Daily Brief - A Mixed Inflationary Tale

TLDR: February's Producer Price Index signals areas of both concern and control. With an overall 0.6% rise in final demand and energy prices leading the charge, the fight against rising costs takes a nuanced turn.

In February, while the energy sector showed significant inflationary pressures—gasoline and jet fuel prices notably surging—core goods (excluding food and energy) maintained a more modest increase of 0.3%.

The services sector presented its own mixed bag, with transportation and warehousing costs climbing by 0.9%, yet trade services dipped by 0.3%. Such disparities highlight the uneven terrain policymakers must navigate in managing inflation without stifling growth.

A rise in wholesale and consumer prices in February signals the ongoing challenge of reducing inflation. Despite inflation's significant slowdown after the Federal Reserve's rate hikes since early 2022, officials are hesitant to cut rates without clear evidence of inflation returning to pre-pandemic levels of 2% or less.

Recent consumer and producer price indexes, exceeding expectations, indicate persistent inflation, raising concerns for the Federal Reserve.

Market Movers: When 10Y yields rise:

Here are the historically best and worst performing sectors on 1-month basis, when the US 10Y rises 15bps in 3 days:

Top 3:

1. S&P Oil Gas Explore Prod, with a return of 2.97%.
2. S&P Software, with a return of 2.02%.
3. Energy Select Sector, with a return of 1.93%.

Bottom 3:

1. S&P Gold Miners, with a return of -0.59%.
2. S&P Telecom, with a return of -0.28%.
3. S&P Utilities, with a return of 0.21%.

Asset Spotlight: Li Auto Price Drop

In the last 14 occasions where Li Auto's price dropped, Toggle's analysis showed a median upward movement in the stock's price over the subsequent 6 months.

Li Auto officially launched their first battery-electric vehicle (BEV), the Li Mega MPV, in China. This BEV represents a significant step for Li Auto, traditionally known for its hybrid electric vehicles, as it moves into the all-electric vehicle space with plans to introduce more BEV models by 2025.

Earnings Update: Ulta Beauty reports tonight

For Ulta Beauty's earnings report, expectations include quarterly earnings of $5.53 per share and revenues of $3.01 billion, marking year-over-year increases of +2.2% and +10.3%, respectively. The upward revision of EPS estimates by 0.36% over the last 30 days suggests optimism among analysts.

Factors likely to influence these results include growth in the beauty sector, strategic initiatives, and Ulta's responsiveness to consumer trends.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.