Markets rise as investors try to shake off inflation and tariff concerns

Dow recovered 115, advancers over decliners 2-1 & NAZ added 172.  The MLP index was up 2+ to the 316s & the REIT index went up 2+ to 408.  Junk bond funds hardly budged & Treasuries were purchased which reduced yields (more below).  Oil was even in the low 71s on prospect of Russia-Ukraine peace talks & gold went up 16 to 2944.

Dow Jones Industrials

US producer prices increased solidly in Jan, offering more evidence inflation was picking up again & strengthening financial market views that the Federal Reserve would not be cutting interest rates before the 2nd ½ of the year.  The producer price index (PPI) for final demand rose 0.4% last month after an upwardly revised 0.5% gain in Dec, the Labor Dept's Bureau of Labor Statistics (BLS) reported.  The forecast called for the PPI rising 0.3%.  In the 12 months thru Jan, the PPI advanced 3.5% after increasing 3.3% in Dec.  The report followed news yesterday that consumer prices accelerated by the most in nearly 1½ years in Jan, dimming hopes that the central bank would resume cutting rates in Jun.  Financial markets now expect a rate reduction in Sep, though some economists believe the window for further policy easing has closed, citing strong domestic demand & a stable labor market.  Fed Chair Jerome Powell told lawmakers yesterday "we are close but not there on inflation," adding "we want to keep policy restrictive for now."  The Fed left its benchmark overnight interest rate at 4.25%-4.50% in Jan, having reduced it by 100 basis points since Sep, when it launched its policy easing cycle.  The policy rate was hiked by 5.25 percentage points in 2022 & 2023 to tame inflation.  Pres Trump's fiscal, trade & immigration policies are seen fanning inflation.  A 25% tariff on goods from Canada & Mexico was suspended until Mar.  But a 10% additional tariff on Chinese goods went into effect this month.  With Jan's PPI report, the BLS updated weights to reflect price movements in 2024, & seasonal adjustment factors, the model that the gov uses to iron out seasonal fluctuations from the data.

US producer prices rise slightly above expectations in January

Treasury yields pulled back even after another inflation report pointed to hotter-than-expected price pressures.  The 10-year Treasury yield fell 8 basis points to 4.554% & the 2-year Treasury yield dipped 4 basis points to 4.321%.  1 basis point equals 0.01%, & yields & prices move in opposite directions.  Data above showed the producer price index, which measures what producers get for their goods & services, increased by a seasonally adjusted 0.4% in Jan & 0.3% was expected.  Excluding food & energy, core PPI was up 0.3%, in line with the forecast.  Treasury yields had jumped yesterday after a hot consumer inflation report.  The consumer price index rose 0.5% on a monthly basis in Jan & 3% from a year earlier. The forecast had been expecting increases of 0.3% & 2.9%, respectively.  Core inflation, which excludes food & energy costs, rose 0.4% for the month & 3.3% on an annual basis.  That was also higher than the expected 0.3% monthly rise & the 3.1% year-over-year increase.

10-year Treasury yield falls despite a second concerning inflation report

A top Canadian lawmaker& candidate to replace Prime Minister Justin Trudeau has called for a 100% tariff on Tesla (TSLA) vehicles in an effort to counter tariffs from Pres Trump.  Chrystia Freeland worked as Trudeau's finance minister until she resigned in Jan, now running to replace Trudeau as prime minister.  The thrust of her economic policy urges Canada to inflict "the biggest trade blow that the United States has ever endured."  "We are going to go after American stakeholders who matter to the White House," Freeland said.  "I have proposed a 100 percent tariff on all Teslas. I am calling on all the countries that are affected by this tariff to join us, and our retaliation will target specific Trump constituencies."  Freeland also targeted dairy farmers in Wisconsin, saying they are "important" to Trump.  "We're not going to let them sell their products in Canada anymore," she added.  Freeland's threats come after Trump issued pauses on the tariff plans against both Canada & Mexico.  Both countries agreed to some capitulations in order to stave off the tariffs & give time for further negotiations.  TSLA stock went up an amazing 14.69.

Candidate for Canadian prime minister pledges to target Tesla vehicles with 100% tariffs

Stocks ticked higher after Pres Trump said he plans to introduce reciprocal tariffs later in the day.  Meanwhile, investors digested another report that suggested inflation is once again heating up.  Markets are on alert after Trump signaled in a social media post that his promised like-for-like tariffs will arrive later today.