Markets Reel as "Supercore" Inflation Stays Sticky; JPMorgan, Citi Kick Off Earnings with Cautious Tone
Markets Reel as Supercore Inflation Remains Sticky; JPMorgan, Citi Kick off Earnings With Cautious Tone.
Friday saw the U.S. markets shaking as January saw the inflation in the so-called supercore, which removes food, energy, and housing, hit 3.8 percent, its January reading in dead straight and ignoring the hope of Fed-faving decline. This recalcitrant gauge, which Powell preferred due to its predictive punch, killed March rate-cut odds to 40 per cent and started a general selloff: S&P 500 skimmed 1.4 per cent to 5,920, Nasdaq tumbled 2.1 per cent to 19,750 and 10-year yields jumped 15 basis points to 4.28. Opening Q4 earnings, JPMorgan and Citi posted beat but cut 2026 projections, blaming tariff fog and margin squeezes this signals a tone of wary Big Tech next week.
This supercore stickiness rekindles inflation story 2025. Core PCE stood at 2.7% annualized and services ex-housing upgrading to 4.1% on wage rigidity and healthcare expenditure. Nod on data by Powell: Progress, but not pace we need. The soft-landing party is postponed as markets now bet on a 1 cut in 2026.
Supercore Bites: Inflation Breakdown.
Supercore flat reads are heating: Financial services +5.2 YoY, education +4.5. Equivalent rent of the owners softened to 3.9, yet the trend still was terminated. The paid ISM prices were 58, an indication of capex inflation. Commodities stable: oil at 64, copper at 4.60 - yet supercore is oblivious to this, laser-focussing on domestic stickiness.
Fed pivot? The spillover will be hawkish tea January FOMC minutes (next week). Dot plot revision looms: Median rate to remain at 4.25-4.50% till mid-year.
Inflation Metrics (Jan 2026) | Reading | Prior | Consensus |
Supercore (ex-food/energy/housing) | 3.8% | 3.8% | 3.6% |
Core PCE YoY | 2.7% | 2.6% | 2.5% |
Services ex-Housing | 4.1% | 4.0% | 3.9% |
10Y Yield Post-Report | 4.28% | 4.13% | N/A |
This table makes the point of the hawkish surprise--yields stealing the show.
Asia, Earnings Kickoff: JPM, Citi Flag Risks.
JPMorgan exceeded estimates: 4.45 EPS vs. 4.33, revenue 43.8B +8%. Loans increased by 5 percent, deposits rose, and CEO Dimon downplayed: "Tariffs may increase 50bps inflation; net interest income will hit its peak in Q2 2026. Buybacks increased twice to $20B, stocks +0.5% to $215.
Citi reflected: 1.82 EPS (1.75 est.), vol. plus12% on revenue. But guidance trimmed off-2026 EPS to 5% vs 8- due to Basel III capital increases, slowdown in China. Stock flat at $68.
Banks are sounding alarm: Consumer health good (delinquencies 1.2%), yet corporates hoard cash in uncertainty. Investment banking fees + 15 per cent on M & A shrink, yet equity underwriting lags IPO drought.
Market Carnage: Sectors, Flows and Vol Spike.
Rotation inverted: Cyclicals gaped open -2.3% -XLI -1.8%-Yields whacked. Tech safe-haven? Magnificent Seven of Nasdaq fell by 2.5% on average, Nvidia by -3% on AI spending investigation. VIX shot into the air to 18.2, the highest since December jobs.
Dollar +1.1 percent to 109.5 and killing EMs,84.1/USD, nifty-1.2. Gold surged to $2, 610/oz and oil dropped to $63 on the demand pressure.
Commodities desk: Miners of copper (FCX -4%) sinks further; nat gas soars with LNG shipments.
Fed and Policy Fork: Hawkish Tilt.
Powell is caught between two evils: Sticky super core scrubs the neck but unemployment 4.2% speaks cuts. Odds moved down to 65 in March, to 90 in June. Trump administration considers jawboning: Let the prices go.
Scenarios:
Hawk (supercore >4%): Zero cuts, terminal 4.50%.
Base: One cut, 4.00% year-end.
Dove (<3.5%): Two+, sub-3.75%.
Earnings season tests: Apple, TSLA guides may influence the mood.
Trader Playbook: The Pullback Position.
Short run: Bounces- S&P resistance 6,000, support 5,850. VI Long VIX calls, TBT (yield proxy). Teams: Banks vs. growth (XLF vs. QQQ).
Long run: Overweight gold (GLD), quality (after the dip) cyclicals (CAT under $400). India: Nifty IT purchase on rupee hedge- Infosys tough. Commodities: Long ags (DBA) food gets bitten by the inflation.
Portfolios: Increase cash to 15, carrying in IEF (7-10Y Treasuries). Vol strategies are bright tail-risk puts cheap.
The 2026 Prospect Higher for Longer Reality.
Sticky supercore disappoints expectations: S&P target drops back to 6,200 (Goldman). Earnings growth +10, but multiples decline to 21x. Bull case requires colddown of CPI by Feb 11.
Markets wobble, and they are resilient- GDP 2.3% Q1 forecast stands. The hype is tamed by the prudence of banks; inflation reigns. Business men, be vol; 2026 needs swiftness rather than exaltation.
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