DHUnplugged #702: Inflation Nation

Emerging markets breaking out of long consolidation

PPI HOT - Market does not care

A Meme stock face ripper!

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Warm Up

- Inflation reports PPI today and CPI tomorrow

- Sentiment is dropping - wondering why

- Meme stock face ripper

- EV days - losses not acceptable

- PPI and CPI this week

Market Update

- Another good week - seems like coming out of downturn

- Rates down- 10Y Treas falling over past week

- S&P 500 near record

- Emerging markets breaking out of long consolidation

- PPI HOT - Market does not care

Fed talk

- Fed's Goolsbee and Kashkari

- There has been cross currents in the data.

- There has been some bumps in the road on inflation in 2024.

- The Fed is in a wait and see mode

- Cautious about how restrictive policy is.

- More data is needed before they can predict a rate cut.

- There is a high bar for another rate hike, but not ruling it out.

- Leases trending up is a concerning signal.

----- What does any of that tell us?

------ We need to start a movement to SHUT THE FED UP (STFU)

Latest Inflation Readings

- The Producer Price index for final demand increased 0.5% month-over-month in April (Briefing.com consensus 0.3%) following a downwardly revised 0.1% decline (from 0.2%) in March. The index for final demand, excluding food and energy, also increased 0.5% month-over-month (Briefing.com consensus 0.2%) following a downwardly revised 0.1% decline (from 0.2%) in March.

- On a year-over-year basis, the index for final demand was up 2.2%, marking the largest increase since April 2023, while the index for final demand, excluding food and energy, was up 2.4%, unchanged from March.

- The key takeaway from the report is that nearly three quarters of the increase in final demand prices was due to a 0.6% increase in the index for final demand services, something that will detract from the Fed's confidence that inflation is on a sustainable path to its 2% target.

Powell speaking AGAIN!!!!!!!!!!!!!

- Fed Chairman Jerome Powell says he doesn't think next rate move will be a hike, more likely a hold; time will tell if policy is sufficiently restrictive; PPI reading was quite mixed

Getting AI Overload

- OpenAI CEO Sam Altman says "not gpt-5, not a search engine, but we’ve been hard at work on some new stuff we think people will love! feels like magic to me" 

Sentiment

- Consumer sentiment fell sharply in May to the lowest level in six months as Americans cited concerns about stubbornly high inflation and interest rates and fears that unemployment could rise

- May Univ. of Michigan Consumer Sentiment - Prelim 67.4 vs 76.5 Briefing.com consensus; April Final was 77.2

Fed Put

- Markets melting up since last Powell comments

- There is  a new spin on the old "Fed put." The latter rested on an unspoken assurance that the Fed would step in with easier policy to forestall a market meltdown.

- The new version doesn't guarantee a rate cut soon, but it has created an unspoken assurance that market participants can trade around the idea that the next monetary policy move is likely to be a rate cut.

Meme Stocks

- Gamestock was up 80% and  many of the other names moving hard

--- Seems like the original Gamestock dude - Roaring Kitty put out a tweet on Monday and the stock went bananas...

More Squeeze

- Shares of the vaccine maker soared 99% Friday, after the company signed a $1.2 billion licensing agreement with Sanofi that includes commercializing a combined Covid-19 and flu shot.

- The move boosts a stock that had plunged about 99% — prior to the deal — from its 2021 peak amid waning demand for its Covid vaccine.