PPI rhymes with CPI and comes in hotter than expected as well with the headline at 0.4% and the YoY headline at 3.5%. The ex-food and energy measures were still hot as well. There was some optimism that the medical care categories of PPI declined, which might bode well for the read through to PCE, but we’ll see. In labor data, jobless claims remain benign, falling to 213K.
The 30Y Treasury auction was not very inspiring for a country that has a lot of debt to sell, particularly if that country is interested in terming out that debt. A tail of 1.2bps, with a relatively low bid-to-over and weakness in indirect demand. On the day the 2Y yield moved back down to 4.30% and the 10Y yield gave back to 10bps moving back down to 4.53%. The narrative tied to the move lower in yields is increased tariff uncertainty leading to a bid for safe havens, whether or not that’s true is hard to know.
In equities, stock indexes moved higher with the S&P 500 trading up to 1% to 6,115. If you weren’t paying attention it probably wouldn’t feel intuitive that a foreign indexes like the FTSE or STOXX are outperforming the S&P so far this year.
Tariffs in the headlines again, with Trump announcing reciprocal tariffs as had been mentioned yesterday. The devil will be in the details as the messaging is that they’ll essentially be going line by line and country by country to put tariffs in place. The other wrinkle to the tariff news is that the administration will be thinking about tariffs in terms of broad factors, including the impact of VAT taxes, currency devaluations, and any other policies the U.S. trade representative deem to be unfair. Trump also mentioned that tariffs on autos might still be on the come.
On the day ahead we get Retail Sales and Industrial Production data. Then we get a 3-day weekend!
XTOD: “The Big One” - Reciprocal Tariffs would likely increase US tariffs from $75 B in 2024 to ~ $1 T in 2026. Reciprocal includes anything that taxes or discriminates against US business. Market shrugging off as largely a negotiating tactic despite the words to the contrary.
XTOD: As mentioned on @CNBCFastMoney The summer easing of financial conditions and aggressive fiscal spending in 2H of 24 is impacting data the last few months
The tightening of financial conditions in bond yields and Fed pause and the government expenditure cuts and tariffs will cause the data to slow in 2Q
XTOD: Because the PPI components that feed into the PCE index (financial and healthcare services) were soft in January, the core PCE index is estimated to print well below the big 0.45% increase in the CPI. A 0.27% increase in core PCE for Jan would drop the Y/Y rate to 2.6% from 2.8%
XTOD: Even under low interest rates, interest becomes the largest federal expenditure in 17 years, and will consume half of all annual taxes within a few decades. Voting to add even more debt and interest costs is wildly irresponsible.
XTOD: Hats off to the Apollo associate that made this chart https://pbs.twimg.com/media/GjqxP7cXYAEE0Bh?format=jpg&name=900x900
XTOD: We’re prone to asking “What should I do?” but less prone to asking “What shouldn’t I do?” Since what we don’t do determines what we can do, I like asking about not-to-do lists.
https://x.com/altcap/status/1890115417638908229
https://x.com/dampedspring/status/1890041104478662724
https://x.com/NickTimiraos/status/1890057499098911076
https://x.com/JessicaBRiedl/status/1890075114701746505
https://x.com/tferriss/status/1889759868174688296
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