—— March CPI Rises More Than Forecast; BMW EV Sales Surge; New Jersey Transit Approves 15% Fare Hike; Treasury 10-Year Yield Tops 4.5%; Credit-Card Delinquency Rates Hit Record; NY Return-to-Office Rate Climbs
1. March CPI Rises More Than Forecast
The core consumer price index, which excludes food and energy costs, surpassed expectations for the third consecutive month, signaling a new surge in price pressures. This is likely to postpone any potential Federal Reserve interest-rate cuts until later in the year. According to government data released on Wednesday, the core index rose by 0.4% from February. Compared to a year ago, it increased by 3.8%, maintaining the same level as the previous month.
Economists consider the core gauge a more reliable indicator of underlying inflation compared to the overall CPI. According to Bureau of Labor Statistics figures, the overall CPI rose by 0.4% from the previous month and by 3.5% from a year ago, showing an acceleration from February, primarily driven by higher energy prices.
Despite a robust labor market driving household spending, policymakers have consistently emphasized the need for substantial evidence that inflationary pressures are consistently easing before considering a reduction in borrowing costs.
The report released on Wednesday further suggests that efforts to control inflation may be faltering, even as the Federal Reserve maintains interest rates at levels not seen in two decades.
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2. BMW EV Sales Surge
In the first quarter, BMW AG experienced a notable surge in sales of fully electric vehicles within its core brand, surpassing competitors such as Tesla and Volkswagen, both of which have grappled with declining demand. BMW reported a 41% increase in customer deliveries of battery-powered models like the i4, iX1, and i7 compared to the same period last year. This growth contributed to a 28% rise in overall EV sales for the company.
These results stand in contrast to the broader trend of slowing demand for electric vehicles, particularly evident in Europe, where the share of battery-powered cars in total sales has plateaued following the withdrawal of government incentives for EV purchases. Volkswagen AG, for instance, reported a 3% decrease in EV deliveries during the first quarter, with gains in China unable to offset a 24% decline in Europe.
On Wednesday, BMW shares surged by as much as 1.3%, bringing their year-to-date gains to 14%. Notably, BMW’s stock has slightly outperformed its competitor Mercedes-Benz over the past 12 months.
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3. New Jersey Transit Approves 15% Fare Hike
New Jersey Transit passengers should anticipate higher fares following the system’s board decision to implement fare increases in order to address a $107 million deficit. The proposed 15% fare hike is scheduled to take effect on July 1, with subsequent 3% annual increases planned to align with inflation.
This adjustment means that New Jersey residents commuting to New York will now need to consider either paying increased transit fares or potentially facing new congestion pricing tolls for most drivers entering Manhattan’s central business district, which could commence as early as mid-June.
Supporters argue that these higher prices are necessary to address the budget shortfall for the upcoming fiscal year while still maintaining current service levels. The financially strained agency last adjusted fares in 2015.
As part of the forthcoming budget, New Jersey Governor Phil Murphy has put forward a proposal to increase taxes on the state’s largest businesses. This measure aims to provide long-term support for the operator.
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4. Treasury 10-Year Yield Tops 4.5%
Wall Street traders drove stocks and bonds lower following yet another inflation report that exceeded expectations, suggesting that the Federal Reserve is unlikely to rush into cutting interest rates this year. The S&P 500 extended its losses in April, dropping approximately 1%, as the consumer price index surpassed economists’ forecasts for the third consecutive month.
Treasury 10-year yields crossed the 4.5% threshold, which some investors view as critical in determining whether rates will reach the highs seen in 2023. With the bond market undergoing a hawkish repricing, Fed swaps now indicate expectations for only two rate cuts throughout the year.
The S&P 500 fell to approximately 5,150 points, while Treasury two-year yields, which are particularly sensitive to imminent Federal Reserve actions, rose sharply by 23 basis points to 4.98%. Meanwhile, the dollar moved towards its most significant gain since January.
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5. Credit-Card Delinquency Rates Hit Record
According to a report from the Federal Reserve Bank of Philadelphia, delinquency rates for US credit cards reached their highest level ever in the fourth quarter. The report states that nearly 3.5% of card balances were overdue by at least 30 days as of December’s end, marking the highest figure since data collection began in 2012. This is an increase of approximately 30 basis points from the previous quarter. Moreover, there was an uptick in the proportion of debts that were 60 and 90 days overdue.
The report highlights increased stress among cardholders, evidenced by a rise in the share of accounts making only minimum payments, which reached a series high with an increase of 34 basis points.
Nominal credit card balances reached a new high in the series, and card utilization also increased as consumers extended their credit limits. However, when adjusted for inflation, credit card balances remained below the levels seen in the fourth quarter of 2019.
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6. NY Return-to-Office Rate Climbs
Wall Street firms such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. have played a significant role in boosting New York City’s return-to-office (RTO) rate to nearly 80% of its pre-pandemic levels, a trend also observed in Miami, according to a particular measure.
Last year, the RTO rates for these two East Coast cities were the highest among seven major US markets, surpassing the national average of approximately 63%, as indicated by Placer.ai’s Nationwide Office Building Index. The firm conducted an analysis of foot traffic data from approximately 1,000 office buildings across the country.
Wall Street banks were at the forefront of aggressively promoting, and later mandating, the return of employees to office spaces, which contributed to the resurgence of weekday foot traffic in Manhattan.
Miami’s resurgence might have been facilitated by Florida’s early lifting of Covid restrictions and a consistent influx of tech companies, according to insights from Placer.ai.
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7. OpenAI to Release GPT-5 Soon
OpenAI and Meta are poised to introduce advanced artificial intelligence models aimed at enhancing reasoning and planning capabilities, crucial advancements toward achieving superhuman cognition in machines.
Both OpenAI and Meta executives have indicated their intentions to unveil the next iterations of their large language models, which serve as the foundation for generative AI applications like ChatGPT.
Meta announced plans to introduce Llama 3 in the forthcoming weeks, while OpenAI, backed by Microsoft, hinted at the imminent release of its upcoming model, likely named GPT-5, stating it is coming “soon”.
However, the stock, trading under the initials DJT, has faced challenges in maintaining the interest of individual investors who purchased shares as a means of backing the former president for his potential 2024 reelection campaign.
Brad Lightcap, the chief operating officer of OpenAI, informed the Financial Times that the forthcoming iteration of GPT would demonstrate advancements in addressing challenging tasks, notably in the realm of reasoning.
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The content of this article comes from various financial news media such as The Wall Street Journal, Financial Times, and Bloomberg.