Another big pre-market in terms of economic data greets us this Thursday — not only the normal Weekly Jobless Claims but also the other shoe dropping on inflationary price indexes — and the results are basically the mirror image of yesterday’s pre-market. After Consumer Price Index (CPI) numbers were hotter than expected, equity markets fell and bond yields rose.
This morning, equity markets went from shallowly in the red to +70 points on the Down, +8 on the S&P 500 and +65 points on the Nasdaq. The 10-year Treasury bond yield ticked down from +4.61% to +4.59%, with the 2-year moving from +4.35% to +4.33%. While these numbers are not earth-shattering, their direction is something closely monitored, because over time they do matter.
PPI for January Hotter than Estimates, Lower than Higher Revisions
This morning’s wholesale inflation figures come with an asterisk: past months going back a year or more have been recalibrated. The result of this is that we swing not to hotter inflation on the Producer Price Index (PPI), but cooler — but from a hotter previous level. Headline January PPI, final demand, came in at +0.4%. This is 10 basis points (bps) higher than expected, 20 bps hotter than the original print a month ago, but now -10 bps below the upwardly revised +0.5%.
Core PPI — ex-food and energy prices — reached +0.3% last month, 10 bps above the +0.2% estimate and 20 bps ahead of the prior print, -10 bps from the revised +0.4% for December. Ex-food, energy and trade also came in at +0.3%, down 10 bps month over month.
Year over year, headline PPI reached +3.5%. This is 20 bps ahead of expectations, though equal to the previous month’s revised number — and the highest level of year-over-year PPI since February 2023. Core PPI year over year hit +3.6%, 30 bps above estimates but 10 bps lower on last month’s revision. Thus, last month’s +3.7% is the highest wholesale inflation read also in two years. Ex-food, energy and trade reached +3.4% — the highest since March ’23.
What’s the takeaway here? Perhaps that inflation metrics on the producer side are actually moving in the right direction, albeit from much higher levels. The Fed clearly recognizes we’re not yet where we need to be on our inflation goals, so we can expect the Fed funds rate to remain at +4.25-4.50% for an indefinite period — as the markets attempted to price-in yesterday morning.
Weekly Jobless Claims Remain Subdued
One metric that seems to tack with investors’ interests in the Weekly Jobless Claims series of data. Initial Jobless Claims for last week came in at +213K, slightly below the +215K anticipated and the slightly upwardly revised +220K from the previous week. Not only are these levels well off the +260K high we saw one week in early October, but the trailing 6-week average of +214K is notably lower than the previous 6-week average of +222K.
Continuing Claimsremain sub-1.9 million — a psychological metric that leads one to see 2 million longer-term jobless claims on the horizon — with 1.85 million lower than expectations and the unrevised 1.886 million from the previous week. Since last fall, we have touched 1.9 a couple of times (and came close a couple more), but longer-term jobless claims seem pleasantly range-bound. We continue to see an historically healthy labor market.
Morning Earnings Roundup: DE, CROX
Major agriculture machinery manufacturer Deere & Co. DE beat earnings estimates this morning in its fiscal Q1 report, with $3.19 per share outpacing expectations by 6 cents, or a +1.9% positive surprise. However, revenues for the quarter missed the Zacks consensus by -11.5% to $6.81 billion. Thus, while the company enjoys its 10th straight earnings beat, shares are down -5% on the news, giving back its +12% gains year to date.
Crocs CROX, on the other hand, posted a +10% earnings beat on its Q4 bottom line ahead of today’s opening bell: $2.52 per share versus $2.29 projected. The innovative footwear maker has only missed on earnings once in the past five years. Revenues of $989.77 million outpaced estimates by +3.1%. On the news, shares have shot up +21% this morning, now swinging to the green both year to date and over the past one year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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