January’s CPI largely met expectations, defying concerns for a bigger jump and boosting expectations that the Federal Reserve will deliver more interest rate cuts.
January inflation readings have been strong in recent years, often beating expectations as companies tend to raise their prices at the start of the year. Many had called for an even bigger pickup in prices for those reasons, as well as predictions that firms would pass along more tariff-related costs to consumers.
At the time of this writing the markets are now suggesting a 50% chance that there may be three interest rate cuts this year.
Treasuries rallied across the curve on the data with the yield curve steepening modestly.
Equities stabilized.
Changing topics, since late 2025 the car companies have written off about $53 billion of EV related investments. Some claim this is because of the Trump Administration ‘s actions. EV demand never materialized as forecasted for a myriad of reasons including the lack of customer acceptance, making yesterday’s Edsel write off as chump change.
Over $750 billion has been committed for AI infrastructure for 2026, up from about $505 billion at year’s end and over double the $365 billion spent in 2025.
At this juncture the only organizations that are benefiting from this massive spending are those who are creating the infrastructure. When will the end user benefit from it…i.e.. make money off of it?
There is an overwhelming belief in the assumption that there will be broad cultural and political embrace of the entire AI story. Is this realistic?
Perhaps the only certainty to write is that there will be winners and losers, but who?? Basic math and cultural history support this assumption.
Will the headlines in several years read similar to the headlines of today’s EV manufacturers but only on steroids?
AI is here but to what degree?
What will happen this week?
The economic calendar is comprised of various housing and manufacturing statistics, the monthly PCE data, initial estimates of fourth quarter GDP, a sentiment survey and personal spending/income.
Last night the foreign markets were mixed. London was up 0.32%, Paris down 0.03% and Frankfurt down 0.04%. China was down 1.26%, Japan down 0.42% and Hang Seng up 0.52%.
Dow and NASDAQ futures are down 0.15% and 0.85%, respectively as AI worries linger. The 10-year is up 5/32 to yield 4.03%.
