Market participants continue to react to the bullish market sentiment created by yesterday’s CPI report. Inflation came in at 6.5% yoy last month, marking the sixth consecutive month that inflation has fallen since peaking at 9.1% in June.
According to the BLS, “The consumer price index for all urban consumers (CPI-U) fell a seasonally adjusted 0.1 percent in December after rising 0.1 percent in November, the US Bureau of Labor Statistics reported today. Over the past 12 Months before seasonal adjustment, the overall index rose by 6.5 percent.”
According to the report, gasoline was “by far the largest contributor to the monthly decline across all items, more than offsetting the rise in accommodation indices. The food index rose 0.3 percent for the month, while the home food index rose 0.2 percent and fell 4.5 percent for the month as the gasoline index fell; other major energy component indices rose during the month.”
Core CPI inflation (which excludes food and energy costs) rose 5.7% yoy and is up 0.3% mom. While inflationary pressures have eased, the core CPI is still around three times the Federal Reserve’s target rate of 2%.
However, the optimism prompted investors to become active buyers of US stocks, gold and silver. However, they did not base market sentiment on the Fed’s recent statements. The caveat is that the Federal Reserve has, on several occasions, reiterated its steadfast determination to keep interest rates high in 2023.
Many analysts believe the Fed is bluffing because current interest rates are not sustainable year-round. Others believe their promise to be transparent just doesn’t exist anymore.
US equities, gold and silver benefited from this sentiment, leading to strong rallies in gold and silver and modest gains in major equity indices. The Dow was up 0.33%, the S&P 500 was up 0.40% and the NASDAQ Composite was up 0.70%.
As of 5:42 p.m. EST, February gold futures are up $24.20 and fixed at $1923. March silver futures are up $0.41 or 1.71% and are fixed at $24.415
As I mentioned yesterday, I continue to believe that if the Fed stays the course, it could make one of the biggest mistakes the Fed has made in recent history. The Fed’s days were dates–Addicts appear to matter only when the data confirms their assumptions.
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I wish you good business as always,
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