Friends
We’ve pointed out that narratives change almost on a daily basis nowadays, and this morning’s PPI number threw a monkey wrench into the “the Fed is going to lower the Fed Funds rate by 50 basis points next month” narrative today. Indeed, inflation at the wholesale level was up much higher than expected running 3.3% year over year vs. the 2.5% analysts had been expecting. Remember, the Fed has two mandates, one is price stability (inflation), and the other is the labor market (jobs), and right now they are trying to determine which one is more likely to be a problem going forward. After Tuesday’s somewhat benign CPI number, market participants were seeing visions of a 50-basis point rate cut dancing in their head. The labor market certainly looked like the part of the mandate that would be most likely to cause a problem going forward. But today’s inflation reading brings price stability back into more of an equal concern along with jobs for the Fed. For the record, we never thought that the Fed would lower rates by 50 basis points next month, but we will stick with the likelihood that a 25-basis point cut will be announced.
As for the markets, stocks retreated on this morning’s PPI data but those losses evaporated as the trading session wore on. By the close the Dow Jones Industrial Average was down 11 points to finish the day at 44,911. The S&P 500 was up 1 point to close at 6,468. The Nasdaq Composite Index was down 2 points to close at 21,710. Gold was down $22 to trade at $3,386 per ounce, while oil was up $1.42 to trade at $64.07 per barrel WTI.
As we have seen, market participants continue to look through all economic data, good or bad. As we have said, right now the bulls are simply comfortable with anything the bears can throw at them. Amazing resilience. Let’s see how the week finishes out tomorrow.
Have a nice evening everyone.
