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CPI Behaves, but Starts Debate Over Rate Cut Amount
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Wednesday, August 14th, 2024
Immediately following the biggest economic print of the week — the July Consumer Price Index (CPI) report — pre-market futures got pretty noisy. So did bond yields. Considering these numbers came in more or less as expected, with no revisions to the previous month on any of these metrics, it was surprising to see the Nasdaq, for instance, got from +10 points directly ahead of the release to -100 points seconds afterward.
Things look to have simmered down somewhat, however. Currently, we see the Dow +10 points, the S&P 500 +15 and the Nasdaq +45 points. The 2-year bond yield looked ready to leap back over +4% for as moment there, but is currently +3.97%, with the 10-year +3.85% — back to 100 basis points on the inverted spread. Makes us think that perhaps the Street was listening for a lower whisper number that was left unspoken.
CPI Steady Overall, Slightly Lower Inflation Rate
There are lots of CPI figures here, so let’s take them one at a time: headline CPI month over month was in-line with expectations at +0.2%, up from the unrevised -0.1% the previous month (which was the lowest monthly figure since April of 2020, near Ground Zero of the pandemic). Year over year headline CPI — aka the “Inflation Rate” — came in 10 bps lower than expected to +2.9%. June’s +3.0% remained unchanged.
This is the first Inflation Rate with a “2-handle” since way back in March 2021, when numbers like these were moving speedily in the opposite direction. The core Inflation Rate met expectations at +3.2%, down 10 bps month over month. Considering we were at +4.7% on this metric a year ago, it would be hard to argue inflation has not been curbed.
Interest Rate Cut Now Priced-In, but How Deep?
So then, with inflation now gradually coming in for that “soft landing” analysts have been hoping for — not to mention employment numbers noticeably weakening over the past couple months — markets can and have confidently baked a rate cut into the cake. Perhaps the pre-market’s attitude toward these very compliant numbers this morning, however, are starting to re-think a 50 bps cut on September 18th.
The good news is there will be plenty of additional data out in the next five weeks. The fear in the market last week revolved (at least somewhat) around the idea that the Fed may have missed their first opportunity to obtain that coveted soft landing, and recession fears re-emerged. This week, the 50 bps cut entered into the narrative like a metaphysical cavalry. But the only thing that would have kept that narrative buoyant would have been slimmer-than-expected CPI figures.
UBS Crushes Q2 Estimates, Brinker Comes Up Short
Swiss multinational bank UBS (UBS - Free Report) posted a major earnings beat this morning — 34 cents per share trounced the 12 cents in the Zacks consensus by +183%. Revenues also outperformed strongly: $11.9 billion for the quarter surpassed expectations by +4.2%. UBS stock has now swung to a positive year over year, trading up +4% in today’s pre-market. For more on UBS’ earnings, click here.
Mid-level restaurant chain Brinker International (EAT - Free Report) , however, broke its string of seven-straight earnings beats with a 4-cent miss in its fiscal Q4 report this morning. Revenues topped expectations by +4.3%, and the parent of Chili’s and Maggiano’s increased guidance on both top and bottom lines. But that earnings miss took the shine off this stock, which took a Zacks Rank #1 (Strong Buy) into its earnings release, and shares are down -11% in the pre-market at this hour. For more on EAT’s earnings, click here.
Image: Shutterstock
CPI Behaves, but Starts Debate Over Rate Cut Amount
Wednesday, August 14th, 2024
Immediately following the biggest economic print of the week — the July Consumer Price Index (CPI) report — pre-market futures got pretty noisy. So did bond yields. Considering these numbers came in more or less as expected, with no revisions to the previous month on any of these metrics, it was surprising to see the Nasdaq, for instance, got from +10 points directly ahead of the release to -100 points seconds afterward.
Things look to have simmered down somewhat, however. Currently, we see the Dow +10 points, the S&P 500 +15 and the Nasdaq +45 points. The 2-year bond yield looked ready to leap back over +4% for as moment there, but is currently +3.97%, with the 10-year +3.85% — back to 100 basis points on the inverted spread. Makes us think that perhaps the Street was listening for a lower whisper number that was left unspoken.
CPI Steady Overall, Slightly Lower Inflation Rate
There are lots of CPI figures here, so let’s take them one at a time: headline CPI month over month was in-line with expectations at +0.2%, up from the unrevised -0.1% the previous month (which was the lowest monthly figure since April of 2020, near Ground Zero of the pandemic). Year over year headline CPI — aka the “Inflation Rate” — came in 10 bps lower than expected to +2.9%. June’s +3.0% remained unchanged.
This is the first Inflation Rate with a “2-handle” since way back in March 2021, when numbers like these were moving speedily in the opposite direction. The core Inflation Rate met expectations at +3.2%, down 10 bps month over month. Considering we were at +4.7% on this metric a year ago, it would be hard to argue inflation has not been curbed.
Interest Rate Cut Now Priced-In, but How Deep?
So then, with inflation now gradually coming in for that “soft landing” analysts have been hoping for — not to mention employment numbers noticeably weakening over the past couple months — markets can and have confidently baked a rate cut into the cake. Perhaps the pre-market’s attitude toward these very compliant numbers this morning, however, are starting to re-think a 50 bps cut on September 18th.
The good news is there will be plenty of additional data out in the next five weeks. The fear in the market last week revolved (at least somewhat) around the idea that the Fed may have missed their first opportunity to obtain that coveted soft landing, and recession fears re-emerged. This week, the 50 bps cut entered into the narrative like a metaphysical cavalry. But the only thing that would have kept that narrative buoyant would have been slimmer-than-expected CPI figures.
UBS Crushes Q2 Estimates, Brinker Comes Up Short
Swiss multinational bank UBS (UBS - Free Report) posted a major earnings beat this morning — 34 cents per share trounced the 12 cents in the Zacks consensus by +183%. Revenues also outperformed strongly: $11.9 billion for the quarter surpassed expectations by +4.2%. UBS stock has now swung to a positive year over year, trading up +4% in today’s pre-market. For more on UBS’ earnings, click here.
Mid-level restaurant chain Brinker International (EAT - Free Report) , however, broke its string of seven-straight earnings beats with a 4-cent miss in its fiscal Q4 report this morning. Revenues topped expectations by +4.3%, and the parent of Chili’s and Maggiano’s increased guidance on both top and bottom lines. But that earnings miss took the shine off this stock, which took a Zacks Rank #1 (Strong Buy) into its earnings release, and shares are down -11% in the pre-market at this hour. For more on EAT’s earnings, click here.
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