(As of 7:15 am PST)
Stocks
opened Friday’s session lower following a weak close Thursday, however the
three main US benchmarks remained on pace for gains near 3% on the week – the
best of 2016. A surprise report on inflation was the talk of the morning. The
consumer price index was flat in January led by lower gasoline prices, the
government reported Friday. Core consumer prices, which excludes the volatile
food and energy sectors, jumped 0.3%, the biggest monthly gain since August
2011. Year-over-year core prices rose 2.2%. The data surprised most economists’
expectations and has stirred up debate now as to what the interpretation of
this new inflation data will mean for the Fed’s policy path towards rate
normalization. The markets are selling off on the perception that rising
inflation (although still very low historically) means the Fed will move more
quickly to raise rates. The instability of the current global economy has kept
the Fed under pressure on its decision to move forward on its next round of
rate hikes. Yet, with today’s inflation data, the debate is back on the table
once again. In other news, oil prices are slipping Friday, with WTI crude down
3.3% to under $30 per barrel. Oil is higher on the week, however, as four major
oil producers agreed to an output freeze to stop-gap a further decline in oil
prices. WTI crude is up over 13% in the past 5 days. Asian stocks skidded into
the weekend mostly lower on the day, but still booked solid gains on the week.
European equities followed the same path. It remains to be seen whether or not
this week’s buying enthusiasm is the beginning of a larger turnaround or not.
However, it was a welcome respite from what has been a brutal start to the
year.
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