Latest / Markets with Megan: A Quick Financial Markets Update / Deciphering Mixed Market Signals from Latest Price Indexes | Episode 154 | 07-12-24

Transcript

Deciphering Mixed Market Signals from Latest Price Indexes | Episode 154 | 07-12-24 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Megan Horneman: It's like we took three steps forward and just one step back.
• 0:05
  Megan Horneman: We got two different inflation indicators over the past two days.
• 0:08
  Megan Horneman: It's Friday, july 12th, and I'm talking about the consumer price index that we got yesterday, which was a fantastic report for the Federal Reserve, and then the producer price index today, which shows a kind of a mixed message here from the inflation standpoint.
• 0:23
  Megan Horneman: But let's break down the consumer side first.
• 0:25
  Megan Horneman: On the consumer price index, it actually came in weaker than expected on both the headline and the core level when you extract food and energy.
• 0:34
  Megan Horneman: At the headline level, it actually declined for the month, so that's actually deflation.
• 0:39
  Megan Horneman: That was the first time we've had a negative number since May of 2020.
• 0:43
  Megan Horneman: So, deep into the pandemic.
• 0:45
  Megan Horneman: On the core level, where we extract food and energy, it rose only 0.1%.
• 0:51
  Megan Horneman: Market was looking for 0.2%, so that brought the year-over-year level down to a 3.3% growth, compared to 3.4% last month, and that's the lowest annual rate since April of 2021.
• 1:06
  Megan Horneman: So great news there for the Fed.
• 1:08
  Megan Horneman: Not exactly where they want it to be, but it's slowly getting into that trajectory.
• 1:14
  Megan Horneman: We knew that getting down to 2% would take more time, be a little bit more difficult to do, but it is moving in that direction.
• 1:22
  Megan Horneman: In some of the details, the energy was a huge component.
• 1:26
  Megan Horneman: Obviously, that's why you saw a big decline in the headline level.
• 1:29
  Megan Horneman: Energy commodities were down almost 4%.
• 1:32
  Megan Horneman: When you look at new vehicles, used cars and airline fares, airline fares were down 5% on a month-over-month basis.
• 1:40
  Megan Horneman: On a year-over-year basis, they're actually down 5% as well.
• 1:43
  Megan Horneman: Used cars and trucks are down 10% on a year-over-year basis.
• 1:45
  Megan Horneman: They're actually down 5% as well.
• 1:45
  Megan Horneman: Used cars and trucks are down 10% on a year-over-year basis.
• 1:47
  Megan Horneman: So this is a lot of goods and we know this.
• 1:51
  Megan Horneman: As the supply chain and all repaired itself and demand for goods started to slow, then we would see this kind of in the prices and we are seeing that.
• 1:59
  Megan Horneman: So good, prices definitely lower.
• 2:01
  Megan Horneman: Now the stickier side, the services and the housing.
• 2:04
  Megan Horneman: This is what we've talked about.
• 2:05
  Megan Horneman: Services only grew 0.1% on a month-over-month basis.
• 2:09
  Megan Horneman: They're still growing 5% on a year-over-year basis, so that's not great.
• 2:14
  Megan Horneman: We would like to see that much lower, but only growing 0.1%.
• 2:17
  Megan Horneman: So that was pretty good.
• 2:19
  Megan Horneman: Owner's equivalent rent We've tended to see, you know, four-tenths, five-tenths, six-tenths on a month-over-month basis.
• 2:27
  Megan Horneman: We got 0.3% for the month, so that is good news as well.
• 2:30
  Megan Horneman: That's the lowest month-over-month pace that we've had since April of 2021.
• 2:34
  Megan Horneman: Still growing over 5% on a year-over-year basis, but again slowly getting down to what the Fed wants to see.
• 2:41
  Megan Horneman: So markets loved this.
• 2:43
  Megan Horneman: Yesterday had a great rally, we saw some rotation out of the tech stocks, bond yields were down and this morning we came in to get the I guess you could say sister report to this the producer price index, and unfortunately producer prices came in hotter than expected.
• 2:57
  Megan Horneman: So on the headline level, the economists were looking for 0.1%.
• 3:03
  Megan Horneman: It came in at 0.2.
• 3:04
  Megan Horneman: When you strip out food and energy, economists were looking for two-tenths.
• 3:08
  Megan Horneman: It was up four-tenths.
• 3:09
  Megan Horneman: And when you look at the ex-food and energy on a year-over-year basis, it's now 3% compared to last month being up 2.3.
• 3:19
  Megan Horneman: So not the right direction from the producer standpoint.
• 3:22
  Megan Horneman: Some of those things are similar story.
• 3:25
  Megan Horneman: It was all energy and goods related but services are still growing.
• 3:29
  Megan Horneman: Actually, services prices jumped up 0.6% and are growing 3.5% on a year-over-year basis.
• 3:36
  Megan Horneman: Now, this report today didn't do much to the expectation for Fed rate cuts.
• 3:41
  Megan Horneman: There is some people starting to price in the possibility of a July rate cut.
• 3:46
  Megan Horneman: I think that's highly, highly unlikely.
• 3:48
  Megan Horneman: I think this is completely.
• 3:50
  Megan Horneman: Even September is completely dependent on what happens with the next labor report, labor market report, and we'll get that.
• 3:58
  Megan Horneman: We won't get that until early August.
• 4:01
  Megan Horneman: That's all we have today.
• 4:02
  Megan Horneman: Thank you so much.
• 4:03
  Megan Horneman: Please like and share this podcast with friends or family, and if you would like to see any of our other podcasts, you can view them on verdence.
• 4:11
  Megan Horneman: com backslash podcast.
• 4:14
  Megan Horneman: Thank you.