Overall, the trading was less-than-enthusiastic. Stocks were bid at the open and early in the session, but gradually lost momentum as the session progressed.
Thursday morning, investors were looking again to the BLS, this time for August CPI, expecting a result similar to that displayed by the PPI, i.e., lower inflation.
They didn't quite get it, as August inflation was higher than in August, with the annualized rate up to 2.9%, nowhere near the Fed's stated goal of 2.0%.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent on a seasonally adjusted basis in August, after rising 0.2 percent in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment.The index for shelter rose 0.4 percent in August and was the largest factor in the all items monthly increase. The food index increased 0.5 percent over the month as the food at home index rose 0.6 percent and the food away from home index increased 0.3 percent. The index for energy rose 0.7 percent in August as the index for gasoline increased 1.9 percent over the month.
The index for all items less food and energy rose 0.3 percent in August, as it did in July. Indexes that increased over the month include airline fares, used cars and trucks, apparel, and new vehicles. The indexes for medical care, recreation, and communication were among the few major indexes that decreased in August.
The all items index rose 2.9 percent for the 12 months ending August, after rising 2.7 percent over the 12 months ending July. The all items less food and energy index rose 3.1 percent over the last 12 months. The energy index increased 0.2 percent for the 12 months ending August. The food index increased 3.2 percent over the last year.
This reading puts a bit of a crimp in Wall Street's plan for higher highs on a regular basis, cheaper money and lower borrowing costs for banks to make loans to corporations to buy back their own stock. WHile the betting for a 50 basis point cut next Wednesday (9/17) was in play after Wednesday's PPI came in at -0.1%. Fed Chairman Jerome Powell and his brain trust on the FOMC might see fit to only cut a quarter point off the federal funds target rate, then follow wiht similar cuts at the November and December meetings. The scary employment figures, however, could make the FOMC lean toward a quicker remedy, as in a half-point decrease.
Powell will tap-dance his way through the press conference, suggesting that the August CPI might be a one-off, driven mostly by increases in the price of gas at the pump, but the data tells a different story. Food prices remain stubbornly high and continue to strip disposable income from what remains of the middle class. The core at 3.1% suggests that Trump's tariffs are fueling further inflation in imported goods, which is just about everything Americans buy.
Trump's messaging on inflation and the economy needs to be sharpened, to focus on re-shoring the industrial base, which is a barren wasteland. It's going to take more than a few months or even a few years to shift manufacturing back to American soil. Trump's insistence that inflation is going or gone is without any realistic in fact. Tariff price increases have only begun to show up. In six months, with higher prices, a lower federal funds rate, and more liquidity for banks to lend overnight to each other and to their corporate brethren, inflation will almost certainly reignite.
From the reaction Thursday morning to the CPI release by the stock futures, traders are focused more on CPI than the troubling employment picture. The Fed is stuck between the proverbial rock and hard place. Chairman Powell may have to twist some arms at the FOMC confab next week if he indeed intends to lower interest rates.
As the CPI numbers were announced, all stock futures traded straight down though they remained positive. Just before 9:00 am ET, Dow futures were up 40, NASDAQ Futures up 35, and S&P futures added seven points.
The main benefactor of the higher inflation suggested by CPI was gold, which bounded higher upon the data release. The price was still down from Wednesday, as the usual suspects pushed it back from record territory, but it stood at $3,675 about a half hour before the bell. Silver was relatively stable at $41.45 and WTI crude oil fell 82 cents to $62.27.
The sour news on CPI should lead to another nasty social media outburst from the Tweeter-in-Chief. Maybe firing the entire staff at BLS and the Fed can set matters straight toward the administration's "all's well" messaging.
At the Close, September 10, 2024:
Dow: 45,490.92, -220.42 (-0.48%)
NASDAQ: 21,886.06, +6.57 (+0.03%)
S&P 500: 6,532.04, +19.43 (+0.30%)
NYSE Composite: 21,294.57, +101.46 (+0.48%)
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