Thursday's Market Minute: Watching The CPI And PPI Reports

We’ve got a few closely-watched numbers headed our way today, and with all the focus on the new all-time highs in the indices, these seem to be flying below the radar – which I think could be a mistake.

There’s been a lot of optimism in the last few days tied to coronavirus vaccine news – the S&P 500, the Dow, and the Russell all posted new highs – but have investors lost sight of the potential headwinds inflation could present? It’s not just here in the U.S.: we saw the Stoxx Europe 600 to its best levels since February on the news, and the Nikkei has been strong as well.

Today we have Consumer Price Index (CPI) at 8:30am ET, and tomorrow Producer Price Index (PPI) figures will be released. If there’s one thing that could derail this move up and spoil investors’ appetite for stocks, that’s inflation and rates inching higher too fast. With all the stimulus we’ve seen from the Fed and lawmakers here in the U.S., inflation concerns, while still not a major issue, should not be ignored; many feel that when the trend starts to shift, it will move fast.

While commodities and wage pressures still remain muted, keep an eye on the data this week: investors will take notice of any signs of inflation with the TNX inching up to near 1% and the longer dated TYX to back above 1.75%, especially if CPI and PPI come in higher than expected. This week’s expectations are for a 0.2% increase month-over-month for both the CPI and the CPI Ex-Food and Energy.

PPI is expected to show prices for the producer are on the rise a bit faster – both PPI and the PPI Ex-Food and Energy are expected up 0.4%. So with rates on the rise, more stimulus expected, and concerns related to inflation still looming – keep a close eye on these numbers. Too hot, too fast could slow the momentum higher and raise investors’ concerns about inflationary pressures.

Keep an eye on the U.S. Dollar; it’s been holding near 2020 lows and if we start to see inflationary pressures emerge, rates to the upside and indices coming off as a result, will the dollar rally as well? If so, potentially another headwind for stocks. Lots to keep an eye on tied to the inflation data.

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