Inflationary Thursday – CPI Report Colors Our Week

We're waiting on inflation data this morning.

CPI is expected to come in at 0.5% for January but October was 0.9% and November was 0.8% and December was 0.5% but that was when Oil FELL from $80 to $65 to start the month and we finished at $75 so there's your 0.5%.  That did not happen in January as Oil blasted from $75 to $87.50 over the month. 

Core CPI excludes Food and Energy but headline CPI does not, so I wonder what our Leading Economorons are thinking when they predict January will be as low as December?  Yesterday morning, as we expected from Friday's discussion on rates and affordability, the Mortgage Application Index was down 8.1% and we can't read too much into one report but that's a pretty shocking decline.  Wholesale Inventories blasted up 2.2% in December (they are supposed to go down) and November was revised up from 1.4% to 1.7% so two big builds during holiday shopping season is not ideal in a robust economy.

Of course, you can leave 2.2% on the shelves if you are charging 10% more for the goods and it looks like you sold ((100 x 1.1) x 0.978) = 107.58 (7.58% more) goods than last year – even though all you did was sell less stuff for more money.  This is why Consumers (who are getting less stuff for more money) are not very confident – and we get that report tomorrow morning but, as you can see on the chart – we're on a track that looks more like the crisis of 2008/9 than record high market prices.

 Yesterday's 10-year note auction did not go well, notes going off at 1.929% – the highest level since November of 2019 – before the pandemic.  The last time they traded at 2% was August, 2019 and this is how the Fed's hand gets forced because, as much as they want to pretend there's no inflation, Bond Investors literally are not buying their BS and the wost thing the Fed can do is lose credibility so they are forced to raise rates to make it look like it was their idea and not the result of market forces that are out of their control.   …

You must login to see all of Phil's posts. To read the rest of this article now, along with Phil's live intra-day comments, live trading ideas, Phil's market calls, additional member comments, and other members-only features - Subscribe to Phil's Stock World by clicking here.
To signup for a free trial membership, click here.

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!