US DATA: Recreation Services A Particularly Strong Case Of January Price Hikes

Feb-12 20:10
  • We touched earlier upon the outsized strength in recreation services, on its own adding 0.06pps to core CPI and helping our collection of “other services” (items within core services beyond housing, lodging, medical services, car insurance and airfares) add 0.15pp to core CPI after just 0.02pp. There has only been one month with a stronger contribution - Jun 2022 - since this calculated series started in 2012.
  • It came as recreation services increased a seasonally adjusted 1.4% M/M, helped by video and audio services jumping 2.0% M/M sa for its highest on record (back to 2010) but also ‘other recreation’ services increasing a rapid 1.5% M/M sa with its weight 2.5x that of video and audio services.
  • As such, the video & audio services contribution to M/M core CPI only increased from 0.07pp to 0.20pp but the sheer magnitude of the acceleration is nevertheless worth noting.
  • In non-seasonally adjusted terms, recreation services increased 1.6% M/M as video and audio services jumped 2.2% M/M. The latter is far stronger than normal with a January average since 2017 of 0.5% (range -0.3% to 0.9%) and with February typically seeing a heavier increase with an average of 1.1% - see chart.
  • Particularly aggressive start-of-year price increases are naturally floated as a reason for this although the sector naturally doesn’t lend itself well to the argument that tariff anticipation is at hand. Some anecdotal evidence likely at least partly at play is the Netflix price hike amounting to 14-16% depending on subscription type after no price hikes in 2024. That said, whilst it was announced Jan 21, it’s not that clear cut as it was due to come into effect at the subscriber’s next billing cycle so the impact will likely be spread over Jan and Feb.
  • Whilst the seasonal adjustment process itself is naturally under scrutiny to see how it handles start-of-year price increases, the translation from 2.2% M/M nsa to 2.0% M/M sa looks small considering the unprecedented nature of the 2.2% increase for a January but the adjustment factors themselves don’t untoward compared to recent years.
  • To be clear though, this is only a small part of the overall acceleration in recreation services and core services more generally but it’s an important example of the frothiness seen in price setting at the start of the year.   
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US STOCKS: Late Equity Roundup: Paring Losses, Oil & Gas Leading

Jan-13 20:03
  • Stocks are still trading mixed but climbing off lows amid chatter of an impending Israeli ceasefire/hostage deal tomorrow that lent to late Monday risk-on tone. Narrow ranges persisted as focus remains on this week's PPI and CPI inflation measures on Tuesday and Wednesday respectively, as well corporate earnings that kick off this week.
  • Currently, the DJIA trades up 267.83 points (0.64%) at 42205.15, S&P E-Minis down 3.25 points (-0.06%) at 5862.5, Nasdaq down 137.1 points (-0.7%) at 19022.49.
  • Energy and Materials sectors continued to outperform in the second half, support for the former tied to gains in crude (WTI +2.40 at 78.97): Valero Energy +5.29%, Marathon Petroleum +3.56%, APA Corp +3.25%. Materials led by Mosaic +7.49%, CF Industries +7.37%, Steel Dynamics +6.22% while Albemarle gained 4.99%.
  • Utility and Information Technology sectors continued to underperform, electricity providers weighed on the former: Edison International down nearly 12% amid investigations into whether electrical equipment operated by SoCal Edison sparked a blaze in Hurst. Elsewhere, Constellation Energy declined 6.15% despite several agency upgrades, PG&E -4.19% and AES Corp -3.33%.
  • IT sector shares remained under pressure as the Biden administration looked to curb semiconductor exports to China: Super Micro Computer -4.79%, Micron -4.17%, Palantir -4.25, Nvidia -2.53%.
  • Reminder, the next round of quarterly earnings kicks off this week with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 15-16.

GBPUSD TECHS: Southbound

Jan-13 19:53
  • RES 4: 1.2629 50-day EMA
  • RES 3: 1.2607 High Dec 30     
  • RES 2: 1.2482/2576 20-day EMA / High Jan 7 
  • RES 1: 1.2367 High Jan 9 
  • PRICE: 1.2169@ 19:52 GMT Jan 13
  • SUP 1: 1.2100 Low Jan 10 
  • SUP 2: 1.2087 0.764 proj of the Sep 26 - Nov 22 - Dec 6 price swing
  • SUP 3: 1.2037 Low Oct 4 ‘23 and a key support 
  • SUP 4: 1.2000 Psychological round number      

The trend condition in GBPUSD remains bearish and the pair traded to a fresh trend low on Monday. Last week’s move down confirmed a resumption of the downtrend and marks an extension of the price sequence of lower lows and lower highs. Note too that moving average studies are in a bear-mode position highlighting a dominant bear trend. Sights are on 1.2087 next, a Fibonacci projection. Initial firm resistance is at 1.2367, the Jan 9 high.

US TSYS: Late Session Risk-On Move: Israeli Ceasefire/Hostage Deal Chatter

Jan-13 19:50

Seeing a bit of late session risk-on, Tsys softening ((TYH5 107-08, -4.5) while stocks climb off lower lvls, SPX Eminis near steady, DJIA outperforming, Nasdaq weaker but well off lows. Appears to be reacting to tweet making the rounds that "Israeli official says ceasefire-hostage deal may be reached tomorrow".