Markets plunge while Treasury yields climb sharply on inflation fears

Dow sank 524 with buying into the close, only 222 stocks on the NYSE were gainers & NAZ tumbled 285  The MLP index was off 2+ to the 259s & the REIT index retreated a very big 7+ to 370.  Junk bond funds were not in demand & Treasuries had very heavy selling, raising yields sharply.  Oil was up nearly 1 to the 78s & gold dropped 27 to 2005 (more on both below).

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National Economic Council Director Lael Brainard blamed higher consumer prices on “shrinkflation,” doubling down on the latest battlefront of Pres Biden's corp pressure campaign.  “If you look at some of the staples, like eggs or milk, they have come down. But consumer brands, instead of actually lowering prices, they’ve shrunk packaging,” Brainard said.  “That’s the shrinkflation that the president is really calling attention to.”  Brainard's comments came hours after the consumer price index showed inflation trending above expectations, coming in 0.3% higher in Jan.  In particular, food prices slid up 0.4% during the month.  Consumer brands have raised prices over the past year to keep profits afloat.  Shrinkflation, the practice of reducing product sizes while keeping prices the same, is Biden's latest line of attack against corps, which he debuted on Super Bowl Sunday.  Both the White House & Biden's 2024 reelection campaign have touted inflation recovery as a key accomplishment of his economic agenda, dubbed Bidenomics.  But consumers have yet to feel the relief on their wallets & they blame Biden for it, according to recent polls.  Instead, Biden has pointed the finger at corp price-gouging tactics, which he says are the real driver of sticky high prices.

Lael Brainard slams food companies for ‘shrinkflation’ as White House attacks price gouging

Boeing (BA), a Dow stock, aircraft orders & deliveries fell in Jan as the company grappled with the fallout from a midflight blowout of a fuselage panel on one of its 737 Max 9s, an accident that overshadowed the manufacturer's strong finish in 2023.  The company handed over 27 planes last month, its lowest tally since Sep, compared with 67 deliveries in Dec.  It sold 3 BA 737 Max planes, but also logged 3 cancellations.  The deliveries were roughly in line with what was expected.  The 3 gross orders come after a big Dec when BA sold 371 planes.  BA rival Airbus handed over 30 planes in Jan.  BA execs have been scrambling to persuade airline customers, investors & regulators that it will find more reliable footing after the Jan 5 accident, when a door plug blew out on an Alaska Airlines (ALK) flight at 16K feet shortly after it left Portland, Oregon.  No one was seriously injured on Flight 1282, but the violent detachment ripped off headrests & exposed travelers to a gaping hole in the 26th row.  BA declined 4.96.

Boeing plane orders, deliveries dry up in January amid latest Max crisis

Toy company Hasbro (HAS) reported a more than 20% hit to its 4th-qtr revenue & issued a downbeat 2024 forecast.  For the last 3 months of 2023, HAS lost $7.64 per share, drastically wider than losses than 93¢ a year earlier.  After major adjustments related to goodwill & intangible assets, the company reported adjusted EPS of 38¢, still well below estimates.  For the full year 2023, revenue declined 15% to $1.3B, including double-digit sales drops in its consumer products & entertainment segments.  The company did see an increase in revenue, however, in its Wizards of the Coast & digital gaming segment, primarily due to licensing revenue related to Baldur's Gate 3 & Monopoly Go.  The company reduced its inventory by more than 50% compared to the year prior.  “2023 was a productive year for Hasbro, although not without some challenges,” CFO Gina Goetter said.  “As we navigated the current environment, we took aggressive steps to optimize our inventory, reset the cost structure, and sharpen our portfolio focus on play with the eOne film and TV divestiture.”  HAS expects further revenue declines in the year ahead.  In the Wizards of the Coast segment, the company expects a 3-5% revenue dip, coupled with a 7-12% hit to the consumer products business.  The company expects overall adjusted earnings before interest, taxes, depreciation & amortization of $925M to $1B.  It now expects to cut $750M in costs by the end of 2025, up from a previous target of $350-400M.  In Dec, the toymaker laid off 1100 employees after it had already cut 15% of its workforce earlier in the year.  The stock fell 69¢.

Hasbro reports 20% revenue drop, issues downbeat 2024 outlook

Gold prices fell as the $ surged after US inflation rose more than expected in Jan.  Gold for Apr closed down $25 to settle at $2007 per ounce, falling off overnight highs of $2047 following the release of the Jan inflation data. The $ surged after the US reported the Jan consumer price index rose more than expected last month, climbing 3.1% annualized, down from 3.4% in Dec but above expectations for a 2.9% rise.  The core rate, which excludes volatile food & energy, rose 3.9% annualized, unchanged from Dec & above the consensus estimate for a rise of 3.7%.  The ICE dollar index was up sharply following the data, last seen up 0.7 points to 104.87, as the report again cuts expectations the Federal Reserve will soon move to lower interest rates.  Treasury yields were also higher after the data, with the 2-year note last seen paying 4.611%, up 11.9 basis points, while the yield on the 10-year note was up 9.3 basis points to 4.279%.

Gold Closes Lower as the Dollar and Yields Jump After US Inflation Rose More than Expected Last Month

West Texas Intermediate (WTI) crude closed higher for a 7th-straight session as Middle East tensions continue to boil while OPEC left its optimistic forecast for 2024 unchanged at 2.2M barrels per day over 2023 levels & the $ surged after US inflation rose more than expected last month.  West Texas Intermediate crude for Mar closed up 95¢ to settle at $77.87 per barrel, while Apr Brent crude, the global benchmark, was last seen up 92¢ to $82.92.  Prices have risen for more than a week as tensions over the Israel-Hamas war rise, with Israel pushing into the crowded city of Rafah in Gaza with no agreement on a ceasefire seen.  Continuing attacks on Red Sea shipping are also raising shipping costs shipping companies re-route tankers around Africa.  However demand worries continue as China's economy slows & high interest rates cuts growth in developed economies.  Still, OPEC left its 2024 demand forecast intact in its influential Monthly Oil Market Report, with its expectations of a 2.M bpd rise, well above estimates from the Intl Energy Agency & the Energy Information Administration.  The $ surged after the US reported the Jan consumer price index rose more than expected last month, climbing 3.1% annualized, down from 3.4% in Dec but above expectations for a 2.9% rise.  The ICE dollar index was up sharply following the data, last seen up 0.76 points to 104.93.

WTI Crude Closes Higher Again on Mideast Worries

Treasury yields rose to roughly a 10 week high after hotter-than-expected CPI inflation.  The Fed will have an exciting meeting in Mar when it has to decide how to adjust to the latest rise.  That assumes rates do not fall from these levels.  While inflation is below its recent highs, prices remain elevated which pinches budgets of consumers.  Meanwhile oil is up to a 10 week high, partially related to the war in the MidEast.  The bulls will need to examine their rosy outlook for the economy.

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