Inflation Reports are In

After a very strong run higher, stocks are falling in early morning trading.  The drop in the markets is being heavily attributed to renewed fears of a growing number of Coronavirus cases.  China announced that there were 15,152 new cases and 254 deaths yesterday.  The spike in new cases is due to the count now including people who show the symptoms of the virus without actually being diagnosed.  With this increase, the number of people who are considered to have the virus is nearly 60,000, with the death toll around 1,367.  With many in China still hunkered down as a protective measure against catching this deadly virus, there are certain to be long term global economic impacts.  We will have to see how the markets respond as time goes on.

We received an update on consumer inflation this morning via the Consumer Price Index (CPI) report.  The Headline number showed that prices increased by 0.1% last month, which was just beneath expectations of 0.2%.  When stripping out volatile food and energy prices, the Core rate showed an increase of 0.2%, which increased the year-over-year number from 2.3% up to 2.5%.  Given that this is well above the Fed’s target rate of 2%, it seems strange to thing the Fed will likely be cutting rates one more time in the months to come.  They must know that the economy isn’t strong enough to sustain without the Fed’s support, which is not something many discuss when talking about how good the economy is right now.

We will maintain a locking bias.