Rise and shine everyone.

The US Markets have been odd over the past couple of days, with meme stocks moving higher after the so-called return of “Roaring Kitty”.

In other news, Home Depot disappointed on earnings. It looks like the consumer is finally slowing down, particularly where big ticket items are concerned.

We also got the PPI numbers yesterday and they were less than stellar, coming in higher than expected. Finally, we have the CPI Inflation & Retail Sales data being released today at 8:30 am - the data point the market has been anxiously waiting for. (More on these below)

US Equity Futures are flat this morning ahead of the CPI while Yields and the US Dollar are pulling back. Oil is lower but, Gold and Copper are higher. Copper continued its insane run crossing $5/lb, on unconfirmed reports that the Chinese government may be considering purchasing unsold Chinese homes to ease the supply glut.

CPI and Retail Sales

The consensus shows CPI numbers are expected to come in lower than last month based on:

• Lower Used Car Inflation

• Moderating Energy Inflation & Public Transport numbers

• Moderating Hotel / Motel (lodging away from home) numbers

I, however, expect core CPI to come in higher than expected. One of the reasons is higher Owners’ Equivalent Rent (26% of CPI), a case I made on Monday with this article:

Single Family rents are still increasing and so are home prices - both lend to higher OER numbers.

I also expect that the insurance CPI levels will continue to remain high, since the CPI takes into account total premium paid.

As far as Retail Sales is concerned, given that most of the increase last month was driven by energy (gas station sales), we may see some moderation in the numbers this time around.

PPI comes in higher

Yesterday’s PPI numbers came in significantly higher than expected. Interestingly enough, Fed Chair Powell didn’t see this as an issue stating the reading was “mixed rather than hot”. He’s trying to talk down expectations of a hike it would seem. The PPI feeds into the PCE data so it’s rather important to keep track.

• Prices for services increased 0.6%, the most since July, following a downwardly revised 0.1% fall in March.

• Prices also went up for machinery and equipment, wholesaling, residential real estate services, automobile retailing, guest room rental, and truck transportation of freight.

• Goods cost rose 0.4%, rebounding from a 0.2% fall in March, with nearly three-quarters due to a 5.4% increase in gasoline.

Meme Stock Craze

We’re seeing more people talking about piling into these stocks. Dave Portnoy talked about putting $1 million - half in GME and half in AMC.

But, the moves may not be sustainable and caution is probably warranted when trading these if you’re looking for a short squeeze. HFs are not significantly short these names Mayhem has made a point of the short interest being nowhere close to last time and so we are not likely to get the kind of “short squeeze” we experienced in 2021.

Furthermore, there were a lot of people who got stuck in these names the last time around and I bet they’re just waiting to break even and get out.

Chart of the Day - JP Morgan CPI Scenario Analysis

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)