CPI came in on target. for February was +0.3%, one tick higher than January, as forecasted. Y-o-y CPI stands at +2.4%, flat with January. of +0.2%, one tick lower than January, also as forecasted. These levels are close enough to the Fed 2% target to expect a cut if not for the spike in energy prices brought on by the Iran conflict, which was not in the February numbers.
Energy is higher. Helping to ease concerns over the restriction of transportation through the Strait of Hormuz, the IEA (Intl Energy Agency) has organized the release of 400M barrels of oil from strategic reserves, an unprecedented move, to ease concerns of availability.
The bond market evidently sees higher inflation in the cards. The US 2-year is up 6bps to 3.63%, up 25bps from the Feb 27 recent low. The 10-year is also up 6bps, now 4.20%, up 26bps, the highest level in over a month, taking mortgage rates higher. Bets for cuts anytime soon are softer. The has climbed back above 99.
Stocks are taking the situation fairly well, with the and modestly in the green, and the essentially flat, while the is down 0.5% and the even-weighted S&P is down 0.3% after the first hour of trading. The is down modestly but remains very elevated at 24.6
On the commodity front, precious metals are softer; is down 1%, as is , and is down 4%. is 3.3% higher but actually down 2% for the trailing month. Crypto is flat with at $70.8K, up 5% for the trailing month.
Holding the market up today is tech, with the Magnificent 7 up 0.7% and semiconductors up 1.3%. Energy is up 1.9%, now up 24.3% YTD. Concerns about private credit continue, now affecting even the largest money managers with exposure. This has brought concerns about contagion to all lenders, leaving financial services the weakest sector YTD, down 8.6%, down 6.5% in the trailing month.
The resilience to higher interest rates likely reflects the belief that the energy squeeze is temporary, and there is likely to be a relief rally in the future when the Iran situation is resolved. At the same time, if it drags out, we should expect further volatility. The trend remains volatile for now.