US egg prices doubled to three times in January.
Fatih Aktas | Anadolu agent | beautiful pictures
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US inflation is starting to bite again. But most stocks ignore it.
What you need to know today
- America’s January Consumer price index increased by 0.5%, higher than economists’ forecast of 0.4%. On a year-over-year basis, prices increased 6.4%, compared with the expected 6.2%. egg price still sky high.
- US stock market closed Tuesday mixed. The Dow Jones Industrial Average and S&P 500 fell slightly, while the Nasdaq Composite rose. After a positive trading day, Asia-Pacific shares mostly lower endonly Shanghai Composite and Shenzhen Component of China are left in green.
- US Treasury yields climb up after a hotter-than-expected inflation report. The 6-month Treasury note, notably, rallied to close at 5.022%, its highest yield since July 2007.
- PROFESSIONAL US Treasury yields are on the rise again. The 10-year Treasury yield hit a 5-week high this week, while the 2-year rose 0.41 percentage points in February alone. here’s how professionals will play in the market.
Key point
January’s hotter-than-expected CPI report cast a dark shadow over the US market yesterday.
Prices in the US last month rose faster than economists expected; they have been pushed up by higher food, energy and housing costs. However, even the core CPI – which excludes more volatile food and energy prices – saw a monthly gain of 0.4% and a 5.6% increase over the same period. period last year. Both exceeded estimates by 0.3% and 5.5%, respectively.
Is deflation – in the words of Federal Reserve Chairman Jerome Powell – still going on in the US? January’s core CPI was 5.6%, slightly lower than December’s 5.7%, which means prices are still falling. But just enough.
The US market reacted accordingly. Treasury yields rose, suggesting investors are pricing in a Fed rate hike higher. Stocks fall. The Dow fell 0.46% and the S&P fell 0.03%. However, the Nasdaq, traditionally the most rate-sensitive index, closed 0.57% higher, helped by Tesla’s 7.51% gain and Nvidia’s 5.43% gain.
Even though most stocks are down, they still have considerable resilience. A team at JPMorgan has forecast that the S&P will fall between 0.75% and 1.5% if the annual CPI stands at 6.4%. The actual decrease of the index: only 0.03%.
The strange disconnect between the bond market and the stock market continues. Investors can be optimistic that consumer spending will remain strong even as prices rise – as Coca Cola’s earnings report pointed out – thus allowing the economy to continue to grow. For that theory, Wednesday’s US retail sales report puts it to the test.
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