Inflation Rears its Head Again (February 17 Market Recap )
Indices
- Dow 33,826, -43 or –0.13%.
- Nasdaq 11,787, +69 or +0.59%.
- S&P 4,079, -11 or -0.27%.
- USD10Y 3.828%, +8.4bp or +2.2%.
- WTI Crude $76.34/bbl, -$3.42 or –4.3%.
Inflation Rears its Head Again
The inflation data this week seems to have proven the Fed’s hawkishness prescient. January Consumer Price Index came in higher than expected. January Retail Sales were higher than expected. January wholesale prices, the Producer Price Index (PPI) was also higher than expected. While both CPI and PPI numbers declined year over year, the data from this week demonstrates the volatility of these indicators as well as underscores the perseverance of higher prices.
However, despite two Fed officials suggesting that this week’s data has opened the door to a return of 50bp rate hikes, the CME FedWatch tool only saw a 6% increase in probability of a 50bp hike in March and in the following meeting in May.
Next Week
Earnings season continues to wind down, with the focus on retail stocks (Walmart, Home Depot, TJ Maxx, Ebay). The minutes from the Fed’s last meeting will be released on Wednesday. And no week is replete without more inflation data over which to fret: the Fed’s preferred measure of inflation, the Personal Consumption Expenditure (PCE), will be released Friday.
Economic Calendar
- Monday – N/A.
- Tuesday – February S&P U.S. Flash Services and Manufacturing PMI. Earnings: Home Depot (HD), Walmart (WMT).
- Wednesday – FOMC minutes. Earnings: Nvdia (NVDA), Ebay (EBAY), TJ Maxx (TJX),
- Thursday – Initial Jobless Claims, 1st Revision Q4 GDP. Earnings: Warner Bros Discovery (WBD).
- Friday – January Personal Consumption Expenditure (PCE)
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February 17 Daily Trading Recap…
Monday – Dow +385 to 34,254, Nasdaq +174 to 11,892, S&P +45 to 4,135, USD10Y –2.7bp to 3.717%.
Tuesday – Dow -156 to 34,098, Nasdaq +68 to 11,960, S&P -1 to 4,136, USD10Y +4.4bp to 3.761%.
- Only four of the eleven S&P sectors traded higher today, led by Energy, Communication Services, and Technology.
- January Headline and Core CPI were both a tenth of a percent higher than expected, interrupting the thesis that all danger has passed regarding inflation. Both Year over Year numbers for Headline and Core decreased, just not as much as the market had expected.
- Earnings: Coca-Cola (KO) reported inline earnings but better than expected revenues and traded down –1.67% during the normal session. Airbnb (ABNB) blew out their numbers and traded up 10% post close. TripAdvisor (TRIP) also traded up 10% in the extended session after beating their earnings and revenue expectations. The ABNB and TRIP earnings stand in stark relief to those of EXPE, which missed their quarter badly suggesting their issue is with execution and not demand.
Wednesday – Dow +38 to 34,128, Nasdaq +110 to 12,070, S&P +11 to 4,147, USD10Y +4.8bp to 3.809%.
- Nine of eleven S&P sectors traded higher today, led by Communication Services, Consumer Discretionary, and Utilities.
- January Retail Sales were much higher than expected at +3.0% vs expectations of +1.9%. Although this should have caused markets to trade down given the inflation implications of the data, perhaps the market is more concerned with avoiding a recession?
- February Empire State Manufacturing recovered somewhat to post a –5.9% print soundly beating expectations of -20.3 and vs last month’s disastrous –32.9 number.
- Earnings: Shopify (SHOP) beat numbers but traded down 10% post close on worse than expected guidance. Cisco Systems (CSCO) beat their numbers and traded up 3% in the extended session. Twilio (TWLO) beat their revenue expectations and traded up 12% after hours.
Thursday – Dow -431 to 33,696, Nasdaq -214 to 11,855 S&P -57 to 4,090, USD10Y +3.4bp to 3.843%
- All eleven S&P sectors traded down today, led lower by Consumer Discretionary, Technology, and Communication Services.
- Jobless claims continued to fall to 194,000 claims vs 200,000 expected and last week’s slightly revised lower print of 195,000 (originally 196,000). Continuing claims rose slightly to 1.696 million.
- January Producer Price Index (PPI) was hotter than expected. The month over month number was up +0.66% vs –0.22% last month and the year over year number declined to +6.03 vs +6.47% last month.
- Earnings: DoorDash (DASH) beat revenues and gave upbeat guidance; DASH traded up 5.4% post close. Applied Materials (AMAT) beat their numbers but issued lower guidance. Despite the guidance AMAT traded up 1.5% in the extended session.
Friday – Dow +129 to 33,826, Nasdaq -68 to 11,787, S&P -11 to 4,079, USD10Y -1.5bp to 3.828%.
- Six of eleven S&P sectors traded higher today, led by Consumer Staples, Utilities, and Health Care.
- January Leading Economic Indicators improved to –0.3% vs last month’s -1.0% print.
If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review.
Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, and TSLA.