The Consumer Price Index (CPI) rose 0.4% in April, following the 0.6% increase in March. Year-to-date, the CPI has risen at an annual rate of 4.8%
versus a 2.5% increase in 2006.
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in April. The Cleveland Fed’s median CPI and 16% trimmed-mean CPI are measures of core inflation, based on BLS monthly CPI data.
Over the last 12 months, the median CPI rose 3.4%, the 16% trimmed-mean CPI rose 2.8%, the CPI 2.6%, and the CPI less food and energy 2.3%.
>
UPDATE: May 15, 2007 1:58pm
Despite the earlier CPI number, the 10 yr bond yield is at
its highest level in a month (US Treasury bonds are trading at the lows of the day).
The rumor circulating the street is that the Chinese are close to revaluing
the Yuan. To do this, the PBOC would buy a
X billions of Dollars and sell Y billions of Yuan in order to prevent the yuan from rallying above
its preferred "band."
OFF TOPIC:
Did anybody else peruse the 9/13/01 Fed transcript? Several references to massive liquidity injections in the hours after the attack. One Gov. specifically mentioned a $100B figure. I headed over to http://www.ny.frb.org to get the historical effective rate data, and the min values floored me: 0.5, 0.25, even 0.0625
Did the recession already arrive and nobody else noticed ?
According to David Rosenberg, chief North American economist for Merrill Lynch, a recession isn’t just back-to-back quarters of shrinking gross domestic product. Think of it, rather, in terms of stall speed:
“It’s when GDP gets to 1.5% or lower. Why? Because population is rising 1.5% a year. When you get GDP growth below 1.5% a year, what it means is that real per-capita national income is actually contracting.”
Indeed.
.
and to keep our dollar from crashing below it’s “preferred” band- whatever that is….
If that happens then I guess Paulsen’s trips actually got something accomplished. For who remains to be seen.
Ciao
MS
A fairly strong reversal and the Dow is still up 40 points.
Are there no such things as down days in the Dow?
was wondering that myself. I think it shows that there is more than “normal market forces” acting upon it. I had the SPY chart open when the current “auction” ended this morning. It took less than 8 minutes for that new money to find a home in the SPY. Buying the SPY’s a few cents over ask works like a charm everytime as once you get it going it’s hard to stop.
It’s all in the days chart to look at. But some will just dismiss it as another “corection”
But I guess Fred and Nogo will describe it as “healthy”
Ciao
MS
The future is becoming clear…core inflation is low and heading lower, the economy is approaching zero growth, and the Fed will lower interest rates in response to this. Just as it always has.
The rationale is laid out on my blog post here:
http://thetraderboy.blogspot.com/2007/05/common-myths-of-market.html
Today’s report on CPI came at .4% . PPI(all commodities ) was .9%
In the last few years ,the PPI has been accelerating more rapidly than CPI.
The implication is for an overall stock market P/E contraction.
Ex-Fed Chairman Greenspan’s favorite way of measuring relative valuation
between Stocks and Bond is the Earnings-Yield to Bond-Yield ratio.
This ratio oscillates around one.
When should this ratio be above one?
The answer is: in an environment of PPI relative out-performance to CPI.
That is the environment we are in. This is due to the P/E contraction that
results when the PPI/CPI ratio goes up over time.
To see this behavior historically go to:
http://wrahal.blogspot.com/2007/05/earnings-yield-to-bond-yield-vs-cpi-to.html
Barry,
Are the chinese revaluing the Yuan upward or downward? If they are revaluing it upward, shouldn’t they be selling dollars and buying yuan?
Interesting quote from The Economist
“””
Stockmarkets are today buoyed by a belief that LBO-bidders will swoop if share prices fall. It is known in the markets as the “private-equity put”, an echo of the “Greenspan put” in the late 1990s, when investors believed the Federal Reserve would always step in to save markets by cutting interest rates.
“””
http://economist.com/opinion/displaystory.cfm?story_id=9150756
mhm – Of course, the “L” in LBO might get scarce and expensive in the event of a real equity blowup. Greenspan had the advantage of being able to literally print the money needed.
traderboy,
“The future is becoming clear…core inflation is low and heading lower”
Eh, who buys food and energy anyway ?
.
>>Greenspan had the advantage of being able to literally print the money needed.>>
And Ber”hank”ke does’nt???
They do it far more today than it was ever done.
Ciao
MS
VJ,
I just updated my blog post with CPI All Items (ie including Food and Energy) vs Fed Funds.
When the Fed started rate cutting cycles in 1985, 1987, 1989, 1996 and 2000, CPI All Items was HIGHER than it is today (I only checked the data from 1985 onwards).
So why wouldn’t they cut rates now?
m.s.
Please post some links to charts or other background info for your point about “It took less than 8 minutes for that new money to find a home in the SPY.”
Links to to any of the raw data would be interesting.
Barry: Please explain why the market loved this report so much. It’s not as if the Fed is really going to cut rates any time soon, especially with the Dow setting records every day.
The CPI is slowing because the economy is. How can that be good for equities?
traderboy,
“When the Fed started rate cutting cycles in 1985, 1987, 1989, 1996 and 2000, CPI All Items was HIGHER than it is today”
* In 1985, the Fed Funds rate began at 8.35 and ended at 8.27.
* In 1987, the Fed Funds rate began at 6.43 and ended at 6.77. (An increase)
* In 1989, the Fed Funds rate began at 9.12 and ended at 8.45. (Negligible cut)
* In 1996, the Fed Funds rate began at 5.56 and ended at 5.29.
* In 2000, the Fed Funds rate began at 5.45 and ended at 6.40. (An increase)
.
VJ,
You are indeed correct.
All I am saying though is that the Fed has cut rates several times in the not-to-distant past when inflation (ex-food-and-energy OR all items) has been higher than it is today.
So the argument that the Fed cannot cut rates today due to inflation being too high does not look particularly strong to me.
“So the argument that the Fed cannot cut rates today due to inflation being too high does not look particularly strong to me.”
That means they cannot cut rates due to other reasons. And it will look bad if they say in plain words.
It could reduce demand for Treasuries for start.
traderboy,
“All I am saying though is that the Fed has cut rates several times in the not-to-distant past when inflation (ex-food-and-energy OR all items) has been higher than it is today.”
* In February of ’94, Greenspan claimed the economy was overheating, which he claimed would without a doubt lead to renewed inflation, therefore he needed to dramatically raise interest rates. The Fed raised the Fed Funds Rate repeatedly over the next 15 months. Unfortunately for the Fed Chairman, the economy continued to expand robustly, and simultaneously, inflation continued to decline.
* In March of ’97, Greenspan announced that with the unemployment rate having fallen below 5.5%, out-of-control inflation must surely be returning. The Fed raised the Fed Funds Rate repeatedly over the next 18 months. Unfortunately for the Fed Chairman, the Unemployment Rate continued to decline, but there was no return of runaway inflation.
* Add in Greenspan’s warning in December of ’96, that the stock market was suffering from “irrational exuberance” and was highly over-bought, and you have just a preview of his litany of blunders.
“So the argument that the Fed cannot cut rates today due to inflation being too high does not look particularly strong to me.”
I never presented such argument. I merely intimated that core inflation is a joke, and the CPI in general is ridiculously lowballed.
.
rebound-
just pull up a daily chart of the SPY from yesterday. Pay particluar attention to the time frame of EST 9:40am to just after 10:00am.
The “auction” ends at :40…by :50 the $ is in the hands of the “broker/dealers”…
The rapid ascent began at :53…….
I am speculating yes however one does not need to be told where the latest round of repo agreements went to….If you had a portion of yesterday’s repo. in your pocket at 9:50am…where would you put it?
No news just buy after buy at over the ask price. Unfortunately I cannot point to a link that will show the buys over the ask..I had time/sales window open at the time.
Ciao
MS