- US January PPI +0.9% vs +0.6% expected
- US February UMich prelim consumer sentiment 79.6 vs 80.0 expected
- US January housing starts 1.331 million versus 1.460 million estimate
- SF Fed Pres.Mary Daly: More work to do on inflation
- Daly Q&A: None of the recent data was surprising
- BOE's Pill: Getting to the point of reducing Bank Rates "still some way off"
- Joe Manchin won't run for President - report
- Trump fined $364 million in fraud case
- Fed's Bostic says he was a little surprised by CPI report
- Baker Hughes rig count -2 in the current week.
- Fed's Barr: Supervisors closely focused on commercial real estate risks
- Fed's Barkin: January economic data has been messy, not that good
- Canada December wholesale sales +0.3% vs +0.8% expected
Markets:
- Gold up $9 to $2013
- US 10-year yields up 4.3 bps to 4.28%
- WTI crude oil up $1.20 to $79.23
- S&P 500 down 0.5%
- NZD leads, JPY lags
The hot PPI reading initially looked like it would kick off something like CPI did earlier in the week, albeit at a smaller scale. The dollar initially sold off, stocks fell and yields popped but it didn't last. The dollar highs for the day were immediately after the release and then the questions started.
As I highlighted before the release, there might be seasonal adjustment factors at play in January BLS inflation data. CPI and import/export prices were both surprisingly high and now PPI has joined in to complete the trio. Those are three different data sets but all are seasonally adjusted so maybe there is something going on? January is particularly hard to adjust for because of turn-of-the-year price resets.
Or maybe I'm overthinking it. Fed officials today again brushed off the high inflation numbers, highlighting instead that the trend remains down. The big turn in the markets this week came after the Powell leak on Tuesday and that has grown into the consensus.
In any case, the dollar gave back all its PPI gains in about 90 minutes and then continued even lower against the euro, pound and Australian dollar. However those overshoots were later faded as stocks were hit by late selling. I'm not sure if those late moves in stocks were on options expiration, Middle East worries or the long weekend but the moves accelerated late. The air also came out of SMCI so maybe that's a sign that the bubble is deflating in AI (though I doubt it's bursting).
Ultimately, most FX levels finished close to flat. I'll be watching on Sunday for news out of the PBOC on rates and I suspect some of the buying in Chinese stocks, copper and antipodeans on Friday were related to rate cut hopes/signals, or some other kind of stimulus.
Commodities were notable outperformers across the board with gold quickly rebounding from the PPI number and oil bouncing around before finishing just below the January high That will be an interesting spot to watch in the week ahead.
Enjoy the long weekend.
