Is Inflation Rearing its Head?

Broad positive market movement continues, signs of concerns, though, trickling in.By: Shlomo Cooper, Senior Analyst at Tradenet

The main Wall Street indexes rallied to greater historic highs yesterday, led by banking stocks after Fed Chairwoman, Janet Yellen, remarking that it would be unwise to wait too long to hike rates. Apple (AAPL) set a new historic high for the second day in a row, contributing to the gains on the 3 main indexes, the Dow Jones, S&P 500 and NASDAQ. Almost 90 days have now gone by since the S&P 500 fell 1% on a day. Market volatility has plummeted to its lowest level in 10 years.

Yellen related that pushing off a rate hike is likely to compel the central bank at a later point to tighten monetary policy faster, which could pose a recessionary threat. Likewise, Yellen voiced uncertainty about economic policy under a Trump administration. In her testimony before the Senate Banking Committee yesterday, Yellen did not note whether the Fed is still planning on hiking rates 3 times this year, nor did she signal whether the next rate hike will be in March or in June. Most analysts expect the next hike to be in June.

The banks expected to benefit from higher rates were those leading the market higher. Goldman Sachs (GS) rose 1.29%, Bank of America (BAC) jumping 2.82%. The financial sector (XLF) ended up by 1.16%, the banking sector (KBE) soaring 1.59%. Year-to-date, the banking sector is up 4.5%.

In summary for the day, the Dow Jones climbed 0.45%, the S&P 500 tacking on 0.4%. The NASDAQ rose 0.32%.

On the economic front, the Producer Price Index (PPI) rose 0.6% for January, double expectations. Annualized producer inflation now stands at 1.6%, a level not seen since 2014.

On the S&P 500, 60 stocks rose to new 52-week highs, without a single stock dipping to a new yearly low; on the NASDAQ, 124 stocks recorded new 52-week highs, 22 falling to new yearly lows.

About 6.7 billion shares changed hands on U.S. exchanges, in keeping with the 6.7 billion average over the last 20 trading days.

Wednesday: The producer inflation rate, which was twice the forecasted figure, is likely to weigh on consumer inflation figures expected today – especially in light of the fact that the energy and housing sectors were hot last month. A surprise surge in inflation is likely to heighten pressure on the Fed to hike rates, and possibly, as soon as the Fed’s March Open Market Committee meeting. Likewise, high inflation levels are likely to add another facet to Trump’s infrastructure spending and tax reform plans. After all, higher interest rates will exacerbate budget forecasts.

The two key reports today include retail chain sales and the Consumer Confidence Index, both likely to provide further hints into how close the Fed is to executing its next rate hike. Inflation figures are expected to come out at 8:30 N.Y. time and point to annualized inflation of 2.4%. In December, the annual inflation rate rose past 2% for the first time in 2 years. The Fed’s annual inflation target is 2%. The Consumer Price Index is expected to record January gains of 0.3%.

Another significant report today will be coming out at 8:30, i.e. January retail chain sales, the figure expected to climb 0.1% compared to the 0.6% gains recorded in December. Other figures today will include the Empire State Survey on manufacturing at 8:30, with industrial output coming out at 9:15 and business inventories at 10:00.

The U.S. Department of Energy will release its weekly crude inventory report at 10:30.

Trump is also expected to command attention today in light of his meeting with Israeli PM Binyamin Netanyahu.

The companies releasing their numbers today before opening include PEP and GRPN. After closing, be primed for the numbers of CSCO, AMAT, KHC, MAR, CAR and CBS.

IndexLastDaily changeR2R1PPS1S2


Wednesday’s Hot Stocks: PEP, PG, AIG, FOSL, ESRX, A

IPOs: None

Have a great trading day! 

Economic Calendar


DAYTIME (EST)EventForecastImpact
Wednesday8:30Empire Manufacturing7.0Medium
Wednesday8:30Retail Sales0.1%High
Wednesday9:15Industrial Production0.0%Medium
Wednesday10:00Business Inventories0.4%Medium
Wednesday10:00NAHB Housing Market Index68Medium
Wednesday10:30Crude InventoriesLow
Thursday8:30Housing Starts1220KMedium
Thursday8:30Initial Claims245KHigh
Thursday8:30Philadelphia Fed17.5Medium
Friday10:00Leading Indicators0.5%Medium



Earning Calendar


HCPHCP, Inc.AMMonday
RYAAYRyanair Holdings plcAMMonday
TEVATeva Pharmaceutical Industries LimitedAMMonday
VNOVornado Realty TrustPMMonday
NBLNoble Energy, Inc.PMMonday
DISCADiscovery Communications, Inc.AMTuesday
DPSDr Pepper Snapple Group, Inc.AMTuesday
QQuintiles IMS Holdings, Inc.AMTuesday
TMUST-Mobile US, Inc.AMTuesday
TAPMolson Coors Brewing CompanyAMTuesday
INCYIncyte CorporationAMTuesday
DVNDevon Energy CorporationPMTuesday
ESRXExpress Scripts Holding CompanyPMTuesday
AAgilent Technologies, Inc.PMTuesday
AIGAmerican International Group, Inc.PMTuesday
PEPPepsico, Inc.AMWednesday
ADIAnalog Devices, Inc.AMWednesday
WMBThe Williams Companies, Inc.PMWednesday
LBTYKLiberty Global plcPMWednesday
LBTYALiberty Global plcAMWednesday
AMATApplied Materials, Inc.PMWednesday
CBSCBS CorporationPMWednesday
MARMarriott International, Inc.PMWednesday
NTESNetEase, Inc.PMWednesday
MROMarathon Oil CorporationPMWednesday
NTAPNetApp, Inc.PMWednesday
CSCOCisco Systems, Inc.PMWednesday
KHCThe Kraft Heinz CompanyPMWednesday
MGMMGM Resorts InternationalAMThursday
AEEAmeren CorporationAMThursday
WMWaste Management, Inc.AMThursday
ALXNAlexion Pharmaceuticals, Inc.AMThursday
EDConsolidated Edison, Inc.PMThursday
DVADaVita Inc.PMThursday
DLRDigital Realty Trust, Inc.PMThursday
CPBCampbell Soup CompanyAMFriday
SJMThe J. M. Smucker CompanyAMFriday
MCOMoody’s CorporationAMFriday
DEDeere & CompanyAMFriday



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1314.2.2017CXWLongOpen +1.75%


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