Morning Note: CPI and Central Bankers' Concerns

As I suggested in last week's macro update, given the recent extreme ramp up in commodities prices, we should expect to see some choppiness there, if not real downside volatility, in the near-term as "things" move forward. 

Well, yesterday saw one doozy of a selloff in most things commodity, and quite the rally in non-commodity equities. 

Today, however, at least to start the session, we're (save for ag) once again experiencing the opposite (although stocks have bounced notably off of their opening lows as I type -- but don't hold your breath in either direction]). 

Tragically, with regard to Ukraine, per research firm Bespoke Investment Group this morning:

"There is still little progress on either the military front or peace talks in Ukraine. Shelling of civilian neighborhoods has continued in Mariupol, Kharkiv, and other cities. Kyiv continues to be slowly encircled, but supply and escape corridors are still wide open to the south despite Russian forces blocking the city from the east and west."

February CPI was released this morning and came in as expected; headline up .8% month-on-month, core up .5%. Year-on-year headline CPI rose 7.9%, core (ex food and energy) was up 6.4%. And, keep in mind, this doesn't capture the Russia/Ukraine impact. 

If there's any question as to the switch in concern among central bankers from keeping asset bubbles afloat to tackling 40-year high inflation, it was essentially answered in today's European Central Bank (ECB) announcement that, while, as expected, they didn't hike rates, they announced a pick up in the pace of tapering their asset purchase program, which also implies that they'll move sooner than previously expected on rates.

Asian equities followed the West's yesterday lead overnight, with all but two of the 16 markets we track closing higher.

Europe, however, is retracing about a fourth of yesterday's epic rally. 5 of the 19 bourses we follow are notably in the red as I type.

US stocks are lower across the board to start the session: Dow down 170 points (0.51%), SP500 down 0.64%, SP500 Equal Weight down 0.51%, Nasdaq 100 down 1.17%, Nasdaq Comp down 1.03%, Russell 2000 down 0.66%.

The VIX sits at 31.71, down 2.29%.

Oil futures are up 0.40%, gold's up 0.22%, silver's up 0.69%, copper futures are up 1.55% and the ag complex (DBA) is down 0.34%.

The 10-year treasury is down (yield up) and the dollar is up 0.38%.

Among our 38 core positions (excluding cash and short-term bond ETF), 13 -- led by carbon credits, base metals futures, metals miners, uranium miners and energy stocks -- are in the green so far this morning. The losers are being led lower by semiconductor stocks, solar stocks, South Korean equities, Eurozone equities and US tech stocks.

"Herding is a different type of propensity from all the rest in that it refers not only to individuals’ copycat propensity but also to the principles of group behavior and thus has implications for the economy overall. Fear and euphoria, for example, are contagious processes exaggerated by herding."

--Greenspan, Alan. The Map and the Territory 2.0 

Have a great day!
Marty