Producer Prices

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Jan. 14. Be sure to check out the ‘occasional fearless prediction’ at the bottom of this page…

State of Play

Stocks reversed yesterday to rebound after some selling early in the session. The S&P 500 eked out a higher open whilst tech stocks measured by the Nasdaq registered a small decline. As we eye our board of indicators for signs of direction at 0530, things are pretty quiet:

• Stock index futures are pointing to a higher open, with tech stocks leading things out. The Nasdaq is up 0.6%, same as the Russell 2000 which tracks small caps. The S&P 500 is up 0.5%;

• Cryptos are also rebounding and that in a major way. Bitcoin is up almost 5% to trade close to $97,000;

• Commodities are quiet. WTI crude oil is down 0.3% to trade around $77/barrel. Copper is up 0.4%;

• Bonds are unchanged. The 10-year yields 4.78%.

Today’s Known Events

Producer prices, out at 0830, give us our first look at December inflation. This will be particularly crucial after Friday’s hot jobs report raised fresh concerns about the dreaded i-word.

Economist expectations for today’s Producer Price Index are as follows:

• Headline PPI of 0.4% month-over-month, identical to last month;

• Headline PPI of 3.4% year-over-year (3.0% last month);

• Core PPI of 0.2% MoM (0.2%);

• Core PPI of 3.7% YoY (3.4%)

As you can see this calls for a re-acceleration of wholesale prices, which alone is worrisome seeing how this is (or should be) a pretty reliable leading indicator for consumer prices, under the premise that producers pass higher costs off to consumers.

(‘Trader scrutinizes producer prices chart’ by author via Grok AI)