Coffee With Greta: Fed’s Fave Inflation Gauge Comes in Hot


DJIA Futures: +7 (+0.02%)

SPX Futures: +5 (+0.1%)

NASDAQ Futures: +8 (+0.1%)

Good morning friends!

Futures are swinging between positive and negative territory as traders gear up for the final day of Q3.

Let’s get right to it!

PCE Inflation Pushes Higher in August

Another hot inflation reading is not what the Fed wants to see.

The Bureau of Economic Analysis’ personal consumption expenditures (PCE) price index rose 0.3% monthly and 6.2% year over year in August. 

That was up from the -0.1% monthly reading in July but a slowdown from 6.4% annually.

The core PCE price index, which excludes food and energy and is the Fed’s preferred measure, rose 0.6% monthly and 4.9% annually. 

That was also up from 0.1% monthly and 4.7% annually in July. 

The jump in core inflation pressures shows rising prices extending past just oil, gas, and food.

Treasury Yields Slip 

Treasury yields are slipping this morning as stocks try to rebound. 

The 2-year yield is down 4 basis points to 4.18% while the 10-year yield is off 8 basis points to 3.71%. 

Bonds have seen a volatile week alongside stocks as the market remains on edge about the Fed’s plans to continue aggressive rate hikes. 

Several more Fed officials are set to give speeches today including the Richmond and New York Fed Presidents, as well as Fed Vice Chair Lael Brainard.

Eurozone Inflation Jumps to Record High

New data from Eurostat shows inflation jumped to a record high of 10% across Europe in December. 

That’s up from 9.1% in August and higher than 9.7% expected. 

Nearly all segments of the economy saw increases in prices. 

Energy prices soared 40.8% year over year vs 38.6% in August. 

Food and alcohol prices saw the second largest increase at 11.8% vs 10.6% in August. 

Core inflation rose just 4.8% annually, up from 4.3% the prior month. 

This new data increases pressure on the European Central Bank to hike rates aggressively at its meeting in October.

Nike Drops As Supply Chain and Inventory Issues Weigh on Earnings

Nike (NKE) shares are down 12.3% ahead of the open despite topping fiscal Q1 expectations. 

Here’s how the sneaker giant’s results compared to analysts’ expectations:

  • EPS: $0.93 vs $0.92 expected
  • Revenue: $12.69 billion vs $12.27 billion expected

Earnings were down 22% year over year while revenue rose 4%.

Sales in China dropped 16% compared to a year ago while sales in North America increased 13%. 

The company continued to struggle with supply chain issues like higher shipping costs and longer shipping times. 

That caused inventory on its balance sheet to swell 44% to $9.7 billion. 

The company said it will offer more discounts this holiday season in an effort to reduce those inventory levels.

Nike said its direct sales grew by 8% in the quarter and its digital-brand sales rose 16%. 

The company has been focusing on selling its products directly to consumers and scaling back on wholesale partners like Foot Locker (FL). 

Nike’s wholesale business sales rose by just 1%. 

Oil on Track for First Quarterly Loss Since 2020

Oil prices are mixed this morning but on track to post their first quarterly loss since 2020. 

West Texas Intermediate crude futures are down 0.5% to under $81 bbl while Brent crude futures are up 0.1% to under $89 bbl. 

The market is looking ahead to next week’s OPEC+ meeting. 

The group is expected to discuss cutting its output in order to support prices that have been hit by lower demand. 

OPEC+ is said to be considered a 500,000 barrel per day reduction to production.

In Case You Missed It

  • Apple (AAPL) shares tumbled 4.9% on Thursday after the stock got hit with a rare analyst downgrade. Bank of America analysts downgraded the stock from buy to neutral and cut the price target to $160 from $185 per share. The group said they anticipate “weaker consumer demand” over the next year. The drop prompted a broader tech sell-off with Alphabet (GOOGL) and Microsoft (MSFT) both hitting fresh 52-week lows.

Leave a Comment: