US stocks on the back foot on worrying PPI and Philly Fed data

Worrying PPI inflation and Philly Fed manufacturing data dragged US stocks lower this afternoon, with the dollar rising into five-week highs, says Joshua Mahony, senior market analyst at online trading platform IG.

US market jitters emerge as manufacturing survey decline

“US markets had grown accustomed to seeing positive data of late, with the recent upside surprises in both the non-farm payrolls and retail sales figures building a picture of a buoyant and resilient economy. However, todays Philadelphia Fed manufacturing survey saw a collapse to levels not seen since the inception of the pandemic in early 2020. These are the levels that typically precede a recession, although it is notable that the resilient employment element continues to show that the jobs remains strong despite economic pressures. ”

PPI portrays worrying inflation picture

“ If the Philly Fed reading undermined recent retail sales and payrolls data, the PPI release sparked concern that the inflation trajectory may not be as predictable as the Fed would hope. The Tuesday US CPI release did raise questions over whether this disinflation phase may be losing traction amid a mere 0.1% decline. Unfortunately, this afternoons PPI figure provided a similar warning, with the January headline reading of 0.7% signalling the biggest monthly rise in in seven-months. This is bad news for markets, with US equities heading south on the prospect of a prolonged period of higher rates at the Fed. The dollar does enjoy the prospect of elevated rates and economic concerns, with the greenback pushing into a five-week high off the back of these figures. ”