GOOD MORNING! A large upside surprise in the Producer Price Index (PPI) whipsawed the markets. Producer price inflation rose to its highest level in 3 years. The numbers were beyond the biggest forecast and suggest that firms may be starting to pass through tariffs on input costs. At the same time, jobless claims still didn’t indicate signs of a pickup in layoffs in early August. Thursday’s data may cause the Fed to raise the bar on the markets and Treasury Secretary Bessent’s item on their wish list for a 50 basis point rate cut next month. Treasury yields moved higher across the curve. Stocks initially tumbled on the data releases, but with lots of money sloshing around (M2 money supply and money market funds assets at record highs) dip buyers started showing up in the afternoon, paring the losses and ending the day narrowly mixed with the S&P eking out a small gain (+1.95) for a new record high.

     Economists have chopped up the CPI and PPI reports for the pieces that feed into the Fed’s favorite inflation measure, the core PCE Deflator. Their conclusion is that will make for a muted bump in the gauge. At least, that’s are what the markets are buying. Early trading is seeing the Dow attempting to lead the other equity indices higher. Treasuries are little changed ahead of a slate of economic releases and oil and gold are treading water ahead of the Putin – Trump meeting. This morning’s economic releases will be closely monitored. Included are July’s retail sales, import/export price indices, industrial production/capacity utilization, the preliminary August University of Michigan Consumer Sentiment Index and June’s business inventories. TGIF.