Tuesday Morning Rebel Brief: White House Gives Ominous CPI Prediction

Market Rebellion

This article was last updated on 09/21/2022.

CPI Data

Good morning Rebels! The market is indicated to open slightly lower for the second day in a row as investors gear up for another important piece of economic data tomorrow: The June CPI Report! Last time the CPI Report came in hot (last money) the Fed upped the ante on rate hikes — increasing the Fed Funds Rate by 75 basis points — the largest hike in decades (and one supported by Bullard in the upcoming meeting)! At the same time, the yield curve between the 2/10 year is now inverted by 11bps, the most since February 2007.

Speaking of investors gearing up for the CPI…

White House Press Conference Leads to Ominous CPI Prediction

You know who else gearing up for the CPI Report? The White House. Monday afternoon the White House gave an ominous warning:

Now, that warning is pretty vague. “Highly elevated” — what could that mean? The Fed is projecting a Wednesday CPI number at 8.8% — that would indicate a modest increase from the prior month’s 8.6%. Maybe that’s what the White House is talking about. 

But would an in-line number be enough for the White House to jump out in front of the number with a pre-emptive warning? It’s possible that this White House press conference foreshadows another negative inflationary surprise. Only time will tell. And we won’t have to wait long — tomorrow’s CPI Report is due at 8:30 AM EST. 

Not sure where to read about it? We’ll be posting about it in tomorrow’s Rebel Brief the moment the news drops! 

Unusual Options Activity

It Isn’t Just America — Europe Feels the Recessionary Pressure

It really does not look good out there in Europe. The Euro has slid to parity with the dollar — the weakest the Euro has been since November of 2002. The weakness is due in part to an economic slowdown, and also to Europe’s dependence on Russian gas supply. 

The European Central Bank Governing Council has also said that its central bank must increase interest rates by as much as 1.25% by September if Europe’s inflation situation doesn’t improve. At the same, German investor confidence has fallen to levels not seen since the European debt crisis 2011. 

Not a Good Sign: Klarna’s Micro-loans Become Popular For Necessities

Sad Trend: According to Klarna, which has typically been known as a popular buy-now-pay-later option for things like furniture and tech, loan applications for necessities (groceries and gas are two of the biggest ones) have become increasingly as the effects of inflation take hold. 

As a whole, 36% of people surveyed say that micro-loans have become “more appealing amid the record inflation,” At the same time, Klarna’s borrowing cost for supplying these interest free loans has skyrocketed — more than doubling from less than 150 basis points in February to 318.82 at present day. 

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More Brief Headlines

  • Peloton (PTON +5.5%) to stop in-house bike production — will now outsource
  • PepsiCo (PEP +1.4) — beats EPS and revenue expectations, issues upbeat guidance
  • LoanDepot (LDI) will cut 2000 staff by the end of the year
  • Gap (GPS -6.4%) expects rising costs combined with deep discounts driven by high inventory to hurt profit margins. CEO Sonia Syngal fired.
  • Bitcoin (BTC) drops below $19,000 in fourth day of decline
  • Ginkgo Bioworks (DNA +1.3%) were higher by as much as 9% this morning after an 860,480 share purchase from Cathie Wood’s Ark Invest.
  • American Airlines (AAL +1.04%) sees Q2 revenue higher by 12% versus 2019.

For more quick takes on this morning’s market-moving news, check out 60 Seconds With Jon Najarian!

https://twitter.com/jonnajarian/status/1546843145895170051

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