PPI Runs Hot, Nike Job Cuts, Coinbase’s Surprise Profit 2/16/24

David Faber (0:00)

Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Good Friday morning. Welcome to Squawk on the Street. I'm David Faber with Sara Eisen and Mike Santoli. We're post-9 of the New York Stock Exchange. Carl and Jim have the morning off. Let's give you a look at futures. Of course, we get started with the final day of trading. You can see we are set up for, I don't know. Usually, I defer to somebody else to tell me even what that looks like. Mike, you want to?

Mike Santoli (0:23)

It's flattish on the S&P.

NASDAQ has a bid. Yeah. Thank you.

David Faber (0:27)

That's the kind of insight we look for here at CNBC. Let's get to our roadmap this morning. It does begin with this morning's economic data. PPI did come in hotter than expected.

It did further complicate, perhaps, that picture for future inflation.

Sara Eisen (0:39)

Plus Nike, the latest company announcing job cuts, slashing more than 1,600 positions.

Mike Santoli (0:45)

And shares of Coinbase are surging in the pre-market after the company posted it is its first quarterly profit in two years.

David Faber (0:53)

All right, we do start with this morning's PPI report, 0.3% for the month of January, and I'll turn to Sara to sort of give us a sense here. We've got a CPI and now this. So where do we stand?

Sara Eisen (1:03)

It was not a great read because what we were hoping going in after the hotter consumer price inflation report is that PPI, which measures the prices in the pipeline. It's business to business. It's not business to consumer. So it's before the price increases that we get from corporations, we were hoping that that would be lower and it has been a lot lower than CPI.

Now it is still lower overall year on year. It's only point nine percent. However, it's higher than expected. We were expecting that number to come down. So the point three percent headline compares to a consensus that was looking for point one percent. The core, which strips out food and energy, we know the Fed looks at point five percent on the month. That was a lot hotter than the point one percent expected. It was all a story of services.

Goods are deflating in many categories. And actually, it was good to see that food prices were down as well in that PPI report.

But it's services that are the problem. They are sticky. There was a two point two percent increase on the month for hospital outpatient care. That was a big factor in the rise in prices. But you did see it in a number of other categories. So, Mike, I think the question now because after the CPI, it was, well, it was just one report, kind of an anomaly. And now the question is, is January an anomaly or is there really a reacceleration in the economy and in prices that the Fed and investors should worry about?

Mike Santoli (2:27)

And you know, the market's response is kind of interesting because in the two days since that one day sell off we had on the CPI number, bond yields went up, stock market goes down 1.4 percent. We recaptured all of it over two days. So it seems like this moderate response we have right here is investors saying, I'm not going to get fooled again. I'm not going to get trapped into selling because we have this uptick in an inflation rating. Now, whether that's right or not obviously remains to be seen. Another factor that I think people had anticipated in the number is portfolio management services. So these financial services metrics, because the market's up a lot and therefore people's portfolio balances are up a lot and therefore the fees they pay are up a lot.

That's not something that people get too excited about because obviously you know it's just a market effect and now the game is you know extrapolate PPI in all of its components to what the PCE inflation number is going to say next week because that's the one that matters to the Fed. So, so far I mean look, 10-year treasury yield pretty much went back up to Tuesday's high. It's about 4.3 percent, sort of at the border lines of the comfortable range that the market has been treating it as for now.

That yield sensitivity has mostly been in things like the Russell 2000 and the breadth of the market, although that game is changing. I mentioned a couple of times yesterday, there's all this speculative stuff happening in precincts of the market and Supermicro is by far the largest holding in the Russell 2000 right now and it's literally material for how it moves, 1.8 percent.