The September Producer Price Index gave markets mixed signals

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Published Date 10/11/2024

Prior to PPI at 8:30 am ET the 10 year note was up 3 bps from yesterday at 4.10%. At 8:30 am September PPI was generally better than thought, the fly though was the annual core rate accelerated to 2.8% from an upwardly revised 2.6% and above expectations of 2.7%. Factory prices in the US were unchanged in September from August, below the previous month's 0.2% uptick and lower than forecasts of a 0.1% rise at 0.0%. Prices for services increased 0.2% after rising 0.4% in August, led by a 3% increase in cost for deposit services (partial). The indexes for machinery and vehicle wholesaling, furniture retailing, desktop and portable device application software publishing, apparel wholesaling, and airline passenger services also rose. Meanwhile, prices for goods were down 0.2%, led by a 5.6% drop in gasoline prices. Prices for diesel fuel, jet fuel, chicken eggs, home heating oil, and plastic resins and materials also fell. On an annual basis, producer price inflation eased to 1.8% from an upwardly revised 1.9%, a 7-month low but higher than forecasts of 1.6%. The core PPI went up 0.2% on the month, below 0.3% in August and in line with forecasts. Like yesterday, inflation isn’t slowing as much as traders expected, its what media calls sticky.

Yesterday’s September CPI inched up 0.1% from August, expected +0.2% reported +0.3%; then the Atlanta Fed’s Bostic who has been speaking a lot recently, said he is thinking the Fed should pause and not cut rates at the November FOMC meeting. The increase in the core rate in the past year meanwhile, edged up to 3.3% from 3.2% in the prior month. It was the first increase in a year and a half; the yearly rate of inflation slowed to 2.4% from 2.5% and touched the lowest level since February 2021. Also, yesterday weekly jobless claims increased more than estimates, +33K and continued claims also edged a little higher.

Jamie Dimon, JP Morgan Chase, in his remarks when the company issued its 3rd quarter data, was not very uplifting. “We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,”… “There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history,”… “While inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world,” Dimon said. “While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment.”

At 9:30 am the DJIA opened +74, NASDAQ -58, S&P +5. 10 year 4.10% +4 bps. FNMA 5.5 30 year coupon at 9:30 am -6 bps from yesterday’s close and -10 bp from 9:30 am yesterday.

At 10 am the mid-month University of Michigan consumer sentiment index softer than at the end of September.

Source: TBWS

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