Iran rejects U.S. war proposal, says no talks before conditions met
Gold prices continue to decline after breaking through a 50-day moving average. Normally, gold is an oasis during uncertainty, like the “fog of war” that now exists. I am planning on maintaining my big gold bet, since my gold stocks have very strong forecasted sales and earnings. I should add that the prices of other commodities are also soft, since there is a fear of slower worldwide economic growth.
President Trump on Wednesday said that if Iran persists in targeting Gulf energy facilities, the US “will massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before.” This escalation is unfortunate, so the “fog of war” persists. Until the fighting stops and the shipping traffic through the Strait of Hormuz resumes, energy inflation is expected to persist.
The PPI report was scary since the food and energy inflation in March is expected to be much worse due to the Iran war and the closure of the Strait of Hormuz. The Labor Department on Wednesday announced that the Producer Price Index (PPI) surged 0.7% in February and 3.4% in the past 12 months.
Wholesale food prices rose 2.4%, while wholesale energy prices rose 2.3% in February. Prices for final demand goods rose 1.1% and accounted for half of the increase. Wholesale service costs rose 0.5% in February.
The acknowledgement of labor market problems was the big news in the FOMC statement, which means that the Fed is paying close attention to its unemployment mandate. Specifically, the FOMC statement said, “job gains have remained low,” and during his press conference, Fed Chairman Jerome Powell said that the private sector is not creating jobs.
The “dot plot” forecasted one key interest rate cut, but a minority of FOMC members forecasted more cuts.
Rather than say that war-related inflation would be transitory, the FOMC chose to say, “the implications of developments in the Middle East for the US economy are uncertain.” The FOMC also said economic activity “has been expanding at a solid pace” and inflation “remains somewhat elevated.”
The Commerce Department reported on Thursday that new home sales declined 17.6% in January to an annual pace of 587,000. This is the slowest annual pace since 2022 and was likely impacted by severe winter weather, since sales fell nearly 45% in the Northeast and about 34% in the Midwest. Overall, a weak housing market is expected to remain a drag on overall GDP growth.
The data center demand for fast memory chips remains robust. Micron Technology (MU) on Wednesday announced that its revenue surged 196.3% to $23.86 billion in its latest quarter compared to a year ago. Even more impressive, the company’s earnings soared 682.1% to $12.20 per share compared to $1.20 per share a year ago. Micron Technology posted a whopping 21.7% revenue surprise and a 38.6% earnings surprise.
