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This morning’s big economic report — one of the most important prints of the entire month — came in hotter than expected, which is causing pre-market futures to take a bath in red ink. January Consumer Price Index (CPI) numbers came in higher than estimates on every single metric, and the slight pre-market sell-off has plummeted in a matter of minutes.
Headline CPI month over month reached +0.3%, higher than the +0.2% expected and the downwardly revised print for December. This is the biggest inflation read month over month since last September’s +0.4%. Core CPI month over month (stripping out volatile food and energy prices) came in at +0.4%, ahead of the +0.3% expected and the previous month, at a level not seen since May of 2023.
Year over year CPI is also known as the Inflation Rate, and here we see +3.1%, 20 basis points (bps) above expectations. However, this is below the +3.4% print from December, and nearly 3x slimmer than peak inflation at +9.1% back in June of 2022. What’s emerging here, however, is something of a resistance to go lower than +3.0% — we’d seen a +3.1% as recently as November, and a +3.0% back in June of last year.
Core CPI year over year is one of the stickiest of all inflation figures, and January was no exception: +3.9% is the same as we saw the previous month. Food, medical and auto insurance prices were all higher. Shelter (rents) is the largest component, up +0.6% for the month. Meanwhile, real earnings have declined, putting a strain on spending when expectations had been that inflation would continue its slow melt back down to 2%, eventually. This morning’s CPI report throws something of a monkey wrench into that; you can hear erasers all over the country take out the expected Fed rate cut at its upcoming March meeting.
This all said, seasonally we tend to see thorny numbers early on in a given year. The hangover from holiday shopping, cold and flu season advancing, higher heating bills in temperate climates, etc. all have a say in inflation metrics for early months on the calendar. Besides which, one set of data does not a trend make.
However, pre-market futures continue to tumble: ahead of this CPI print, the Dow was -30 points, the S&P 500 -14 and the Nasdaq -106 points. Currently, we’re -320, -295 and -60 points, respectively. Bond yields are rising: the 10-year is climbing toward 4.3% and the 2-year over +4.6% — still inverted, natch, as is has been for a year and a half.
This report is a good example of why the Fed pounds the table (maybe a tad superlative for Fed Chair Powell’s gentle approach) on remaining data-dependent. The Fed funds rate has remained 5.25-5.50% since late July of last year. Expectations ahead of 2024 were that rates were finally ready to tick down — even by Powell’s own assertion — but only if the data continues to show inflation dwindling. We’re still higher than we want to be, which almost certainly takes a March 20th cut off the table (and with it an assumption of 4-5 rate cuts this year), but it remains to be seen if this is a mere hiccup on a longer trajectory back down to where we want to go.
Meanwhile, Coca Cola (KO - Free Report) beat estimates by a penny to 49 cents per share on $10.85 billion in quarterly sales, which amounts to a positive surprise of +1.9%. Popeyes and Burger King parent Restaurant Brands (QSR - Free Report) outpaced by 2 cents on its bottom line to 75 cents per share on $1.82 billion in revenues, +1% from estimates. Marriott (MAR - Free Report) zoomed past bottom-line expectations to $3.57 per share on a revenue miss of $6.095 billion from $6.32 billion anticipated. All three companies are riding multi-quarter earnings beats.
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Bond Yields Rise as CPI Data Unfolds
This morning’s big economic report — one of the most important prints of the entire month — came in hotter than expected, which is causing pre-market futures to take a bath in red ink. January Consumer Price Index (CPI) numbers came in higher than estimates on every single metric, and the slight pre-market sell-off has plummeted in a matter of minutes.
Headline CPI month over month reached +0.3%, higher than the +0.2% expected and the downwardly revised print for December. This is the biggest inflation read month over month since last September’s +0.4%. Core CPI month over month (stripping out volatile food and energy prices) came in at +0.4%, ahead of the +0.3% expected and the previous month, at a level not seen since May of 2023.
Year over year CPI is also known as the Inflation Rate, and here we see +3.1%, 20 basis points (bps) above expectations. However, this is below the +3.4% print from December, and nearly 3x slimmer than peak inflation at +9.1% back in June of 2022. What’s emerging here, however, is something of a resistance to go lower than +3.0% — we’d seen a +3.1% as recently as November, and a +3.0% back in June of last year.
Core CPI year over year is one of the stickiest of all inflation figures, and January was no exception: +3.9% is the same as we saw the previous month. Food, medical and auto insurance prices were all higher. Shelter (rents) is the largest component, up +0.6% for the month. Meanwhile, real earnings have declined, putting a strain on spending when expectations had been that inflation would continue its slow melt back down to 2%, eventually. This morning’s CPI report throws something of a monkey wrench into that; you can hear erasers all over the country take out the expected Fed rate cut at its upcoming March meeting.
This all said, seasonally we tend to see thorny numbers early on in a given year. The hangover from holiday shopping, cold and flu season advancing, higher heating bills in temperate climates, etc. all have a say in inflation metrics for early months on the calendar. Besides which, one set of data does not a trend make.
However, pre-market futures continue to tumble: ahead of this CPI print, the Dow was -30 points, the S&P 500 -14 and the Nasdaq -106 points. Currently, we’re -320, -295 and -60 points, respectively. Bond yields are rising: the 10-year is climbing toward 4.3% and the 2-year over +4.6% — still inverted, natch, as is has been for a year and a half.
This report is a good example of why the Fed pounds the table (maybe a tad superlative for Fed Chair Powell’s gentle approach) on remaining data-dependent. The Fed funds rate has remained 5.25-5.50% since late July of last year. Expectations ahead of 2024 were that rates were finally ready to tick down — even by Powell’s own assertion — but only if the data continues to show inflation dwindling. We’re still higher than we want to be, which almost certainly takes a March 20th cut off the table (and with it an assumption of 4-5 rate cuts this year), but it remains to be seen if this is a mere hiccup on a longer trajectory back down to where we want to go.
Meanwhile, Coca Cola (KO - Free Report) beat estimates by a penny to 49 cents per share on $10.85 billion in quarterly sales, which amounts to a positive surprise of +1.9%. Popeyes and Burger King parent Restaurant Brands (QSR - Free Report) outpaced by 2 cents on its bottom line to 75 cents per share on $1.82 billion in revenues, +1% from estimates. Marriott (MAR - Free Report) zoomed past bottom-line expectations to $3.57 per share on a revenue miss of $6.095 billion from $6.32 billion anticipated. All three companies are riding multi-quarter earnings beats.