The Fallout from January's Hot PPI Report

Insights and Strategies for Navigating the Volatile Market in the Wake of PPI's Surprising Results.

Author

Cents Invest
February 17, 2023

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 What You Need to Know

Headlines

Super Bowl betting sets records for sportsbooks

The Super Bowl matchup between the Chiefs and the Eagles proved to be a huge night for gamblers and sportsbooks.

https://www.cnbc.com/2023/02/13/super-bowl-betting-records.html

Annual Inflation Cooled Slightly in January as Pace of Moderation Levels Off

Annual inflation cooled for the seventh straight month, to 6.4% in January.

https://www.wsj.com/articles/us-inflation-january-2023-consumer-price-index-f080e30b

U.S. Retail Sales Rebounded Sharply in January

U.S. retail sales rose 3% in January as job growth accelerated and inflation cooled slightly at the start of the year. 

https://www.wsj.com/articles/us-economy-retail-sales-january-2023-b59cb036?mod=hp_lead_pos2

WSJ News Exclusive | U.S. Escalates Apple Probe, Looks to Involve Antitrust Chief

The department has ramped up work in recent months on drafting a potential complaint against the tech giant, and is looking to involve its top antitrust official, who was initially sidelined.

https://www.wsj.com/articles/u-s-escalates-apple-probe-looks-to-involve-antitrust-chief-2fa86ddf?mod=hp_lead_pos1

January PPI Report Shows Producer Prices Rose, Pointing to Persistent Inflation

U.S. supplier prices rose 6% in January from a year earlier, a sign of still stubborn inflation pressures in the economy.

https://www.wsj.com/articles/january-ppi-report-shows-producer-prices-rose-pointing-to-persistent-inflation-9bbc252b

On Twitter

 Trends In Focus

  • Strong performance in Venmo and legacy products

  • Member growth is weak but volume growth drove growth

  • Strong guidance signaling "soft landing" from company's opinion

  • CEO retires by end of 2023

PayPal continues to dominate the digital payment wallet space with strong share of the market. The strength of this business lies in its brand and the trust that entails. Margins remain strong and growth while slowing, continues. Venmo grew in the low single digits and guidance on overall revenue growth was given at 7%. General sentiment on the call was more optimistic, in line with the banks we reported on earlier last month. The CEO is set to retire at the end of 2023, but may continue to stay longer in the role should the firm find it difficult to find a suitable successor. He will be transitioning to the chairman of the board for the foreseeable future.

To read more and what price we like PayPal click here. 

Oil (WTI) has been rebounding strongly in the past few trading sessions - and has crossed key technical levels. 

On the daily candle WTI chart, the price has regained the 50-day EMA, but importantly has rebounded off an oversold stochastic (bottom chart), crossed over 50 RSI (second from bottom), and is crossing over the MACD signal line (third from bottom). On longer term (weekly and monthly) charts, the price is found solid support at the 200-period EMAs. This all implies that after a period of downtrend/consolidation, the oil price is about to make a solid move up.

On a fundamental basis, this has been driven by renewed concern over inflation as well as energy supply dynamics as Russia announces they are cutting production by 5% in response to price caps on Russian supply. This move was done without consultation with OPEC+. I have maintained for the past year that energy has more risk to undersupply than oversupply after years of under-investment in capex. Unless we see significantly more capex across the globe or significant demand drop-off, I still expect oil to trade above $60-$70 for an extended period of time. Fluctuation in that range will depend on short-term supply and demand dynamics that are difficult to predict. We are closer to balance right now, but there are still geopolitical risks to production as seen today, and China reopening/Europe avoiding recession may add additional demand as well to keep an eye on.

To read more and see what stocks are interesting click here. 

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