to play pivotal roles in shaping market sentiment in the coming weeks.

Wall Street Rises as August PPI Data Points to Modest Rate Cut by the Fed

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Wall Street’s main indexes rose after August producer price data reinforced expectations of a 25-basis point rate cut.
– Moderna shares tumbled following a weak revenue forecast, while communication services led sector gains.
– Gold miners surged, benefiting from record-high gold prices.

Wall Street’s major indexes climbed Thursday, buoyed by producer price index (PPI) data that met expectations, pointing to a smaller interest rate cut by the Federal Reserve. The PPI for August showed a 0.2% increase, slightly higher than the anticipated 0.1%, while core prices (excluding volatile food and energy) rose 0.3%, indicating that inflation pressures are continuing to ease but remain a concern. This data has solidified investor expectations of a 25-basis point rate cut at the Fed’s September 17-18 meeting, as opposed to a more aggressive 50-basis point cut.

The stock market responded positively, with the Dow Jones Industrial Average up 0.40%, the S&P 500 gaining 0.70%, and the Nasdaq Composite rising 1.04%. The report also showed initial claims for unemployment benefits at 230,000, aligning with estimates and signaling that the labor market is cooling but remains stable.

Investors remain optimistic despite concerns over inflation, with some bargain hunting occurring in the more economically sensitive small-cap Russell 2000 index, which outperformed with a 1.4% rise. According to Chuck Carlson, CEO of Horizon Investment Services, “There’s a willingness among investors to buy on declines,” highlighting growing confidence in a more controlled inflation environment.

However, Moderna faced significant losses, dropping over 11.5% after issuing a disappointing revenue forecast for fiscal year 2025, citing a lower-than-expected demand for vaccines. This dragged down the healthcare sector, although the rest of the market showed strength in communication services and gold mining stocks. Shares of Warner Bros. Discovery surged nearly 9% following news of a strategic partnership with Charter Communications, further boosting investor sentiment in the media and communications space.

The gold mining sector was another bright spot in the market, with spot gold prices reaching new highs, driving up the Arca Gold BUGS index by 6.3%. Investors flocked to gold as a safe-haven asset amid global economic uncertainties, propelling mining stocks like Newmont Corporation and Barrick Gold.

The backdrop of cooling inflation is encouraging for investors who anticipate that the Fed will begin a more dovish monetary policy cycle. A quarter-point rate cut would mark the first reduction since March 2020, when the pandemic triggered rapid monetary easing. With the U.S. central bank likely to cut rates next week, expectations for further rate reductions in 2024 are growing, depending on how inflation and labor market data evolve.

Looking ahead, investors will continue to monitor economic indicators closely, especially as concerns about the health of the U.S. economy persist. While inflation appears to be retreating, the possibility of a broader economic slowdown could influence market sentiment in the coming months. For now, the stock market is riding high on the belief that the Federal Reserve’s actions will continue to support growth while taming inflation.

Inflation Just Dropped a Massive Hint About the Fed’s Next Move

Posted on by slightbourne@noblecapitalmarkets.com

The major U.S. stock indexes inched up on Tuesday as investors digested mixed producer inflation data and turned their focus to the much-anticipated consumer price index report due out on Wednesday.

The producer price index (PPI) for April showed prices paid by businesses for inputs and supplies increased 0.2% from the prior month, slightly above economists’ expectations of 0.1%. On an annual basis, PPI rose 2.3%, decelerating from March’s 2.7% pace but still higher than forecasts.

The “hot” PPI print caused traders to dial back bets on an interest rate cut from the Federal Reserve at its September meeting. Fed funds futures showed only a 48% implied probability of a 25 basis point rate cut in September, down from around 60% before the report.

Speaking at a banking event in Amsterdam, Fed Chair Jerome Powell characterized the PPI report as more “mixed” than concerning since revisions showed prior months’ data was not as hot as initially reported. He reiterated that he does not expect the Fed’s next move to be a rate hike, based on the incoming economic data.

“My confidence [that inflation will fall] is not as high as it was…but it is more likely we hold the policy rate where it is [than raise rates further],” Powell stated.

Investors are now eagerly awaiting Wednesday’s consumer price index data as it will provide critical signals on whether upside inflation surprises in Q1 were just temporary blips or indicative of a more worrying trend.

Consensus estimates project headline CPI cooled to 5.5% year-over-year in April, down from 5.6% in March. Core CPI, which strips out volatile food and energy prices, is expected to moderate slightly to 5.5% from 5.6%.

If CPI comes in hotter than projected, it would solidify expectations that the Fed will likely forego rate cuts for several more months as it prioritizes restoring price stability over promoting further economic growth.

Conversely, cooler-than-forecast inflation could reinforce the narrative of slowing price pressures and clear the path for the Fed to start cutting rates as soon as June or July to provide a buffer against a potential economic downturn.

The benchmark S&P 500 index closed up 0.18% on Tuesday, while the tech-heavy Nasdaq gained 0.43%. Trading was choppy as investors bided their time ahead of the CPI release.

Market focus has intensified around each new inflation report in recent months as investors attempt to gauge when the Fed might pivot from its aggressive rate hike campaign of the past year.

With inflation still running well above the Fed’s 2% target and the labor market remaining resilient, most economists expect the central bank will need to keep rates elevated for some time to restore price stability. But the timing and magnitude of any forthcoming rate cuts is still hotly debated on Wall Street.

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