U.S. January PPI Surprises on the Upside

Advertisements

On Wednesday, the stock market in the United States witnessed an upswing, with all three major indices ending the day on a high noteTesla emerged as a front-runner among prominent tech stocks, with the "AI super stock" Apploving experiencing a staggering surge of over 24%. Chinese concepts saw a mixed performance, but the NASDAQ Golden Dragon Index climbed by 1.20%. Meanwhile, the price of gold increased by nearly 1%, while the dollar index dropped by 0.83%. Oil prices continued their downward trend for a second consecutive day.

Closing figures indicated the Dow Jones rose by 342.87 points, representing a 0.77% increase, resulting in a value of 44,711.43 pointsThe NASDAQ Composite saw an even more significant uptick, rising by 295.69 points or 1.50% to close at 19,945.64 pointsThe S&P 500 also added 63.10 points, up 1.04% to end at 6,115.07 pointsProminent technology firms mostly experienced gains, with Intel climbing by over 7%, Tesla nearing a 6% increase, and NVIDIA seeing gains exceeding 3%. In contrast, TSMC experienced a decline of over 2%. The impressive earnings report that surpassed expectations propelled Apploving's remarkable rise, and Robinhood also gained more than 14%.

Across the Atlantic, European markets displayed positive trends, with Germany's DAX 30 rising by 463.99 points, a gain of 2.09%, closing at 22,612.02. The UK's FTSE 100, however, saw a slight dip of 42.72 points, down 0.49% to 8,764.72. France's CAC 40 index grew by 121.92 points, up 1.52% at 8,164.11 pointsThe Euro Stoxx 50 also rose by 92.70 points, representing a 1.71% increase to 5,498.35. The Spanish IBEX 35 saw a marginal uplift of 24.80 points, or 0.19%, settling at 12,936.30, while Italy's FTSE MIB rose by 376.86 points, a 1.00% gain to 37,908.05.

In the Asia-Pacific region, Japan's Nikkei 225 gained 1.26%, while South Korea’s KOSPI index rose by 1.36%. Conversely, Indonesia's Composite Index witnessed a decrease of 0.48%.

In the precious metals market, spot gold saw an increase of 0.83%, reaching $2,928.48 per ounce, while COMEX gold futures rose nearly 1%, settling at $2,957.20 per ounce.

In the oil market, WTI crude for March delivery dropped by $0.08, a decrease of 0.11%, ending at $71.29 per barrel

Advertisements

Brent crude for April delivery fell by $0.16, or 0.21%, concluding at $75.02 per barrel.

The US dollar also experienced a decline, as the dollar index, which measures the dollar against six major currencies, fell by 0.83% to 107.04.

Setting the stage for macroeconomic analysis, the US Producer Price Index (PPI) for January exceeded expectations, although the related Personal Consumption Expenditures (PCE) component showed moderate price increasesDue to rising food and energy costs, the PPI for January climbed to 3.5% year-on-year, marking the highest since February 2023, surpassing both the expected and previous values, which were both at 3.3%. The core PPI also showed a 3.6% year-on-year growth, exceeding predictions of 3.3% and the previous figure of 3.5%. This data indicates that inflationary pressures are still significant ahead of any tariff imposition by the US governmentAnalysts noted that the PPI data further corroborates the strong Consumer Price Index (CPI) figures and the low number of unemployment claims, suggesting that a rate cut by the Federal Reserve in the near term remains unlikelyHowever, a few analysts predict that the components of PPI that make up the Fed's preferred PCE index—especially in financial and healthcare services—may show weaker performance, leading to expectations that the month-to-month rise in core PCE for January will fall considerably below the CPI increase.

In a stern warning, renowned investor Ray Dalio emphasized the urgent need for the US to significantly reduce its debt, or else it risks facing a “heart attack” crisis in the economyHe cautioned that without substantial debt reduction, the consequences would be direDalio urged the new US administration to commit to lowering the budget deficit from 7.5% of GDP down to 3%. Failure to act, he warned, could result in a dire situation for the bond marketHis comments highlight the severity of the US debt dilemma, which has continued to climb year after year, with the national debt reaching approximately $36.22 trillion as of February 11. Additionally, he pointed out risks associated with a potential "debt death spiral" in the private credit sector.

In corporate news, speculation arose regarding a potential joint venture between Intel and TSMC, driven by a supply chain rumor suggesting that the US government might intervene to facilitate a partnership between the two semiconductor giants

Advertisements

This strategic shift in manufacturing could potentially reshape the competitive landscape within the semiconductor industryBaird analysts referenced ongoing discussions from the Asian supply chain indicating that TSMC engineers might provide expertise and support at Intel's 3nm/2nm wafer fabrication facilities to ensure the feasibility of Intel's manufacturing projectsThe proposed arrangement could see Intel's plants transformed into a new entity jointly owned and operated by both Intel and TSMC.

In a notable move within the automotive sector, Honda and Nissan announced the termination of their merger talks, which could have led to the formation of one of the largest automobile manufacturers globallyDespite abandoning the plan to create a holding company for the two brands, both companies reaffirmed their commitment to maintaining a strategic partnership with Mitsubishi MotorsThey expressed intentions to collaborate on advancements in battery technology, autonomous driving, software development, and electric vehicle innovations.

Airbnb's fourth-quarter performance exceeded market expectations, reporting a 12% year-on-year revenue growth to $2.48 billion, surpassing analyst forecasts of $2.42 billionEarnings per share came in at $0.73, also exceeding predictions of $0.59. Total booking value reached $17.6 billionThe company indicated it would continue building upon last year's progress as travel demand remains robustProjections for Q1 2025 forecast revenue between $2.23 billion and $2.27 billion, slightly below analyst expectations of $2.29 billionFollowing the announcement, shares of Airbnb increased by more than 15% in after-hours trading.

Roku showcased impressive results in its fourth-quarter report, revealing a 25% year-on-year revenue increase to $1.2 billion, exceeding the anticipated $1.15 billionThe company's net loss decreased significantly to $35.5 million, a substantial improvement from a net loss of $78.3 million during the same period last year, also beating analyst projections of a $59.7 million loss

Advertisements