Daily Economic Update: February 13, 2025

 The CPI report came in hotter than expected and following the report the market now just has one rate cut priced in for the remainder of the year.  The pain points in the report were really everywhere, but eggs, rents and car insurance all remain trouble spots.  In Powell’s second day of testimony his message was much the same as the day prior, that there’s no rush to move the policy rate. The 2y yield moved up to 4.36% and the 10y treasury yield backed up to 4.64%.  The 10y treasury auction was about average.

Stocks managed to do ok, all things considered, ending the day off the early morning lows  The S&P 500 finished at 6,050.  The earnings picture has been strong and Trump headlines about working on de-escalation in Ukraine seemed to help sentiment.

The topic of reciprocal tariffs remains front and center.

On the day ahead we get PPI, jobless claims and the 30y auction.

XTOD: It was a wild Wednesday in markets news, with Trump demanding lower interest rates, inflation surprising to the upside — and Fed Chair Powell keeping the train on the tracks

XTOD: CPI in 60 seconds: 

1) The rise in commodities is making inflation sticky. That creates some modest upside risk. 

2) But this story remains *mostly* about shelter. And commodities need to rise MUCH more than this to offset the continued shelter disinflation, which I expect to revert to its 40 year average. 

3) This isn’t a second wave. If it is, it’s a sad little wave. SAD. 

4) No rate cuts this year unless the labor market really starts to fall apart.

XTOD: All benefits in life come from compound interest, whether in money, relationships, love, health, activities, or habits. I only want to be around people I know I’m going to be around for the rest of my life. I only want to work on things I know have long-term payout."

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