Spooked: Inflation is scaring investors... again

9/13/22 8:00PM

Spooked

‍"It's not what you don't know that gets you in trouble, it's what you know that just ain't so". Those words from Mark Twain were relevant again yesterday as markets digested the latest inflation data. Investors were expecting inflation in August to follow the good news in July and continue to cool off. Instead, consumer prices actually rose 0.1% relative to July and core inflation, which strips out energy and food, rose 0.6% in the month.

That rise caught investors off guard, as higher inflation gives the Fed a stronger incentive to keep raising interest rates, sending US stocks (S&P 500 Index) down more than 4% yesterday. As visualized above, that was the worst day of the year so far and you have to go back to the highly volatile 2020 to find a sharper one-day decline for US equities.

‍A silver lining

‍There was some good news out in the report — average gas prices across the country were down 26% since June. Unfortunately, the savings you make at the gas station are likely to go towards your groceries. Food prices jumped again, meaning that they are up 11.4% on the year, the sharpest rise since 1979. With every inflation report that comes and goes, Costco's famous $1.50 hot dogs just look better and better.

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Paramount reportedly receives $24 billion from Gulf funds to back its Warner Bros. takeover

Three Middle East sovereign wealth funds have agreed to back Paramount’s takeover of Warner Bros. Discovery to the tune of roughly $24 billion, according to Wall Street Journal reporting.

The company’s triumph over Netflix in the bidding war came thanks in part to financial backing from Oracle cofounder Larry Ellison, billionaire father of Paramount CEO David Ellison.

Saudi Arabia’s PIF, which last year led the $55 billion deal to take Electronic Arts private, will provide about $10 billion in the deal. The Qatar Investment Authority and Abu Dhabi’s L’imad Holding Co. is also involved.

According to the WSJ, the funds will not receive voting rights in the combined Paramount-Warner company. Those working on the deal don’t expect the Gulf funds’ involvement to spark any additional regulatory reviews.

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The company’s triumph over Netflix in the bidding war came thanks in part to financial backing from Oracle cofounder Larry Ellison, billionaire father of Paramount CEO David Ellison.

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JetBlue is raising its bag fees as fuel costs squeeze airlines

JetBlue will reportedly hike its bag fees, as the cost of jet fuel continues to climb amid the war in Iran. It’s the latest example of carriers finding ways to push rising costs onto travelers.

Last week, United Airlines CEO Scott Kirby said that if fuel prices remain elevated, fares would need to rise another 20% for his airline to break even this year.

As CNBC reported, when one airline raises fees, others tend to follow.

Earlier this month, JetBlue hiked its first-quarter outlook for operating revenue per seat mile to between 5% and 7%, saying that strong Q1 demand helped “partially offset additional expenses realized from operational disruptions and rising fuel costs.” Now, the carrier appears to be making moves to further boost revenue to offset those costs.

Earlier on Monday, JetBlue rival Alaska Air lowered its Q1 profit forecast. The refining margins for the carrier’s cheapest fuel option — sourced from Singapore and representing about 20% of Alaska’s overall supply — have spiked 400% since February.

JetBlue did not immediately respond to a request for comment.