Markets sold off heavily on Thursday when the Labor Department posted the Producer Price Index. The report tracks prices businesses pay to manufacture products and services. The PPI rising 0.6% is bad news for the markets. It pushes the Fed’s interest rate cut forecast beyond June 2024.
The PPI rise is higher than the 0.3% increase in the previous month. Fed Funds Futures pushed the odds of a June rate cut down from 67% to 63%. In next month’s inflation report, rising WTI crude prices will lower the chances of the expected rate reduction.
WTI prices are now around $81. The upward momentum suggests that inflation will not fall for a long while. Investors should continue to ignore investment pundits and analysts. Instead, one may shelter their portfolio by buying energy stocks. Already, Exxon Mobil (XOM) is up by 10% in the last month. Devon Energy (DVN) fared better, rising by 14.8%.
Bullish Market
After markets brushed off the hot January inflation report and ignored last week’s strong jobs report, it may overlook the hot PPI report. Speculators may trade mega-cap stocks like Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), and Alphabet (GOOG) to play the stock market volatility. Avoid penny stocks that are bound to file for bankruptcy. Fisker (FSR) is an example of a firm under financial duress.
