Wall Street might not like this: Inflation rises 2.1 percent, faster than expected

[BumRushDaShow]

Source: Washington Post

The Consumer Price Index, which measures how quickly prices are going up in the U.S. economy, rose at a faster than anticipated 2.1 percent in January compared to a year ago, triggering fears of another rocky run on Wall Street.

The monthly Labor Department report on the price of everything from gas to groceries was closely watched Wednesday, with Wall Street investors suddenly very concerned about inflation.

The stock market sell-off earlier this month that caused the Dow to fall over 1,000 points in a single day began after a Labor Department report showed wages grew at a better-than-expected pace in January.

Now another key gauge of inflation -- CPI -- is showing a similar upward trend. Inflation around 2 percent is still very low, but Wall Street traders fear that this could be the beginning of a quick run up in wages and prices.

Read more: https://www.washingtonpost.com/news/wonk/wp/2018/02/14/wall-street-might-not-like-this-inflation-rises-2-1-percent-faster-than-expected/?utm_term=.2c15305bd9ad

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Regarding this -

market sell-off earlier this month that caused the Dow to fall over 1,000 points in a single day

There were 2 days that had a 1000+ drop - Feb. 5th & Feb. 8th

The Dow Jones plunged more than 1,000 points on Thursday in another volatile day for the stock market. It was the second-worst single-day point drop in history, beaten only by the record set after this Monday’s 1,175-point drop.

The Dow’s tumble of 1,033 points on Thursday officially marks a stock market correction, which means the market is down 10 percent from its previous high.

https://www.vox.com/policy-and-politics/2018/2/8/16992860/dow-down-1000-points-stock-market-correction

In the scheme of where the Dow was, it's not as significant as back in 1987 when the market drops 500+ points from a high of ~2200.

[tanyev]

1. Well that's obviously Obama's fault.

[IronLionZion]

11. There is some truth to that

because of Fed stimulus and low interest rates.

But also Trump because his tax cuts and deregulation are stimulating an already very stimulated economy.

[Calista241]

2. I think this is a good sign personally. Interest rates will go up.

Wages will go up. You can’t have good growth of the economy without a balance between inflation and interest rates.

[BumRushDaShow]

5. Agree although

you know the other side will believe that "consumers" (who really aren't in the market like they think because often their money is tied up in funds related to 401(k)s and other pension funds) will pull their money out and put it in the bank (that has had minuscule interest rates for savers).

[IronLionZion]

9. The retirement account equivalent would be money market or short term bond funds

So a normal person who is close to retirement and feeling risk averse might move some money out of equities as a way to preserve it for when Trump crashes the whole economy.

[BumRushDaShow]

12. Right

but it will take some time and more interest rate rises for some to move that direction (at least those who have money in funds).

I think maybe that is why they think this last correction is signaling a deeper ripple of a response regarding future trends and will probably initiate some period of shifting and re-balancing (volatility) before moving to a possible bear market.

[yallerdawg]

3. Now THIS is the Dotard's economic and financial policies coming into play.

Best case scenario for that...person?

One-term precedent.

[nycbos]

4. We need a secret plan to fight inflation.

&t=2s

[bucolic_frolic]

6. You could feel inflation building from late October into January

Many many things cost more, not to mention gasoline

Even closeout items cost more. Anything that's 'underpriced' disappears fast.

Been through many cycles like this. This looks to be a robust inflation. Stimulating a full employment economy is very inflationary. We will pay dearly for that stupid move in the form of decreased purchasing power, a de facto devaluation of the currency.

[BumRushDaShow]

7. I may be wrong

but am not sure if the CPI ever included what they consider the "volatile" priced goods like gasoline/energy and food prices, which was a major complaint I have had about some of these indexes for years because those items directly impact people to the core.

So if that is the case, this news would really be a red flag.

[IronLionZion]

10. Goods and services covered in calculating CPI:

The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:

FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
https://www.bls.gov/cpi/questions-and-answers.htm#Question_7

[BumRushDaShow]

13. Okay but they still segregate the figures

and apparently did a shift since 2012 (what had been called the "Core CPI" ) where they are apparently calling this the "all items" CPI (including energy/food). From their release -

The index for all items less food and energy increased 0.3 percent in January.
Along with shelter, apparel, and medical care, the indexes for motor vehicle
insurance, personal care, and used cars and trucks also rose in January. The
indexes for airline fares and new vehicles were among those that declined over
the month.

The all items index rose 2.1 percent for the 12 months ending January, the same
increase as for the 12 months ending December. The index for all items less food
and energy rose 1.8 percent over the past year, while the energy index increased

https://www.bls.gov/news.release/cpi.nr0.htm

I think my issue was which was/is used to calculate COLAs.

[IronLionZion]

14. Social Security uses the broader CPI for COLAs.

https://www.ssa.gov/oact/cola/latestCOLA.html

They raised it 2.0% last month

[BumRushDaShow]

15. Okay

I get federal retirement and it matches the SS COLA but SS uses CPI-W and not this reported CPI-U.

[inwiththenew]

8. In general as unemployment levels drop inflation rises

More people with more money. Generally speaking of course.