Q4 Earnings Season Wrapped Up

With Q4 earnings season all but wrapped and some of the major economic indicators — last week’s jobs and jobless reports — ahead of next week’s Fed meeting, we focus a bit more tightly on this morning’s February Consumer Price Index (CPI). Results were completely in-line with expectations: 0.2% month over month and also 0.2% minus more volatile food & energy prices.

These are both milder than the 0.5% and 0.4%, respectively, we saw in the January reads — which helped flip a switch of volatile trading in was was feared to be inflation hitting the market too aggressively for the Fed to handle without pushing up interest rates much higher in a shorter amount of time. These fears now appear to be unfounded, or at least premature: 0.2% CPI is almost as low growth as we can get.

Year over year, the headline figure of 2.2% CPI is also in-line and, while still the highest year-over-year read in the past 12 months, again relatively tepid. We also see nothing to tip the scales from the slam-dunk quarter-point rate hike from the Fed next week. In many ways, this is easily digestible for the markets overall; this morning’s CPI figures do not appear to be moving the needle on futures in either direction.

Tomorrow we expect to see the other side of this coin, the Producer Price Index (PPI) numbers. Speaking of the Fed, the PPI traditionally gets more focus from Fed participants in deciding interest rate policy. But unless we see figures that are vastly wide of the mark compared to expectations and CPI actuals, it’s reasonable to expect more of the same.

Tillerson Out as Secretary of State, Replaced by Pompeo

One thing that did tip pre-market futures — gains cut roughly in half — upon its report was the sudden departure of Rex Tillerson as Secretary of State after just 14 months on the job. According to the Washington Post and confirmed moments later via tweet by President Trump, Tillerson will be replaced by CIA Director Mike Pompeo, whose deputy at the CIA, Gina Haspel, is nominated to replace him there.

Tillerson proved media-shy during his tenure, almost never appearing in public and often not on the same page as Trump. This may have reached a crest when Tillerson’s office claimed he was not informed of the president’s willingness to meet with North Korean dictator Kim Jong-un. Tillerson’s previous job was as long-time CEO of ExxonMobil (NYSE:XOM) , the world’s largest oil & gas company.

Pompeo completes his year of service with the CIA, before which he was a 4-term congressman from Kansas, is on the record for favoring regime change in North Korea, solidly in favor of Israeli Prime Minister Netanyahu and prefers Guantanamo Bay stay open. He has had harsh words for both Muslim leaders and Wikileaks founder Julian Assange.

The new Secretary of State is a West Point graduate, and served in the army during the Reagan and Bush 41 terms, where focus on tearing down the Berlin Wall was at its peak. Following his graduation from Harvard Law, he founded an aerospace and private security firm.