Inflation was a little higher than expected, but initial claims were also higher than expected. Since the Fed’s emphasis has seemingly shifted to the employment side of the dual mandate question, this morning’s economic data supports the likelihood of a 50 bps rate cut either all at once next week or spread over the next two FOMC meetings.

A rate cut into a bull market pushing to all-time highs might seem odd. Especially when the index for all items less food and energy rose 3.1% again and services remain quite sticky at 3.6%.But, the correlation with YoY gas changes is still holding……and sagging energy prices (-6.6% for gasoline!) are keeping headline inflation in check. It’s not so much that gas prices are much lower lately, just that the base effect is so strong. And, the tailwinds from the base effect are coming to an end.

Unless prices nosedive this is the last month when YoY price drop will be very substantial. Next month we should see a small drop, followed by increases.

Considering a 3.2% increase in food prices, steady commodity prices (subject to tariffs) and a 3.6% increase in services, CPI will likely rise for September. The only question is whether the BLS will report it truthfully…

But, let’s examine how the Fed might respond. First, the 10Y just tested 4%. So, the bond market is already doing the Fed’s job for it. Would a lower fed funds rate cause firms to fire fewer or hire more employees to offset the impact of AI? It’s clearly different this time.

For now, algos are responded as expected, following the dovish data and, of course, the VIX smackdown.

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Not surprisingly, PPI came in at a level which bolstered the administration’s case for a 50 bps rate cut: -0.1% versus +0.3% expected and 0.7% prior. In our opinion, each of these data points must now feature an asterisk meaning “consider the source.”

When Trump fired the head of the Bureau of Labor Statistics for reporting disappointing jobs data in August, it put all of Wall Street and every federal government employee on notice that no negative news would be tolerated. The move was met with a chorus of negative comments, with one of the exceptions being Lori Chavez-DeRemer, who loudly praised Trump’s move.

“I agree wholeheartedly with @POTUS that our jobs numbers must be fair, accurate, and never manipulated for political purposes,” Chavez-DeRemer wrote without offering any evidence to support Trump’s claim.

For those unfamiliar, Chavez-DeRemer is the head of the Department of Labor which houses the Bureau of Labor Statistics which, of course, publishes the PPI. She is also one of several Trump cabinet members who, per Trump’s definition, committed mortgage fraud by claiming more than one home as her principal residence. For some reason, no one is demanding she resign.

Futures, already up nearly 0.5% on Oracle’s earnings, pushed higher on the print.

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Futures are flat ahead of the open as markets await important inflation data coming out the next two days.

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Recent very disappointing employment reports have provided the “stag-” in stagflation. This week, we’ll see whether PPI and CPI prints provide the “-flation” part.  While a rate cut next week could certainly goose the markets, would it induce employers to turn on the hiring spigot?

Futures are up modestly ahead of the open.

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Only 22,000 jobs were added in August, well below the 78K expected and 79K in July. The unemployment rate ticked higher, from 4.2% to 4.3%. Futures are higher on the news, however, as the slowdown bolsters the case for a rate cut when the FOMC meets on Sep 17.

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Jobless claims came in higher than expected, notching the highest level since June. ADP came in very light: 54K versus 59K expected and 106K prior. The 10Y gapped down to the lowest level since May 1, but futures remained flat.

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Futures are moderately higher ahead of the open following the latest vol smackdown and a legal decision that went in Google’s favor, sending GOOG 6% higher.

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Futures are off sharply as we begin the new month amid renewed tariff uncertainty.

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YoY Core PCE, the Fed’s preferred gauge of inflation, rose to 2.9% in July – even further away from the Fed’s 2.0% target. Everything else was in line with expectations.

Futures were already modestly lower and were little moved after the print.

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NVDA’s outlook slightly disappointed, but it’s still growing like a weed and is taking up financial engineering. Not surprisingly, this morning’s economic data came in on target. And, tomorrow’s PCE is in the hands of the BEA which is “supervised” by Trump loyalist Howard Lutnick. Oh, and Trump’s takeover of the Fed is proceeding and practically guarantees a rate cut. What could go wrong?

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