Eagle Bites August 14th

US Inflation Data

Thursday, July’s US consumer price index (CPI) data, a key indicator of inflation, came in largely as expected. Consumer price growth now sits at 3.2% YoY with core–which excludes food and energy–at 4.7%. Though still significantly above the Fed’s 2% target, it’s positive that 90% of July’s increase was due to housing costs. As a lagging component of CPI, the rents reflected in the data are a result of prices from up to 12-18 months ago, as it includes not only new leases but existing ones too. In real time, rents are decreasing so for housing to be the biggest source of price growth is a good sign. So far, the probability is in favor of a Fed pause in September’s FOMC meeting, however, a data-driven focus remains amongst the board and a lot can change by September.

Forex & Indices News

The dollar declined as U.S. jobs growth in July was slower than expected, with higher wages suggesting the Federal Reserve might need to keep interest rates elevated; this halted the dollar’s recent climb and led to the biggest single-day loss in three weeks for the dollar Index. Slowing job growth moved the economy closer to the Fed’s desired creation number, although wage increases remained inconsistent with the Fed’s 2% goal; the euro and Japanese yen strengthened against the dollar, and long-term U.S. Treasury yields hit nine-month highs. The major U.S. equity benchmarks experienced a decline in this week of August following a strong performance in July. Rising Treasury yields and an unexpected downgrade to the U.S. government’s credit rating contributed to the stock market losses, with the technology-heavy Nasdaq Composite suffering the largest decline.

Rivian Earnings Looking Bullish

Electric vehicle maker Rivian Automotive (NASDAQ: RIVN) is set to report its second-quarter earnings on Tuesday, August 8th, after markets close, with investors closely watching how the company deals with increasing competition in the EV pickup truck space, its margins, cost-saving measures, and agreement with Amazon (AMZN). Shares of the EV startup have surged nearly 39% YTD. In July, the company beat expectations for its Q2 deliveries, delivering 12,640 vehicles, above the consensus of 11,300. The company reaffirmed its 50,000 annual production guidance. The company’s largest shareholder Amazon began rolling out its electric delivery vans in Europe ahead of schedule. The EV maker has seen significant boosts to its estimates over the last three months. Earnings per share forecasts have been revised upwards nine times, compared to 2 downward revisions, while revenue estimates have been revised seven times vs. four downward moves.

US Treasury Yields 

U.S. Treasury yields rose on Friday as traders assessed a slightly higher-than-expected measure of wholesale inflation. The yield on the benchmark 10-year Treasury note added 7 basis points to 4.15%, while the yield on the 2-year Treasury note ticked up 7 basis points to 4.89%. The producer price index rose 0.3% for July, the Bureau of Labor Statistics reported Friday. That came in slightly ahead of the 0.2% month-over-month increase expected by economists polled by Dow Jones. This news should be very welcomed by the FED. Traders are closely watching several key data points to gauge whether the central bank will need to hike interest rates again in September and for how long monetary policy will stay tight.

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