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Chief Economist Scott Brown discusses the latest market data.

The headline Consumer Price Index (CPI) figures for January were a bit higher than expected (up 0.6% overall and ex-food & energy), bringing the year-over-year pace to 7.5% – the largest 12-month gain since February 1982. Ex-food & energy, the index for consumer goods rose 1.0% in January, up 11.7% year over year (vs. +1.5% y/y a year ago). Prices of new vehicles were flat (+12.2% y/y), while the index for used cars and trucks rose 1.5% (+40.5% y/y). The CPI for non-energy services rose 0.4%, up 4.1% y/y (vs. +1.6% y/y a year ago), largely reflecting a rebound from the low inflation of a year earlier. The price index for transportation services rose 1% (+5.6% y/y, vs. -3.5% y/y a year ago), while rent of shelter rose 0.4% (+4.4% y/y, vs. +1.9% y/y a year ago).

Following on the heels of the strong January employment report, the CPI data boosted market expectations that the Federal Reserve will raise short-term interest rates by 50 basis points at the mid-March policy meeting. However, there are some signs that consumer spending (nearly 70% of gross domestic product) will slow. University of Michigan Consumer Sentiment fell to 61.7 in the mid-February reading (down from 67.2 in January and 70.6 in December). Wage income growth is supportive, but the extended child tax credit has ended; fiscal stimulus payments are long behind us; and higher inflation erodes purchasing power.

Next week: The Producer Price Index (PPI) report should continue to reflect pipeline inflation pressures, but somewhat more moderate. Retail sales should be boosted by a pickup in vehicle sales but amplified by the seasonal adjustment. Investors will look to the Federal Open Market Committee minutes for signs of whether Fed officials are open to a larger rate increase.

Indices

Consumer Money Rates

Currencies

Commodities

Bond Rates

Bond Rates

Treasury Yield Curve – 2/11/2022

As of close of business 2/10/2022

S&P Sector Performance (YTD) – 2/11/2022

Economic Calendar

All expressions of opinion reflect the judgment of the author and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

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Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business February 10, 2022.