Investors are anxious to see the PCE Prices Index this morning with economists expecting a rise of +0.4% in January, an uptick from +0.3% in December. The annual pace is expected to slow to +4.1% in January from +4.4% in December.

The estimates are largely based on the Consumer Price Index which was running at +0.4% in January. Some bulls believe the PCE Prices Index may show a slower pace, though, as it uses slightly different metrics as well as different data sources than CPI. Notably, the "shelter" category has a significantly higher relative weight in the CPI than the PCE, and shelter is currently a key driver of inflation.

In January, the government actually increased the weight of shelter in CPI, which some argue made inflation look even worse. PCE Prices also uses slightly more up-to-date data than CPI and bulls are hoping this variance will capture prices that have once again started falling. That's the theory at least.

Overall, bulls are hoping a softer-than-expected PCE Prices will help them gain back the momentum that was trampled by "hot" CPI, a super-strong jobs report, and other recent data indicating the Federal Reserve may need to lift rates far beyond expectations.

It's worth pointing out that the "minutes" from the last Fed meeting stressed that central bank officials still wanted "substantially more evidence" that inflation was on a sustained downward path. Fed officials and other economists have warned that it may not be straight shot down but how the central bank might react to one month of inflation gaining pace is not clear.

The Fed's primary focus of concern still seems to be on the labor market and the threat of sharply rising wages that could potentially fee an inflation spiral. The next major update there comes March 10 with the February Employment Report.

Remember, January job gains came in at more than +500,000, far higher than expected and certainly not a sign that the labor market is cooling off. The one positive in the report was a slight slowdown in wage gains, which the Fed and investors are obviously watching very closely.

Other data today includes Consumer Sentiment and New Home Sales. Berkshire Hathaway is today's earnings highlight.

Looking to next week, there's a slew of data on the calendar. The top highlights include the ISM Manufacturing Index on Wednesday and ISM Non-Manufacturing Index on Friday, both of which will provide some insights into how inflation has been trending in February.

The rest of the week brings Durable Goods and Pending Home Sales on Monday; advance reads on International Trade, Retail Inventories, and Wholesale Inventories, Consumer Confidence, and the S&P Case-Shiller Home Price Index on Tuesday; Construction Spending on Wednesday; and Productivity and Labor Costs on Thursday.

Earnings next week include several retailers that will be closely watched following disappointing guidance from heavyweights Walmart and Home Depot this week. Ross Stores and Target report on Tuesday; Dollar Tree and Lowe's on Wednesday; and Costco and Best Buy on Thursday. Other highlights include Occidental Petroleum on Monday; AutoZone, J.M. Smucker, Monster Beverage, Rivian, and Rocket Companies on Tuesday; NIO, Salesforce, and Snowflake on Wednesday; and Dell, Hormel Foods, and Kroger on Thursday.

Combustion Going Bust as the World Phases-Out of Gasoline Cars: The European Union last week approved a law that will ban the sale of combustion engine cars in its member states from 2035. For Germany and Italy as well as for Romania, Bulgaria, the Czech Republic and Hungary, the new bill sets the first deadline for the sale of gasoline-powered cars. Other European Union countries had already embraced the phase-out of gasoline cars like The Netherlands, Belgium's Flanders region, Sweden, Greece and Slovenia, who are all looking to end the sale of gas-powered cars even earlier, between 2029 and 2030. The only country in the world beating this is Norway, an electric mobility pioneer from outside of the European Union, where around 80 percent of new cars sold are already fully electric and 100 percent are scheduled to be in 2025. Similarly, voluntarily formed blocks of uniform vehicle standards could be dissolved in the U.S. over the issue of combustion engine cars. California in August set a phase-out date for new sales of these vehicles, also for 2035, and while 17 states had previously tied their vehicle standards to California's under the Federal Clean Air Act, several now want out. Source Statista

Unusual Temps at Both Extremes Could Break Over 100 Records This Weekend: A powerful and disruptive winter storm that has impacted millions of people from coast-to-coast has led to a dramatic temperature divide across the country that is breaking records. There’s been an area of high pressure settled across the Southeast, which aided in the development of the storm that’s impacting the Northeast and New England after slamming the Plains and Upper Midwest with heavy snow, blizzard conditions and icing. That area of high pressure is also allowing for warm air to expand across the Southeast and mid-Atlantic, leading to the possibility that more than 100 record-high temperatures could be broken through the weekend. In fact, parts of Florida could break February records that have stood for years, with high temperatures away from the coast climbing into the 90s through the weekend. Orlando, Florida, has only hit 90 degrees in February three times since 1892: Feb. 15, 1935, Feb. 24, 1962, and Feb. 25, 1962. On the flip side, parts of Montana and North Dakota could experience temps that feel like it's -35 degrees on Saturday morning. Oklahoma could see its first February tornado in over a decade. The crazy weather extremes continue...

The Average 401(k) Lost 20% of Its Value Last Year: The average 401(k) account at Fidelity Investments lost about a fifth of its value in 2022, tumbling to $103,900 from $130,700, according to a report Thursday from the asset manager. After a year when the S&P 500 plunged 19% and bonds provided little refuge, double-digit drops are about what you’d expect for investors who didn’t retreat into money market funds. Average account balances at Vanguard were down -20%, and losses on some of the largest actively managed equity funds in 401(k) plans were far greater. Meanwhile, the 401(k) millionaire club has shrunk by a third. Fidelity Investments had just 299,000 seven-figure workplace retirement accounts at the end of 2022, down from 442,000 a year prior. Investors may have multiple 401(k)s at Fidelity so it isn’t clear exactly how many individuals are represented in the diminished pool of accounts with at least $1 million. Most accounts are far, far smaller, with the average 401(k) account at Fidelity standing at $103,900 in 2022’s fourth quarter. Source Bloomberg

Reverse Aging Drugs May Already Be on Pharmacy Shelves: At 67 years old, Dr. Nir Barzilai looks about the same as, if not younger than, he did 10 years ago. It’s apparent in side-by-side photographs, and it’s what most people who know him say. Barzilai lives a healthy lifestyle. He’s also been taking the diabetes drug metformin off label for 10 years. He has never been diagnosed with diabetes or prediabetes—the conditions for which the drug is approved and prescribed—but takes it for a different off-label reason. “We know that it targets aging,” said Barzilai, who is a professor of medicine and genetics at Albert Einstein College of Medicine and director of the American Federation for Aging Research. “People on metformin have 30% lower rates of almost every kind of cancer. It delays cognitive decline. Even people with diabetes who are obese and have more disease to start with but are on metformin have lower mortality rates than people without diabetes who aren’t on the drug.” Metformin is just one of many medications, including other old ones and some brand new inventions, that academic researchers and biotech startups are exploring to slow, stop, or perhaps even reverse aging. Source Fortune

New York City’s Largest Office-to-Condo Conversion Prepares to Open: The largest office-to-condo conversion in New York City history will get its first residents next month, just as developers and policymakers turn their attention to repurposing more commercial buildings. The first move-ins are scheduled for early March at One Wall Street, the Macklowe Properties project that transformed a landmark Art Deco office tower into an amenity-filled, 566-unit residential property. Units on the market range from low-floor studios for $1.1 million to a four-bedroom spread with outdoor space for $12.75 million. The building’s sellout is projected at just under $1.7 billion, not including the three-story, 13,000-square-foot (1,200-square-meter) penthouse atop the tower and four additional large units that haven’t been listed yet. The project is opening in a city that’s changed dramatically since 2014, when Macklowe paid $585 million for the tower that was still partly occupied by employees of Irving Trust successor BNY Mellon. Source Bloomberg

Average Tax Refund is $300 Smaller So Far This Year: True to the IRS’s warning, tax refunds are worth a few hundred dollars less this filing season than they were last year, on average. The average tax refund as of Feb. 10, 2023, is $1,997, compared to an average of $2,323 last year. That’s a -14% drop, according to statistics released by the IRS. It is possible that that average will change as more people file their taxes—the deadline isn’t for another two months—but the decrease makes sense. Taxpayers did not receive COVID-19 relief including stimulus checks and certain tax deductions and credits, like the expanded Child Tax Credit (CTC), in 2022. Those provisions led to increased refunds for many people the past two years. As of Feb. 10, the IRS had received almost 29 million returns, and processed more than 26.6 million of those. But the IRS is still working through a backlog of some returns filed last year. That could further delay those filers possible refunds this year. Taxpayers who file a paper return may wait up to six months to receive a refund, according to the IRS. To receive your refund as quickly as possible, the agency encourages taxpayers to file electronically. Source Fortune

JPMorgan Restricts Employees From Using ChatGPT: JPMorgan Chase & Co. is restricting employees from using ChatGPT, according to a person familiar with the matter. The bank didn’t restrict usage of the popular artificial-intelligence chatbot because of any particular incident, the person said. It couldn’t be determined how many employees were using the chatbot or for what functions they were using it. ChatGPT has grown increasingly popular since the startup OpenAI released it in November, crossing a million users a few days after its launch. However, ChatGPT isn’t always reliable because it sometimes responds to prompts with misinformation or wrong answers. In addition to JPMorgan, other organizations have also blocked access to ChatGPT, including Verizon and New York City public schools. Workers at some companies have been using ChatGPT to write emails and research topics. Some of the employees say the chatbot helps them work faster while others are trying to avoid being left behind as technology evolves. Source WSJ

Majority of Americans Uncomfortable with AI in Health Care: A new Pew Research Center survey explores public views on artificial intelligence (AI) in health and medicine – an area where Americans may increasingly encounter technologies that do things like screen for skin cancer and even monitor a patient’s vital signs. Six-in-ten U.S. adults say they would feel uncomfortable if their own health care provider relied on artificial intelligence to do things like diagnose disease and recommend treatments; a significantly smaller share (39%) say they would feel comfortable with this. One factor in these views: A majority of the public is unconvinced that the use of AI in health and medicine would improve health outcomes. Though Americans can identify a mix of pros and cons regarding the use of AI in health and medicine, caution remains a dominant theme in public views. When it comes to the pace of technological adoption, three-quarters of Americans say their greater concern is that health care providers will move too fast implementing AI in health and medicine before fully understanding the risks for patients. Source PEW Research

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