Only when the tide goes out do you discover who’s been swimming naked. — Warren Buffett

1. U.S. Producer-Price Inflation Stays Hot, Reinforcing Fed’s Plan to Start Raising Rates — the producer price index for final demand increased 9.7% from January of last year and 1% from the prior month, latest Labor Department data showed. The gain from December was the largest in eight months. The median forecasts in a Bloomberg survey of economists called for a 9.1% year-over-year increase and a 0.5% monthly advance. The figures, which reflected broad increases across categories, may bolster the case for the Federal Reserve to be more aggressive on raising interest rates and shrinking its bond holdings in the coming months. Transportation bottlenecks, robust demand and labor constraints experienced through 2021 have carried over into this year and risk keeping price pressures well-elevated.
2. U.S. Retail Sales Grew by 3.8% in January — sales at retail stores, online and restaurants rose by seasonally adjusted 3.8% in January from the prior month, the Commerce Department reported. That marked the strongest monthly gain since last March when pandemic-related stimulus was being distributed to households. The jump in retail spending last month also represented a rebound from December, when sales fell by a revised 2.5%.
Increased spending was broad-based, with large gains for purchases of vehicles, furniture and building materials. Online sales also rose sharply. Restaurant and bar receipts dropped last month as consumers limited in-person services during the latest Covid outbreak. Retail spending has been choppy in recent months as consumers face rising inflation and supply-chain disruptions because of the Covid-19 pandemic, despite relatively robust household finances and a strong labor market. Unlike other economic-data reports produced by the U.S. government, retail sales aren’t adjusted for inflation. That means higher retail-sales figures can reflect higher prices rather than more purchases.
3. Mortgage Rates Approaching 4% — the average fixed rate for a 30-year mortgage was 3.92% for the week, the highest since late May 2019, according to Freddie Mac’s Primary Mortgage Market Survey. The rise is in response to inflation and higher-than-expected consumer spending, Freddie Mac chief economist Sam Khater said. The climb has occurred in tandem with the 10-year Treasury yield’s rise. Year to date, the yield has increased roughly 0.8 percentage point, crossing the 2% mark for the first time since 2019 last Thursday.
4. Nasdaq Sinks Into Death Cross After 16% Drop From November Peak — the Nasdaq Composite Index tumbled into an ominous “death cross” technical formation Friday for the first time since April 2020, when the pandemic battered the global economy and U.S. equity markets swooned. Following Friday’s 1.2% decline, the index has now shed 16% since touching a record high on Nov. 19. The pattern, which is used by some investors to assess longer-term trends, has at times presaged further weakness. It appears when an index’s short-term 50-day moving average crosses below its longer-term 200-day moving average. With inflation surging, the Federal Reserve is preparing for its sharpest monetary policy tightening in decades in an attempt to bring down prices. This has sparked wild swings among the rate-sensitive tech, Internet and growth stocks that fill the Nasdaq Composite, since their elevated valuations become targets as borrowing costs rise.

The week ahead — Economic data from Econoday.com:

This entry was posted on Monday, February 21st, 2022 at 5:54 pm and is filed under Weekly Summary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.