Feb 19, 2025
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“There are no rules here — we’re trying to accomplish something.” – Thomas Edison
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Asian stocks had a mixed showing overnight with Japan down fractionally, and China’s Shanghai Composite rising by 0.8%. Economic data in the region, though, was weak with Home Prices in China falling 5.0% y/y in January versus a decline of 5.3% in December. In Japan, Core Machinery Orders fell 1.2% on a m/m basis which was well below the forecast of an increase of 0.4%.
In Europe, stocks are trading down for a change as the STOXX 600 is down by over 0.5%. Contributing to the weakness there are both micro and macro factors. On the micro side, a weaker-than-expected earnings report from Philips, where sales came in weaker than expected and guidance was weak, has that stock trading down over 10%. On the macro side, UK inflation for January came in at 3%, which was above the consensus forecast of 2.8%. Core inflation, meanwhile, surged up to 3.7% from 3.2% in December.
Here, futures are modestly lower ahead of Building Permits and Housing Starts at 8:30 and FOMC Minutes at 2 PM. Treasury yields, crude oil, and gold are all higher on the day, reversing some of the losses from late last week while Bitcoin has bounced back over 2% to get back above $96K.
With a dozen eggs becoming as popular as a Furby circa Christmas 1998 and what seems like half a paycheck going to fund your daily bacon, egg, and cheese habit, egg prices have become a national nightmare. In last week’s CPI report, egg prices rose over 15% in January representing the largest monthly increase since June 2015. The chart of egg prices makes it look more like the Palantir (PLTR) of the CPI report than a boring old breakfast staple.
Egg prices have caused a frenzy online as Google searches have spiked. The chart below shows Google Trends results for eggs going back to 2004. At first glance, it doesn’t look like the spike has been all that extreme. Searches tend to have a seasonal aspect, but there have been many months in the last ten years when the frequency of searches was higher.
Taking seasonality into account, though, searches are easily at extremes. The chart below is the same as the one above, except that we have included red dots for February of each year. Comparing these February readings, searches have been 30% higher this February than any other February in history. The spikes you see in the chart come every year in either March or April coinciding with Easter. If the recent trends in egg prices continue, we can only imagine what the chart above will look like in two months when Easter arrives.
A headline last week from animal health care company Zoetis (ZTS) provides some hope, though. On Friday, the company announced that it had received conditional approval for a bird flu vaccine from the USDA for use in chickens. While the stock of ZTS saw little reaction, the stock of Cal-Maine Foods (CALM), the largest producer of eggs in the US, has been shelled. CALM has been a big winner from the bird flu, more than doubling in the year leading up to last Friday, but it has declined more than 16% in the last two sessions for its largest two-day decline since December 2022.
Markets are forward-looking, so is CALM’s decline the canary in the coalmine signaling that the worst of this wave of bird flu is behind us? Who knows, maybe by the summer, we’ll be able to afford two eggs on our beacon, egg, and cheese, or maybe even an omelet! Seriously, though, since the recent low in egg prices in September 2023, total CPI is up 3.8%. With egg prices up 63% over that same span and having a weighting of 0.172% in the total CPI index, ex eggs prices, total CPI would be up 9 basis points less at 3.72%. So, in terms of a direct impact, egg prices haven’t had a major impact on inflation over the last 16 months. They haven’t helped, though!
Feb 18, 2025
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“We all go through a challenge in life because without a challenge there’d be no reason to keep going toward your future.” – Mark Twain
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After a mixed session overnight in Asia, European equities are trading modestly higher this morning, and that follows a gain of over 0.5% for the STOXX 600 on Monday while US markets were closed. Here in the US, equity futures are looking to start the short week positively. The S&P 500 is indicated to open 0.4% higher while Nasdaq 100 futures are looking at gains of just about 0.5%. Yields are also higher as the 10-year is modestly back above 4.5%.
The economic calendar is on the quiet side this morning with the only two reports of note being Empire Manufacturing at 8:30 and the NAHB Homebuilder Sentiment Index at 10 AM. Both reports are forecast to improve from last month’s reading, but they’re also forecast to remain in contraction territory. For the remainder of the week, the calendar is relatively busy with notable reports including Housing Starts and Building Permits on Wednesday, Jobless Claims on Thursday, and the final read on UMich Consumer Sentiment on Friday. That last report will be notable as the preliminary report released earlier this month showed a major skew in inflation expectations between Democrats and Republicans.
After closing out the prior week just south of 4.5% on February 7th, the 10-year US Treasury yield exploded higher with sound and fury in the first three days of last week. It rose as high as 4.66% on Wednesday after the stronger-than-expected January CPI report. Just as it looked like the early January highs were due for a test, though, on Thursday and Friday, yields reversed lower and more than erased the gains from the first three days. By Friday’s close and heading into the three-day weekend, the big moves from earlier in the week had nothing to show for themselves, and the 10-yield finished the week lower than it started below 4.48%. Just when you think the market is going to go one way, it does its best to keep you on your toes (or knock you off them depending on your perspective).
Feb 14, 2025
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“If you’d asked me in 1980 what the big impact of microprocessors would be, I probably would have missed the PC. If you asked me in 1990 what was important, I probably would have missed the Internet.” – Gordon Moore
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After coming up just a couple of points short of a closing record high yesterday, US equity futures are heading into the long weekend on a very modest negative note while the 10-year yield is unchanged. There’s a decent amount of economic data to deal with so the placid tone will likely change between now and the closing bell. Retail Sales were just released, and the January readings came in significantly weaker than expected although December’s report was revised higher. Import and Export Prices were largely inline with forecasts.
Also, the last three Fridays have seen stocks sell off into the weekend as investors look to avoid any potential tape bombs. With a three-day weekend on the horizon after today, if the market manages to avoid a sell-off like it has done the last three Fridays, that would be considered a win!
Gordon Moore co-founded Intel (INTC) in 1968, and in the above quote, he was brutally humble about his fallibility regarding large technological trends. While Intel (INTC) was on the cutting edge of the semiconductor industry for its first few decades, the company has missed a lot of major tech developments and trends over the last decade. The stock has paid handsomely for it. After trading above $60 less than four years ago, INTC recently traded below $20 shedding 70% of its value.
This week, though, INTC has done something not seen since its glory days. In the five trading days ending Thursday, the stock rallied 24.5% which is a level it has only exceeded in three other periods in the last 30 years – January 2000, April 2001, and October 2002.
Feb 13, 2025
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“With regard to matters requiring thought: the less people know and understand about them, the more positively they attempt to argue concerning them.” – Galileo
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
What looked like it would be a troublesome day for bulls yesterday took a positive turn as the S&P 500 opened down nearly 1% at the open after CPI came in surprisingly high. The opening ticks were as bad as things got, though, and from there, stocks staged a comeback throughout the trading session even as yields only pulled back modestly from their intraday highs.
The S&P 500 successfully tested its 50-day moving average right at the open, but bulls still have something to prove as a pattern of lower highs has started to set in since the high in late January. Individual investors appear to be increasingly worried about the market’s churning lately as the American Association of Individual Investors (AAII) gauge of bearish sentiment has surged from 34.0% to 47.3% in the last two weeks!
This morning, futures sit right around the unchanged level ahead of the January PPI and after a rollercoaster overnight session where futures sold off into the Asian close and have rallied since then as European stocks rally (again).
Feb 12, 2025
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“Time would become meaningless if there were too much of it.” – Ray Kurzweil
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Equity futures are mixed heading into the open and the January CPI report but based on Powell’s testimony in front of the US Senate yesterday, this report will probably have no impact on short-term Fed policy which looks to be on hold. A key reason for that view from the Fed is that while inflation has come down considerably from its peak, it’s become stuck at levels too high for the Fed’s liking. Hence, the moderately restrictive policy stance.
The chart of Core CPI encapsulates this pattern. After peaking at a year/year rate of 6.6% in September 2022, Core CPI steadily pulled back over the next 20 months dropping to a rate of 3.2% last July. Since July, though, the core inflation rate has been stuck at that 3.2% level. The year/year rate was forecast to fall to 3.1% in this morning’s report for January which would have been the lowest rate since April 2021. The actual rate came in higher than expected at 3.3% which is still within the stall speed range we’ve been in since last July. Even if the y/y rate did fall to 3.1%, though, the core rate would still be 0.7 ppts above its pre-Covid peak of 2.4% from 2015 through 2020.
Feb 11, 2025
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“Common sense is the most widely shared commodity in the world, for every man is convinced that he is well supplied with it.” – René Descartes
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Equity futures are moderately lower this morning with technology leading the way to the downside as markets digest the latest round of tariffs from the President last night. Treasury yields and crude oil are higher, and the only economic report of the day – the NFIB Small Business Optimism survey showed a modest deterioration after the historic post-election surge.
As you probably know by now, this is an important week for interest rates. It starts with today’s Senate testimony by Fed Chair Powell. Then, we’ll get CPI and more Powell testimony at the House tomorrow. Thursday will cap things off with PPI, but there will also be plenty of other Fedspeak sprinkled in between. Maybe all this Fed/inflation news will allow the market to shift some of its attention from the White House!
Heading into today’s Powell testimony, Treasury yields are at an important juncture. The 10-year yield saw a sharp decline from its mid-January peak of 4.8% down below 4.4% but increased in the last few days moving back above 4.5% this morning. As shown in the chart, these levels put the 10-year yield back above its 50-day moving average (DMA) but still below the uptrend line that was broken to the downside last week. It’s common to see a test of a former trend line after it has been broken, and how that test turns out in the short term can often signal the intermediate-term direction going forward. An upside break would potentially signal higher rates going forward while a failed test could indicate a longer downtrend in rate from here.
