Market Rises On Inflation Optimism

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In his Daily Market Notes report to investors, Louis Navellier wrote:

Inflation Optimism

Market rises on inflation optimism.

We get CPI data for June this Wednesday, and PPI on Thursday. We already know that shelter data, the biggest single component, will fall y-o-y as last year’s very high numbers fall off. Today, we got a huge 4% drop in used car prices in June, another large component, out of Manheim, the largest wholesale auto dealer. It appears clear that the overall inflation will fall, it’s only a question of how much.

China Dancing with Deflation

A further sign of easing global inflation came out of China where annual producer prices fell 5.4% and consumer prices were flat (0%). China’s problems are expected to be solved by further government spending and rate cuts, but it is somewhat disturbing that the world’s second-largest economy is dancing with deflation.

Today, interest rates are slightly lower with the 10yr still above 4% but the 2yr has fallen to 4.90% after having been above 5% just last Thursday. Gold remains soft, below $1,930, and crude oil is hanging on to the 5% gain from last week, though still down 4.5% YTD. High Yield bonds are up on the day but remain flat YTD.

AI Theme

The theme for the year remains AI and will be a topic on virtually all earnings calls as investors try to determine the willingness of non-tech companies to spend significantly to employ the technology and how soon it will impact bottom line results.

Uncertainties also remain regarding consumer spending with credit card balances at records and delinquency rates on the rise. Concerns also remain with the lack of any easing in Ukraine, where the US has announced shipping them cluster bombs, another retreat from an escalation they said last year would never happen.

Of note is that the NASDAQ announced that they will be doing a rebalancing of the QQQ on July 24th to knock down the oversized weights of the leaders this year, leading to a drop in the QQQ since this was announced on Friday. This week will see volatility as the inflation numbers come in but the more important element remains earnings which will kick off with the major banks on Friday. 

Coffee Beans: Beyflation

Tickets to Beyoncé’s show in Charlotte, North Carolina cost upwards of $800 – more than three times that of the Stockholm gig. With concert ticket prices on the rise in the United States, some fans have decided they would rather pay for a flight and a cheaper European concert ticket than for the premium prices to the same show on homeground. Source: Statista. See the full story here.