Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, April 11. The Bottom Line segment of today’s podcast starts at (3:53) for listeners who want to skip ahead.
State of Play
Stocks dropped yesterday after a hotter-than-anticipated CPI, but finished off the lows. Small caps saw the worst of it with the Russell 2000 giving up 2.8%. Bonds got beat up, especially at the short end of the curve, which makes sense given what the CPI says about Fed policy. As we look at our board of indicators at 0630, there is no clear sign of direction quite yet:
Stock index futures are pointing to a lower open, with small caps leading the drop again. The Russell is down 0.7% with S&P 500 and Nasdaq off about 0.3% each;
Cryptos are showing some signs of life however, with Bitcoin up 2% to trade around $70,700;
Bonds are consolidating after yesterday’s sell-off. The 2-year yields 4.96% whilst the 10-year yields 4.55%. The 2-year is about 20 basis points higher than it was yesterday. You have to go back to last fall to see it at these levels;
Commodities aren’t doing much. WTI crude oil is down 0.5% to trade around $85.50/barrel. Copper is down 0.6%.
Today’s Known Events
Yesterday we had consumer prices. Today it’s the turn of producers. out at 0830. This is arguably even more important under the premise that producers simply pass higher costs off to consumers.
Economists who were surveyed expect a 0.3% month-over-month increase to headline PPI, down from the 0.6% recorded last month. That would still increase the annualized headline figure to 2.2% from 1.6%. Core PPI, which excludes food and energy, is expected to increase by 0.2% MoM after a 0.3% rise last month, which would push the annualized figure to 2.3% from 2.0%.
The European Central Bank decides on interest rates at 0815. The ECB is widely expected to keep its key policy rate at 4.5%.
Seeing how it’s Thursday we’ll get initial jobless claims at 0830 as well. The expectation here is for 216,000 new claims, down a bit from the 221,000 recorded last week but a bit ahead of the four-week average of 214,000.
We do have some earnings today as well. Constellation Brands (STZ 0.00%↑), CarMax (KMX 0.00%↑), and Fastenal (FAST 0.00%↑) are among companies reporting before the open at 0930. The banks report tomorrow.
The Bottom Line©️
So yeah, inflation isn’t going anywhere and it’s hard to see how the Fed can cut rates against that backdrop. But the fact that yesterday’s selling was not as broad-based as it could have been — and the fact that stocks rebounded into the close — tells us there is still plenty of risk appetite out there. And then there are cryptos. If there is going to be a broad move to risk off, then you figure Bitcoin will have to retreat from its current perch around $70,000. And that ain’t happening.
Perhaps some investors even used yesterday as a buying opportunity. The Contrarian for his part did buy a little more Johnson & Johnson (JNJ 0.00%↑).
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Producer Prices