Market 05/14: April PPI increases at fastest pace in 1 year

Powell: Fed likely to keep interest rates unchanged for a long time

• Modest credit growth due to the impact of tight interest rate & monetary policies

• This policy is impacting the economy, especially spending.

• Fed likely to keep policy interest rates at current levels for longer

• Service inflation takes a long time to cool - Housing inflation remains messy.

• "Credibility is everything for central banks" - "Credibility is everything for central banks"

• Immigrants could help cool the labor market:

  • Labor force participation rate recovers thanks to foreigners rather than Americans

• Read more: Impact of immigrants on the labor market

April PPI increases at the fastest pace in 12 months

1. Core Finished Goods PPI rises above expectations - warning sign of sticky inflation (persistent inflation)

Finished Goods PPI (core basket - heavily influences CPI) still not cooling:

• April PPI increase: +2.2% Y/Y, as expected - higher than previous month (+2.1% Y/Y).

• Core PPI increase: +2.4% Y/Y, higher than expected (+2.3% Y/Y).

• March PPI revised down -0.3% Y/Y - the 4th revision in the past 7 months

This revision causes the m/m growth figure to surge:

• Aggregate PPI +0.5% M/M, higher than expected +0.3% and previous month's -0.1% M/M

• Core PPI +0.5% M/M, higher than expected +0.2% and previous month's -0.1% M/M

• PPI growth over the past 3 months reaches +4.07% in April

2. Service PPI components surge

• PPI M/M growth breakdown:

• April service PPI increases +0.6% M/M, higher than previous month -0.1% M/M

• Goods PPI rises +0.4% M/M, higher than previous month -0.2% M/M

• Gasoline PPI rises as gasoline prices remain high

3 - Unfinished goods PPI also starts accelerating again (red line):

4- If tomorrow's CPI continues to rise, Fed will certainly have to continue maintaining high interest rates - harming the capital environment and consumer sentiment:

• High interest rates hit low-income people the hardest

• Read more at: Labor market and consumption push back Fed's soft-landing dream

• Credit card and auto loan delinquency rates at highest in a decade - both affected by high interest rate environment.

Inflation remains the top concern for small businesses - NFIB survey

• NFIB small business optimism at 89.7, higher than estimates 88.2 & 88.5

• Inflation is the top issue for small businesses

• Labor quality is the second biggest concern, followed by taxes

• Soft data in NFIB survey suggests things are still as bad as during GFC period

• Hard data says we haven't reached that level yet, but recent years have been very tough

Crypto Market: Bank of Montreal holds Spot Bitcoin ETF

• Bank of Montreal discloses holding Spot Bitcoin ETF in 13F filing to SEC

• Coinbase was down for 4 hours temporarily. Issue resolved but cause not disclosed

• Wisconsin investment board discloses holding nearly $100M Blackrock spot Bitcoin ETF

Earnings update: Alibaba

1. Alibaba

• Revenue: $30.73B, +7% Y/Y, reflecting strong growth in commerce and cloud services.

  • Taobao and Tmall Group: Revenue $12.91B, +4% Y/Y, driven by double-digit GMV growth.

  • Cloud Intelligence Group: Revenue $3.55B, +3% Y/Y, with strong growth in AI-related revenue.

• Net income: $127M, -96% Y/Y

Other news

1. AMC Entertainment Holdings completes stock offering and raises about $250M in new equity.

2. US sharply increases tariffs on EVs, chips, and many Chinese goods

3. Japanese JGB yields hit highest in over a decade as BOJ signals readiness to cut bond buying to ease pressure on Yen.

4. Walmart is cutting hundreds of corporate jobs and requiring most remote employees to relocate to 3 main technology offices or leave the company

5. Economic surprise index, which measures economic data coming in above or below consensus estimates, falls to the lowest level since January 2023