Stocks were down by 0.73% in the US and 0.26% outside the US. Bonds fell by 0.63%. The yield on the 10-year treasury is now at its highest level since the pandemic began, closing at 1.34%. Bitcoin burst through $50,000 and is currently trading at about $56,000.
Helped by stimulus checks, retail sales advanced by the most in seven months in January, up by a seasonally adjusted 5.3%. The increase topped all estimates and indicates strong consumer demand. The Atlanta Fed’s GDPNow model now projects a 9.5% annualized growth rate in Q1, up from 4.5%. Industrial production was also up, for the fourth consecutive month, increasing by 0.9%.
While retail sales were surging, so were producer prices, which jumped by 1.3%. That was the biggest increase in the records that date back to 2009. The rising producer prices (PPI) haven’t spilled over into the CPI yet, but it is probably only a matter of time. Now it is only one month and maybe it is an aberration, but when the government throws trillions into the economy and then wants to add a couple of trillion more, the threat of inflation has to be considered. Higher inflation would mean higher interest rates, which would make it difficult for the government to do anything other than pay off interest in the future, it would also cut into p/e ratios which could cause the market to decline. Maybe none of this happens but for those of us that lived through the 70s, it is a threat not to be taken lightly.