Coffee With Greta: Red Hot Inflation Cools Stock Rally
DJIA Futures: -464 (-1.4%)
SPX Futures: -78 (-1.9%)
NASDAQ Futures: -307 (-2.4%)
Good morning friends!
Futures are plunging after the release of unexpectedly hot inflation data.
Let’s get right to it!
Inflation is Stubbornly High
Inflation is still running hot in the U.S. economy.
The Bureau of Labor Statistics consumer price index shows headline inflation rose 0.1% in August and 8.3% year over year.
Economists were expecting prices to fall 0.1% monthly and be up 8% annually.
The increase came despite a 5.9% monthly drop in oil prices and 10.6% monthly drop in gas prices.
Other energy prices rose with electricity prices up 1.5% monthly and 15.8% year over year while utility gas prices jumped 3.5% monthly and 33% annually.
Grocery prices also rose 0.7% monthly and 13.5% year over year.
Shelter prices were up 0.7% monthly and 6.2% annually.
The core CPI, which excludes food and energy prices, also accelerated more than expected.
Core prices rose 0.6% monthly and 6.3% annually vs economists’ expectations for 0.3% monthly and 6% year over year.
Treasury Yields Surge After Hot CPI
Treasury yields jumped higher as traders dump bonds after the release of that hot inflation data.
The 2-year yield is up 16 basis points to 3.73% while the 10-year yield is up 11 basis points to 3.43%.
This was the final release of inflation data before the Fed’s rate hike decision next week.
CME Group’s FedWatch Tool shows 82% of traders expecting another 75 basis point hike while 18% are now expecting a full 1% hike.
Starbucks Hosts Investor Day
Starbucks (SBUX) shares are down 1.6% ahead of the open, following the broader market lower, ahead of the company’s investor day.
The coffee giant is expected to unveil a “reinvention” strategy at today’s event.
That plan was developed by interim CEO Howard Schultz who will stick around to help the incoming CEO implement it.
Schultz previously said the goal is to increase efficiency in U.S. locations as consumer behavior shifts post-pandemic.
Starbucks shares are down 24% year-to-date.
Twitter Shareholders to Vote on Musk Takeover
Twitter (TWTR) shareholders will vote today on whether to approve or reject Tesla (TSLA) CEO Elon Musk’s takeover bid.
Musk proposed the $44 billion acquisition in April but has been attempting to get out of the deal since July.
TWTR shares are down 1.5% in premarket trade, turning lower after the CPI release.
Twitter blew off his latest attempt to terminate the deal over a payment made to a whistleblower.
The social media giant said it has not breached any of its obligations and plans to move forward with the acquisition.
Even if shareholders approve the deal, the two sides will still go to trial on October 17.
Twitter is seeking to force Musk to go through with the purchase while Musk is attempting to prove Twitter has violated the terms of the agreement.
More Executive Shakeups At Peloton
Peloton (PTON) shares are down 5.4% ahead of the open after announcing two of its co-founders are leaving the company.
John Foley, who previously served as CEO, resigned from his position as executive chairman of the board effective immediately on Monday.
Former Restoration Hardware president Karen Boone will take over Foley’s position.
Hisao Kushi will step down from his role as chief legal officer on October 3. He will be replaced by Uber’s chief deputy general counsel.
Peloton’s chief commercial officer Kevin Cornils will leave on September 23 and will be replaced by the current chief strategy officer under a new title of chief emerging business officer.
In a letter to employees, CEO Barry McCarthy said, “There wouldn’t be a Peloton without John Foley or Hisao Kushi. Without John’s unwavering commitment to his dream, there wouldn’t be a passionate and devoted community of nearly 7 million Peloton Members. I want to thank John for paving the way.”
Oracle Reports Strong Fiscal Q1 Sales Growth
Oracle (ORCL) shares are down 0.4% in premarket trade after reporting mixed fiscal Q1 results.
Shares were initially higher this morning but dropped with the broader market after the August CPI report.
The software company reported adjusted earnings of $1.03 per share on $11.45 billion in revenue.
That was shy of analysts’ expectations for adjusted EPS of $1.07 but met revenue estimates.
Sales surged 18% year over year, up sharply from 5% growth in the prior quarter.
Part of that growth was thanks to Oracle’s recent acquisition of software maker Cerner, which contributed $1.4 billion in sales.
Oil Prices Drop After Hot CPI
Oil prices have turned lower as demand concerns take over supply worries.
West Texas Intermediate crude futures are down 0.6% to $87 bbl while Brent crude futures are down 0.5% to $93.50 bbl.
The hot CPI reading has the market predicting a more aggressive Fed to continue slowing consumer demand.
Meanwhile, new data from the Department of Energy showed the U.S. Strategic Petroleum Reserve levels fell by 8.4 million barrels last week to 434.1 million barrels.
That’s the lowest level since October 1984 as President Biden’s planned release from the SPR continues.
The American Petroleum Institute will issue its weekly inventory report at 4:30 p.m. ET today.
In Case You Missed It
- The New York Fed’s latest Survey of Consumer Expectations showed a slowdown in inflation predictions. Respondents to the survey in August said they see inflation at 5.7% a year from now, down from July’s forecast for 6.2%. Median inflation expectations over the next three years fell to 2.8% from 3.2%. The improvement came as predicted price growth for gas, groceries, and rent moderated. Expected home price growth also fell by 1.4 points to 2.1%, the lowest read since June 2020.