The personal consumption expenditures report was released at 8:30 a.m. ET, and gave further clarity on the state of price pressures in America.

The PCE price index excluding food and energy rose 0.6% for the month, and was up 4.7% from a year ago, the Commerce Department revealed. Including the volatile food and energy components, headline inflation gained 0.6% and 5.4% respectively.

Once again, this data is seen by investors as a potential tipping point for the markets. Until the next potential tipping point, since the market loves to rely on this type of milestone. In reality, the consequences are rarely binary. Let's look at what we're talking about and what it means.

The US publishes two main types of monthly inflation. CPI inflation, which measures overall price changes and is published the second week after the end of the month. And the so-called PCE inflation, ten days later. PCE stands for "Personal Consumption Expenditures". It focuses on the prices paid by individuals for goods and services, which makes it possible to refine consumption patterns. It is apparently the inflation measure that the Fed looks at the most, precisely the one called "Core PCE", which excludes the impact of energy and food.

Today's data is much higher than anticipated, since economists expected that Core PCE inflation would rise by 0.4% between December and January, for an annual change of 4.3%, down from December’s 4.4%. A quick reminder: just because the price increase is higher from one month to the next does not necessarily mean that the year-on-year change is higher, because the basis of comparison is different.

Higher-than-expected inflation was the worst possible surprise, because investors now fear that the Fed will raise rates beyond current projections, or even over a longer time frame.

In other news, corporate results remain robust and yesterday boosted most indices. In Europe, markets rich in cyclical stocks benefited, with modest gains in Paris, Frankfurt, Milan and Madrid. Initially hesitant, Wall Street was up, thanks in particular to a Nasdaq spurred on by the semiconductor pocket, after the solid prospects of Nvidia, whose stock soared by 14%. On the other hand, Hong Kong was weighed down by Alibaba's results.

 

Today's economic highlights:

US household income and spending and PCE inflation are today’s main indicators. All the agenda is here. This morning, Japan announced annual inflation of 4.2%, slightly lower than expected.

The dollar is slightly up to EUR 0.9461 and GBP 0.8351. The ounce of gold remains under pressure at 1816 dollars. Oil is waking up, with North Sea Brent at USD 82.57 a barrel and US WTI light crude at USD 76.09. The yield on 10-year US debt falls back a bit to 3.87%. Bitcoin retreats below USD 24,000.

 

In corporate news :

* Boeing lost nearly 3 percent in premarket trading after announcing the temporary suspension of deliveries of the 787 Dreamliner in order to conduct additional testing of a fuselage component, the U.S. Federal Aviation Administration (FAA) said Thursday night.

* Adobe lost 3.5 percent in premarket trading after Bloomberg reported that the U.S. Justice Department is set to block the Photoshop maker's $20 billion (€18.87 billion) takeover of Figma.

* Warner Bros Discovery is down 2.14% in after-hours trading after it reported a $2.1 billion fourth-quarter net loss Thursday night, partly related to a restructuring charge following the merger of Discovery with AT&T's WarnerMedia division.

* Beyond Meat jumped 14.3% in pre-market trading as the "vegetable meat" specialist anticipated full-year sales above analysts' expectations and further cost control.

* Block (formerly Square) gained 2.07% in after-hours trading as the payment services company said Thursday night it expects adjusted EBITDA to rise 30% to about $1.3 billion this year.

* Autodesk fell 3% in after-hours trading after the company issued a forecast for annual revenue growth of between 7% and 9%, compared with the Refinitiv consensus of 9.03%.

 

Analyst recommendations:

  • Domino's Pizza: Baird downgrades to neutral from outperform. PT up 3.9% to $320.
  • Imax: Morningstar downgrades Imax to Hold from Buy, $19 Price Target.
  • Integer: Piper Sandler initiated coverage with a recommendation of overweight. PT up 15% to $85.
  • LyondellBasell: RBC Capital Markets upgrades to outperform from sector perform. PT up 37% to $130.
  • Moderna: Morgan Stanley lowers PT to $185 from $205. Maintains equal-weight rating.
  • Netapp - Credit Suisse lowers its recommendation to "neutral" from "outperform" 
  • NVidia - Goldman Sachs raised its recommendation to "buy" from "neutral" 
  • Stericycle: Baird downgrades to neutral from outperform. PT up 8.5% to $53.
  • W.W. Grainger: RBC Capital Markets upgrades to sector perform from underperform. PT up 3.2% to $679.
  • Yeti Holdings: Jefferies lowers PT to $57 from $75. Maintains buy rating.