MacroEdge: CPI Comes in Cool & Stocks Love It, Global Labor Market Downturn Underway, Cuts on the Horizon/Yields Move Lower, Update on Vision
In this mid-week CPI report special - Don and Six tackle the critical issues surrounding economic data, the markets, global economy, and more. #MacroEdge
Happy Wednesday evening Team MacroEdge,
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In our email last evening we discussed the likely outcome of a soft CPI print and we got it… soft CPI = lower yields. In the context of any market mania - it’s always difficult to bifurcate the data from the assets themselves but that’s what we’ll focus on tonight (especially as correlation remains limited w/bad news = good for yields).
CPI fell to 3.4% y/y and continues to sit above the Fed’s 2% target. The market reacted to this very positively as both the long-end and the short-end of the yield curve fell (10Y fell). We still haven’t seen movement in the shortest-term yields (1M/3M) but this could shift if labor data softens in the months to come here in the United States. The 10Y continues to be the bellwether as highlighted in our weekly report about a month ago with the gauge from Piper Sandler sitting in this now ‘very optimal’ zone for loose financial conditions + rising assets. Recent ollar weakness has also contributed to rising US asset prices as well. Until we get a better picture again on the overall technicals/etc we’ll focus more on the economic data and yield movement which will translate into markets if labor data gets too cool.
The data that wasn’t covered today (outside of CPI) included yet another dose of weak economic data - contracting business inventories, falling Empire State Index (led by a drop in employment/hours), a drop in the NAHB Index (which we expected back in our 4/28 report based on lumber), and a flat real retail sales print (non-seasonal adjustment still continues to be positive).
On business inventories - this is a mixed indicator and not one I would prefer to use as a leading, rather than coincident gauge of business health. In previous downturns, it has been mixed on a lead/lag basis.
Today we’ll cover:
Global CB Policy & Yields /// Global Employment Data
Advancing Equities
Six Discusses an Update on Vision
