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Changing Outlook on Econ Numbers; PPI as Expected: +0.5%
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Friday, March 12, 2021
Back to the cyclical rotation in today’s pre-market for the last day of trading for the week. With the American Rescue Plan (ARP) having been signed into law yesterday, we expect to have a different outlook on investment activity going forward (more on this later). For now, the Dow looks to open +65 points, the Nasdaq -190 and the S&P 500 -10. This follows fresh all-time highs in both the Dow blue-chips and broader S&P 500 Thursday afternoon.
What do we mean by a “changing outlook”? Let’s start with new Producer Price Index (PPI) for February out this morning: +0.5% on the headline came in just as expected, though down from January’s +1.3% — which itself was the highest month-over-month gain since the pandemic era began. Whereas over the previous 18 months or so we would look at a monthly economic read like this looking for “growth — any growth,” nowadays we’ll be checking “how hot is the growth?”
Ex-food and energy (the “core” print), last month’s PPI came in at +0.2% — reliably tepid, still in solid positive territory. Final demand year over year we’re +2.8%; +2.5% on core. This is stronger growth from year-ago levels than we’ve seen, with plenty of easy comps coming up in future months. Analyst will be looking particularly at transportation costs (even more particularly: airline ticket prices) for both PPI and its sister metric Consumer Price Index (CPI), which came out earlier this week.
Generally speaking, higher PPI numbers are a forward indicator of future CPI, as companies pass along price hikes to their consumers. With things like air travel, large pent-up demand is about to be sated not only with the huge stimulus from the ARP, but also increased levels of Covid-19 vaccinations throughout the country. Also, Boeing (BA - Free Report) is seeing a boost this morning with more 737 MAX jets being sold. Boeing has been waiting two years for this sort of development.
After the opening bell this morning, the University of Michigan releases its preliminary Consumer Sentiment Index, which will also track how hot the economy is beginning to get. Currently, a bump up to 78.9 for March is expected from February’s 76.8. This represents the median of pandemic-era levels; back in March of 2020, before the coronavirus shutdowns had begun in earnest, the U of Mich Consumer Sentiment read was 89.1. How long til we get back to those levels — or beyond?
Basically, we expect all quarterly, monthly and weekly economic prints to show signs of economic revival — especially compared to depressed levels we saw for most of 2020, but in a general sense as well. The $1.9 trillion price tag for relief and stimulus, especially to households and small businesses that have struggled over this year-long pandemic, should have an unprecedented, immediate impact on American economic growth. Eventually this will lead to concerns over inflation and rising interest rates, but that’s a bridge to cross at a later date.
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Changing Outlook on Econ Numbers; PPI as Expected: +0.5%
Friday, March 12, 2021
Back to the cyclical rotation in today’s pre-market for the last day of trading for the week. With the American Rescue Plan (ARP) having been signed into law yesterday, we expect to have a different outlook on investment activity going forward (more on this later). For now, the Dow looks to open +65 points, the Nasdaq -190 and the S&P 500 -10. This follows fresh all-time highs in both the Dow blue-chips and broader S&P 500 Thursday afternoon.
What do we mean by a “changing outlook”? Let’s start with new Producer Price Index (PPI) for February out this morning: +0.5% on the headline came in just as expected, though down from January’s +1.3% — which itself was the highest month-over-month gain since the pandemic era began. Whereas over the previous 18 months or so we would look at a monthly economic read like this looking for “growth — any growth,” nowadays we’ll be checking “how hot is the growth?”
Ex-food and energy (the “core” print), last month’s PPI came in at +0.2% — reliably tepid, still in solid positive territory. Final demand year over year we’re +2.8%; +2.5% on core. This is stronger growth from year-ago levels than we’ve seen, with plenty of easy comps coming up in future months. Analyst will be looking particularly at transportation costs (even more particularly: airline ticket prices) for both PPI and its sister metric Consumer Price Index (CPI), which came out earlier this week.
Generally speaking, higher PPI numbers are a forward indicator of future CPI, as companies pass along price hikes to their consumers. With things like air travel, large pent-up demand is about to be sated not only with the huge stimulus from the ARP, but also increased levels of Covid-19 vaccinations throughout the country. Also, Boeing (BA - Free Report) is seeing a boost this morning with more 737 MAX jets being sold. Boeing has been waiting two years for this sort of development.
After the opening bell this morning, the University of Michigan releases its preliminary Consumer Sentiment Index, which will also track how hot the economy is beginning to get. Currently, a bump up to 78.9 for March is expected from February’s 76.8. This represents the median of pandemic-era levels; back in March of 2020, before the coronavirus shutdowns had begun in earnest, the U of Mich Consumer Sentiment read was 89.1. How long til we get back to those levels — or beyond?
Basically, we expect all quarterly, monthly and weekly economic prints to show signs of economic revival — especially compared to depressed levels we saw for most of 2020, but in a general sense as well. The $1.9 trillion price tag for relief and stimulus, especially to households and small businesses that have struggled over this year-long pandemic, should have an unprecedented, immediate impact on American economic growth. Eventually this will lead to concerns over inflation and rising interest rates, but that’s a bridge to cross at a later date.
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Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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