A daytime aerial view of a container ship on the Solent Sea, UK
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This report comes from today’s CNBC Daily Open, our new international markets newscast. CNBC Daily Open updates investors on everything they need to know, wherever they are. Like what you see? You can subscribe here.
Inflation turns out to be more complex than it first appeared. But markets still believe in a direct disinflationary path.
What you need to know today
- Ford Motor said Monday it will work with a Chinese supplier on a new $3.5 billion electric vehicle battery plant. The facility will be built in Michigan and is expected to open in 2026.
If Tuesday’s consumer price index report is hotter than expected, the S&P 500 could fall as much as 3%, according to JPMorgan’s sales and trading desk.
The bottom line
Months of steadily falling prices left investors feeling that inflation was following a linear downward trend. But inflation is more complex than it initially seemed.
Economists expect January’s consumer price index to rise 0.4% on a monthly basis – that’s a jump from December’s -0.1% figure, meaning that prices have actually gone down. So far, the market chatter is that services inflation – the price of travel, restaurants and hospitality, for example – has proven to be more persistent than goods inflation, largely at due to an extremely tight labor market.
But logistics officials warn the supply chain is clogged up again, which could contribute to higher prices for goods. “Late fees and warehouse fees are passed on to the consumer, which is why we’re not seeing products drop as much as they should,” said Paul Brashier, vice president of drayage and intermodal at ITS Logistics.
Nevertheless, markets showed optimism on Monday. The Dow Jones rose 1.11%, the S&P 500 climbed 1.14% and the Nasdaq Composite rose 1.48%. Investors may have been hoping for a “Goldilocks-like mix of picking up industrial production and falling inflation,” Credit Suisse’s Ray Farris said in a Monday note. Time will tell if this comfortable narrative of disinflation – and the provocative optimism of the markets – holds up.
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