A little perspective on today’s economic data:
- January CPI “completes a trifecta of inflation reports that showed both overall and core inflation ahead of expectations,” RDQ Economics writes. “The Fed remains focused on core inflation at the consumer level, which it thinks will be restrained by high unemployment, and largely dismisses higher food, energy, and commodity prices as being influenced by the ultra loose stance of monetary policy,” firm says.
“We are not Phillips Curvers and we are increasingly concerned that inflation is headed higher.” RDQ notes evidence in latest report “that even core CPI inflation has bottomed and has begun to move higher,” and price increases “were fairly broad-based.”
- Weekly initial jobless claims “were worse than expected rising to 410k (400k consensus), but that gain was from a weather induced low of 385k, a number that was not real,” writes Eric Green, chief US rates strategist at TD Securities. “What is real is that the weather distortions are now purged from the claims data and we are left at a 4 week moving average of 417k, essentially unchanged from last week,” he notes. “We need to get below 400k and stay there if the market is to buy in to sustained improvement in the labor market.”
- Philly Fed Index was “WAY stronger than expected,” says Miller Tabak’s Dan Greenhaus, jumping to 35.9 from 19.3. Highest reading since January 2004. “Beneath he headline, new orders rose only modestly but the number of employees jumped to the highest level since 1974!”
Something that doesn’t bode too well for profit margins, the prices paid component hit highest level since summer of 2008, Greenhaus notes. Ex that, “this would be the highest reading dating back to the early 1980s,” and with only a modest increase in prices received, the spread between the two (46.2 points) is the highest since 1979, he adds.
So data continue to have some pros and cons, stocks reacted very little to any of it today. In fact, stocks not reacting to much at all, sort of trance-like but drifting higher nonetheless.
Keen observations from Doug Kass, spotted on Minyanville yesterday by our colleague Kevin Kingsbury:
It now seems as if the U.S. stock market is interpreting the outcome of almost every world political development and domestic economic release as market-friendly. At the same time, emerging stock markets are beginning to break down, the pace of increase in the rate of change in bond yields has accelerated (as we fail to address our ever-growing deficit), and signs of a possible contraction in corporate profit margins grow more visible (as raw material input costs are increasingly more difficult to be passed on to customers). Meanwhile, rising food costs and the prices of life’s necessities continue to pressure the average consumer and raise the specter that recent gains in retail sales are not durable but rather represent nothing more than recession fatigue.
