Morning Minutes

Improved US Inflation Numbers Met With Market Choppiness




The US Consumer Price Index came in at 6.5%, in-line with street expectations and down from 7.1% last month, while core CPI, excluding food and energy also met expectations (5.7% in-line, vs previous 6.0%). Meanwhile, US weekly jobless claims beat expectations (205K vs street 216K), suggesting that the US job market remains robust into January.

US index futures have been volatile following the news first selling off then bouncing back indicating indecision among investors over what the numbers mean. While this result indicates that inflation pressures continue to ease in general, the market reaction suggests that some investors perhaps were hoping for more and may be thinking that this decline is likely not enough to alter the Fed’s current monetary tightening program, while others may be encouraged by the employment data. In other words, this could be shaping up as a battle between the fast/easy money crowd focusing more on liquidity and investors focused more on the prospects for corporate earnings.

Earnings season kicks off tomorrow with results from several senior US banks including JPMorgan Chase and Bank of America, plus UnitedHealth, Delta Airlines, and Blackrock. In addition to the headline numbers, investors may look at loan loss provisions from the banks for insights into the health of US consumers and business. From Delta, investors may be watching for commentary on recent turbulence in the airline sector related to weather and technology issues. Confession season has remained relatively quiet so far.  

Currently, US index futures are flat to up 0.2%, while in Europe, the Dax is up 0.2% and the FTSE is up 0.6%. The US 10-year treasury note yield is holding steady near 3.50%. The US Dollar is sliding on the news falling 1.1% against Gold and 0.4% against the Loonie, Euro and Pound.  

Tonight brings trade numbers from China which could have an influence on commodity trading. Ahead of this announcement, WTI Crude Oil is up 1.4% and Copper is up 0.4%.   

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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