Major stock indices ended the week mixed with U.S. based indices lower and foreign developed and emerging markets higher.  While, year over year, the consumer price index and producer price index have fallen, January’s monthly figures came in higher than expected.  Especially when removing volatile food and energy, core inflation remains significantly above the FED’s 2.0% target and traders are starting to believe that FED rate cuts will come later and be smaller than previously expected.

While the U.S. economy remains strong, both the U.K. and Japan have now entered a recession with two quarters of gross domestic product contraction.

Treasury bond yields rose with the 30-year bond yield at 4.434% and the 10-Year note at 4.284%.  Freddie Mac reported that the average 30-year mortgage rate rose to 6.77%.  Crude oil rose to $79.22 a barrel and natural gas fell to $1.603 per MMBTUs.  The U.S. dollar index rose to 104.28 and gold fell to $2025.40 an ounce.

• The U.K, reported inflation of 4.0% in January from a year ago.
  • Core prices, excluding volatile food and energy, rose 5.2%.
• The Federal Reserve reported industrial production fell 0.1% in January and is unchanged from last January.
  • Manufacturing fell 0.5%.
  • Mining, including oil and natural gas production, fell 2.3%.
  • Utility production rose 6.0%.
• The Commerce Department reported:
  • Housing starts fell a seasonally adjusted 14.8% in January from December and fell 11.7% from a year ago.
    • Permits, a sign of future housing starts fell 1.5% in January but are 8.6% above a year ago.

• The Labor Department reported:
  • The consumer price index rose 0.3% in January after rising 0.2% in December.
    • From a year earlier the CPI rose 3.1% in January down from 3.4% in December.
    • Core prices, excluding volatile food and energy, rose 0.4% in January and 3.9% from a year ago.
    • Shelter cost rose 0.6% in January.
    • Food rose 0.4%.
    • Energy fell 0.9%.

                Source: U.S. Department of Labor

• • The producer price index rose 0.3% in January and 0.9% from a year ago.
    • Excluding food, energy and trade services PPI rose 0.6%
    • Goods prices fell 0.2%.
    • Services prices rose 0.6%.
  • Seasonally adjusted first-time claims for unemployment were 212,000 a decrease from the previous week’s revised level of 220,000.
    • The 4-week moving average of claims, designed to smooth out volatility, was 218,500, an increase of 5750 from the previous week’s revised level. 
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil was unchanged at 13.3MM BPD.
  • Natural gas storage fell 49BN cubic feet and was above the highest level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs fell 2 to 497 and the number of natural gas rigs was unchanged at 121.
• Factset reported, with 79% of S&P 500 countries reporting, the blended earnings increase for Q4 was 3.2%.

Please call us if you have any questions.

Loren Rex – Emeritus

Erik A Smith, AIF® – President & C.E.O.

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).

Sources:

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

https://ir.eia.gov/ngs/ngs.html

https://www.freddiemac.com/pmms

https://www.wsj.com/market-data?mod=nav_top_subsection

https://bakerhughesrigcount.gcs-web.com/na-rig-count

https://www.census.gov/economic-indicators

https://www.spglobal.com/spdji/en/indices/indicators/sp-corelogic-case-shiller-us-national-home-price-nsa-index/#overview

https://www.bls.gov/jlt/

https://www.bls.gov/news.release/prod2.nr0.htm

https://www.bls.gov/news.release/empsit.nr0.htm

https://www.newyorkfed.org/newsevents/news/research/2024/20240206