CNBC Daily Open: Fears over yet another hot inflation gauge

A man walks past a grocery store on February 01, 2023 in New York City. Wages for workers in most major U.S. cities grew at a slower pace in the final three months of 2022, with inflation still outstripping pay for many workers.

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Markets lowerU.S. stocks closed Friday in the red, ending their five-week winning streaks after hotter-than expected producer price index data for January. The benchmark S&P 500 slipped 0.48%, while the 30-stock Dow lost 0.37% and the tech-heavy Nasdaq Composite fell 0.82%. Wall Street is closed Monday for Presidents Day.

Urgent Ukraine appealEuropean leaders seek more support for Ukraine as Russia continues to make gains. “The sense of urgency is simply not clear enough,” Danish Prime Minister Mette Frederiksen said, joining European leaders in appealing for more arms for Ukraine as the war enters its third year.

Sony margins

Sony’s declining margins in its critical gaming business has become a major issue despite higher-margin products like digital game sales and its PS Plus subscription service. The Japanese tech giant slashed its sales forecast for its flagship PlayStation 5 console for the fiscal year, which wiped off around $10 billion off its market value last week.

Clinton’s Trump warningFormer U.S. Secretary of State Hillary Clinton underlined that Donald Trump will quit NATO if re-elected as president in November. She called on delegates at the Munich Security Conference over the weekend to take her one-time presidential rival’s tough talk “literally and seriously.”

[PRO] Bullish on equitiesMorgan Stanley has a positive outlook on equity markets despite some concerns over valuations. The bank’s Andrew Slimmon highlighted: “It’s going to be a good year for equities,” and picked three stocks that are in play.

The bottom line

Is progress on inflation stalling?

That’s the fear gripping Wall Street as another inflation gauge on Friday came in hotter-than-expected.

The producer price index rose 0.3% in January — the largest increase since August and higher than the 0.1% forecast. Excluding food and energy, core PPI jumped 0.5%, again well above consensus.

It is yet another sign of stubborn price pressures across the broader U.S. economy. And it came just days after an unexpectedly hot CPI reading, which gave markets a nasty jolt.

Both data have stoked investor worries on whether inflation is firmly under control. The latest developments also reinforce the Fed’s caution that it will need to see more evidence of disinflation before committing to lower rates.

Mohamed El-Erian, Allianz chief economic advisor, posted on X that like the CPI data, the PPI report was a “further indication that the “last mile” of the inflation battle is more complex than many had assumed (and still assume).”

Some economists even argue the jump in Friday’s data will likely push January’s personal consumption expenditures price index, the Fed’s preferred inflation gauge.

“The PPI data means we can finalize our core PCE forecast for January, at 0.32%. That would be the biggest increase since September,” Pantheon Macroeconomics wrote in a note on Friday. “But the three months since then all saw much smaller gains.”

But investors will have to wait until later this month for PCE data when it’s released on Feb. 29.

U.S. markets are closed on Monday for Presidents Day.

— CNBC’s Jeff Cox contributed to this story.