The Consumer Price Index report for January came out this morning, and it was inline with forecasts. Consumer prices rose 0.3% last month. Core prices rose 0.2% which was 0.1% above consensus.
This is good news. We need some inflation to break the cycle of ower prices. Even though economists expect the CPI to fall in February, I’m encouraged by today’s report since it means that we can hide in commodity stocks in the upcoming months.
As I’ve been warning investors, the banks are still getting crushed. This is why the Dow hit a new low. Wall Street is terrified that BofA or Citigroup is about to be nationalized. Expect the dollar to stumble just like the British pound did after its banks were nationalized. There’s a flight to quality going on and that’s why gold just broke above $1,000 an ounce. As the greenback weakens, other commodities will follow.
When all the dust settles, the exodus out of financials is good for growth stocks since financials dominate value the indices. In the interim, let’s hope the S&P has a successful retest of the November 20th low.