Daytime aerial view of a container ship on the Solent Sea, UK
Carl Hendon | moment | Getty Images
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Inflation has proven to be more complicated than it first appeared. But markets still believe in a direct path to easing inflation.
What you need to know today
- Ford Motor Company announced Monday that it will work with a Chinese supplier on a new $3.5 billion battery plant for electric vehicles. The facility will be built in Michigan and is expected to open in 2026.
If Tuesday’s CPI report comes out hotter than expected, the S&P 500 could drop as much as 3%, according to JPMorgan’s sales and trading desk.
Months of steady declines in prices have given investors the sense that inflation is on a linear downward trend. But inflation is more complex than it first appears.
Economists expect January’s CPI to rise 0.4% month over month – that’s a jump from December’s -0.1% figure, which means prices have actually fallen. So far, market chatter has been that service inflation — the price of travel, dining out and hospitality, for example — has proven more persistent than goods inflation, largely because of a very tight labor market.
But logistics managers warn that the supply chain is once again clogged, which could contribute to higher commodity prices. “Late fees and warehouse fees are passed on to the consumer, which is why we’re not seeing products drop as much as they should,” said Paul Brashier, vice president of exchange and multimedia at ITS Logistics.
However, the markets showed optimism on Monday. The Dow Jones rose 1.11%, the S&P rose 1.14% and the Nasdaq Composite advanced 1.48%. Investors may have been hoping for a “Goldilocks-like combination of recovering industrial production and falling inflation,” Credit Suisse’s Ray Farris said in a note Monday. Time will tell whether this comforting narrative of declining inflation – and the markets’ bold optimism – holds up.
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