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Tag: Producer prices

  • CNBC Daily Open: With an unchanged PPI, the Fed’s near the finish line

    CNBC Daily Open: With an unchanged PPI, the Fed’s near the finish line

    A television station broadcasts the Federal Reserve’s interest-rate cut on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Sept. 18, 2024.

    Michael Nagle | Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Winning week for markets
    All     major U.S. indexes rose Friday on the back of encouraging inflation data and positive earnings from big banks. That gave them a winning week. Asia-Pacific markets mostly traded higher Monday. China’s Shanghai Composite rose around 2% in choppy trading. Over the weekend, Beijing reported a lower-than-expected consumer inflation rate and producer prices falling for September.

    Tesla’s Cybercab and Robovan
    Tesla shares slumped 8.8% after the company’s “We, Robot” event disappointed investors. At the Thursday night event, CEO Elon Musk unveiled the Cybercab, a two-seater with no steering wheels or pedals, and the Robovan, an autonomous vehicle that has a big capacity. But Musk offered little other details, causing analysts to cast doubt on the company.

    More assurances from China
    In a press briefing held Saturday, Chinese Minister of Finance Lan Fo’an told reporters the space for Beijing to increase its budget deficit is “rather large,” but the government is still discussing stimulus plans, according to a CNBC translation of the Chinese. Lan also announced measures to support employment and the real estate industry.

    Banks’ earnings in good shape
    JPMorgan Chase, the biggest bank in the U.S., reported third-quarter earnings and revenue that beat estimates. Net interest income grew 3% from a year ago and helped revenue to increase 6%. Wells Fargo had a decent third quarter. The bank beat estimates for earnings, but unlike JPMorgan, revenue was below expectations and NII decreased.

    [PRO] Earnings will show market direction
    After the deluge of data such as September’s jobs reports and consumer price index report, earnings will determine the path of markets for the near term. Big banks dominate third-quarter reports this week. It’s Bank of America and Goldman Sachs’ turn on Tuesday, while Morgan Stanley announces its earnings on Wednesday.

    The bottom line

    It seems like September’s hotter-than-expected inflation reading was indeed a blip.

    With a snap of its fingers, the producer price index assuaged worries over inflation remaining stubborn. The index, which measures wholesale prices – and thus generally prefigures changes in the CPI – was unchanged in September from August, defying expectations from a Dow Jones survey of a 0.1% increase.

    In fact, last week’s inflation figures looked so promising that Goldman Sachs think the Federal Reserve has just about brought inflation down to its 2% target without crashing the economy, as CNBC’s Jeff Cox reports.

    While consumer sentiment dipped slightly in October, according to the University of Michigan’s Survey of Consumers, “long run business conditions lifted to its highest reading in six months,” wrote Joanne Hsu, the survey’s director.

    JPMorgan Chase’s third-quarter earnings may be the first taste of that. The biggest bank in America beat estimates on both revenue and earnings. As banks generally reflect the health of the broader economy, it’s a signal things aren’t all bad despite dipping consumer confidence.

    Admittedly, earnings reflect what has already happened. Investors care more about what’s going to happen. But consumers are “fine and on strong footing,” as JPMorgan’s CFO Jeremy Barnum told reporters.

    Markets cheered the string of positive news.

    On Friday, the S&P 500 added 0.61%, the Dow Jones Industrial Average rose 0.97% and the Nasdaq Composite was up 0.33%.

    That capped off a winning week for Wall Street – their fifth in a row. The S&P and Nasdaq climbed 1.1%, while the Dow did a bit better with its 1.2% increase for the week.

    “What we’re seeing … is a broadening of the market,” said Craig Sterling, head of U.S. equity research at Amundi US.

    It’s a reminder that subduing inflation is just a stop toward investors’ real endgame of a healthy stock market.

    – CNBC’s Jeff Cox, Samantha Subin and Brian Evans contributed to this story.   

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  • CNBC Daily Open: With a stagnant PPI, the Fed’s nearly at the finish line

    CNBC Daily Open: With a stagnant PPI, the Fed’s nearly at the finish line

    Jerome Powell, chairman of the US Federal Reserve, during the National Association of Business Economics (NABE) annual meeting in Nashville, Tennessee, US, on Monday, Sept. 30, 2024. 

    Seth Herald | Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Winning week for markets
    All     major U.S. indexes rose Friday on the back of encouraging inflation data and positive earnings from big banks. That gave them a winning week. Europe’s Stoxx 600 index climbed 0.55% to end the week higher. Separately, in August, the U.K. economy expanded 0.2% on a monthly basis after stagnating in June and July, according to flash data from U.K. officials.

    Tesla’s Cybercab and Robovan
    Tesla shares slumped 8.8% after the company’s “We, Robot” event disappointed investors. At the Thursday night event, CEO Elon Musk unveiled the Cybercab, a two-seater with no steering wheels or pedals, and the Robovan, an autonomous vehicle that has a big capacity. But Musk offered little other details, causing analysts to cast doubt on the company.

    More assurances from China
    In a press briefing held Saturday, Chinese Minister of Finance Lan Fo’an told reporters the space for Beijing to increase its budget deficit is “rather large,” but the government is still discussing stimulus plans, according to a CNBC translation of the Chinese. Lan also announced measures to support employment and the real estate industry.

    Banks’ earnings in good shape
    JPMorgan Chase, the biggest bank in the U.S., reported third-quarter earnings and revenue that beat estimates. Net interest income grew 3% from a year ago and helped revenue to increase 6%. Wells Fargo had a decent third quarter. The bank beat estimates for earnings, but unlike JPMorgan, revenue was below expectations and NII decreased.

    [PRO] Earnings will show market direction
    After the deluge of data such as September’s jobs reports and consumer price index report, earnings will determine the path of markets for the near term. Big banks dominate third-quarter reports this week. It’s Bank of America and Goldman Sachs’ turn on Tuesday, while Morgan Stanley announces its earnings on Wednesday.

    The bottom line

    It seems like September’s hotter-than-expected inflation reading was indeed a blip.

    With a snap of its fingers, the producer price index assuaged worries over inflation remaining stubborn. The index, which measures wholesale prices – and thus generally prefigures changes in the CPI – was unchanged in September from August, defying expectations from a Dow Jones survey of a 0.1% increase.

    In fact, last week’s inflation figures looked so promising that Goldman Sachs think the Federal Reserve has just about brought inflation down to its 2% target without crashing the economy, as CNBC’s Jeff Cox reports.

    While consumer sentiment dipped slightly in October, according to the University of Michigan’s Survey of Consumers, “long run business conditions lifted to its highest reading in six months,” wrote Joanne Hsu, the survey’s director.

    JPMorgan Chase’s third-quarter earnings may be the first taste of that. The biggest bank in America beat estimates on both revenue and earnings. As banks generally reflect the health of the broader economy, it’s a signal things aren’t all bad despite dipping consumer confidence.

    Admittedly, earnings reflect what has already happened. Investors care more about what’s going to happen. But consumers are “fine and on strong footing,” as JPMorgan’s CFO Jeremy Barnum told reporters.

    Markets cheered the string of positive news.

    On Friday, the S&P 500 added 0.61%, the Dow Jones Industrial Average rose 0.97% and the Nasdaq Composite was up 0.33%.

    That capped off a winning week for Wall Street – their fifth in a row. The S&P and Nasdaq climbed 1.1%, while the Dow did a bit better with its 1.2% increase for the week.

    “What we’re seeing … is a broadening of the market,” said Craig Sterling, head of U.S. equity research at Amundi US.

    It’s a reminder that subduing inflation is just a stop toward investors’ real endgame of a healthy stock market.

    – CNBC’s Jeff Cox, Samantha Subin and Brian Evans contributed to this story.   

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  • Wholesale prices held flat in November, providing another encouraging inflation signal

    Wholesale prices held flat in November, providing another encouraging inflation signal

    Wholesale prices were flat in November, providing a leading indicator that inflation is easing, the Labor Department reported Wednesday.

    The producer price index, which measures a broad range of prices on final demand items, was unchanged for the month, following a 0.4% decrease in October but less than the Dow Jones estimate for a 0.1% gain. On a year-over-year basis, headline PPI accelerated just 0.9%, after peaking above 11.5% in March 2022.

    Excluding food and energy, the index also was unchanged against an estimate for a 0.2% increase. Excluding food, energy and trade services, PPI increased 0.1%, posting a sixth straight increase and good for a 12-month gain of 2.5%.

    The release comes a day after the Labor Department said its consumer price index rose just 0.1% in November and 3.1% from a year ago. The PPI gauges the prices producers receive for what they produce while CPI measures what consumers pay and is considered a leading signal for prices in the pipeline.

    Together, the easing inflation data, along with other economic signals, likely will give the Federal Reserve enough room to hold benchmark interest rates steady when its policy meeting concludes Wednesday.

    At the wholesale level, indexes for both goods and services were unchanged, though there were some big swings within components.

    Gasoline, for instance, fell 4.1% while chicken eggs soared 58.8%. The index for final demand energy fell 1.2%, offsetting increases of 0.6% for foods and 0.2% for goods less food and energy.

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  • How Wall Street’s REIT giants are reshaping U.S. real estate

    How Wall Street’s REIT giants are reshaping U.S. real estate

    U.S real estate investment trusts today manage $4.5 trillion in real estate worldwide. Many groups on Wall Street offer these tax-friendly funds to retail investors. 

    KKR’s real estate business is one of the big players in the REIT game. The private equity firm manages multiple REIT funds. The KKR Real Estate Select Trust, which currently manages $1.5 billion in assets, paid a dividend of 5.4% to its investors in July 2023.

    But the benefits extend beyond returns.

    “When you look at the after tax equivalent of that yield, it is very compelling.” said Billy Butcher, CEO of KKR’s global real estate business. “The depreciation from our properties has covered 100% of the income generated by our properties, and there’s no tax on that dividend,” he said in an interview with CNBC.

    Larger funds sometimes contain a diversified pool of assets. Categories may include office, student housing, casino, timberlands, radio and cell towers, server farms, self-storage properties, billboards, and much more.

    “Back in the 1960s, there were three or four different types [of REITs], said Sher Hafeez, a managing director at Jones Lang LaSalle, a real estate services firm. “Now, I can count at least 20 different types.”

    Top performing REIT sub-sectors in recent years include data centers, self-storage properties, residential housing and tower REITs. Residential housing delivered a return of 16% from 2010 to 2020, according to a S&P Global Investments report.

    The investor-friendly tax rules can also increase the pace of large-scale development. 

    “Having REITs there as a potential exit helps the market, and helps the availability of financing,” said Michael Pestronk, CEO and co-founder of Post Brothers, a Philadelphia-based housing developer. 

    Some funds like Invitation Homes and American Homes 4 Rent were founded in the yearslong slowdown in U.S. home construction. At the time, REITs bought and managed commercial-scale properties, which could include products like master-planned communities or traditional apartment complexes.

    In recent years, publicly traded trusts have targeted single-family rental market, and today, these REITs have grown tremendously — enough to build new neighborhoods in their entirety. 

    Watch the video above to learn the fundamentals of real estate investment trusts.

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  • CNBC Daily Open: Bank fears overshadowed promising inflation signals

    CNBC Daily Open: Bank fears overshadowed promising inflation signals

    A pedestrian walks past a Pacific Western Bank branch in Beverly Hills, California on May 4, 2023.

    Patrick T. Fallon | Afp | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Upbeat economic data couldn’t overcome the resistance stocks faced from disappointing corporate performance and persistent banking fears.

    What you need to know today

    • PacWest shares sank 22.7% after the bank said in a securities filing Thursday that its deposits dropped 9.5% last week, following media reports that the regional bank was “evaluat[ing] all options.” Seeking to head off contagion fears, Western Alliance said its deposits have increased by $600 million since May 2. Western Alliance shares fell 0.77%.
    • Elon Musk said he is stepping down as Twitter CEO and will oversee product and software. Twitter will get a new CEO, an unnamed woman, in six weeks. Tesla (not Twitter!) shares jumped 2.1% on the news, suggesting investors of Musk’s other company were pleased — or just relieved.
    • U.S. stocks traded mixed Thursday as markets were rocked by losses in Disney shares and pressure around regional banks. Asia-Pacific markets were mostly lower Friday. Taiwan’s TWII Index was unchanged even as Foxconn saw its first-quarter net profit slump 56% to 12.83 billion Taiwanese dollars ($417.2 million). Shares of the company, also known as Hon Hai Precision Industry, dropped 2.4%
    • The debt ceiling meeting between President Joe Biden and other leaders, scheduled Friday, has been postponed until next week, CNBC learned. But that’s a good thing because it allows lawmakers’ staffs, who are holding their own conversations, to make more progress before the big names are back in the same room, a source told NBC News.
    • PRO This chipmaker could hit more than $1 billion in revenue if things go well, according to Morgan Stanley. “Higher price points plus supply chain commentary is pointing to an opportunity that is multiples of our initial target,” wrote analyst Joseph Moore in a note to clients.

    The bottom line

    Upbeat economic data couldn’t overcome the resistance stocks faced from disappointing corporate performance and persistent banking fears.

    First, the promising news (at least when it comes to inflation). April’s wholesale prices in the U.S. rose 0.2% for the month, less than the Dow Jones estimate of 0.3%. That translates to a 2.3% year-over-year increase, down from March’s 2.7% and the lowest since January 2021. In another sign inflation might be coming under control, initial jobless claims increased by 22,000 to 264,000 for the week ended May 6, according to the Department of Labor. That’s the highest reading since Oct. 30, 2021.

    But that news didn’t shield markets from other fears. “Investor focus is now on both the economic backdrop and liquidity and what’s going on versus rates and inflation,” said Dylan Kremer, co-chief investment officer of Certuity.

    And liquidity — or, in other words, the health of banks and their willingness or ability to make loans — was in focus again Thursday. PacWest shares tumbled, along with other regional banks like Zions Bancorp, which lost 4.5%, and KeyCorp, which fell 2.5%. The SPDR S&P Regional Banking ETF slid 2.5% Thursday.

    Another big loser on Thursday was Disney, which sank 8.7% after the media giant reported it had lost subscribers from its Disney+ streaming service. That’s the largest one-day fall, in percentage terms, since Nov. 9, when the company slumped 13%.

    Disney’s shares dragged down both the S&P 500, which declined 0.17%, and the Dow Jones Industrial Average, which slid 0.66%. However, the Nasdaq Composite managed to add 0.18%. The tech-heavy index was boosted by a 4.3% jump in Alphabet shares, which are trading at their highest level since August, thanks to investors’ optimism around the artificial intelligence products the tech giant announced at its annual developers conference.

    After a heavy week of economic data releases, investor focus will turn to the looming debt ceiling in the U.S. Unease over a potential sovereign default has already spread through markets. For instance, yields for short-term T-bills have jumped sharply this month. Still, most economists and bankers — including JPMorgan Chase CEO Jamie Dimon — expect the U.S. to avoid defaulting. If they’re proven wrong, the results could, in Dimon’s words, be “potentially catastrophic.”

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  • CNBC Daily Open: Bank fears overshadowed positive inflation signals

    CNBC Daily Open: Bank fears overshadowed positive inflation signals

    In an aerial view, a Pacific Western Bank building is seen on May 4, 2023 in Los Angeles, California.

    David Mcnew | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Upbeat economic data couldn’t overcome the resistance stocks faced from disappointing corporate performance and persistent banking fears.

    What you need to know today

    • PacWest shares sank 22.7% after the bank said in a securities filing Thursday that its deposits dropped 9.5% last week, following media reports that the regional bank was “evaluat[ing] all options.” Seeking to head off contagion fears, Western Alliance said its deposits have increased by $600 million since May 2. Western Alliance shares fell 0.77%.
    • Elon Musk said he is stepping down as Twitter CEO and will oversee product and software. Twitter will get a new CEO, an unnamed woman, in six weeks. Tesla (not Twitter!) shares jumped 2.1% on the news, suggesting investors of Musk’s other company were pleased — or just relieved.
    • JPMorgan Chase CEO Jamie Dimon warned that the U.S. defaulting on its sovereign debt would be “potentially catastrophic” — though he expects U.S. lawmakers to avert a debt crisis.
    • On that note, CNBC learned the debt ceiling meeting between President Joe Biden and other leaders, scheduled Friday, has been postponed until next week. But that’s a good thing because it allows lawmakers’ staffs, who are holding their own conversations, to make more progress before the big names are back in the same room, a source told NBC News.
    • PRO This chipmaker could hit more than $1 billion in revenue if things go well, according to Morgan Stanley. “Higher price points plus supply chain commentary is pointing to an opportunity that is multiples of our initial target,” wrote analyst Joseph Moore in a note to clients.

    The bottom line

    Upbeat economic data couldn’t overcome the resistance stocks faced from disappointing corporate performance and persistent banking fears.

    First, the promising news (at least when it comes to inflation). April’s wholesale prices in the U.S. rose 0.2% for the month, less than the Dow Jones estimate of 0.3%. That translates to a 2.3% year-over-year increase, down from March’s 2.7% and the lowest since January 2021. In another sign inflation might be coming under control, initial jobless claims increased by 22,000 to 264,000 for the week ended May 6, according to the Department of Labor. That’s the highest reading since Oct. 30, 2021.

    But that news didn’t shield markets from other fears. “Investor focus is now on both the economic backdrop and liquidity and what’s going on versus rates and inflation,” said Dylan Kremer, co-chief investment officer of Certuity.

    And liquidity — or, in other words, the health of banks and their willingness or ability to make loans — was in focus again Thursday. PacWest shares tumbled, along with other regional banks like Zions Bancorp, which lost 4.5%, and KeyCorp, which fell 2.5%. The SPDR S&P Regional Banking ETF slid 2.5% Thursday.

    Another big loser on Thursday was Disney, which sank 8.7% after the media giant reported it had lost subscribers from its Disney+ streaming service. That’s the largest one-day fall, in percentage terms, since Nov. 9, when the company slumped 13%.

    Disney’s shares dragged down both the S&P 500, which declined 0.17%, and the Dow Jones Industrial Average, which slid 0.66%. However, the Nasdaq Composite managed to add 0.18%. The tech-heavy index was boosted by a 4.3% jump in Alphabet shares, which are trading at their highest level since August, thanks to investors’ optimism around the artificial intelligence products the tech giant announced at its annual developers conference.

    After a heavy week of economic data releases, investor focus will turn to the looming debt ceiling in the U.S. Unease over a potential sovereign default has already spread through markets. For instance, yields for short-term T-bills have jumped sharply this month. Still, most economists and bankers — including JPMorgan CEO Dimon — expect the U.S. to avoid defaulting. It’s hard to imagine what would happen if they were proved wrong.

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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  • CNBC Daily Open: Inflation’s cooling on two fronts

    CNBC Daily Open: Inflation’s cooling on two fronts

    A Whole Foods Market store in San Ramon, California, on August 28, 2017.

    Smith Collection/gado | Archive Photos | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    March’s producer price index confirmed inflation is cooling — and predicts consumer prices will drop further. The S&P 500 closed at its highest in two months.

    What you need to know today

    • U.S. stocks rallied Thursday as another report showed prices are declining. All three major indexes closed in the green, the first time that’s happened in days. Asia-Pacific markets rose Friday on the back of that rally. Japan’s Nikkei 225 climbed 1.07% as the government approved plans to open the country’s first casino, which will be located in Osaka.
    • China’s loans to countries — issued as part of its Belt and Road Initiative — are becoming a problem. As the global economy falters, borrowers are struggling to repay loans to China, and analysts are starting to question the viability of China’s ambitious initiative.
    • Twitter’s users can now trade stocks, cryptocurrency and other financial assets through a partnership with eToro, an online brokerage. It’s another step forward in CEO Elon Musk’s plan for Twitter to become “the biggest financial institution in the world,” as Musk put it last month.
    • Amazon has jumped on the artificial intelligence wagon with Bedrock, its own generative AI service. Unlike other ChatGPT-style products, Bedrock will give users access to different large language models — and let them customize those models for their own purposes, CEO Andy Jassy told CNBC.

    The bottom line

    Is inflation on its way out?

    The latest producer price index suggests so. Last month’s prices were 0.5% lower — emphasis on lower, not a slower rate of increase — than February’s. Stripping out food and energy, the PPI fell 0.1%, bucking an expected 0.2% increase.

    Since the PPI measures how much companies pay to produce consumer goods and other commodities, and since it takes time for price changes to filter down from the producer to the consumer, many think the PPI acts as a forecast for consumer prices.

    And March’s consumer price index report, released Wednesday, already showed that price increases are slowing for consumers. The PPI, then, doesn’t just signal hope — it confirms that investors’ hope wasn’t misplaced. The latter sentiment is much more powerful.

    Little wonder markets rallied Thursday. The S&P 500 was a big winner: It added 1.33% to end the day at its highest level since February. The Dow Jones Industrial Average rose 1.14%, and the Nasdaq Composite climbed 1.99%, snapping a three-day losing streak.

    The Nasdaq was boosted by a surge in tech stocks, which rose on hopes that the Federal Reserve may soon pause increases in interest rates. Amazon shares popped 4.67% — buoyed, also, by the company’s AI announcement. Other big tech rallied too: Alphabet climbed 2.67%, Apple jumped 3.41% and Meta rose 2.97%.

    Friday in the U.S. will be another big day for markets: JPMorgan, Wells Fargo and Citi report earnings before the bell. If the banks’ numbers look good (and they should, I suspect, considering how many depositors fled to bigger banks after SVB’s collapse) — and, more crucially, if the banks think the months ahead won’t be too painful for the bottom line — expect to see another positive day for markets.

    But if they echo the Fed’s expectations of an impending recession, it’s likely Thursday’s optimism will remain a one-day sentiment.

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  • CNBC Daily Open: Inflation cooled — and might drop further

    CNBC Daily Open: Inflation cooled — and might drop further

    A customer pushing a shopping cart shops at a supermarket on March 14, 2023 in San Mateo County, California.

    Liu Guanguan / China News Service | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    March’s producer price index confirmed inflation is cooling — and predicts consumer prices will drop further. The S&P 500 closed at its highest in two months.

    What you need to know today

    • Amazon has jumped on the artificial intelligence wagon with Bedrock, its own generative AI service. Unlike other ChatGPT-style products, Bedrock will give users access to different large language models — and let them customize those models for their own purposes, CEO Andy Jassy told CNBC.

    The bottom line

    Is inflation on its way out?

    The latest producer price index suggests so. Last month’s prices were 0.5% lower — emphasis on lower, not a slower rate of increase — than February’s. Stripping out food and energy, the PPI fell 0.1%, bucking an expected 0.2% increase.

    Since the PPI measures how much companies pay to produce consumer goods and other commodities, and since it takes time for price changes to filter down from the producer to the consumer, many think the PPI acts as a forecast for consumer prices.

    And March’s consumer price index report, released Wednesday, already showed that price increases are slowing for consumers. The PPI, then, doesn’t just signal hope — it confirms that investors’ hope wasn’t misplaced. The latter sentiment is much more powerful.

    Little wonder markets rallied Thursday. The S&P 500 was a big winner: It added 1.33% to end the day at its highest level since February. The Dow Jones Industrial Average rose 1.14%, and the Nasdaq Composite climbed 1.99%, snapping a three-day losing streak.

    The Nasdaq was boosted by a surge in tech stocks, which rose on hopes that the Federal Reserve may soon pause increases in interest rates. Amazon shares popped 4.67% — buoyed, also, by the company’s AI announcement. Other big tech rallied too: Alphabet climbed 2.67%, Apple jumped 3.41% and Meta rose 2.97%.

    Friday in the U.S. will be another big day for markets: JPMorgan, Wells Fargo and Citi report earnings before the bell. If the banks’ numbers look good (and they should, I suspect, considering how many depositors fled to bigger banks after SVB’s collapse) — and, more crucially, if the banks think the months ahead won’t be too painful for the bottom line — expect to see another positive day for markets.

    But if they echo the Fed’s expectations of an impending recession, it’s likely Thursday’s optimism will remain a one-day sentiment.

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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  • Yet another key economic report is showing inflation pressures are easing | CNN Business

    Yet another key economic report is showing inflation pressures are easing | CNN Business


    Minneapolis
    CNN Business
     — 

    A key measure of inflation, wholesale prices, rose by 8% in October from a year before, according to the latest report from the Bureau of Labor Statistics.

    While still historically high, it was the smallest increase since July of last year and significantly better than forecasts. It’s the second inflation report this month to show signs of cooling in the rising prices that have plagued the economy.

    Economists expected the Producer Price Index, which measures prices paid for goods and services before they reach consumers, to show an annual increase of 8.3%, down from September’s revised 8.4%.

    On a monthly basis, producer prices rose 0.2%, below expectations and even with the revised 0.2% increase seen in September.

    Year-over-year, core PPI — which excludes food and energy, components whose pricing is more prone to market volatility — measured 6.7%, down from September’s revised annual increase of 7.1%.

    Month-over-month, core PPI prices were flat, the lowest monthly reading since November 2020. In September, core PPI increased by a revised 0.2% from the month before.

    Economists had expected annual and monthly core PPI to measure 7.2% and 0.3%, respectively, according to estimates on Refinitiv.

    President Joe Biden heralded October’s PPI report Tuesday calling it “more good news for our economy this morning, and more indications that we are starting to see inflation moderate.”

    “Today’s news – that prices paid by businesses moderated last month – comes a week after news that prices paid by consumers have also moderated,” Biden wrote Tuesday. “And, today’s report also showed that food inflation slowed – a welcome sign for family’s grocery bills as we head into the holidays.”

    For much of this year, the Federal Reserve has sought to tamp down decades-high inflation by tightening monetary policy, including issuing an unprecedented four consecutive rate hikes of 75 basis points, or three-quarters of a percentage point.

    The better-than-expected PPI data reflects an economy that has slowed, with supply moving more into balance, said Jeffrey Roach, chief economist for LPL Financial.

    Costs associated with transportation and warehousing, for example, declined for the fourth consecutive month, a likely result of the improved global shipping climate, he said. Producer costs for new cars fell the most since May 2017, he added.

    “Barring geopolitical or financial crises, inflation should continue its deceleration into 2023,” he said in a statement.

    Since PPI captures price changes happening further upstream, the report is considered by some to be a leading indicator for broader inflationary trends and a predictor of what consumers will eventually see at the store level.

    “The PPI read certainly adds more fuel to the fire for those who feel we may finally be on a downward inflation trend,” Mike Loewengart, Morgan Stanley’s head of model portfolio construction, said in a statement.

    Last week’s Consumer Price Index showed inflation slowed to 7.7% from 8.2% year-over-year for consumer goods, surprising investors and giving Wall Street its biggest boost since 2020.

    The CPI data was “reassuring,” Fed vice chair Lael Brainard said on Monday, signaling that the rate hikes appear to be taking hold, and if the economic data continues to show inflation on the decline, then the central bank could scale back the extent of its future rate hikes.

    “When you look at the inflation numbers, there’s some evidence that we’ve peaked, but are we coming down quickly?” Steven Ricchiuto, chief economist for Mizuho Americas told CNN Business.

    Ricchiuto noted that the October figures are only a couple steps lower than what was seen in September.

    “These aren’t the types of things that tell the Fed to stop tightening rates,” he said. However, “they may tell you [that] you don’t need 75 basis points.”

    CNN’s DJ Judd and Matt Egan contributed to this report.

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  • Asian stocks fall ahead of US inflation update

    Asian stocks fall ahead of US inflation update

    BEIJING — European stocks and Wall Street futures gained Thursday while Asian markets fell ahead of U.S. inflation data that investors worry will reinforce Federal Reserve plans for more aggressive interest rate hikes.

    London and Frankfurt advanced. Shanghai, Tokyo and Hong Kong declined. Oil prices advanced.

    Wall Street’s benchmark S&P 500 ended lower Wednesday after inflation in producer prices edged down but still was near a multi-decade high.

    The more closely watched consumer price index was due out later Thursday.

    “A hawkish reaction to the data could add more pressure to stocks,” Anderson Alves of ActivTrades said in a report.

    The Fed and other central banks in Europe and Asia have raised rates by unusually big margins to cool inflation that is at multi-decade highs, but traders are afraid they might tip the global economy into recession.

    In early trading, the FTSE 100 in London gained 0.2% to 6,840.35. The DAX in Frankfurt rose 0.8% to 12,272.20 and the CAC 40 in Paris added 0.5% to 5,845.55.

    On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones Industrial Average were up 0.5%.

    On Wednesday, the S&P 500 gave up 0.3% for its sixth daily decline and the Dow slide 0.1% after a report showed producer price inflation is very hot.

    Prices rose 8.5% in September, down from March’s peak of 11.7%. But prices gained 0.4% compared with August following two months of declines.

    Consumer inflation on Thursday and retail sales data Friday could give a clearer picture of where prices are hottest and how consumers are reacting.

    Minutes from the Fed’s last meeting, released Wednesday, underscored the central bank’s commitment to taming “unacceptably high” inflation.

    The S&P 500 is down 25% so far this year and close to a two-year low.

    In Asia, the Shanghai Composite Index lost 0.1% to 3,016.35 and the Nikkei 225 in Tokyo sank 0.6% to 26,237.42. Hong Kong’s Hang Seng tumbled 1.9% to 16,389.11, its lowest close in more than 11 years.

    The Kospi in Seoul fell 1.8% to 2,162.87 while Sydney’s S&P-ASX 200 gained less than 0.1% to 6,642.60.

    India’s Sensex lost 0.7% to 57,205.89. New Zealand’s benchmark lost 0.5% and Southeast Asian markets also declined.

    In energy markets, benchmark U.S. crude gained 19 cents to $87.64 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oil trading, added 31 cents to $92.67 per barrel in London.

    The dollar strengthened to 146.74 after hitting a 24-year high of 145.85 on Wednesday.

    The dollar’s exchange rate has been rising against other currencies due to the Fed’s rate hikes and recession fears. The yen’s weakness has prompted expectations Japan’s central bank might intervene for a second time to prop up the exchange rate following an intervention in September.

    The euro gained to 97.39 cents from 97.06 cents.

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  • US producer price inflation eases to still-high 8.5%

    US producer price inflation eases to still-high 8.5%

    WASHINGTON — Inflation at the wholesale level rose 8.5% in September from a year earlier, the third straight decline though costs remain at painfully high levels.

    Wednesday’s report from the Labor Department also showed that the producer price index — which measures price changes before they reach the consumer — rose 0.4% in September from August, after two months of declines.

    The September monthly increase was larger than expected and was pushed higher by a big increase in hotel room costs and higher prices for other services. Food costs also rose in September from August, after a slight drop the previous month. The cost of fresh and dry vegetables soared nearly 16% in September from August.

    The larger-than-expected monthly increase in overall wholesale prices suggests inflation pressures are still strong in the U.S. economy, with the Federal Reserve likely to continue its rapid pace of interest rate hikes at its next meeting in November.

    Wholesale gas costs fell last month, but will likely reverse in the coming months now that oil prices are rising again in the wake of planned production cuts by many oil exporting nations. Grocery bills are rising at their fastest pace in decades, and prices at the gas pump are rising again, squeezing consumers’ budgets.

    Excluding the volatile food and energy categories, core prices rose 0.3% in September from August for the third straight month, and 7.2% compared with a year earlier.

    Overall wholesale inflation peaked at 11.7% in March.

    Services prices — including health care, lodging, and shipping — rose 0.4% in September, the most in three months. Federal Reserve officials have recently cited rising services prices as a source of concern, because they can take longer to reverse since they mostly reflect the impact of rising wages.

    Health care costs rose last month, driven higher by a 0.7% increase in nursing home prices.

    Stubbornly-high inflation is draining Americans’ bank accounts, frustrating small businesses and raising alarm bells at the Federal Reserve. It is also causing political headaches for President Joe Biden and congressional Democrats, most of whom will face voters in mid-term elections in less than a month.

    The Fed has boosted its benchmark short-term interest rate by three percentage points since March to combat rising prices. It’s the fastest pace of rate hikes since the early 1980s. Higher rates are intended to cool consumer and business borrowing and spending and bring down inflation..

    Wednesday’s producer price data captures inflation at an earlier stage of production and can often signal where consumer prices are headed. It also feeds into the Fed’s preferred measure of inflation, which is called the personal consumption expenditures price index.

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