Happy CPI Day,
 
Yesterday was a choppy session with most major indices ending on either side of unchanged. Earnings season “officially” got underway with bank and healthcare earnings generally looking pretty solid, but the stocks were mostly lower. Memory and chip names were under pressure amidst CXMT competition and demand concerns as AI-related debt got hit, however, the stocks ended off session lows. The Russell 2k fell 0.4% as investors moved up the quality scale. Oil prices continued to hover around recent highs. Yields pulled back modestly with the front end dropping in the afternoon after NY Fed Williams said that he sees one additional hike this year but doesn’t currently see the need for additional tightening next year.
 
Futures were modestly higher ahead of this morning’s inflation data. The data came in hot and we’ve since reversed those gains. Headline was inline with expectations up 0.6% m.m while the annual reading accelerated to 3.7% from 3.4%. As widely expected, energy drove much of the move higher with the increase in gasoline accounting for >50% of the total increase. Interestingly food away from home was up 0.2% while food at home fell 0.1% (not my grocery bill). Core came in a tenth ahead of estimates up 0.3% m/m and 2.6% on an annual basis. Shelter ticked up to 0.4% while used cars, apparel, transportation and medical care services all accelerated. Over 50% of components are tracking >3%, a metric Fed Chair Warsh has called out.
 
Treasury yields were lower by a couple of basis points ahead of the data but have moved sharply higher since hovering just under the recent highs. There is a flattening of the curve with the 2yr up 12bps, 10yr up 9bps and 30yr up 6bps.  just under the recent highs. The USD index is hitting new highs up ~0.5% to $102.50. Futures are on the move lower. S&P futures have fallen ~50pts since the release down ~0.3% while Russell futures are now off >1%.
 

• US 2yr +12bps to 4.93%, 5yr +12bps to 5.13%, 10yr +10bps to 5.31%, 30yr +6bps to 5.62%
• USD index: +$0.60 to $102.58

 
On the corporate headline front. Anthropic will be hosting an investor day today which will get a lot of attention. Security risk is top of mind after an OpenAI, Saudi national employee, was arrested for planting a recording device. There are reports that the company is exploring a cybersecurity acquisition and that it plans to delay the release of new models until safety concerns are addressed. ASML is trading slightly lower after earnings. Results were strong, management highlighted strong demand and that it would likely be capacity constrained through 2029. Morgan Stanley(-3%) and Bank of America (-6%) earnings largely had the same themes as yesterday with weakness in FICC trading, advisory/wealth management were strong. This also helped BlackRock (+2%) which is the positive standout this morning. BAC is getting hit after a $1.2B fine from Treasury for AML violations. State Street (-8%) is also sharply lower after its results disappointed.
 
Markets in Asia were mostly lower overnight while European indices extend recent gains. China ended modestly lower despite very strong trade data with imports and exports accelerating meaningfully from last month. CPI was a touch light, but PPI increased more than expected up 5% y.y from 3.8% last month. Japan ended around unchanged tech was mixed, financials were under pressure while other areas of the market were mostly higher. South Korea also ended modestly lower. Financials also led to the downside here while memory stocks continued to be under some pressure. European indices are stilling holding on to gains but have pulled back since the US data.
 

 
ICE Brent is a touch lower despite continued tensions. WTI rolls tomorrow. Keep in mind inventory data is delayed a day for the holiday. Nat gas is down ~2% in both the US and Europe. Precious metals were lower overnight and have accelerated to the downside as the USD has moved higher. Gold is down ~1.5% retesting last week’s low ~4,100. Silver is down ~4% and has already broken that low currently trading ~$57. Ag is mixed. Crypto was holding around unchanged overnight but has also moved modestly lower post data.
 

Economic Data:
US:

• Mortgage apps: -2.7% w.w prior -4.2%; 30yr Rate - 7.5% prior 7.49%
• CPI: 0.6%/3.7% m.m/y.y vs. 0.6%/3.6% cons. ,prior 0.4%/3.4%
• CPI Core: 0.3%/2.6% m.m/y.y vs. 0.2%/2.5% cons. ,prior 0.3%/2.4%
• 11:00 Treasury buyback announcement
• 1:30 Fed Barkin
• 2:00 Fed Beige Book
• 3:00 Fed Goolsbee
• 4:30 API Oil Inventories

Global:

• China CPI: 0.2%/0.9% m.m/y.y vs. 0.3%/1% cons., prior 0.4%/0.8%
• China PPI: 5% vs. 4.5% cons., prior 3.8%
• China Imports/Exports: 31%/36.3% y/y vs. 24.5%/25.5% cons., prior 28.2%/25%
• Germany Wholesale Prices: 1.9% m.m vs. 0.7% cons., prior 0.9%
• India Inflation: 11.39% y/y vs. 10.18% cons., prior 9.92%