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Three Cheers to PPI data

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Equity markets staged a broad rally after wobbling upon the release of the PPI data. All 11 sectors in the S&P 500 rose as the index jumped 0.8%. The same applied to Nasdaq, and Dow climbed 1%.

Strong showing of Arm Holdings

Its first debut after pricing the IPO at $51 was robust. Shares of the chip design firm closed at $63.59, which is 25% above the IPO price, giving it a market capitalisation of $68 billion.

Economic data showed a resilient US economy.

Retail sales data rose 0.6% every month, well above the estimates for a 0.1% jump. While the Fed would like to see a smaller increase to fend off inflation, they did get some optimistic trends in this report.

A large portion of the rise is due to higher gas prices. If we remove the auto and fuel segments, retail sales only increase by a mere 0.2% despite an expected increase of 0.3%.

Not surprisingly, the sales at gasoline stations hit a 5.2% increase from July to August, which is the main culprit for high retail sales data.

Likewise, a retail sales control group classification excludes numerals items such as cars, gasoline, building materials, and even food services rose 0.1%, well below the expectation of 0.2%.

Finally, the collective sales in August climbed by 2.5% annually, further decelerating annual growth. Compared to the 6.4% increase in January a year ago, the current growth level contrasts sharply.

PPI caused initial shock, but beneath the report is a weaker showing

While the PPI displayed a stunning 0.7% jump in August, a large portion is attributed to the rise in gasoline prices. The Core PPI that removes food and energy components was only up by 0.2%, which is in line with expectations and a decline of 0.1% compared to July.

This helped support and consolidate some gains.

It is 16 September 2023, Friday, 9.10 am in Singapore and 9.10 pm in New York. We have reached the final trading day of the week. We hope all friends have a splendid and fruitful day at work and school.