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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!