At Some Point, We All Must Eat

Oil, down $3, and treasury yields, retreating to 4.95%, are buttressing Friday’s early action. ORCL earnings results, released after Thursday’s close, are giving a modest lift to the software space. The CPI release was largely in-line with expectations, giving us no real direction except to say that the inflation landscape is not deteriorating quickly. Nor is it improving, though. Traders are now pricing-in an 88% chance of a rate hike at the next Fed meeting.

Pundits give so much focus to the CPI/PPI ex-food/energy. There’s plenty of logic to smoothing out those more volatile impacts on the month-to-month figures. However, at some point we all must eat, and most of us must drive. Sustained above target, food prices count, and oil counts. Add into consideration the record government deficit, with no prospect of near-term fiscal discipline. The macro picture points to sustained higher interest rates.

This isn’t great news for stocks or for traders, but it doesn’t mean that there aren’t opportunities. It does mean that stock selection will start to matter more and more, both long and short. Keep your eyes on our trading board, and look back at some of our older mentions. Some of them don’t work out right away but can be very helpful on second consideration.