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Daily Market Commentary

Yesterday PPI was really big, and highlighted the worries that surround the markets.  Materials and food prices are pushing the headline numbers into stratospheric territory, while the core numbers remain relatively low.

 

Also in the "negative for bonds" news from yesterday was the rebound in the Empire manufacturing index.  New York State's economic activity index staged a surprise rebound, just barely above the boom/bust level of 0.  As expected, the bond market sold off yesterday mostly on these numbers, but also on a bit of optimism from the equity markets.

 

 

This morning we are seeing further optimism as Earnings from JPMorgan and Wells Fargo weren't as bad as they could have been.  These two more conservative US banks managed to still post profits in the current environment, but both are cautious on the consumer lending side.

 

 

This mornings slew of data starts with US CPI, coming in line with expectations.  Unlike the PPI headline, which was very strong, there is still less flow through to the consumer side.  With the headline printing at 4.0%, the vast majority of that coming from gasoline, the core remained tepid at 2.4%.  Realizing that everyone needs to drive their cars and heat their homes, we are aware of the costs going up, but central banks have little control over those prices with their traditional tools, and the core numbers remain within the comfort zone.  Bonds are trading higher as traders were expecting the worst after yesterday's PPI.

 

 

Housing Starts and Building Permits were both lower than expected.  Last month's tick up appeared to be a head fake and the housing sector decline continues.  With foreclosures and ARM resets accelerating, this number is no surprise.

 



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