Coffee With Greta: Wholesale Inflation Surprise

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DJIA Futures: -80 (-0.2%)

SPX Futures: -17 (-0.4%)

NASDAQ Futures: -107 (-0.7%)

Good morning friends!

Futures are falling after the release of hotter-than-expected inflation data.

Let’s get right to it!

Wholesale Inflation Runs Hot

Wholesale inflation pressures rose more than expected in July.

The Bureau of Labor Statistics’ producer price index rose 0.3% monthly and 0.8% year over year.

That was higher than economists’ expectations for +0.2% monthly and +0.7% annually.

The core PPI was also hotter than expected, up 0.3% monthly and 2.4% year over year.

Economists were expecting the core PPI to rise 0.2% monthly and 2.4% annually.

The PPI gauges the costs that goods and services producers receive for their products.

It is a leading indicator for CPI as retailers, restaurants, and other businesses then pass down those costs to consumers in their prices.

Treasury yields are rising after the release of that hotter-than-expected PPI data.

The 2-year yield is up 4 basis points to 4.88% while the 10-year yield is up 2 basis points to 4.14%.

This week’s inflation data is key in the Fed’s fight against inflation.

The Central Bank has vowed to be data-dependent at the September meeting with the door open for another 25 basis point rate hike if needed.

CME Group’s FedWatch Tool currently shows 88.5% of traders expecting the Fed to keep rates unchanged at that meeting.

Chip stocks are continuing to pullback ahead of the open following the Biden Administration’s new investment ban in China.

The VanEck Semiconductor ETF (SMH) is down 1.2%.

Nvidia (NVDA) shares are falling 1.4% with Advanced Micro Devices (AMD) down 1.1%.

The President signed an executive order this week to regulate new U.S. investments in China.

The order targets semiconductors and microelectronics, quantum computing, and certain AI capabilities.

The restrictions are expected to be implemented next year.