Money

U.S. consumer price surge in March kills rate cut hopes

Published

1 year ago

April 11, 2024

Ahron Young

U.S. consumer prices surged more than expected in March, driven by higher gasoline and rental housing costs, prompting financial markets to anticipate a delay in Federal Reserve interest rate cuts until September.

The latest report from the Labor Department on Wednesday marked the third consecutive month of robust consumer price increases, challenging economists’ previous arguments that inflation spikes at the beginning of the year were merely temporary.

This announcement follows last week’s news of accelerated job growth in March, with the unemployment rate dropping to 3.8% from February’s 3.9%. However, the persistent rise in the cost of living poses a significant concern ahead of the November 5 presidential election.

Despite this, some relief was observed in stable food prices and declining motor vehicle costs, leading to a return of goods deflation.

Phillip Neuhart, Director of Market and Economic Research at First Citizens, commented, “The data does not completely remove the possibility of Fed action this year, but it certainly lessens the chances the Fed is cutting the overnight rate in the next couple of months.”

According to the Labor Department’s Bureau of Labor Statistics, the consumer price index rose by 0.4% last month, mirroring February’s increase. Gasoline prices climbed by 1.7%, while shelter costs, including rents, saw a similar 0.4% increase.

Gasoline and shelter costs accounted for over half of the CPI’s increase, while food prices rose by 0.1%. Notably, grocery food inflation remained unchanged, with declines in the costs of butter and cereals offsetting rises in prices for meats, eggs, fruits, and vegetables.

Low base

In the 12 months through March, the CPI surged by 3.5%, the highest increase since September, partly due to last year’s low base effect dropping out of the calculation. While this represents a decline from the peak inflation of 9.1% in June 2022, the trend of disinflation has plateaued in recent months.

Despite President Joe Biden’s call for corporations to use record profits to lower prices and his plan to tackle housing costs, market sentiment shifted after the data release.

Financial markets revised their expectations for the first rate cut to September from June, with only two rate cuts now expected instead of the previously envisaged three.

Minutes from the Fed’s March meeting expressed concerns that progress on inflation might have stalled.

The central bank has maintained its policy rate in the 5.25%-5.50% range since July, having raised it by 525 basis points since March 2022.

Charlie Ripley, Senior Investment Strategist at Allianz Investment Management, remarked, “The strong inflation data should force the Fed to go back to the drawing board with regards to their monetary policy ambitions for the year.”

Stocks on Wall Street declined, while the dollar strengthened against a basket of currencies. U.S. Treasury yields also rose in response to the news.

Excluding volatile food and energy components, the CPI increased by 0.4% last month, indicating that inflation remains manageable. Core CPI was boosted by rises in rents, motor vehicle insurance, and healthcare costs.

Money

Divorce spike in Australia triggers hidden tax risks

Australia sees increased divorce filings amid emotional challenges, with many couples overlooking significant tax pitfalls in their settlements.

Published

23 hours ago

April 29, 2025

ticker NEWS

Australia sees increased divorce filings amid emotional challenges, with many couples overlooking significant tax pitfalls in their settlements.

Australia is facing a sharp rise in divorce filings over the past two months — but as couples navigate emotional breakups, many are missing major tax traps hidden in their settlements.

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Money

Stocks rebound despite tariff concerns and earnings anticipation

US stocks rebound amid tariff uncertainty; key earnings reports and economic data loom as volatility persists in the market.

Published

1 day ago

April 29, 2025

Ahron Young

US stocks rebound amid tariff uncertainty; key earnings reports and economic data loom as volatility persists in the market.

In Short

The stock market recovered after an early decline, led by companies like Boeing and IBM.

Investors are cautious ahead of upcoming economic data and potential trade developments, with projections of a 7% drop in S&P 500 earnings by 2025 due to tariffs.

A late recovery in the stock market reversed an early decline as dip buyers entered during a volatile day.

On Monday, the S&P 500 completed its fifth reversal of 1% or more in a month, matching the total seen throughout 2024. Gains were led by Boeing and IBM, while Nvidia fell following Huawei’s announcement regarding a new chip. Major tech companies, including Microsoft and Apple, are expected to report earnings soon.

Short-term Treasuries performed better, and the dollar weakened amidst ongoing economic data releases.

Economic data

The upcoming week promises substantial economic data, with reports on jobs and inflation due. A Texas manufacturing survey revealed significant weakness, with executives describing the tariff situation as chaotic.

Experts predict an eventful week, with potential for market volatility driven by various trade and economic headlines. Investors are particularly attuned to trade relations with China, with outlooks hinging on government actions.

Despite some executives remaining uncertain about tariff impacts, analysts are calculating potential effects on corporate earnings. Bloomberg Economics projects net income for the S&P 500 could drop around 7% by 2025 due to elevated tariff rates, compared to previous growth expectations.

Morgan Stanley suggests that a weak dollar may help US earnings, keeping the S&P 500 within a 5,000 to 5,500 range unless trade agreements with China are made, alongside a rebound in earnings and potential easing of monetary policy.

Money

Busy week: big tech earnings, U.S. jobs data

Busy week for markets with major tech earnings and U.S. jobs data shaping investor sentiment amid trade uncertainties.

Published

3 days ago

April 27, 2025

Ahron Young

Busy week for markets with major tech earnings and U.S. jobs data shaping investor sentiment amid trade uncertainties.

In Short

Next week, major tech companies, including Apple and Microsoft, will report earnings alongside key economic data, amid ongoing global trade concerns.

The S&P 500 has seen some recovery but remains down 10% since February, with investors anxiously awaiting the U.S. jobs report and economic growth indicators.

Next week, U.S. markets anticipate significant activity as big tech companies release earnings and crucial economic data is reported.

Investors will focus on corporate results from major firms like Apple and Microsoft, alongside the U.S. jobs report and first-quarter economic growth data. This comes amidst ongoing concerns related to global trade that could affect market stability.

The S&P 500 index has seen modest recovery recently, cutting its previous losses but still down roughly 10% from February’s peak. Optimism has been partially driven by indications of a softer trade approach from the Trump administration.

Market sensitivity

Michael Mullaney of Boston Partners noted that stock market sensitivity remains high, responding rapidly to any shifts in tariff news. Recent easing of trade tensions, including a pause in major tariffs announced by Trump, has contributed to market gains, but uncertainty continues.

In the forthcoming week, about 180 S&P 500 companies, accounting for over 40% of the index’s value, will announce their quarterly performance. Early reports indicate strong earnings growth, though some firms have lowered profit forecasts, highlighting potential challenges ahead.