Stocks closed the week on a mixed note. The Dow fell 21 to 16,321 on heavier volume. For the week the Dow gained about 400 points or 2.5%.
Core inflation rose 0.3% in January and is now up 2.2% over the past year for its biggest gain in over 3 years. The rise in core inflation, according to the Labor Department, is being driven primarily by increases in medical care, health insurance and housing. Jed “Clampett” Graham, reporting for IBD, noted that today’s core inflation reading is no big deal. With core inflation now over the Fed’s target price of 2%, Jed thinks it will not force the Fed to raise rates because of a thing called the “core PCE Deflator” which has been flat. The difference between core inflation and the PCE deflator is the core rate is based on a fixed basket of goods while the PCE deflator looks at how consumption changes as prices for certain items within a basket change. In short, if the cost of a donut doubles then people will only buy the hole, or if the price of gas falls then the urgency to buy a Prius, Tesla or Leaf is replaced by the lust to buy a Chevy Silverado with big tires.
Nordstrom’s reported earnings and it was a story of short term pain and long term gain. The upscale retailer posted a 4% increase in revenue while profits slipped 11% thanks to holiday deals that boosted sales at the expense of profits. Going forward the street commented favorably about how Nordstrom’s is investing in “multi-channel customer growth initiatives. A multi-channel customer is defined as the guy who buys socks as well as underwear and a watch.
Oil today closed down about 3% to $29.86 per barrel as global “production cap freeze” talk was overcome by the reality of current oversupply. Baker Hughes reported the US rig count fell another 26 units to 413. The rig count was 606 last year at this time. Meanwhile gold rose $3.80 per ounce to close the week at $1,230.
Have a good weekend. I am once again taking a load of lunkheads… I mean Boy Scouts…… on a snow shoe trip.