Weekly Market Update: Inflation data gets more stubborn as markets await central bank action
Coming into the week the focus was squarely on inflation. Reports surrounding ongoing Japanese wage talks provided fodder to those who think the BOJ will start to raise rates, perhaps as soon as next week. For the second straight month US CPI ran hotter than most expected, but some of the sting of the surprisingly strong January data was softened by negative revisions. The owners-equivalent-rent index decelerated as expected, but the widely tracked supercore services index did not slow as much as many had hoped. PPI readings also surpassed estimates along with import/export price data and came alongside a rise in New York Fed inflation expectations. US Treasury yields tracked higher with the 2-year climbing above 4.7% and the 10-year back to 4.3%. Oil prices also moved up throughout the week as geopolitics remained a worry on the supply side, and strong US demand continued to underpin global demand. Fed rate cut expectations receded, but only modestly given the inflation data. Fed fund futures markets continued to price ~75bps of cuts this year, likely to begin in June or July. ECB officials pointed to a similar playbook by suggesting rate cuts are still likely coming in June and perhaps July, too.
For the most part, equities initially whistled past the signs inflation data was proving to be stickier than most have been forecasting. Nvidia and the SMH continued to drift below the exuberant highs seen just one week ago. As the week progressed, though, rates tracked higher and equity sentiment deteriorated. Bitcoin continued to forge new all-time highs above $70K before reversing into Friday. For the week, the S&P and Nasdaq each slipped 0.1%, and the DJIA was about flat.
Corporate news featured a few more notable reports from the tail end of the earnings season. Oracle continued the successful expansion of its cloud business, beating its numbers and touting that this was the first quarter in which cloud revenue has surpassed license & support sales. Shares of Dick’s Sporting Goods surged to new all-time highs as it reported muscular results in Q4 and boosted its dividend payout. ADM reported solid results in its delayed quarterly report after cleaning up the accounting mess in its Nutrition unit.
In deals news, US Steel got the rug pulled out from under its merger with Nippon Steel after President Biden took a stand against the agreement in an effort to court union votes. Former bidder Cleveland Cliffs said it would not reinstate its loftly offer for US Steel, but could consider a much lower bid. In the same vein, British electronics store Currys found itself without any bidders after both Elliott Advisors and JD.com announced they would not pursue an offer. Meanwhile, TikTok remained under pressure from the US Congress to relinquish ties to mainland China and former Treasury Secretary Mnuchin stepped in to try and buy the US-facing part of the social media platform.
LAST WEEKED
(CN) CHINA FEB CPI Y/Y: 0.7% V 0.3%E; Feb food CPI Y/Y: -0.9% v -5.9% prior
MON 3/11
(CN) US Steelworkers Union (USW) to file USTR petition on China practices related to shipbuilding and maritime logistics - FT
(EU) Reportedly ECB is likely to keep banks minimum reserve level (MRR) at 1%, despite push by some officials to raise it – press
(JP) BOJ seen ending negative rate policy next week if Rengo wage data on Mar 15th is 'strong' – JIJI
(TW) Taiwan top security official: We do Not see any signal of a war in the Taiwan Strait breaking out; China running joint combat readiness patrols near country every 7-10 days on average - Parliament comments
(US) TTN Reminder: Fed's Bank Term Funding Program (BTFP) set to cease making new loans today, on Mar 11th, as scheduled
BALY Standard General (23.2% shareholder) proposes deal at acquire all remaining shares at $15.00/shr - 13D/A filing
ORCL Reports Q3 $1.41 v $1.37e, Rev $13.3B v $13.3Be
ORCL Guides Q4 EPS $1.62-1.66 v $1.64e, Rev +4-6% including Cerner (+6-8% ex Cerner) v +6.5%e - earnings call
ORCL CEO teases a 'joint announcement' with Nvidia next week - earnings call
TUES 3/12
(IN) INDIA FEB CPI Y/Y: 5.1% V 5.0%E (6th straight month within target range)
(JP) MORE PRESS REPORTS THAT BOJ OFFICIALS SAID TO BE CURRENTLY SPLIT OVER HIKE IN MARCH OR APRIL; BOJ'S MARCH 18-19TH MEETING OUTCOME IS CURRENTLY TOO CLOSE TO CALL – PRESS
(US) Atlanta Feb Sticky-CPI annualized 4.0% v 6.7% m/m, Core 4.3% v 6.8% m/m (update)
(US) FEB CPI M/M: 0.4% V 0.4%E; Y/Y: 3.2% V 3.1%E (1st reacceleration since Dec 2023)
(US) BofA Feb credit & debit card spending per household +2.9% y/y v -0.2% y/y prior; Notes retail spending has turned softer over the last few months
(US) FEB MONTHLY BUDGET STATEMENT: -$296.3B V -$298.0BE
(US) Republican Ken Buck to leave congress on March 22nd
7203.JP Outcome of fourth scheduled meeting with union for Spring wage negotiations: Co responds to union's wage hike demand in full (biggest pay hike in 25 years) - Japanese press
ADM Reports FY23 $6.98 adj v $7.03e, Rev $93.9B v $101.6B y/y; Adds $2B to its share buyback program; Recorded a goodwill impairment charge of $137M related to the Animal Nutrition reporting unit
AAPL Apple said to let developers distribute apps directly from their sites for the first time, as part of changes required by new EU rules - press
HON Guides Q1 $2.12-2.22 v $2.18e, Rev $8.9-9.2B v $9.01Be; Affirms FY24 $9.80-10.10 v $9.96e; Rev $38.1-38.9B v $38.4Be, Organic Rev +4-6% - JPM conf slide
KSS Reports Q4 $1.67 v $1.24e, Rev $5.96B v $5.97Be
WED 3/13
(US) Association of American Railroads weekly rail traffic report for week ending March 9th; 472.7K total units, +5.0% y/y (update)
(UK) JAN MONTHLY GDP M/M: 0.2% V 0.2%E
(JP) TTN Research Alert: Japan large caps such as Toyota, Nissan, Mitsubishi Heavy, Nippon Steel, Hitachi, Panasonic and others reported meeting their respective union’s demands in full
(US) DOE CRUDE: -1.5M V 0ME; GASOLINE: -5.7M V -1ME; DISTILLATE: +0.9M V -0.5ME
(US) TREASURY $22B 30-YEAR BOND REOPENING DRAWS 4.331% V 4.229% PRIOR; BID TO COVER 2.47 V 2.37 PRIOR AND 2.41 OVER LAST 8 REOPENINGS
ADS.DE Reports Q4 Op -€377M v -€373Me, Rev €4.81B v €4.81Be; Notes should see some growth in Q1
BUD Altria (10% holder) announces intends to Sell a Portion of its Investment in Anheuser-Busch InBev
EOAN.DE Reports final FY23 Adj Net €517M v €1.83B y/y, adj EBITDA €9.37B v €8.06B y/y, Rev €93.7B v €115.7B y/y
ITX.ES Reports FY23 Net €5.40B v €4.13B y/y, EBITDA €9.85B v €8.65B y/y, Rev €35.9B v €32.6B y/y; Feb 1st to Mar 11th sales +11% y/y
LEN Reports Q1 $2.57 v $2.21e, Rev $7.31B v $7.44Be; Notes demand strength driven by strong household formation
LLY Amazon Pharmacy said to deliver certain prescription drugs by Eli Lilly, including weight loss treatment Zepbound, directly to patients’ homes through the new direct-to-consumer website LillyDirect – press
X Reportedly Pres Biden plans to voice concerns about Nippon Steel takeover of US Steel - FT
THRS 3/14
(CN) CHINA PBOC CONDUCTS CNY387B IN 1-YEAR MEDIUM TERM LENDING FACILITY (MLF) AT 2.50% VS. 2.50% PRIOR
(UK) PM Sunak: Ruling out May 2nd election - TV interview
(US) FEB ADVANCE RETAIL SALES M/M: 0.6% V 0.8%E; RETAIL SALES (EX-AUTO) M/M: 0.3% V 0.5%E
(US) FEB PPI FINAL DEMAND M/M: 0.6% V 0.3%E; Y/Y: 1.6% V 1.2%E (highest annual pace since Sept 2023)
(US) BOFA INSTITUTE: WEEK-TO-MAR 9TH TOTAL CARD SPENDING +0.1% Y/Y V -1.0% PRIOR WEEK; OVERALL, SPENDING IN MARCH SEEMS TO BE IMPROVING AFTER A SOFT BUT STABLE FEBRUARY
IEA Monthly Oil Report (OMR); Sees some room for OPEC+ to increase oil production later in 2024
2317.TW Reports Q4 (NT$) Op 48.9B v 51.7Be, Rev 1.85T v 1.96T y/y; Expects sales for AI servers to grow more than 40% in 2024
BYTEDANCE.IPO Former Treasury Sec Mnuchin: We are putting together group to try and buy TikTok – CNBC
DKS Reports Q4 $3.85 v $3.35e, Rev $3.88B v $3.78Be; Raises Quarterly dividend 10% to $1.10 from $1.00 (indicated yield 2.34%)
NUE Guides Q1 $3.56-3.65 v $3.83e
FRI 3/15
(JP) BOJ leaning toward guiding short term rate to 0.0-0.1% range during rising wages - Nikkei
(JP) Japan's Rengo Union [largest trade union in Japan]: 1st round of FY24 annual wage hikes at 5.28% v 3.80% y/y (largest in 30 years and first time above 5% since 1991); Base pay to rise 3.70% v 2.33% y/y [**Note: last key data point ahead of BOJ meeting next week]
(JP) Japan unions said to have won >5% average wage hike - Japanese press
(JP) Japan Trade Union Confederation (Rengo): Scheduled to deliver overall % wage increase following Spring wage talks 03:15 ET (07:15 GMT)
(US) FEB IMPORT PRICE INDEX M/M: 0.3% V 0.3%E; Y/Y: -0.8% V -0.8%E
(US) MAR EMPIRE MANUFACTURING: -20.9 V -7.0E; Prices Paid: 28.7 v 33.0 prior (1st drop in 3 months)
(US) MAR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 76.5 V 77.1E
(US) Redfin: Feb new listings jumped 3.8% m/m on a seasonally adj basis to the highest level since Sept 2022 and up 14.8% y/y, the largest annual gain since May 2021
CURY.UK JD.com says it does NOT intend to make an offer for Currys