The Buzz on Business for August 14th 2024 

The business, financial, economic or stock market story that has dominated our collective consciousness over the last year has not been the labor market, jobs or wages, it has not been housing prices, it has not been the chronic weakness in manufacturing, it has not even been higher for longer interest rates! The story that has dominated has, of course, been inflation. 

Also, to us, here at the Buzz on Business, a corollary has been how wrong the political and chattering classes have been about the causes, the effects and the solutions to that inflation. 

Later this morning, the Consumer Price Index Complex rolls out. Economists expect that the CPI as well as the Core CPI, both increased by 0.20%, or a 2.4% annual rate in July. That’s not awful. It’s above the Federal Reserve’s target of 2.0% but it’s not awful. Certainly, well below the double-digit rates we confronted just two years ago. 

Over the last 12 months, the Month-over-month Consumer Price Index has ranged from a high of 0.60% twelve months ago in July of 2023, to a low of -0.10%, just last month, in June. 

It came in at 0.0% twice during the last year. In May of this year and October of last year. Eight times during the last twelve months, the CPI came in at or above consensus. Four times in was lower than expected and three of those have been the last three months, April, May and June. 

The median MoM inflation rate is 0.24% and the numbers have been trending downward and in recent months that trend has accelerated, especially versus expectations. 

We think that 2% inflation is way too high. It means the value of the money you earn today is cut in half in just 35 years! We think that absent the ham-fisted interventions of self-interested political types; inflation would actually be negative—that your dollars would be more valuable tomorrow than they are today and that that would radically change our economy and culture for the better. There has been consistent deflation over the last fifty years, in TVs and computers, communications, airline tickets. 
 
Imagine if that were the case for everything! 
 
With government debt and deficits measured in the trillions upon trillions of dollars and a co-dependent, indulgent central bank that’s unlikely. But it does seem that 2.0% inflation is very much on the horizon. 

Stock Market Report 

Stocks rallied across the board to strong gains on Tuesday, in response to the better-than-expected inflation figures. Breadth was good as advancing stocks exceeded decliners by over three-to-one. We’d have been happier if it had all come on better volume which came in well below average but hey! We’ll take it! 

• The Dow Jones Industrials gained 409 points, that’s a bit over 1.0% and they closed at 39,766. 

• The S&P 500 rallied for a 1.7% gain. That’s 90 S&P points and it closed at 5,434. 

• The techs had a particularly good day. The NASDAQ Composite was up a stout 2.4%. It closed at 17,192, a 408-point gain. 

• And the small caps had a good day. The Russell 2000 was up 1.6%, that’s 33 points and they closed at 2,095. 

Bond Market Report 

Rates fell throughout the day on Tuesday and closed near their lows of the session. 

• The yield on the 2-year treasury was off 8 basis points and closed back below 4.0% at 3.936%. The 2-year was yielding 5.4% last October. 

• The 20-year was off 5 ticks and closed at 4.241%. 

Oil, Gold, and Bitcoin 

• Oil gave back some of its recent gains. It was off $1.61, and a barrel now changes hands at $78.46. 

• Gold was down a minuscule $3.70, and a troy ounce will now set you back $2,506.90. 

• And Bitcoin got back above $60,000. It gained $1,796.79 and at 4:00 PM ET stood at $60,903.42. 

CPI Due Out. Will it Confirm the PPI? 

2^nd quarter earnings season continues to wind down. Home Depot was the only company that showed up on the Giant Quote Machine on Tuesday and the company posted excellent numbers indeed. Home Depot earned $4.67 per share, versus expectations of $4.54, on revenue of $43.18 billion, which exceeded estimates by more than $500 million. 

But the big story was inflation. The Producer Price Index, which measures inflation at the wholesale level, came in at 0.10%, versus expectations of 0.20%. And, the Core PPI, which excludes food and energy, came in flat. No inflation in July! Again, expectations were for a 0.20% increase. 

Good news on inflation indeed. 

Today, the Consumer Price Index complex rolls out. Everyone here at the Ministry of Truth is calling in favors and dialing up sources to get the best analysis possible for you here tomorrow on the Buzz!