CPI came and went. It was a little softer than expected—2.8% headline, 3.1% core. Unfortunately, some of the biggest declines, like airfares, don’t pass through to PCE. This is a good summary of some of the major differences between CPI and PCE.
Bottom line: A softer CPI makes today’s PPI report more important. Areas like financial services and healthcare could move the needle for PCE, which is what the Fed watches.
And since this CPI data dropped before the “T” word hit, it was, as the kids say… mid.
Speaking of the “t” word..
Tariff Tiff
Tariffs are already weighing on Canada. Bank of Canada Governor Tiff Macklem (yes, really) said, “The pervasive uncertainty created by continuously changing U.S. tariff threats has shaken business and consumer confidence.”
The BoC cut their policy rate by 25bps to 2.75%.
And the hits keep coming: The EU and Canada both slapped retaliatory tariffs on U.S. goods after the U.S. put 25% duties on steel and aluminum.
So, does a unified front from U.S. trade partners make it harder for the administration to negotiate one-on-one? Probably. Maybe that was part of the plan… or maybe not. Something to chew on.
While the rest of the world hates U.S. tariffs, on the brightside…
But Hey, No One Boycotted The Treasury Auction
10Y Auction was solid - strong bid to cover, solid indirects (foreign demand). So there’s that.
Despite positive inflation news and a solid auction yields rose, with the 2Y treasury closing at 3.99% and the 10Y at 4.32%.
Over in equity land…
Continuing the 2000s Greatest Hits Tour:
Yes, stocks bounced. The S&P rose for the first time this week, closing at 5,599. Your favorite tech names had a good day. Fine.
But the 2000s nostalgia is more fun. So, here’s today’s throwback:
Michael Saylor, founder of MicroStrategy, rode the internet bubble to a $13.5 billion net worth. In 2000, he told Noel Tichy, “The only people who think we’re in a bubble are the ones who don’t get it.” One week later, MicroStrategy restated earnings. The SEC charged them with fraudulent revenue recognition. Saylor was fined $10 million and lost control of the company. The stock dropped 62%.
On Deck for Today:
PPI, Jobless Claims, 30Y Auction. More fun awaits.
XTOD’s:
XTOD: What the @bogleheads know: If you have a sane asset allocation and a portfolio of low-cost investments, you can pretty much tune out the current nonsense with tariffs, market gyrations, etc. I've got to say, it's incredibly freeing.
XTOD: Breaking: People close to @WhiteHouse believe @JoeBiden increased federal spending by as much as $300 billion in his final months of his presidency to juice the economy and markets and help @KamalaHarris get elected. That combined that with rolling over short term debt in order not to force rates on the all-important 10 year note (which consumers rates are priced off of) to spike higher, has left a balance sheet mess of epic proportions. They say this spending spree provides an insight into the mountain of debt and deficits that Trump must start to eliminate. Story developing
XTOD: The Atlanta Fed's sticky-price consumer price index (CPI)—a weighted basket of items that change price relatively slowly—rose 3.1% (on an annualized basis) in February, following a 4.9% increase in January. On a year-over-year basis, the series is up 3.5%.
On a core basis (excluding food and energy), the sticky-price index rose 2.9% (annualized) in February, and its 12-month percent change was 3.5%. The flexible cut of the CPI—a weighted basket of items that change price relatively frequently—rose 2.4% (annualized) in February and is up 0.8% on a year-over-year basis.
XTOD: Nearly everything awesome takes longer than you think. Get started and don't worry about the clock.
XTOD: When Kobe Bryant said his insane level of confidence came from knowing he’d done all he could to prepare, it taught me that anytime I feel nervous, it meant I didn’t prepare enough.
https://x.com/christine_benz/status/1899858661238874611
https://x.com/CGasparino/status/1899787584001245529
https://x.com/AtlantaFed/status/1899853419797414003
https://x.com/JamesClear/status/1899859536489427012
https://x.com/DearS_o_n/status/1899520848890925334
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