Dow dropped 221, decliners over advancers about 3-1 & NAZ slipped back 54. The MLP index fell 1+ to the 231s & the REIT index declined 3+ to 399. Junk bond funds retreated & Treasuries saw a little selling after the inflation report, bringing higher yields (more below). Oil was even in the 78s & gold was off 1 to 1843.
AMJ (Alerian MLP Index tracking fund)
Inflation at the wholesale level rose more than expected in Jan, the latest sign that painfully high consumer prices could take some time to dissipate. The Labor Dept said that its producer price index, which measures inflation at the wholesale level before it reaches consumers, rose 0.7% in Jan from the previous month. It marked the steepest monthly increase since early summer & on an annual basis, prices are up 6%. Those figures were both higher than the 5.4% headline figure & 0.4% monthly increase forecast, a worrisome sign for the Federal Reserve as it seeks to cool price gains & tame consumer demand with the most aggressive interest rate hike campaign since the 1980s. Excluding the more volatile measurements of food & energy, core inflation rose 0.5% for the month, the highest increase since May 2022 & nearly double the estimate. The sharp increase in the monthly number stemmed from a big jump in final demand for goods, which climbed 1.2% in Jan, the biggest one-month increase since Jun. Nearly 1/3 of that increase can be traced to prices for gasoline, which rose 6.2% last month. The final demand index for food, meanwhile, fell 1%, as the cost of eggs & other items dropped.
Wholesale inflation surges more than expected in January
Cisco (CSCO), a Dow stock, reported better-than-expected fiscal Q2 results & lifted its forecast for the full year. EPS was 88¢, adjusted, vs 86¢ as expected & revenue of $13.6B vs $13.4B as expected. Total revenue grew 7% year over year in the qtr, which ended Jan 28. Some
components that go in its hardware products remain constraints, but
the company did see an improvement across the board, CEO Chuck Robbins
said. “Based on the sequentials
that we saw, demand remains stable,” he said, although he added some
sales cycles are longer than usual. The company called for fiscal Q3 adjusted EPS of 96-98¢ on 11-13% revenue growth. The forecast had called for adjusted EPS
of 89¢ on revenue of $13.6B, which implies 6%
growth. CSCO
lifted its guidance for the 2023 fiscal year & expects $3.73-3.78 in adjusted EPS on 9-10.5% revenue growth. Both numbers are well ahead of estimates. Backlog increased year over year. The backlog for
both hardware & software is still considerably higher than usual for
CSCO because of limited supply availability, said CFO Scott Herren. “We continue to have very low order cancellation rates, which remain below pre-pandemic levels,” Herren added. Logistics costs have come down somewhat, he continued. The stock rose 2.49.
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club.ino.com/trend/analysis/stock/CSCO_aid=CD3289&a_bid=6ae5b6f7
Cisco beats earnings and revenue estimates, boosts full-year guidance
Treasury yields ticked higher after Jan's wholesale prices report showed higher-than-expected inflation. The Jan PPI report is a reversal from Dec, when the PPI declined by 0.5%, leading many investors to believe that inflation was easing. The yield on the 10-year Treasury was trading at 3.852%, up about 4.4 basis points & the 2-year Treasury yield gained 3 basis points to 4.657%. Yields & prices move in opposite direction & one basis point equals 0.01%. The producer price index showed an increase of 0.7% in Jan, above the 0.4% expected. The report was followed by hawkish comments from Cleveland Fed Pres Loretta Mester. The 2 & 10-year yields were lower prior to the data release. Other economic reports today showed a smaller than expected number of weekly jobless claims & a steep decline for the Philly Fed economic index. In recent weeks, various Fed officials, including Chair Jerome Powell, have indicated that the central bank will base future policy decisions on economic data. That includes whether there will be further interest rate hikes and how big they will be.
Treasury yields rise as investors weigh inflation data, Fed official comments
After a weak opening, there was limited buying in the 2nd hour of trading. A Fed official talked about a 50 basis point increase after the report was published. That will be weighing on investors for the rest of the day.Dow Jones Industrials
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