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Inflation Back on Front Burner: CPI +0.6% Not Cool (revised)
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Thursday, February 10, 2022
January numbers for the Consumer Price Index (CPI) are out this morning, and with an enormous impact on pre-market trading: +0.6% on headline CPI matches the upwardly revised read in the previous month, 20 basis points higher than expected. We had been looking for these numbers to moderate over time — out of holiday season and working through supply chain issues — but so far they’ve not done so.
Stripping out food and energy costs, which can push these headline numbers higher or lower depending, brings us the “core” read, and that came in at +0.6%, as well. These are the highest month-over-month CPI numbers we’ve seen since October on headline, April on core, when they each came in at +0.9%.
Year over year, headline CPI rose to 7.5% — the highest read since February 1982. This is 30 basis points higher than we’d been expecting, and half a full-point from December’s year-over-year 7.0%. On core, it’s 6.0% — the highest since August 1982, another half-percentage-point rise from the previous month. So we’re looking at the highest rates of inflation in 40 years.
Pre-market indexes went from mixed-to-down to down fairly big. The Dow was +60 points ahead of this announcement, the Nasdaq was -80 and the S&P 500 was -5 points. Since this report has come out, we’re now -150 points on the Dow, -200 on the Nasdaq and -35 on the S&P.
The odds of the Fed raising interest rates by 50 basis points (bps) rather than the 25 bps expected jumped to over 50% on this news. Previously, only 30% of analysts were looking for a doubling of the rate hike. Further, instead of the four or so interest rate hikes previously expected for full-year 2022, some analysts are now looking for six rate hikes. At 50 bps per, this would bring us all the way to 3% by the end of the year. This is much higher than anyone had even been whispering about until not long ago.
Initial Jobless Claims usually takes precedence on Thursday mornings, and new numbers for last week did indeed come out this morning: 223K on the headline was a welcome drop of -16K new claims from the upwardly revised previous week. It’s a good sign to be headed back toward 200K new claims per week, where we had enjoyed a few weeks in the final months of 2021.
Continuing Claims were revised down from last week’s number, and come in-line this week at 1.62 million. Again, this is a good, low number historically, though still a ways off the 1.56 million we saw in the last week of last year — the week between Christmas and New Year’s.
Twitter shares are up +1.5% following its Q4 earnings report which came exactly in-line with expectations on both top and bottom lines: 33 cents per share on $1.57 billion in revenues. monetizable Daily Active Users (mDAU) missed expectations a bit, coming in at 217 million from 218.6 million anticipated. But an announced $4 billion share buyback, and all is forgiven in today’s pre-market. For more on TWTR's earnings, click here.
The battle of the biggest American soft drink companies hits the earnings tape this morning, as well, with Coca Cola (KO - Free Report) beating expectations by 5 cents on the bottom line to 45 cents per share, while Pepsico (PEP - Free Report) matched the $1.53 per share expected. Revenues for both companies grew notably: by 6% for Coke to $9.46 billion and by 4% for Pepsi to $25.25 billion. Pepsico is clearly the bigger company due to its investment in snack foods. Both stocks are trading down on the troubling CPI numbers.
(NOTE: We are re-issuing this article to correct a mistake. The original version, published ealrier this morning, should no longer be relied upon.)
Image: Bigstock
Inflation Back on Front Burner: CPI +0.6% Not Cool (revised)
Thursday, February 10, 2022
January numbers for the Consumer Price Index (CPI) are out this morning, and with an enormous impact on pre-market trading: +0.6% on headline CPI matches the upwardly revised read in the previous month, 20 basis points higher than expected. We had been looking for these numbers to moderate over time — out of holiday season and working through supply chain issues — but so far they’ve not done so.
Stripping out food and energy costs, which can push these headline numbers higher or lower depending, brings us the “core” read, and that came in at +0.6%, as well. These are the highest month-over-month CPI numbers we’ve seen since October on headline, April on core, when they each came in at +0.9%.
Year over year, headline CPI rose to 7.5% — the highest read since February 1982. This is 30 basis points higher than we’d been expecting, and half a full-point from December’s year-over-year 7.0%. On core, it’s 6.0% — the highest since August 1982, another half-percentage-point rise from the previous month. So we’re looking at the highest rates of inflation in 40 years.
Pre-market indexes went from mixed-to-down to down fairly big. The Dow was +60 points ahead of this announcement, the Nasdaq was -80 and the S&P 500 was -5 points. Since this report has come out, we’re now -150 points on the Dow, -200 on the Nasdaq and -35 on the S&P.
The odds of the Fed raising interest rates by 50 basis points (bps) rather than the 25 bps expected jumped to over 50% on this news. Previously, only 30% of analysts were looking for a doubling of the rate hike. Further, instead of the four or so interest rate hikes previously expected for full-year 2022, some analysts are now looking for six rate hikes. At 50 bps per, this would bring us all the way to 3% by the end of the year. This is much higher than anyone had even been whispering about until not long ago.
Initial Jobless Claims usually takes precedence on Thursday mornings, and new numbers for last week did indeed come out this morning: 223K on the headline was a welcome drop of -16K new claims from the upwardly revised previous week. It’s a good sign to be headed back toward 200K new claims per week, where we had enjoyed a few weeks in the final months of 2021.
Continuing Claims were revised down from last week’s number, and come in-line this week at 1.62 million. Again, this is a good, low number historically, though still a ways off the 1.56 million we saw in the last week of last year — the week between Christmas and New Year’s.
Twitter shares are up +1.5% following its Q4 earnings report which came exactly in-line with expectations on both top and bottom lines: 33 cents per share on $1.57 billion in revenues. monetizable Daily Active Users (mDAU) missed expectations a bit, coming in at 217 million from 218.6 million anticipated. But an announced $4 billion share buyback, and all is forgiven in today’s pre-market. For more on TWTR's earnings, click here.
The battle of the biggest American soft drink companies hits the earnings tape this morning, as well, with Coca Cola (KO - Free Report) beating expectations by 5 cents on the bottom line to 45 cents per share, while Pepsico (PEP - Free Report) matched the $1.53 per share expected. Revenues for both companies grew notably: by 6% for Coke to $9.46 billion and by 4% for Pepsi to $25.25 billion. Pepsico is clearly the bigger company due to its investment in snack foods. Both stocks are trading down on the troubling CPI numbers.
(NOTE: We are re-issuing this article to correct a mistake. The original version, published ealrier this morning, should no longer be relied upon.)
For more on KO's earnings, click here.
For more on PEP's earnings, click here.
Questions or comments about this article and/or its author? Click here>>