November PPI comes in Hotter than Expected; Futures Fall, Gold, Silver Ripped Lower after Big Gains Wednesday

Uh-oh.

At 8:30 am ET, the BLS issued the following:

The Producer Price Index for final demand rose 0.4 percent in November. Prices for final demand goods increased 0.7 percent, and the index for final demand services moved up 0.2 percent. Prices for final demand advanced 3.0 percent for the 12 months ended in November.

This was not expected by most of the brainiacs on Wall Street, but those in goods-producing businesses have been seeing input prices rising throughout the year. The 0.7 percent increase puts yesterday's CPI figure into question. Surely producers are passing along their increased costs to consumers.

That's why CPI and PPI, two measures that are never revised and are merely estimates of a very large population (all of America) should be regarded as highly unreliable.

Nevertheless, Wall Street's response was typical. Stock futures sold off just as rapidly as they rose on Wednesday's benign CPI release. The BLS press release offers more granularity, but, suffice it to be said that Wall Street is set up for a massive waterfall event, largely because it throws shade on the Fed's proposed 0.25% cut in the federal funds rate next week, but also because, in the most basic sense, inflation is bad.

Missing Wall Street's estimates (put another way, the experts on Wall Street were way off) isn't catastrophic, but it will likely leave some deep dents.

Just after 9:00 am ET Dow futures were down 32 points, S&P futures were off 16, and NASDAQ futures slid 116.

In an odd, but somewhat expected twist of logic, gold and silver are both down sharply. However, Wednesday saw some of the best gains in the past month. Gold is currently down more than $30, to $2,725.50. Silver is off 35 cents, at $32.62 after reaching a high overnight of $33.31.

If there's inflation at the producer level, it's a safe bet that consumer prices will soon be rising. In such an environment, precious metals usually do exceedingly well.

With 39 days left until Trump's inauguration, it's a crap-shoot in the near term.

At the Close, Wednesday, December 11, 2024:
Dow: 44,148.56, -99.27 (-0.22%)
NASDAQ: 20,034.89, +347.65 (+1.77%)
S&P 500: 6,084.19, +49.28 (+0.82%)
NYSE Composite: 19,891.03, +9.13 (+0.05%)