February 13 – More inflation and jobs data was the focus this morning, although none of it had the impact of yesterday’s strong consumer price data. Stock futures pushed modestly higher following this morning’s data release, with the VIX dropping below 16. Even so, there’s a bit of apprehension on Wall Street today as it waits for the details of President Trump’s reciprocal tariff announcement, as well as indications of retaliatory steps that other countries may take. The dollar index slipped a bit lower to trade near 107.8. Yields on 10-year Treasuries are trading near 4.55%, having dropped following this morning’s data release, while yields on 2-year Treasuries are trading near 4.32%. Crude oil prices are more than 1% lower after falling to fresh six-week lows on ideas that a Russia / Ukraine peace agreement could increase supplies at a time when demand remains suppressed. The grain and oilseed markets were mixed overnight.
The headline producer price index rose 0.4% on the month in January, exceeding analyst expectations of a 0.3% rise. Furthermore, the December number was revised to 0.5% growth, up from the 0.2% originally reported. The headline PPI rose 3.5% year-on-year in January, exceeding expectations of 3.2%, although matching an upwardly revised 3.5% from the previous month. The core PPI that excludes the more volatile food and energy sectors rose 0.3% month-on-month in January, matching analyst expectations. However, the December number was raised significantly – coming in at 0.4%, up from the 0.0% originally reported. The core PPI rose by 3.6% year-on-year in January, up from expectations of 3.3%, and up from 3.5% the previous month. The PPI for goods rose 0.6% on the month and 2.3% on the year. The PPI for services rose 0.3% on the month and 4.1% on the year. The bottom line is that today’s numbers confirm yesterday’s numbers that we’re seeing renewed inflation numbers once again.
First-time claims for unemployment benefits dropped to 213K in the week ending February 8, down from 220K the previous week, and below analyst expectations of 217K. The four-week moving average slipped to 216K claims, down from 217K the previous week. The weekly numbers remain at historically low levels. Continuing claims for the week ending February 1 dropped by 36K to 1.850 million. The four-week moving average for continuing claims slipped by 750 to 1.872 million. Continuing claims remain somewhat elevated yet, but not necessarily at worrisome levels. Federal Reserve Chair Jerome Powell stated that we remain near “full” employment levels, and these numbers don’t really detract much from that.
President Trump and Russian President Vladimir Putin reportedly had a conversation regarding the Ukraine war, followed by a call to Ukraine President Volodymyr Zelenskiy. Momentum is moving toward a Black Sea peace agreement, although there are many obstacles to be overcome before that becomes a reality. Nonetheless, optimism of a deal is higher than its been since the start of the war three years ago. Chinese President Xi Jinping doesn’t want to be left out, so he’s reportedly offered to host a peace summit in Beijing. Keep in mind that he tried to play the role of peacekeeper early in the war, but his efforts came up empty. Xi has been trying to shore up his relationship with Putin in recent weeks, fearing that Trump’s conversations with Putin to reach a peace deal could pull Russia and the United States closer to each other, isolating China. Of course, egos are on the line here as well. Xi wanted to be seen as the peacemaker on the world front two years ago, and he failed. Trump now wants the title. It’s yet to be seen whether he’ll succeed, but momentum is currently moving in his direction. Other egos involved are in Moscow, Kyiv, and Brussels. It’s going to take quite a balancing act to achieve peace. Meanwhile, crude oil prices traded to just above the $70 level again for the first time in more than six weeks this morning. This should help lower the energy component of the consumer price index when the February data is reported next month. Traders fear that a peace agreement will increase the supply of crude oil at a time when Chinese demand remains suppressed, and global overall demand is sluggish due to increased tariffs.
Wheat prices firmed today as another arctic blast of cold air promises to slip down into the U.S. winter wheat belt over the coming week, although the brunt of it is expected to miss much of the central and southern Plains. Snow cover remains limited for the Russian winter wheat crop as well, which will certainly need some help from the weather this spring. Corn and soybean prices slipped lower overnight. Fund managers defended their long positions in corn on Wednesday, but it’s yet to be seen whether they’ll return to do so today. Meanwhile, soybean prices remain under modest pressure again this morning. Yield reports remain quite good in Center-West Brazil, where a drier pattern facilitates an active harvest program. Later developing southern areas of Brazil are benefiting from increased moisture, as is most of Argentina as well. Dry areas of Argentina currently make up roughly a quarter of the grain belt, but that is expected to narrow to just 10 – 15% of the belt next week as more rains develop.
