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CPI +0.9%, Pepsi +20.5% Sales: Both Better than Expected

Tuesday, July 13, 2021

New Consumer Price Index (CPI) numbers have hit the tape for June this morning, and anyone still fretting over a falling 10-year treasury yield illustrating deflationary pressure on the economy can take a deep breath: +0.9% on the month is way ahead of the +0.5% expected and the unrevised +0.6% for May. I guess now those market participants worrying about inflationary pressures are getting their turn at bat.

Core CPI — stripping out volatile food & energy prices — also reached +0.9%, beating the +0.5% expected and unrevised +0.7% from the previous month. Year over year CPI, on headline, is +5.4%, while core is +4.5% over the past year. These numbers are all hotter than expected. The 10-year treasury has now bumped up to the top of its near-term range, +1.38%, which is still well off the pace we were seeing a few months ago.

What this may lead to, however, is an earlier-than-expected tapering of asset purchases from the Fed. When we see moves like Used Cars up 10.3% on the month, and Food +0.8%, that is a clear a sign that inflation is more fact than fiction, and may have longer legs than the Fed had supposed — based on earlier data — over the past couple meetings. Even still, removing the backstop of tapering is not the same thing as raising interest rates; that would come later.

Elsewhere, Wall Street giant JPMorgan Chase & Co. JPM posted strong beats on both top and bottom lines this morning as Q2 earnings season shifts to a higher gear. Earnings of $3.78 per share easily surpassed the $3.10 expected, while $31.4 billion in revenues beat the $29.6 billion in the Zacks consensus. However, shares are down 1% on the news in pre-market trading, as the $2.3 billion benefit the company saw from a release of $3 billion in loan losses may be seen as a one-time item. For more on JPM's earnings, click here.

PepsiCo PEP, on the other hand, is +1.4% in its early trading following its Q2 earnings release: $1.72 per share beat estimates by 20 cents, while revenues grew 20.5% year over year to $19.2 billion, topping consensus of $18.0 billion. Organic Revenue Growth of +7.4% was very strong, and guidance is for +6% organic revenue growth through the second half of 2021. PepsiCo has not missed an earnings estimate since Q4… of 2009!

Speaking of tapering, market indexes ahead of the bell are pulling back from their all-time high closes yesterday: the Dow is giving up 110 points at this hour, while the S&P 500 is down 15 and the Nasdaq -60 points. But these earnings reports and economic prints are going to go a long way in sketching out the forward narrative for the market, and almost all expectations are for this to be a robust period for publicly traded companies.

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Bitcoin, Like the Internet Itself, Could Change Everything

Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.

Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. 

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