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Inflation is back. Don't panic

Quest's Profitable MomentFor the past five years, the search has been on for any signs of inflation. Month aft...

Posted: Feb 16, 2018 9:54 AM
Updated: Feb 16, 2018 9:55 AM

Quest's Profitable Moment

For the past five years, the search has been on for any signs of inflation. Month after month, in the United States, the UK and the Eurozone, inflation appeared becalmed if not dormant. More recently in the US, of course, core inflation numbers have risen toward the Fed's 2% target, prompting the five interest rate hikes that began in December 2015. The US federal funds rate now stands at 1.5%, with the prospect of up to four more rate hikes this year, potentially taking rates to 2.5%.

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The Fed has said time and again that rates are "likely to remain, for some time, below levels that are expected to prevail in the longer run." Translated, that means interest rates will top out considerably lower than during previous economic expansions.

Even the Bank of England has warned that rates will rise more aggressively than previously thought. The message to the market is: Be calm. Don't panic. Inflation has started to awaken. Rates are going to have to rise.

Blankfein worries the economy could overheat

Is President Trump pouring lighter fluid on an already hot economy? That's the fear of Lloyd Blankfein. The Goldman Sachs CEO told CNN that Washington's spending spree - $1.5 trillion in tax cuts, $300 billion in extra spending - could be "too much of a good thing." Echoing Wall Street's inflation jitters, Blankfein said, "The odds of a bad outcome have gone up." Blankfein conceded that the economy looks good, and he credited Trump with lifting it "higher" than Hillary Clinton would have. "What could possibly go wrong?" he joked. "I haven't felt this good since 2006."

-- Matt Egan

Calm returns to Wall Street

Wall Street has stabilized after one of its worst weeks since the 2008 financial crisis. The Dow turned positive on the year again this week and is back above 25,000. Investors are slowly adjusting to higher volatility, rising bond yields and creeping signs of inflation. Fear of inflation and higher interest rates sparked the market sell-off that began February 2, when the Labor Department reported that wages grew at the fastest pace in nine years. The Dow tumbled 1,000 points twice last week. While the Federal Reserve will keep its toolkit handy in case inflation takes off, the strong economic backdrop hasn't changed much, and corporate profits are strong.

-- Nathaniel Meyersohn

Warren Buffett dumps IBM, buys a drugmaker

Warren Buffett is making another big bet on health care. His company Berkshire Hathaway has taken a $358 million stake in Teva Pharmaceutical, an Israeli company that makes generic drugs. It makes sense for Buffett to beef up his pharmaceutical portfolio: Last month, Berkshire, Amazon and JPMorgan Chase announced they would form a company to give their U.S. workers and their families better health insurance. It's also no surprise that Buffett is shedding more IBM stock. Last May, he said he had gotten rid of a third of his IBM shares. IBM has run into "some pretty tough competitors," he told CNBC.

-- Danielle Wiener-Bronner

Trump hints at 'reciprocal tax' as trade actions soar 81%

Trump revived fears of a trade conflict this week. He promised a "reciprocal tax" on imports, seemingly from any nation that runs a trade surplus with the United States. Although the White House later said nothing formal was in the works, Trump's remark spoke to the White House's fixation on trade. The Trump administration has launched 94 trade investigations in its first year, an 81% increase from the final year of the Obama administration.

-- Patrick Gillespie

Unilever sends stern warning to Facebook and Google

Unilever is threatening to pull its advertising from digital platforms it says have become a "swamp" of fake news, racism, sexism and extremism. The company said objectionable content on social media - and a lack of protections for children - is eroding social trust, harming customers and undermining democracies. Brands and publishers are increasingly under the thumb of Facebook and Google because they provide massive audiences. Unilever may be all bark and no bite, but it's a significant escalation in the power play between online advertisers and Silicon Valley.

-- David Goldman

Quick takes

Nearly a third of Main Street businesses say it's a good time to expand, the highest level on record.

Oxfam is facing tough questions from its investors following reports of sex crimes-by the charity's workers in Haiti and Chad.

Alibaba signed a deal to stream more than 1,000-Disney-movies and TV episodes in China on its Youku video platform.

McDonald's went McVegan-in Europe and cheeseburgerless in U.S. Happy Meals. And it's sponsoring its last Olympic games.

Japan is in its-longest uninterrupted growth streak since the booming 1980s. But economists say it may get left behind from the global rally.

What's next

Food earnings bonanza:-Coca-Cola, Campbell Soup, Kraft Heinz and Smucker are all reporting earnings on Friday. Coke will try to outduel Pepsi, which reported much lower North American beverage sales earlier this week.

Walmart earnings: Walmart was among the first companies to provide tax cut bonuses to its employees. It will reveal how much it expects to benefit when it reports earnings on Tuesday.

Fed minutes:-The Federal Reserve didn't raise rates last month, but its meeting minutes, to be released Wednesday, may provide a sense of the board's economic outlook.

California Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 284012

Reported Deaths: 6573
CountyConfirmedDeaths
Los Angeles1207643582
Riverside21101506
Orange18892369
San Diego17578399
San Bernardino15932272
Imperial7343121
Alameda6925140
Fresno692481
San Joaquin560058
Kern554384
Santa Clara5478165
Tulare5175139
Sacramento456676
Contra Costa409286
San Francisco402050
Ventura385850
Santa Barbara374230
San Mateo3692111
Marin298926
Stanislaus288945
Kings275537
Monterey223917
Solano182627
Merced162311
Sonoma146612
Placer93811
San Luis Obispo8082
Yolo72326
Madera7137
Santa Cruz5013
Napa4484
San Benito2922
Butte2753
Sutter2753
Lassen2670
El Dorado2640
Shasta1635
Humboldt1544
Nevada1511
Glenn1460
Yuba1392
Lake981
Tehama941
Mendocino920
Colusa860
Calaveras610
Del Norte581
Tuolumne570
Mono481
Amador340
Inyo341
Siskiyou320
Mariposa311
Plumas130
Alpine20
Trinity20
Sierra10
Unassigned00
Chico
Scattered Clouds
93° wxIcon
Hi: 97° Lo: 66°
Feels Like: 93°
Oroville
Clear
97° wxIcon
Hi: 98° Lo: 66°
Feels Like: 97°
Paradise
Scattered Clouds
93° wxIcon
Hi: 90° Lo: 66°
Feels Like: 93°
Chester
Clear
84° wxIcon
Hi: 79° Lo: 53°
Feels Like: 84°
Red Bluff
Clear
98° wxIcon
Hi: 98° Lo: 66°
Feels Like: 98°
Willows
Scattered Clouds
93° wxIcon
Hi: 100° Lo: 64°
Feels Like: 93°
Sunny skies and hotter temperatures are ahead for today. We'll be very dry and winds will be a little stronger out of the Northwest this afternoon. Fire danger will be elevated for some areas later today.
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