Core inflation still punchy
Grateful to econodata wizard James Foster for staying up last night to analyse the all-important inflation figures from the US, especially given that this certainly isn't my wheelhouse.
Headline inflation fell sharply to 0.3 per cent in the month, largely driven by declines in energy prices (-2.7 per cent).
That's the good news!
However, the core rate of inflation was stronger than expected, at 0.6 per cent.
Headline inflation slowed to 8.3 per cent for the year, and core inflation slowed to 6.2 per cent.
Durable goods inflation has now peaked, but food prices were still rising.
Overall, it was good to see year-on-year inflation has now peaked, and will decline from here.
But services inflation was still strong, largely because shelter makes up 40 per cent of it, although there was a broader-based punch to this figure than just rising rents.
To my untrained eye, I assume this means that sticky services inflation won't slow down until rents and other shelter costs start to roll over significantly, which may take some time.
All of which means further rate hikes will follow over the second half of 2022.
Market reaction
The NASDAQ fell a further 3.2 per cent overnight, with ARKK down another 10 per cent, and Beyond Meat getting murdered after hours on its latest released numbers to be down 33 per cent over the day (so that's another big growth story stock that's lost 90 per cent of its value).
MicroStrategy dropped another 27 per cent fell back to where it was in 2020, when it began hoovering up Bitcoins in earnest on a leveraged bet.
And listed exchange platform Coinbase fell another 30 per cent, to be down 85 per cent from 6 months ago, reflecting some pain in that space.
Of the tech stocks, some of the big names are starting to look more attractively priced than they were, having kicked off 2022 with some sharp declines.
Disclaimer: who knows where the bottom is, and there may be more to come.
In summary - and I'm no expert in the dynamics of US inflation - but from market pricing and breakevens it looks like the Fed is still behind the curve given the surge in services inflation, and will be hiking rates towards 2-3 per cent forthwith.
Stay safe out there.
