Breakfast Bites: US PPI in focus

Oracle furthers AI optimism; Apple fails to impress; International and political conflicts heating up

Rise and shine everyone

It’s inflation week. Today, we get the US PPI numbers at 8:30 am ET - after quite a while, the PPI comes before the CPI. So, we’re getting a bit of a preview. Remember that the PPI also feeds largely into the US PCE inflation data, and that’s what makes it important. Last month, we got a significantly hotter print, but expectations are for a milder print this time around.

These inflation numbers will be important, and if they come in hotter, they will likely temper some of the Fed rate cut expectations. We still expect a September cut but the market has gotten a bit ahead of itself, talking about a 50bp cut this month, and even consecutive cuts in every meeting this year.

This comes even more so after yesterday’s BLS revisions that came in at about -900k, much higher than the average expectation of -800k. This equates to monthly revisions of about -76k. Now remember that these are just mark-to-market data, and this weakness in the jobs numbers has already happened. The argument is that the labor market is weaker than we thought. While this is true, we have already experienced the impact of this on the GDP numbers. So the bottom line is that they have not translated into a much weaker economy.

So it’s not a doom and gloom situation just yet. That’s what the market is telling us as well, with US equities hitting yet another all-time high yesterday. If there was a hint of a recession, I doubt we’d see such robust performance.

Oracle helped further that optimism as well. Despite missing estimates, they soared after hours by about +28% on forward guidance and AI outlook. (More below)

Apple on the other hand failed to impress with their event yesterday. They launched a thinner iPhone Air, and revamped AirPods but lacked major breakthroughs in product design. Apple didn’t provide any fresh updates on Apple Intelligence, its AI feature suite that has been facing delays.