Yesterday major US indices closed down between 1% - 2% as the AI disruption wrecking ball continued to dismantle sectors moving to office properties, media and in part trucking, which was also hit by a Department of Transportation ruling leaving the Dow Jones Transportation Average down 4%. Ahead of today’s CPI report the defensive bid helped Treasury yields reverse much of the post jobs report move higher. Within equities defensive and yield oriented sectors bucked the weakness (consumer staples/Utilities +2%, REITs +1%, Healthcare 0.1%). Tech underperformed falling 2.6% with continued weakness in software and IT services. Hardware companies got hit after Cisco earnings highlighted margin pressure related to the surge in memory prices. The financials and energy sectors were both down ~2%.

US futures were modestly lower ahead of this morning’s data. From a headline perspective it was a reasonably quiet overnight session. There were a couple of solid tech earnings reports (AMAT/ANET) but that won’t be enough to break the current negative feedback loop. There are reports the administration is considering easing steel and aluminum tariffs as the focus shifts to affordability ahead of midterms, this is weighing on producers. This morning’s CPI report came in a touch better than expected. On an annual basis headline moderated to 2.4% from 2.7% last month driven by a decline in oil prices and moderation of food prices. Core was inline with expectations at 2.5% down from 2.6% in December. Within core shelter moderated from 0.4% to 0.2%. There had been some concern ahead of this report following multiple years where January inflation jumped with annual price resets. Interestingly looking under the hood, it shows that auto and healthcare insurance both declined, these have been upside drivers over the last couple of years, reach out to the MAC Desk if your policies reset lower. Equity futures had started to come off the lows ahead of the data and are now trading slightly higher. Treasury yields initially dropped 2-3bps on the data but have retraced that move. The USD index also reversed its initial downward move trading a touch higher just under $97.