Marketbites: All Eyes On CPI Report
Portfolio Manager Commentary:
Stocks rose Wednesday as investors seem to be confident today's consumer price index will show cooling inflation and signal to the Fed they might not need to be as hawkish as previously expected. Economists polled by Dow Jones expect the CPI to show prices cooled by a modest 0.1% in December from the prior month. This would represent a 6.5% increase from the prior year. Bond yields also pulled back as investors readied for the report.
“It’s really all today about kind of positioning ahead of head of CPI,” said Daniel Eye, chief investment officer at Fort Pitt Capital Group. “You’re trying to get in there ahead of a big, big move on the report tomorrow.”
It was also a big day for meme stocks, punctuated by a 68% gain in Bed Bath & Beyond.
After the CPI comes out today, investors will keep an eye on big bank quarterly results being released tomorrow to kick off a new earnings season.
Chart of the Day:
While core CPI has turned negative and is showing cooling, many investors will be looking towards services inflation which has remained elevated. Many argue the elevated services inflation is the result of a stubbornly hot jobs market and escalating labor costs. In recent months, Fed Chairman Jerome Powell himself has emphasized the importance of core services excluding housing. Still, to add some optimism, last Friday’s jobs report included good news that the pace of wage gains rose less than expected in December. Unfortunately, however, job openings hold near historically high levels. In all, watch out for services inflation in today's CPI report which may shed more light into the Fed's future decision making than overall CPI.