LIVE MARKETS Inflation mentions surge in Q4 earnings calls

  • Major U.S. indexes fall; Nasdaq down >1%
  • Utilities lead S&P sector decliners; materials sole gainer
  • Dollar dips; crude, gold, bitcoin up
  • U.S. 10-Year Treasury yield rises to ~2.03%

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Investor chatter is all about inflation on Thursday after a hotter-than-expected CPI reading earlier in the day, and S&P Capital IQ is out with a report saying how much companies are talking about the topic as well.

Mentions of inflation-related words appeared in 71.0% of calls in reports on the fourth quarter of 2021, up from 39.2% in the comparable period a year ago, according to the analysis of earnings call transcripts from S&P Capital IQ.

It also showed that talk of "supply chain" and "logistics" have increased as well in the fourth quarter, "with up to 77.8% of calls for 'supply chain' and 61.2% of calls for 'logistics' in the fourth quarter."

"These are significantly higher than pre-pandemic levels, such as the fourth quarter of 2019," according to the report.

Based on an analysis by Panjiva, a business line of S&P Global Market Intelligence, which is a division of S&P Global Inc, consumer discretionary goods like apparel and leisure products are having the biggest year-over-year change in mentions of inflation, according to the note.

Talk of supply chains remained high in the textiles, apparel and luxury goods industry, increasing to 87.5% of calls in the fourth quarter of 2021 from 76.9% of calls in the equivalent quarter in 2020; in leisure goods, there was a slight decrease to 94.1% of calls from 94.4% of calls, the report said.

"These sectors import products with lower margins that require cost competitiveness to gain and hold market share, making them more supply chain-focused than other segments."

"Some of the largest growth in supply chain mentions came from the healthcare equipment industry... indicative of an industry facing waning demand for pandemic-related products, as well as chip shortage issues affecting new products," according to the analysis.

(Caroline Valetkevitch)



After January CPI data came in hotter than expected, it would seem inflation would be sitting at the forefront of investors' minds. Indeed, the Bespoke Investment Group says that inflation has easily been the No. 1 concern of investors for the last year now.

That said, according to Bespoke, when looking at market performance on the day of prior reports since the start of 2021, you wouldn't necessarily think the markets were all that obsessed with inflation.

They note that since the start of 2021, there has only been one CPI report that has come in below expectations (the August report released on 9/14/21). Of the remaining 12 reports, eight have been greater than forecasts, and four have been in line with estimates.

"Given all those higher than expected reports, you would think that the average S&P 500 performance on CPI days since the start of 2021 would be negative and Treasury yields would move higher, but that hasn't really been the case."

However, Bespoke says that the S&P 500's (.SPX) average performance on the day of CPI reports since the start of 2021 has been a rise of 0.25% (median: -0.04%) with gains 61.5% of the time.

Moves in the Treasury market have been "even more counter-intuitive." On the 13 prior report days since the start of 2021, the U.S. 10-Year Treasury yield has dropped an average of about 2 basis points (median: -0.6 bps) with increases in yield less than a third of the time.

Nevertheless, around midday on Thursday, the SPX is currently off around 0.4%, while the 10-year yield is jumping about 7 bps.

Traders will no doubt be eyeing where these markets close.

(Terence Gabriel)



Tuesday's data gave evidence of an economy running hot enough to provoke increased Fed hawkishness, with a robust labor market and the hottest core inflation reading since "E.T." ruled the box office and Steve Miller released his immortal "Abracadabra."

Consumer prices (USCPI=ECI) increased last month by 0.6%, hotter than the 0.5% consensus and building on December's upwardly revised 0.6% monthly spurt. read more

Stripping out food and energy, prices rose at a 6% annual rate (USCPFY=ECI), a 0.5 percentage point acceleration and the highest year-over-year "core" reading in 40 years - since August 1982, to be exact.

While the Labor Department's consumer price index (CPI), based on prices urban consumers pay for a basket of goods, is not the U.S. Federal Reserve's favored inflation yardstick, the hot CPI print does provide some red meat for hawks.

"(The report) doesn't suggest inflation is peaking anytime soon. It might mean the Fed could get more aggressive," says Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "The jury is still out whether we'll have a 25-basis-point or 50-basis-point rate hike in March."

Cardillo, who expects inflation "will peak in the beginning of the fourth quarter," due to ongoing supply bottlenecks and structural rather than transitory issues, suggests the Labor Department's reading of February wage growth could be the catalyst to push Powell & Co to hike key interest rates more aggressively.

Line-by-line, the largest monthly increases were seen in airfares, utilities, prescription drugs, apparel, and autos. A 0.8% monthly drop in gasoline prices provided cold comfort.

The graphic below shows core CPI along with other major indicators, and the extent to which they continue to soar well above the central bank's average annual 2% inflation target:


What do you say we take a moment to drop in on our grouchy old friend the misery index?

It takes different forms, but for our purposes it adds the unemployment rate to annual growth of headline CPI.

It's true that January's 4% unemployment print suggests the labor market has fully recovered from the pandemic recession, when added to the whopping 7.5% annual headline CPI reading, we have a level of misery not seen since June of 2020, the immediate aftermath of the steepest and most abrupt economic downturn in history:

Misery index

The number of U.S. workers filing first-time applications for unemployment benefits (USJOB=ECI) edged 6.7% lower last week to 223,000, a larger drop than analysts expected, according to the Labor Department.

Although the number remains within a range economists associate with healthy labor market churn, it's likely that claims data are inflated by infections - albeit abating - due to the Covid Omicron variant, disguising the effects of the ongoing labor drought, which has employers reluctant pass out pink slips.

"The drop in initial claims continues the unwinding of the hit triggered by the Omicron Covid wave, which briefly drove claims up to a peak of 290K in the week of January 15," writes Ian Shepherdson, chief economist at Pantheon Macroeconomics. "We expect claims to hit a new cycle low by the middle of next month; the pre-Omicron low was 188K in the first week of December."

Ongoing claims, reported on a one-week lag, inched down to 1.621 million, sinking further below the pre-pandemic level of about 1.7 million:

Jobless claims

Wall Street is in the throes of a moderate sell-off by late morning trading, with all three major stock indexes in the red as benchmark Treasury yields danced along the 2% line.

Financials (.SPSY), which stand to benefit from rising interest rates, are having a decent day; but tech (.SPLRCT), which had enjoyed a near-zero Fed funds target rate, is among the losers.

(Stephen Culp)



Major U.S. stock indexes are down in early trading Thursday after a reading on inflation was higher than forecast, and added to expectations the Federal Reserve will move to curb rising prices.

Rate-sensitive S&P 500 sectors are among the biggest percentage losers including real estate (.SPLRCR) and utilities (.SPLRCU).

The benchmark 10-year U.S. Treasury yield is flirting with 2% for the first time since August 2019.

The consumer price index gained 0.6% last month, matching its increase in December, the Labor Department said. In the 12 months through January, the CPI jumped 7.5%, the biggest year-over-year increase since February 1982 and above the forecast for a rise of 7.3%.

"It is another data point that points to the fact the Fed will be in the market raising rates, and at some point during that rate hiking cycle you'll likely see something break in the economy. That's what we've seen historically from the Fed," said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago.

Here is the early market snapshot:

for feb 10

(Caroline Valetkevitch)



In the wake of above-estimates U.S. January CPI data, U.S. equity index futures are red, while the U.S. 10-Year Treasury yield is flirting with 2%.

Indeed, these hotter-than-expected inflation numbers may keep the market concerned that a more aggressive Fed is on the table.

Therefore, it's perhaps no surprise that CME Nasdaq 100 futures , given the concentration of tech titans/large-cap growth shares in the Nasdaq 100 index (.NDX), are taking the biggest hit in premarket trade with a loss of around 1.5%.

The broader Nasdaq Composite (.IXIC) would also appear poised to feel the heat. This after failing to overwhelm resistance at its Jan. 10 low at 14,530:


A IXIC break below its Feb. 4 low at 13,850 can put its January trough at 13,094 at risk.

The May 2021 low was at 13,002, and the 38.2% Fibonacci retracement of the Composite's March 2020-November 2021 advance is at 12,552. The May 2021 low was at 12,397.

That said, on weakness, traders will be watching momentum oscillators read more , and internal measures closely to see if they can hold their recent lows. read more

(Terence Gabriel)



Terence Gabriel is a Reuters market analyst. The views expressed are his own

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