The Dividend Cafe - The Dividend Cafe Thursday - September 12, 2024

Episode Date: September 12, 2024

Market Gains and Disinflationary Signs on Dividend Cafe In this episode of Dividend Cafe, Brian Szytel discusses the positive movements in the markets on September 12th, with the Dow gaining 235 points, the S&P rising for the fourth straight day, and minor gains in the NASDAQ and 10-year Treasury note. The focus is on the latest Producer Price Index (PPI) data showing a disinflationary trend with a year-over-year number under 2%, reinforcing the Federal Reserve's shift from inflation to employment and economic growth concerns. Revised July PPI figures indicate deflation. Initial jobless claims align with expectations, supporting the 'soft landing' economic narrative. 00:00 Introduction and Market Overview 00:37 Inflation Data Insights 01:23 Federal Reserve and Bond Market Dynamics 02:24 Revised PPI Numbers and Jobless Claims 03:05 Conclusion and Sign-Off Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome to Dividend Cafe. This is Thursday, September the 12th. Brian Seitel with you here today on what was generally a fairly positive day overall in markets. The Dow was up 235 points, actually opened with a little bit of weakness early in the morning. By about 10 o'clock or so mid-morning, we started to rally a little bit and then just built on some gains and ended up closing a nice positive 235 on the day. This is the fourth straight day actually for the S&P as well. It was up about three quarters of a

percent. NASDAQ was up a point on the day. The 10-year was up two basis points at 368. So overall, fairly good. And the news really was we had PPI data. This is the producer price index inflation data that comes out on wholesale side, basically exactly the same as what CPI came out as to yesterday. So we had a 0.2% month over month number on PPI for headline, and then we had a 0.34 core. So basically food and energy, because it has come down pretty much across the board relative to some other goods in the baskets that they measure in these data points like PPI and CPI. When you strip it out in the core numbers, that's why those monthly numbers are just a little bit higher. But all that to say the year over year number on PPI is now under 2%. It's 1.7.

So below where the Fed wanted to see. So these things are good. All of this stuff is speaking to a pretty consistent disinflationary narrative. And that's why the Fed has pivoted from talking about inflation, which they're pretty convinced is moving in the right direction to things like employment and growth in the economy. I was on Yahoo Finance this morning talking about this, but there's only about a 15% chance of a 50 basis point rate cut in the Fed futures. But the two-year bond is already 175 basis points below where Fed funds is. So the bond market is an actively traded market, and participants can set different yields and prices based on where they think the future will be. And of course, they've already voted with their feet, and whether they've gotten ahead of

themselves or not, we'll have to see next week. I think what's priced in is a 25 basis point cut, but the bond market is saying that 50 is where it wants it to be. And also because there's over 100 basis points by the end of the year and then another 125 plus by the end of next year, I suppose where we start matters a little bit less at this point. And the bond market, again, has priced a lot of that in advance. One thing to note today about the PPI number was that July, so these numbers I gave you were for August, by the way, but what they did is revise July as they do. And the July numbers were revised to zero on headline and negative 0.2 on core. So a deflationary number actually in PPI. So it's not just this month was in line, but they

revised last month to quite a bit lower. The other data point on the day was initial jobless claims were at 230,000. That's exactly what we thought they would be. So it's in line with expectations. And more or less, this stuff is all positive for the soft landing camp. This is about what we were expecting to see. So with that, I think I'll keep it short here today and let you go into your Friday tomorrow. It's been fun to be with you this week. And please reach out with your questions as always. And if I don't speak to you for some reason, please have a lovely weekend.

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