Wednesday, March 15th, 2023
Pre-market futures are selling off this morning, even after some very favorable economic data that shows inflation levels rolling off slightly more than expected. We also hear from a numbers of these reports at the same time, so we’ll be able to look at this from several angles. Yet at this hour, the Dow has sold off -500 points, -58 on the S&P 500 and -133 points on the Nasdaq. Nervousness about Credit Suisse — now trading at a new record low — looks to be outpacing positive effects of these data points.
Producer Price Index (PPI) numbers for February — the sister report to yesterday’s important Consumer Price Index (CPI) — swung to a negative -0.1% from an expected +0.3% and originally posted +0.7% the previous quarter. Core PPI (stripping out volatile food and gas costs) was unchanged month over month, down from the +0.4% expected and +0.6% reported for January. Ex-food, energy and trade, this figure swings to +0.2%, but also down from the estimated +0.3%.
Year-over-year PPI slid 80 basis points (bps) from expectations to +4.6%, and down more than a full percentage point from the previous month’s downwardly revised +5.7%. This is perhaps the most pronounced of today’s anti-inflationary data points, although the core PPI read year over year came in at +4.4%, 10 bps lower than expected. That said, we’re now less than half the cycle high +9.7%; +4.4% is the lowest print we’ve seen since March of 2021.
Retail Sales for February came in as expected: -0.4%, a big swing down from the upwardly revised January outlier +3.2%. (December’s Retail Sales reached -1.1%, so we’re going through a turbulent period over the past few months.) Ex-autos, we’re at -0.1%, down from the unched (unchanged) read analysts were anticipating. Ex-autos and gas, we came in unched, higher than expectations for -0.2%. A month ago — again, the post-holiday season outlier month — we saw +2.3% ex-autos and +2.8% ex-autos and gas. The Control read was an even stouter +0.5%, down from +2.3% previously.
Empire State for March also showed a big fall further into the negative: -24.6, well off the predicted -7.8 and the previous month’s read of -5.8. This is the fourth straight month in negative territory in New York State productivity, with a trailing four-month average -18.6. Again, more clear evidence the Fed’s 450 bps in rate hikes over the past year have had a dampening effect on particular aspects of the economy.
And we see bond yield rates tumble: now 3.93% on the two-year and 3.50% on the 10-year. This is also a crystal clear depiction that higher rate expectations are draining from the market. Not only that, but the margin of the yield curve inversion is back within 60 bps for the first time in quite a while. It’s not panic we’re seeing in this morning’s trading activity, but we do expect some ebbs and flows as the smoke begins to clear on the banking contagion issue.
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PPI, Retail Sales Lower; Pre-Markets Down on Banking Concerns
Wednesday, March 15th, 2023
Pre-market futures are selling off this morning, even after some very favorable economic data that shows inflation levels rolling off slightly more than expected. We also hear from a numbers of these reports at the same time, so we’ll be able to look at this from several angles. Yet at this hour, the Dow has sold off -500 points, -58 on the S&P 500 and -133 points on the Nasdaq. Nervousness about Credit Suisse — now trading at a new record low — looks to be outpacing positive effects of these data points.
Producer Price Index (PPI) numbers for February — the sister report to yesterday’s important Consumer Price Index (CPI) — swung to a negative -0.1% from an expected +0.3% and originally posted +0.7% the previous quarter. Core PPI (stripping out volatile food and gas costs) was unchanged month over month, down from the +0.4% expected and +0.6% reported for January. Ex-food, energy and trade, this figure swings to +0.2%, but also down from the estimated +0.3%.
Year-over-year PPI slid 80 basis points (bps) from expectations to +4.6%, and down more than a full percentage point from the previous month’s downwardly revised +5.7%. This is perhaps the most pronounced of today’s anti-inflationary data points, although the core PPI read year over year came in at +4.4%, 10 bps lower than expected. That said, we’re now less than half the cycle high +9.7%; +4.4% is the lowest print we’ve seen since March of 2021.
Retail Sales for February came in as expected: -0.4%, a big swing down from the upwardly revised January outlier +3.2%. (December’s Retail Sales reached -1.1%, so we’re going through a turbulent period over the past few months.) Ex-autos, we’re at -0.1%, down from the unched (unchanged) read analysts were anticipating. Ex-autos and gas, we came in unched, higher than expectations for -0.2%. A month ago — again, the post-holiday season outlier month — we saw +2.3% ex-autos and +2.8% ex-autos and gas. The Control read was an even stouter +0.5%, down from +2.3% previously.
Empire State for March also showed a big fall further into the negative: -24.6, well off the predicted -7.8 and the previous month’s read of -5.8. This is the fourth straight month in negative territory in New York State productivity, with a trailing four-month average -18.6. Again, more clear evidence the Fed’s 450 bps in rate hikes over the past year have had a dampening effect on particular aspects of the economy.
And we see bond yield rates tumble: now 3.93% on the two-year and 3.50% on the 10-year. This is also a crystal clear depiction that higher rate expectations are draining from the market. Not only that, but the margin of the yield curve inversion is back within 60 bps for the first time in quite a while. It’s not panic we’re seeing in this morning’s trading activity, but we do expect some ebbs and flows as the smoke begins to clear on the banking contagion issue.
Questions or comments about this article and/or its author? Click here>>