market:
- Gold rises $9 to $2013
- US 10-year bond yield rose 4.3bps to 4.28%
- WTI crude oil rose $1.20 to $79.23
- S&P500 falls 0.5%
- NZD leads, JPY lags
The closely watched PPI reading initially appeared to be the start of something similar to the CPI earlier this week, albeit on a smaller scale. Initially, the dollar sold off, stocks fell, and yields soared, but that didn’t last. The dollar’s high for the day came immediately after the announcement, and then questions began.
as I emphasized in front This announcement indicates that January BLS inflation data may be subject to seasonal adjustment factors. Both the CPI and import/export prices were shockingly high, so now the PPI has been added to complete the trio. These are three different datasets, but they’re all seasonally adjusted, so maybe there’s something going on? January is especially difficult to adjust because prices reset at the turn of the year.
Or maybe I’m thinking too much. Fed officials today also dismissed high inflation numbers, emphasizing instead that the inflation trend continues. This week’s big market shift came after Tuesday’s Powell leak, which became the consensus.
In any case, the dollar regained all of its PPI gains in about 90 minutes, and then continued to fall further against the euro, pound, and Australian dollar. However, these overshoots later disappeared as stocks suffered a late sell-off. It’s unclear whether this late-game movement in stocks was due to options expiring, concerns about the Middle East, or a long weekend, but the movement accelerated in the second half. There’s also some air coming out of SMCI, which could be a sign that the AI bubble is deflating (although I don’t think it will burst).
In the end, most exchange rates ended almost flat. I’ll be keeping an eye on interest rate news from the People’s Bank on Sunday, but I wonder if some of Friday’s buying in Chinese stocks, copper, and Antipodes was related to rate cut expectations, signals, or other stimulus. I think so.
Commodities significantly outperformed across the board, with gold quickly rebounding from the PPI numbers and oil rebounding before the close. just It will be an interesting spot to watch over the coming week as it remains below January highs.
Enjoy your long weekend!
