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Hot June CPI (+9.1% YOY) Gives Pre-Market Indigestion
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Wednesday, July 13, 2022
Much-anticipated Consumer Price Index (CPI) — shorthand for inflation these days — came forth with disappointingly hot numbers for the month of June: month over month headline CPI reached +1.3%, the highest print of the year so far, and hotter than any month since 2005. Ex-food & energy, “core” CPI month over month grew +0.7% — hotter than expected by 20 basis points and the highest since the +0.9% posted in April of last year.
The real shorthand inflation figure, however, is year over year, which hit +9.1% in June. This is half a percentage point higher than May and 30 basis points above expectations. At +9.1%, this is the highest year-over-year print since 1981 — President Reagan’s first year in office and “Bette Davis Eyes” topped the music charts.
The only June number to come down in this report is core CPI year over year: +5.9%, down a tick from May’s +6.0%. It’s the first time in 2022 core CPI is lower than 6%, but it’s still higher than the +5.7% analysts were expecting. This figure is key going forward, in that it takes those high energy prices and spreads them into other less volatile measures of the domestic economy, starting with Transportation but ending with higher costs of goods being delivered.
It’s this “entrenched” aspect of inflation which the Fed is most concerned with, based on the minutes from the last monetary policy meeting from mid-last month. With this in mind, we can more clearly see the Fed cranking another 75 basis points (bps) on the Fed funds interest rate at its next meeting in the last week of July. Or, perhaps more accurately, we can take a 50 bps hike off the table based on this morning’s news.
Pre-market futures had been in the green ahead of this major report: the Dow was +137 points, the S&P 500 +20 and the Nasdaq +76 points. Minutes after the numbers were released, we saw the Dow sink -350 points, the S&P -60 and the Nasdaq -270 points. Pre-market indigestion is the order of the morning. Probably keep some Tums handy ahead of the opening bell.
Delta Air Lines (DAL - Free Report) , the first of the major American airline companies to announce Q2 earnings, posted mixed results this morning ahead of the opening bell. Earnings of $1.44 per share missed the $1.71 on the Zacks consensus, though far better than the year-ago quarter’s -$1.07 per share, while revenues beat expectations by +1.58% to $13.82 billion.
The air carrier makes direct comparisons to 2019, the year prior to the Covid pandemic which took airlines down due to lack of travel demand. Thus, Delta reported non-fuel expenses +22% from Q2 2019, while fuel prices were up, unsurprisingly, +41%. Higher air fare prices helped make up for higher input prices, including increased wages and equipment supplies. The company expects Q3 capacity at 83-85% of 2019 levels.
Shares are down -2% on the report, after climbing more than +6% yesterday. Delta is still trading -3.5% lower that it was a month ago, and nearly -23% year to date. For more on DAL’s earnings, click here.
Image: Bigstock
Hot June CPI (+9.1% YOY) Gives Pre-Market Indigestion
Wednesday, July 13, 2022
Much-anticipated Consumer Price Index (CPI) — shorthand for inflation these days — came forth with disappointingly hot numbers for the month of June: month over month headline CPI reached +1.3%, the highest print of the year so far, and hotter than any month since 2005. Ex-food & energy, “core” CPI month over month grew +0.7% — hotter than expected by 20 basis points and the highest since the +0.9% posted in April of last year.
The real shorthand inflation figure, however, is year over year, which hit +9.1% in June. This is half a percentage point higher than May and 30 basis points above expectations. At +9.1%, this is the highest year-over-year print since 1981 — President Reagan’s first year in office and “Bette Davis Eyes” topped the music charts.
The only June number to come down in this report is core CPI year over year: +5.9%, down a tick from May’s +6.0%. It’s the first time in 2022 core CPI is lower than 6%, but it’s still higher than the +5.7% analysts were expecting. This figure is key going forward, in that it takes those high energy prices and spreads them into other less volatile measures of the domestic economy, starting with Transportation but ending with higher costs of goods being delivered.
It’s this “entrenched” aspect of inflation which the Fed is most concerned with, based on the minutes from the last monetary policy meeting from mid-last month. With this in mind, we can more clearly see the Fed cranking another 75 basis points (bps) on the Fed funds interest rate at its next meeting in the last week of July. Or, perhaps more accurately, we can take a 50 bps hike off the table based on this morning’s news.
Pre-market futures had been in the green ahead of this major report: the Dow was +137 points, the S&P 500 +20 and the Nasdaq +76 points. Minutes after the numbers were released, we saw the Dow sink -350 points, the S&P -60 and the Nasdaq -270 points. Pre-market indigestion is the order of the morning. Probably keep some Tums handy ahead of the opening bell.
Delta Air Lines (DAL - Free Report) , the first of the major American airline companies to announce Q2 earnings, posted mixed results this morning ahead of the opening bell. Earnings of $1.44 per share missed the $1.71 on the Zacks consensus, though far better than the year-ago quarter’s -$1.07 per share, while revenues beat expectations by +1.58% to $13.82 billion.
The air carrier makes direct comparisons to 2019, the year prior to the Covid pandemic which took airlines down due to lack of travel demand. Thus, Delta reported non-fuel expenses +22% from Q2 2019, while fuel prices were up, unsurprisingly, +41%. Higher air fare prices helped make up for higher input prices, including increased wages and equipment supplies. The company expects Q3 capacity at 83-85% of 2019 levels.
Shares are down -2% on the report, after climbing more than +6% yesterday. Delta is still trading -3.5% lower that it was a month ago, and nearly -23% year to date. For more on DAL’s earnings, click here.
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