January CPI Expected to Rise 0.5%, 10-Year Yield Hits 2023 High, Retail Sales Up 3.0% M/M

Economists are expecting the overall consumer price index (CPI) to rise 0.5% in January, after December’s upwardly revised 0.1% gain.[0] The yearly rate is anticipated to decrease to 6.2% from 6.[1] The core CPI, excluding food and energy, is seen rising 0.3%, which would lower the core CPI inflation rate to 5.5%.[2] This prediction was backed up by the 10-year Treasury yield rising 5 basis points to 3.81%, a 2023 high, which suggests investors still expect quarter-point Fed rate hikes at the March and May meetings.[3]

Data released today showed that retail sales rose 3.0% M/M in January, significantly higher than the estimated 1.7% increase and following a 1.1% dip in December 2022.[4] This suggests that consumer spending has remained strong and could keep prices elevated, which in turn could increase pressure on the Federal Reserve to stick with its rate hikes.[4]

At the same time, the U.S. crude oil prices sank 0.6% to $78.59 a barrel, while copper futures sank 1.4%.[5] Natural gas futures however, popped 6.7%.[5] CRDO saw a sharp decrease of nearly 50% in pre-market trading after estimating their Q4 revenue to be between $30 million and $32 million, far under the expected $58.3 million.[6]

At the Economic Club of Washington, D.C. last week, Jerome H. Powell, the Federal Reserve Chair, warned that the journey to reduce inflation will most likely be “bumpy” and not “smooth”.[7] His expectation was proven true by the hot January jobs report, and if the economic data continued to exceed expectations, then they would increase rates more than they are predicting currently.[8] However, a lot of data will come out between now and then, and Tuesday’s CPI will be long forgotten.[1]

Roku’s stock skyrocketed following the close of trading, as its Q4 loss and revenue exceeded expectations.[3] Shares of Cisco Systems rose 4% after the company reported results that exceeded analysts’ expectations for both revenue and profit.[9]

For the last seven months, the Consumer Price Index (CPI) – a measure of a selection of goods and services – has dropped from its 40-year high of 9.[10]

0. “Consumer prices rose 6.4% in January” Fox Business, 14 Feb. 2023, https://www.foxbusiness.com/economy/will-cpi-reinforce-powells-disinflation-view

1. “Fade The CPI; Here’s What Matters To The Fed, S&P 500” Investor’s Business Daily, 13 Feb. 2023, https://www.investors.com/news/economy/fade-the-cpi-inflation-report-what-matters-to-the-fed-sp-500

2. “U.S. inflation is likely ‘far stickier’ and could last a decade, Bill Smead says” CNBC, 14 Feb. 2023, https://www.cnbc.com/2023/02/14/bill-smead-us-inflation-is-far-stickier-and-could-last-a-decade.html

3. “Dow Jones Futures: Market Rally Keeps Rising” Investor’s Business Daily, 16 Feb. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-market-rally-keeps-climbing-shopify-roku-cisco-are-key-earnings-movers

4. “Nasdaq, S&P, Dow mixed as January retail sales jump by the most in almost two years” Seeking Alpha, 15 Feb. 2023, https://seekingalpha.com/news/3936430-nasdaq-sp500-dow-jones-stock-market-retail-sales-data-earnings

5. “Futures Fall After Market Shrugs Off Inflation; Hot Stock Crashes” Investor’s Business Daily, 15 Feb. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-market-rally-shrugs-off-hot-inflation-tesla-runs-airbnb-flies-on-earnings

6. “Stocks Plunge Before The Open As Sticky U.S. Inflation Sparks Rate Worries, U.S. Retail Sales Data In Focus” Barchart, 15 Feb. 2023, https://www.barchart.com/story/news/14218794/stocks-plunge-before-the-open-as-sticky-u-s-inflation-sparks-rate-worries-u-s-retail-sales-data-in-focus

7. “Inflation data will test ‘disinflation’ optimism: What to know this week” Yahoo News, 12 Feb. 2023, https://news.yahoo.com/stock-market-week-ahead-consumer-price-index-inflation-retail-sales-172419890.html

8. “CPI: Prices rise 6.4 percent in January, seventh month of easing inflation” The Washington Post, 14 Feb. 2023, https://www.washingtonpost.com/business/2023/02/14/inflation-easing-cpi-january/

9. “Stock futures are flat Thursday as traders digest earnings, latest data: Live updates” CNBC, 16 Feb. 2023, https://www.cnbc.com/2023/02/15/stock-market-today-live-updates.html

10. “US inflation eases again for seventh consecutive month” The Guardian, 14 Feb. 2023, https://www.theguardian.com/business/2023/feb/14/us-inflation-eases-seventh-consecutive-month