💵 Wholesale prices jump

and big international earnings

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Good morning investors! The market was hot yesterday despite mixed signs.

Today we cover:

  • Wholesale prices jump

  • Trump talks about tariffs

  • Big international earnings

Do you think Trump should move his focus from tariffs to other issues

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📊 Economy and News 

Wholesale Prices Rise More Than Expected in January

Wholesale prices increased more than anticipated in January, with the producer price index (PPI) rising 0.4%, above the 0.3% forecast. However, core PPI, excluding food and energy, matched expectations at 0.3%, signaling some easing in inflation pressures.

Despite the higher headline figure, stock futures climbed while Treasury yields fell, as certain report details suggested a softer inflation outlook. Healthcare costs, including physician care, declined 0.5%, while domestic airfares dropped 0.3%, and brokerage services fell 2.2%.

On a yearly basis, PPI rose 3.5%, exceeding the Federal Reserve’s long-term goal. Market expectations now suggest the Fed may delay rate cuts until October. However, the Fed primarily monitors the personal consumption expenditures (PCE) index, due later this month. Analysts estimate core PCE rose just 0.22% in January, down from December’s 0.45%, potentially lowering annual inflation to 2.5%.

Revised December data also complicated the inflation picture, with PPI now showing a 0.5% gain instead of 0.2%. In January, services prices rose 0.3%, driven by a 5.7% increase in traveler accommodation, while goods prices climbed 0.6%, largely due to a 10.4% surge in diesel costs. Egg prices skyrocketed 44% in a month as the avian flu outbreak reduced supply.

Meanwhile, jobless claims remained stable, with initial claims falling to 213,000 and continuing claims dropping to 1.85 million. The inflation outlook remains uncertain, with expectations for Fed rate cuts hinging on future economic data.

Global hits:

Trump Signs Memo for Reciprocal Tariffs

President Donald Trump signed a memorandum outlining plans to impose “reciprocal tariffs” on foreign nations, aiming to match taxes and tariffs imposed on U.S. goods. “They charge us, we charge them,” Trump said at an Oval Office event.

The plan considers foreign value-added taxes (VATs) and other trade policies as unfair practices, justifying retaliatory tariffs. Trump hinted at potential tariffs on auto imports as well.

The tariffs won’t take effect immediately. Commerce Secretary nominee Howard Lutnick will lead a study to determine appropriate tariff levels, expected to be completed by April 1.

These tariffs would add to duties already imposed on China, Canada, Mexico, steel, and aluminum. Tariffs on Canada and Mexico remain on hold as both nations address border security and drug trafficking concerns.

Surprising: Elon Musk will withdraw his nearly $100 billion bid for OpenAI if it remains a nonprofit. Elsewhere, about 77,000 US federal workers accept Trump administration buyout program. Lastly, Bezos’ Blue Origin to lay off about 10% across its space, launch business.

Rising debt: Total debt rose 0.5% to $18.04 trillion in Q4, with credit card balances reaching $1.2 trillion, up 7.3% year-over-year. Serious delinquencies on auto loans and credit cards hit 14-year highs, while overall delinquency rates edged up to 3.6%.

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📈 Stocks

S&P 500 6,115.07 (+1.04%)
DJIA 44,711.43 (+0.77%)
NASDAQ 19,945.64 (+1.50%)
BRENT CRUDE 75.14 (-0.03%)
* Prices as of Feb 14th, 12:20 AM UTC

Big international earnings

Here are the major names you need to know about:

  • Barclays shares fell as its outlook disappointed investors despite a 24% rise in 2024 pre-tax profit to £8.1 billion, slightly above estimates. Net profit reached £5.3 billion but missed forecasts. Fourth-quarter profit of £965 million fell short of expectations, though total income jumped to £6.96 billion. Return on tangible equity rose to 10.5%, with targets of 11% in 2025 and over 12% in 2026. The bank expects £7.4 billion in net interest income from its retail unit this year.

  • Unilever’s fourth-quarter underlying sales rose 4%, just below the 4.1% forecast, while full-year growth reached 4.2%, missing the 4.3% estimate. For 2025, the company expects sales growth within its 3% to 5% range but warns of a “slower start.” Unilever also announced plans to spin off its ice cream unit through a demerger, with listings in Amsterdam, London, and New York.

  • Sony now expects 2024 sales to reach 13.2 trillion yen, a 4% increase from its November forecast. It also raised its annual operating profit outlook by 2% to 1.34 billion yen. PlayStation 5 sales climbed to 9.5 million units in the December quarter, up from 8.2 million a year earlier. The stock was up after beating expectations.

  • Nestlé posted slightly better-than-expected annual sales growth, driven by price hikes, but warned of a tighter profit margin in 2025. Under new CEO Laurent Freixe, the company aims to boost sales volumes, invest in innovation, and rebuild investor confidence after years of price increases hurt consumer demand and marketing spend. Nestlé reaffirmed its forecast for higher organic sales in 2025, maintaining its target from November’s capital markets day.

Exciting: Arm secures Meta as first customer for ambitious new chip project. Also, Apple has picked Alibaba to launch AI features in China.

💵 Personal Finance

China’s Economic Shift Could Drive Strong Corporate Returns

China is set for economic stimulus and structural reforms that could boost corporate returns, according to Andrew Swan, head of Asia (ex-Japan) equities at Man Group. Despite weak market sentiment, Swan believes investors are overlooking positive developments.

“China’s leadership acknowledged economic challenges, particularly deflation, last year, and 2025 will see the rollout of policies to support growth,” he told CNBC. Policymakers have already cut interest rates, and more stimulus targeting consumer demand and real estate is expected.

While China’s economy grew 5.4% in late 2024, deflation concerns and new 10% U.S. tariffs on Chinese imports will create more pressure. Beijing has responded with retaliatory measures, but Swan argues tariffs will have less impact than in the past, as businesses have adapted supply chains.

A New Economic Model Emerging

Beyond cyclical support, Swan sees China shifting toward a new growth model, with consumption playing a larger role. “We may look back at this as a turning point, potentially led by lower-income groups,” he said.

Chinese corporate earnings have suffered due to macroeconomic pressures, keeping profit growth expectations low. But Swan believes rising corporate profitability could drive strong equity returns.

“Markets react to growth rates relative to expectations. If profits improve, Asian equities will perform well.”

Balancing Risks and Opportunities

Investor concerns over tariffs, government control, and China’s property crisis make India an attractive alternative. Some analysts, including PAG’s Lincoln Pan, see better investment opportunities in India and Japan.

Still, Swan argues that the key question is whether China’s outlook shifts.

“If nothing changes, the market will continue to underperform. But if expectations improve, there’s room for a strong recovery.”

Here’s interesting video on the topic:

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Benjamin Franklin

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