Coffee With Greta: Is Inflation Actually Cooling?
DJIA Futures: -299 (-1%)
SPX Futures: -40 (-1%)
NASDAQ Futures: -125 (-1.1%)
Good morning friends!
Futures are slipping after the release of the Fed’s favorite inflation gauge.
Let’s get right to it!
Core PCE Inflation Cools
The Fed’s favorite inflation measure cooled slightly in May.
The Bureau of Labor Statistics Core Personal Consumption Expenditures (PCE) Price Index rose 0.3% monthly and 4.7% year-over-year.
That index excludes food and energy prices.
The gain was lower than expectations for a 0.4% monthly increase and 4.8% annual jump in prices.
It was a slowdown from 4.9% in April but is still the highest reading since the 1980s.
The headline PCE Price Index rose 0.6% monthly and 6.3% annually.
That was sharply higher than the 0.2% monthly increase in April and unchanged on an annual basis.
Personal incomes rose 0.5% but disposable incomes fell 0.1%.
Headline personal spending rose 0.2% monthly but when adjusted for inflation that spending dropped 0.4%.
Weekly Jobless Claims Fall Less Than Expected
Weekly jobless claims fell slightly last week as the labor market remains tight.
The Labor Department reported 231,000 Americans filed initial claims for unemployment benefits last week.
That was down 2,000 from the previous week but higher than expectations for 228,000.
It was the second weekly drop in a row but claims are still hovering near a five-month high.
Continuing claims fell by 3,000 to 1.328 million in the week ending June 18.
Walgreens Slips Despite Earnings Beat
Walgreens (WBA) shares are down 2.3% ahead of the open despite beating fiscal Q3 expectations.
The drugstore chain reported adjusted earnings of $0.96 per share on $32.6 billion in revenue.
That beat analysts’ expectations for adjusted EPS of $0.92 on $32.06 billion in revenue.
Sales were down year-over-year as demand fell for Covid vaccines.
The company administered 4.7 million vaccines in Q3, down from 11.8 million in Q2 and 15.6 million in Q1.
Walgreens reiterated its full-year forecast, expecting adjusted earnings growth in the low single-digits.
RH Tumbles After Slashing Outlook
RH (RH) shares are tumbling 8.6% in premarket trade after slashing its full-year outlook after-hours on Wednesday.
The high-end furniture chain now expects annual sales to fall between 2% and 5% this year.
That’s down from previous guidance for sales to rise 0% to 2%.
In a statement, RH’s CEO said, “With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year-end, our expectation is that demand will continue to slow throughout the year.”
Gas Prices Continue Decline
U.S. gas prices are continuing to fall.
AAA shows the national average for regular gas fell to $4.857/gal today.
That’s down about 16 cents from the record high earlier this month.
Diesel prices are also continuing to decline.
The national average for diesel slipped to $5.772/gal today, down from the peak of $5.816/gal on June 19.
Oil Prices Slip
Oil prices are falling today as the market weighs supply concerns against an increase in fuel product inventories in the U.S.
West Texas Intermediate crude futures are down 1.2% at $108 bbl while Brent crude futures are slipping 0.8% to $115 bbl.
U.S. oil inventories fell more than expected last week.
The Energy Information Administration reported crude stockpiles fell by 2.8 million barrels vs 800,000 barrels expected.
But U.S. crude-oil production also rose by 100,000 barrels per day to 12.1 million bpd, the highest level since mid-April 2020.
The EIA reported gas inventories rose by 2.6 million barrels last week vs expectations for an 800,000 barrel drop.
The gas increase comes as U.S. refineries are running at 95% capacity in an effort to keep up with demand and lower prices.
Bitcoin Drops Below $19,000
The crypto crash is continuing with Bitcoin briefly falling below $19,000 today.
Currently, the largest coin in the world is down 4.3% at $19,200.
Ethereum is down 6.8% at just over $1,000 per coin.
Crypto has been hit hard by macroeconomic pressures like inflation and the possibility of a recession.
Bitcoin has fallen more than 70% from its record-high.
In Case You Missed It
- Fed Chair Jerome Powell told other Central Bankers around the world on Wednesday that the Fed cannot “guarantee” a soft-landing for the U.S. economy. Speaking at a conference in Portugal, Powell said the bank is still optimistic the economy can handle tighter monetary policy. But he said recent events have made that goal more challenging. He said the Fed is aiming to “growth moderate” to allow the supply chain to catch up with demand.
- JPMorgan (JPM) analysts say they now see a “reasonable” risk of a recession this year. In a note on Wednesday, Bruce Kasman and Joseph Lipton said “it is reasonable to consider the risk that the US and/or global economy slips into recession this year.” They added, “rising concern about persistent inflation shocks has combined with news of a more aggressive Fed and sliding sentiment to materially shift our views on 2022 growth.” This is a reversal from last week’s global markets outlook that showed no risk of a recession this year.