CPI Deceleration May Convince The Fed To Pause Again

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

If you wish to listen to this commentary, please click here.

Labor Department Figures Are More Muted

Today is the opposite of yesterday. While yesterday, ADP reported an increase in jobs, today’s Labor Department figures are more muted. (497,000 private payroll jobs versus 209,000 jobs).

Confused? We all are. But here’s the deal: ADP does not have big revisions, and the Labor Department does. ADP doesn’t have seasonal adjustments that are extreme like the Labor Department does. Frankly, I’d rather believe ADP because they actually do the payroll processing.

Interestingly, Treasury bond yields did not move lower after a weaker-than-expected June payroll report and the downward revisions for April and May. As I have repeatedly said, the Fed does not fight market rates, so if Treasury yields remain high, the Fed is much more likely to raise key interest rates at its July FOMC meeting.

Waiting For CPI

Since there is an outspoken minority of doves on the Fed from Atlanta, Chicago, Minneapolis, and San Francisco, I think the July FOMC meeting will rest on the June inflation report, especially the Consumer Price Index (CPI).

Due to the fact that the CPI surged 1.2% in June 2022, by cutting off that one month, I am expecting that the annual pace of the CPI will decelerate to an annual pace of 3% or less, which will hopefully cause the doves on the FOMC to be more outspoken at the July meeting and convince the rest of the FOMC to pause again.

Iranian Aggression 

The U.S. Navy announced on Wednesday that it intervened to prevent Iran from seizing two oil tankers in the Gulf of Oman. Iran has seized six oil tankers this year due to the fact that the U.S. Navy is now stretched thin and can no longer protect all free trade routes.

However, the White House National Security Council said “The United States will respond to Iranian aggression together with our global allies and our partners in the Middle East region to ensure the freedom of navigation through the Strait of Hormuz and other vital waterways.” Nevertheless, Iran is seizing some ships which keeps energy prices high.

The other thing that is keeping energy prices high is crude and gasoline inventories fell much more than expected according to the Energy Information Agency. We have higher energy prices as demand picks up in the summer months.

Coffee Beans: Turtle Lays an Egg

A loggerhead sea turtle crawled onto a crowded South Carolina beach in broad daylight to lay her eggs – a highly unusual incident. Turtles are easily spooked by the presence of humans and normally wouldn’t lay their eggs in the middle of the day. Source: UPI. See the full story here.