Wed, April 24, 2024 at 9:35 AM EDT
Business
US Inflation rises 0.5% over last month in January, most since October
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Inflation picked up in the first month of the year, defying optimism from investors and officials over a steady move lower seen in recent readings.
The Consumer Price Index (CPI) for January showed a 0.5% increase in prices over the past month, an acceleration from the prior reading, government data showed Tuesday. On an annual basis, CPI rose 6.4%, continuing a steady march down from a 9.1% peak last June.
Economists had expected prices to climb 6.2% over the year and jump 0.5% month-over-month, per consensus estimates from Bloomberg. New seasonal adjustments released by the BLS on Friday also switched December’s initial reading of a 0.1% monthly drop in headline inflation to an increase of 0.1% in the year’s final month.
Core CPI, which strips out the volatile food and energy components of the report, climbed 5.6% year-over-year, more than expected, and 0.4% over the prior month. Forecasts called for a 5.5% annual increase and 0.4% monthly rise in the core CPI reading.
U.S. stocks slid following the release, while Treasury yields declined, as investors assessed the implications of Tuesday’s release on Federal Reserve policy,
The headline figure for January was the smallest 12-month increase since the period ended October 2021, while the core annual reading was the smallest since December 2021. Even as the inflation picture has improved since the peak of the current cycle last year, rising costs for essential items remain a burden for U.S. consumers.
Policymakers monitor “core” inflation more closely due to its nuanced look at key inputs like housing, while the headline CPI figure has moved largely in tandem with volatile energy prices last year.
Housing prices continued to be the dominant factor in the CPI report by far, accounting for nearly half of the monthly jump in inflation, the Bureau of Labor Statistics said.
The shelter category of CPI — which accounts for 30% of overall CPI and 40% of the core reading — increased 0.7% over the month and 7.9% over the last year.
For Fed Chair Jerome Powell, shelter inflation — a “stickier” component of CPI that has remained stubbornly high — is a key component of evaluating the path forward for interest rates. In a sit-down interview last week in Washington, D.C., Powell said he expects housing inflation to fall in the middle of the year.
“There has been an expectation that [inflation] will go away quickly and painlessly; I don’t think it’s guaranteed that’s the base case,” Powell said last Monday at the Economic Club of D.C., even as he acknowledged the presence of “disinflation” in the economy. “It will take some time.”
“The strength of core inflation suggests that the Fed has a lot more work to do to bring inflation back to 2%,” Maria Vassalou, co-chief investment officer of Multi-Asset Solutions at Goldman Sachs Asset Management said in a note. “If retail sales also show strength tomorrow, the Fed may have to increase their funds rate target to 5.5% in order to tame inflation.”
Food prices increased 0.5% in January, up from December’s 0.3% increase, while the cost of food at home rose 0.4%. Egg prices, which have risen 70% over the past year and 8.5% over the past month, were a significant contributor.
An increase in energy prices was also a big contributor, with the energy index climbing 2% over the month.
Some improvements in the inflation picture were seen in the report. Prices for used cars and trucks, medical care, and airline fares decreased over the month.
Investors have recently recalibrated expectations over how quickly inflation is falling and how high the Federal Reserve will raise rates in order to stabilize prices.
Last week, the CME Group’s FedWatch Tool, which measures market expectations for the federal funds rate, showed the range with the highest probability at the end of the year was 4.50-4.75%, or the current rate after the Fed’s 0.25% increase earlier this month.
The new modal estimate now sees rates at 4.75-5.00% at the end of this year.
“[Inflation is] down substantially from the peak, and we’ll probably see inflation continue to moderate as the year goes on. But even by year-end, optimistically, inflation is still going to be up 3%, maybe 3.5% from a year and a half ago,” Cumberland Advisors chief U.S. economist David W. Berson told Yahoo Finance Live Monday.
“My guess is the Fed will not ease this year — it may not tighten much more, we might see fed funds at the peak go a little above 5% — but that’s very different from an expectation that by year-end the Fed will ease.”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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Business
Oil Firms Doubtful Trans Mountain Pipeline Will Start Full Service by May 1st – OilPrice.com
Oil companies planning to ship crude on the expanded Trans Mountain pipeline in Canada are concerned that the project may not begin full service on May 1 but they would be nevertheless obligated to pay tolls from that date.
In a letter to the Canada Energy Regulator (CER), Suncor Energy and other shippers including BP and Marathon Petroleum have expressed doubts that Trans Mountain will start full service on May 1, as previously communicated, Reuters reports.
Trans Mountain Corporation, the government-owned entity that completed the pipeline construction, told Reuters in an email that line fill on the expanded pipeline would be completed in early May.
After a series of delays, cost overruns, and legal challenges, the expanded Trans Mountain oil pipeline will open for business on May 1, the company said early this month.
“The Commencement Date for commercial operation of the expanded system will be May 1, 2024. Trans Mountain anticipates providing service for all contracted volumes in the month of May,” Trans Mountain Corporation said in early April.
The expanded pipeline will triple the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.
The Federal Government of Canada bought the Trans Mountain Pipeline Expansion (TMX) from Kinder Morgan back in 2018, together with related pipeline and terminal assets. That cost the federal government $3.3 billion (C$4.5 billion) at the time. Since then, the costs for the expansion of the pipeline have quadrupled to nearly $23 billion (C$30.9 billion).
The expansion project has faced continuous delays over the years. In one of the latest roadblocks in December, the Canadian regulator denied a variance request from the project developer to move a small section of the pipeline due to challenging drilling conditions.
The company asked the regulator to reconsider its decision, and received on January 12 a conditional approval, avoiding what could have been another two-year delay to start-up.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana Paraskova
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
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Tesla profits slump by more than a half
Tesla has announced its profits fell sharply in the first three months of the year to $1.13bn (£910m), compared with $2.51bn in 2023.
It caps a difficult period for the electric vehicle (EV) maker, which – faced with falling sales – has announced thousands of job cuts.
Boss Elon Musk remains bullish about its prospects, telling investors the launch of new models would be brought forward.
Its share price has risen but analysts say it continues to face significant challenges, including from lower-cost rivals.
The company has suffered from falling demand and competition from cheaper Chinese imports which has led its stock price to collapse by 43% over 2024.
Figures for the first quarter of 2024 revealed revenues of $21.3bn, down on analysts’ predictions of just over $22bn.
But the decision by Tesla to bring forward the launch of new models from the second half of 2025 boosted its shares by nearly 12.5% in after-hours trading.
It did not reveal pricing details for the new vehicles.
However Mr Musk made clear he also grander ambitions, touting Tesla’s AI credentials and plans for self-driving vehicles – even going as far as to say considering it to be just a car company was the “wrong framework.”
“If somebody doesn’t believe Tesla is going to solve autonomy I think they should not be an investor,” he said.
Such sentiments have been questioned by analysts though, with Deutsche Bank saying driverless cars face “technological, regulatory and operational challenges.”
Some investors have called for the company to instead focus on releasing a lower price, mass-market EV.
However, Tesla has already been on a charm offensive, trying to win over new customers by dropping its prices in a series of markets in the face of falling sales.
It also said its situation was not unique.
“Global EV sales continue to be under pressure as many carmakers prioritize hybrids over EVs,” it said.
Despite plans to bring forward new models originally planned for next year the firm is cutting its workforce.
Tesla said it would lose 3,332 jobs in California and 2,688 positions in Texas, starting mid-June.
The cuts in Texas represent 12% of Tesla’s total workforce of almost 23,000 in the area where its gigafactory and headquarters are located.
However, Mr Musk sought to downplay the move.
“Tesla has now created over 30,000 manufacturing jobs in California!” he said in a post on his social media platform X, formerly Twitter, on Tuesday.
Another 285 jobs will be lost in New York.
Tesla’s total workforce stood at more than 140,000 late last year, up from around 100,000 at the end of 2021, according to the company’s filings with US regulators.
Musk’s salary
The car firm is also facing other issues, with a struggle over Mr Musk’s compensation still raging on.
On Wednesday, Tesla asked shareholders to vote for a proposal to accept Mr Musk’s compensation package – once valued at $56bn – which had been rejected by a Delaware judge.
The judge found Tesla’s directors had breached their fiduciary duty to the firm by awarding Mr Musk the pay-out.
Due to the fall in Tesla’s stock value, the compensation package is now estimated to be around $10bn less – but still greater than the GDP of many countries.
In addition, Tesla wants its shareholders to agree to the firm being moved from Delaware to Texas – which Mr Musk called for after the judge rejected his payday.
Business
Stock market today: Nasdaq futures pop, Tesla surges after earnings with more heavyweights on deck
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Tech stocks rose on Wednesday, outstripping the broader market as investors welcomed Tesla’s (TSLA) cheaper car pledge and waited for the next rush of corporate earnings.
The Nasdaq Composite (^IXIC) rose roughly 0.6%, coming off a sharp closing gain. The S&P 500 (^GSPC) was up 0.2%, continuing a rebound from its longest losing streak of 2024, while the Dow Jones Industrial Average (^DJI) fell 0.1%.
Tesla shares jumped nearly 12% after the EV maker’s vow to speed up the launch of more affordable models eclipsed its quarterly earnings and revenue miss. That cheered up investors worried about growth amid a strategy shift to robotaxis and the planned cancellation of a cheaper model.
The results from the first “Magnificent Seven” to report have intensified the already high hopes for Big Tech earnings, that the megacaps can revive the rally in stocks they powered. The spotlight is now on Meta’s (META) report due after the market close, as the Facebook owner’s shares rose after the Senate voted for a potential ban on rival TikTok. Microsoft (MSFT) and Alphabet (GOOG) next up on Thursday.
Meanwhile, Boeing (BA) reported better than expected first quarter results before the opening bell with a loss per share of $1.13, narrower than the $1.72 estimated by Wall Street. Shares rose about 2% in morning trade.
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