Markets closed at or near session lows today, with the Nasdaq once again underperforming and the small-cap Russell 2000 outperforming the other major indices. We’ve seen unexpected strength in certain areas of late — Bitcoin and Japanese trading houses (thanks to Warren Buffett’s recent investments), to name a couple — and otherwise feeling some altitude sickness in areas like Tech; the Nasdaq remains +15% year to date.
Frankly, we’re ready to hear from the March Consumer Price Index (CPI) report tomorrow morning. Nothing moves until these numbers come out. Month over month, analysts expect +0.2% on headline — half of the +0.4% reported for February and +0.5% in January. In fact, another print in positive territory would mark the third-consecutive monthly increase in headline CPI, something we haven’t seen in almost a year. Core CPI is expected to dip 10 basis points (bps) to +0.4% month over month.
The Inflation Rate, aka “non-core CPI year over year,” is positioned to land sub-6% for the first time in 18 months tomorrow; the February print was an even +6.0%. This figure has descended in each of the past eight months, by an average of nearly -0.4% — which is what the February post relative to January was. We only saw a steeper, more prolonged slide in the past 20 years back during the Great Recession; even the Covid drop in the Inflation Rate was briefer. This is a healthy sign — 2022’s +8.6% CPI was the highest since +10.3% in 1981.
For the core side (stripping out volatile food and energy prices), CPI year over year has already come down 110 bps since 40-year highs reached in September of last year, from +6.6% to +5.5%. We’ve come down each month for the last five, though only by 10 bps in each of the last two prints. This may indicate something of a resistance level in core CPI, or it could indicate a bigger drop is due. After all, we’ve seen incremental drops in other inflation data over the past few months which eventually dropped deeper, almost as if it had gotten “stuck.” Perhaps we’ll see the same thing tomorrow, perhaps not.
Perhaps then we’ll also stop plodding along and get somewhere meaningful in April trading. We’re flat-to-down so far to start calendar Q2, with most everyone waiting for the CPI shoe to drop. After that, we’ll see some further color with Producer Price Index (PPI) numbers out Thursday, and Retail Sales, Import Prices, Industrial Production and Capacity Utilization results all on Friday. In addition, the first of the big banks report Q1 earnings that morning, as well. So buckle up — the week is just about to get interesting.
Questions or comments about this article and/or its author? Click here>>
Image: Bigstock
CPI Wednesday the First of Many Instructive Reports
Markets closed at or near session lows today, with the Nasdaq once again underperforming and the small-cap Russell 2000 outperforming the other major indices. We’ve seen unexpected strength in certain areas of late — Bitcoin and Japanese trading houses (thanks to Warren Buffett’s recent investments), to name a couple — and otherwise feeling some altitude sickness in areas like Tech; the Nasdaq remains +15% year to date.
Frankly, we’re ready to hear from the March Consumer Price Index (CPI) report tomorrow morning. Nothing moves until these numbers come out. Month over month, analysts expect +0.2% on headline — half of the +0.4% reported for February and +0.5% in January. In fact, another print in positive territory would mark the third-consecutive monthly increase in headline CPI, something we haven’t seen in almost a year. Core CPI is expected to dip 10 basis points (bps) to +0.4% month over month.
The Inflation Rate, aka “non-core CPI year over year,” is positioned to land sub-6% for the first time in 18 months tomorrow; the February print was an even +6.0%. This figure has descended in each of the past eight months, by an average of nearly -0.4% — which is what the February post relative to January was. We only saw a steeper, more prolonged slide in the past 20 years back during the Great Recession; even the Covid drop in the Inflation Rate was briefer. This is a healthy sign — 2022’s +8.6% CPI was the highest since +10.3% in 1981.
For the core side (stripping out volatile food and energy prices), CPI year over year has already come down 110 bps since 40-year highs reached in September of last year, from +6.6% to +5.5%. We’ve come down each month for the last five, though only by 10 bps in each of the last two prints. This may indicate something of a resistance level in core CPI, or it could indicate a bigger drop is due. After all, we’ve seen incremental drops in other inflation data over the past few months which eventually dropped deeper, almost as if it had gotten “stuck.” Perhaps we’ll see the same thing tomorrow, perhaps not.
Perhaps then we’ll also stop plodding along and get somewhere meaningful in April trading. We’re flat-to-down so far to start calendar Q2, with most everyone waiting for the CPI shoe to drop. After that, we’ll see some further color with Producer Price Index (PPI) numbers out Thursday, and Retail Sales, Import Prices, Industrial Production and Capacity Utilization results all on Friday. In addition, the first of the big banks report Q1 earnings that morning, as well. So buckle up — the week is just about to get interesting.
Questions or comments about this article and/or its author? Click here>>