By Romain Fournier
The long-awaited inflation numbers have finally been released. And things are not as good as investors had hoped, but also not as bad. U.S. inflation eased slightly in April, but less than analysts had forecast.
The CPI fell to an 8.3% annual rate, the Labor Department said Wednesday, dropping for the first time in eight months, as energy prices fell slightly in April, while supply chains improved. However, this is still higher than analysts expected, since the forecast was an 8.1% annual rate.
Consumer price index shows costs advanced by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021. Meanwhile, core inflation accelerated to 0.6%, as an easing trend in goods prices was not enough to overcome the upward trend in services. All in all, it is still too early to say if inflation actually fell, since the CPI’s food index jumped 9.4%, the largest 12-month increase since April 1981.
Market reaction to the figures so far is rather positive, since all three Wall Street indexes were up this morning. The market may believe that the inflation peak has passed, which is a positive signal as it is well known that price chaos is at the root of much of the current turmoil. However, the debate is likely to shift to the pace at which prices will ease. It might look bad if it takes three years for prices to go from 8% annual increase to 2%.
"April's CPI data served as a stark reminder that the Fed has a long road ahead of it in bringing down inflation", said Wells Fargo in a note. "Although base effects are starting to help drive the year-over-year rates of inflation lower, that will no longer be the case come mid-summer. With the underlying trend in inflation still well-above what the Fed considers desirable, another 50 bps rate hike at the June 14-15 FOMC meeting seems all but assured, with further hikes of that magnitude highly likely to follow in our view."
Economic highlights of the day:
Earlier today, China reported higher than expected consumer and producer prices.
The dollar is down 0.24% to EUR 0.9477. The ounce of gold is down to USD 1847. Oil remains under pressure, with North Sea Brent at USD 106.52 per barrel and U.S. light crude WTI at USD 103.84. The yield on 10-year U.S. debt falls further to 2.99%. Bitcoin has recovered a bit to USD 31,200.
On markets:
* Tesla has shipped 4,767 cars from Shanghai destined for Slovenia, its first batch of vehicles exported since the factory reopened on April 19, the Shanghai Observer media outlet reported. Separately, a U.S. court ruled Tuesday that Tesla CEO Elon Musk's 2018 tweet that he had secured funding to take the automaker private was inaccurate and reckless.
* Philip Morris formalized a bid Wednesday to buy Swedish Match, offering 161.2 billion Swedish kronor for the Swedish tobacco products maker.
* Alphabet subsidiary Google told Reuters it has signed an agreement with more than 300 newspaper publishers in Germany, France and four other European countries to pay them for the use of their information and will roll out a tool to facilitate more such deals. Alphabet's stock is up 1.3% in pre-market trading.
* Chinese technology companies listed on Wall Street are rising in premarket trading after Shanghai authorities announced that half of the city's 16 districts have been placed under "zero-CoVID" status, with no new cases of SARS-CoV-2 infection recorded in the last three days.
* The Boeing Company is in a dispute with Aerojet Rocketdyne, a major supplier of the aerospace giant's Starliner spacecraft, which is scheduled for a test flight on May 19, sources close to the matter said.
* Ford Motor sold eight million shares of electric-vehicle maker Rivian Automotive for $214 million, or $26.80 per share, a stock exchange notice showed Tuesday.
* Electronic Arts said Tuesday it expects quarterly revenue to fall short of expectations due to lower video game sales following the lifting of health restrictions around the world. The video game publisher also ended its licensing agreement with Fifa after nearly 30 years of partnership. The share price was down 1.3% in the aftermarket.
* Western Petroleum reported Tuesday a quarterly profit that exceeded Wall Street expectations despite a drop in production volumes. The stock was down 1% in after-hours trading.
* Coinbase Global reported a net loss and lower-than-expected first-quarter revenue on Tuesday as the stock market rout dampened investors' appetite for risky assets, including cryptocurrency trading. The stock plunges 17% in pre-market trading.
* Globalfoundries gained 4% in premarket trading after better-than-expected first-quarter revenue and earnings.
* Western Digital gained 1.1% in premarket trading after Well Fargo raised its price target, citing the hard drive and flash memory maker's growth prospects.
* Warner Music is down 2.2% in premarket trading after at least six intermediaries, including Barclays, lowered its price target in light of the group's Tuesday earnings release.
* Hasbro - Several shareholders, including Boston Partners and Anchor Capital, urged the toymaker to renew its board of directors with at least one investor-appointed director and to reach an agreement with activist investment firm Alta Fox Capital Management
Analyst recommendations:
Arrowhead Pharma: Baird analyst upgrades to outperform from neutral. PT jumps 75% to $60.
Avaya Holdings: J.P. Morgan downgrades to underweight from neutral. PT down 7% to $7.
Bausch Health: BMO Capital Markets downgrades to $15 from $26. Maintains market perform rating.
Corning: Barclays downgrades to equal-weight from overweight. PT up 5.6% to $38.
Electronic Arts: Wedbush lowers PT to $164 from $180. Maintains outperform rating.
International Consolidated Airlines: Berenberg maintains a hold rating with a price target reduced from GBp 150 to GBp 135.
Norwegian Cruise: Stifel downgrades to $32 from $36. Maintains buy rating.
Planet Fitness: J.P. Morgan upgrades to overweight from neutral. PT up 33% to $90.
Tesla: CTBC Securities Investment initiated coverage of Tesla Inc. with a recommendation of add. PT set to $880.
Upstart: Atlantic Equities downgrades to neutral from overweight. PT rises 34% to $45.
Warner Music: Guggenheim Securities cut the target to $30 from $39. Maintains buy rating.
Watches of Switzerland: Goldman Sachs upgrades from neutral to buy targeting GBp 1330.
Wynn Resorts: Stifel lowers PT to $112 from $139. Maintains buy rating.
