Coffee With Greta: Wholesale Inflation is Still Running Hot

DJIA Futures: +49 (+0.2%)

SPX Futures: +9 (+0.3%)

NASDAQ Futures: +39 (+0.4%)

Good morning friends!

Futures are higher even after the release of some hot inflation data. 

Let’s get right to it!

Wholesale Inflation Rises More than Expected

Wholesale inflation pressures rose more than expected in September as prices remain stubbornly high in the face of the Fed’s tightening policy. 

The Bureau of Labor Statistics producer price index rose 0.4% monthly and 8.5% annually vs analysts’ expectations for a 0.2% monthly increase and 8.4% annually.

That was still a deceleration from the 8.7% annual increase in August. 

The core PPI, which excludes food, energy, and trade services, rose 0.3% monthly and 7.2% annually. 

That was in line with expectations on a monthly basis and slightly lower on an annual basis.

Producer prices are a leading indicator for consumer prices. 

The September consumer price index will be out tomorrow morning. 

PepsiCo Tops Q3 Expectations, Hikes Forecast

PepsiCo (PEP) shares are up 2.1% ahead of the open after beating Q3 expectations and hiking its full-year forecast. 

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

• Adjusted EPS: $1.97 vs $1.84 expected
• Revenue: $21.97 billion vs $20.84 billion expected

Revenue rose 9% year over year.

Pepsi said it is accelerating its cost management initiatives, including smaller sizes for its variety packs. 

The company now expects full-year revenue growth of 10% to 12% up from 10% previously. 

Pepsi also sees core constant EPS growth of 10% vs 8% in its prior forecast.

Intel Reportedly Planning Job Cuts

Intel (INTC) shares are up 0.8% in premarket trade following a Bloomberg report the company is considering thousands of job cuts. 

The report said those layoffs will be announced as early as this month. 

Some divisions, like sales and marketing, are expected to see cuts that affect about 20% of staff. 

The reported plan comes in the face of a sharp slowdown in PC demand.

Advanced Micro Devices (AMD) released preliminary Q3 results last week that sharply missed expectations due to that slowing demand. 

Adjustable-Rate Mortgage Demand Jumps

Mortgage demand fell last week as rates pushed higher but buyers are now looking toward more risky loan types in order to purchase a home. 

The Mortgage Bankers Association reported total application volume fell 2% last week as the average 30-year fixed contract rate rose to 6.81% from 6.75%. 

That’s the highest rate since 2006. 

But the average rate for 5/1 adjustable rate mortgages was lower at 5.56. 

The ARM share of applications last week was just under 12% vs 3% at the beginning of this year. 

Purchase applications fell 2% weekly and were down 39% annually. 

Refinance applications also fell 2% weekly and plunged 86% compared to a year ago. 

Oil Prices Fall Flat

Oil prices are slightly lower today as the strong dollar overshadows supply worries.

West Texas Intermediate crude futures are down 0.4% to under $89 bbl while Brent crude futures are down 0.2% to $94 bbl. 

The market is in a back-and-forth over supply and demand with the strong U.S. dollar also pushing prices lower. 

The dollar hit a 24-year high against the yen today, making dollar-denominated commodities like oil more expensive for other currency holders.

Fed Minutes on Deck

The Fed will release the minutes of its September policy meeting at 2:00 p.m. ET today. 

The bank voted for its third straight 0.75% rate hike at that meeting and penciled in another large rate hike at the November meeting as well.

The market will be looking at the minutes for more clarity on the bank’s discussion around when rates will peak. 

Traders have been hoping for an earlier Fed pivot than laid out in the dot plot if the economy continues to weaken. 

But today’s PPI data and last week’s strong jobs data don’t make that case.