Producer Price Index..... Hello all,
Been busy but I'm back. Today the PPI number was released and it is suggesting that producers are able to produce goods at a fairly cheaper rate than the last time it was reported. This is full PPI number. Yet, most smart people on Wall St. focus on the core number. Excluding food and energy, the number was .1 percent better month over month and .2 worse year of year. Though most people perdicted a .1% PPI number, the actually PPI core number came in at .3 compared to .4 last month (returning to the status quo of inflationary concerns).

What does this mean? It means that the long term trend is still intact concerning the inflation and its affects upon the well being of our national economy. Yet, I would like to see how the PPI (not the core PPI) came in a lot better than it did. If this is a sign of weakening inflationary pressure for the short-term, some of the ideas that pop into my head are:

1) While the markets might react very positive to the PPI number, we must see a consistent improvement in the PPI number as well as CPI number to confirm that inflationary trends are not causing issues for the economy.

2) If this trend continues, corporate earnings might be adjusted to the upside. Why? Because we can assume that if the CPI number remains at it's current level and PPI is continuing to come down, companies are producing cheaper goods while making a nice profit selling their goods.

3) We must see how the Fed will react considering these numbers. Bernanke spoke last night in NY and described that the US Fed policy should reflect more of the stimuli coming from the global landscape rather than an internal reflection. What does this mean? Bernanke is guiding the economy to be flexible and adapt more to the emerging and interdependent global marketplace.

While I am still a believer that this market might turn to the downside in the short-term, I will be watching how these numbers will affect the market. It might just be a determining factor for the bulls to justify a rally. If this rally does happen, be prepared to see short interest covering go into full swing. But only time will tell and I feel that we must trend a little lower after a 3 year rally to really break out to the upside...  ¶ 9:23:00 AM