Markets plummet after January consumer price index disappoints

Dow dropped 434, only 207 stocks are higher on the NYSE & NAZ retreated 176.  The MLP index was off 2+ to the 259s & the REIT index nosedived 9+ to the 367s.  Junk bond funds slid lower & Treasuries were heavily sold on the inflation news bringing sharply higher yields (more below).  Oil was fractionally higher to the 77s & gold tumbled 24 to 2008.

AMJ (Alerian MLP Index tracking fund)

The Labor Dept said that the consumer price index, a broad measure of the price of everyday goods including gasoline, groceries & rent, rose 0.3% in Jan from the previous month, more than expected.  Prices climbed 3.1% from the same time last year, which also came in above the 2.9% expectation.  Both of those figures came in higher than the 0.2% monthly increase and 2.9% headline figure forecast.  Other parts of the report indicated that inflation has been slow to retreat.  Core prices, which exclude the more volatile measurements of food & energy, climbed 0.4% (3.9% annually).  Both of those figures are slightly higher than estimates.  Altogether, the report indicates that while inflation has fallen considerably from a peak of 9.1%, it remains above the Federal Reserve's 2% target.  High inflation has created severe financial pressures for most US households, which are forced to pay more for everyday necessities like food & rent.  The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations.  Housing costs were the biggest driver of inflation last month.  Rent costs rose 0.6% for the month & are up 6.1% from the same time last year.  Rising rents are concerning because higher housing costs most directly & acutely affect household budgets.  Other price gains also proved persistent in Dec.  Food prices, a visceral reminder of inflation for many Americans, rose 0.4% over the course of the month.  Grocery costs also rose 0.4% last month & are up 1.2% compared with the same time last year.  The price of both health insurance & auto insurance also jumped in Jan, rising 1.4% over the course of the month.

Inflation rises faster than expected in January as high prices persist

The yield on the 10-year Treasury note surged after Jan inflation data came in stronger than expected.  The 10-year Treasury yield added nearly 10 basis points to 4.269%, while the yield on the 2-year Treasury climbed more than 13 basis points to 4.601%.  Yields & prices move in opposite directions, & 1 basis point equals 0.01%.  Market participants have watched for any signs that inflation has cooled enough to allow the Federal Reserve to begin cutting interest rates.  But today's data added to doubts that the central bank would be able to lower the cost of borrowing several times this year, which has been a centerpiece of equity market bullishness in recent months.  Some investors are even anticipating 10-year yields moving back above 5.00%.  Later in the week, Jan retail sales figures are slated for release on Thurs, while the Jan producer price index comes out on Fri.

10-year Treasury yield shoots higher as January CPI is hotter than expected

Coca-Cola (KO), a Dow stock & Dividend Dividend Aristocrat, posted quarterly earnings that met expectations & sales that topped estimates, as higher prices helped the beverage maker overcome a volume decline in North America.  EPS was 46¢, down from 47¢ a year earlier.  Excluding items, the EPS was 49¢.  Net sales rose 7% to $10.8B.  Organic revenue, which strips out acquisitions & divestitures, climbed 12% in the qtr.  Unit case volume growth was 2% for the qtr.  The metric excludes pricing & foreign currency.  Execs estimated that the conflict in the Middle East hurt volume growth by 1% in the 4th qtr.  North American volume shrank 1%, as demand for the water, sports drinks, coffee & tea fell.  CEO James Quincey said some North American consumers with less disposable income have been squeezed more by inflation.  Those shoppers have focused more on affordability & spent more time at home.  For 2024, KO is forecasting organic revenue growth of 6-7% & an increase in comparable EPS of 4-5%.  The company expects that foreign exchange rates will weigh on both its earnings & revenue for the full year.  Looking to the first qtr, KO is anticipating a 4% headwind from currency exchange rates on its comparable revenue.  The company also expects foreign exchange to slow EPS growth & anticipates an 8% hit from currency changes during the period.  The stock fell 85¢.

Coca-Cola sales beat estimates, helped by higher prices

After the inflation data was released today, the markets priced in a 94% chance the central bank will hold rates steady at its next meeting, up from 84% yesterday.  With the popular stock averages at record levels & following an almost 4 month spectacular rally, investors were expecting the Fed to cut rates rapidly this year.  Disappointment brings on significant selling, although there has been some bargain hunting in the last hour.

Dow Jones Industrials