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Headline CPI in Dec rose .1% and also rose .1% ex f&f. Y/o/Y CPI is now up 2.7% on easy comparisons and 1.8% at the core. Energy prices rose .2% after a 4.1% spike in Nov and food prices rose .2%. Owner’s Equivalent Rent (24% of CPI) was flat and has been either flat to down .1% for 5 straight months now and has been a main contributor to moderating the government reported CPI figure which the Fed relies so much on. This as a result of the lack of landlord pricing power due to elevated unemployment and competition from unsold homes. Commodity prices however, which influence 40% of CPI rose .2% overall and are now up 5.5% y/o/y and will be the offsetting factor in 2010. The Fed’s focus and modeling on the output gap and direction of wages will miss commodity induced inflation which will be the main driver in the next bout of price pressures, if not already. Gasoline prices in particular, according to AAA, are at a 13 month high.

Jan NY manufacturing survey, the 1st Jan industrial # out, was 15.9, almost 4 pts above expectations and up from 4.5 in Dec. The figure though has been extremely volatile over the past 3 Q’s as monthly moves have ranged from 4 pts to 18. New Orders spiked to 20.5 from 2.8 but was 31 in Oct. Shipments which follow orders rose to 21.1 from 8.4. Backlogs jumped from -21 to +2.7 with the 6 mo average -5.5. Employment rose to 4 from -5.3 but is up for 3 out of the last 4 months. Inventories remained depressed at -17.3 and have been positive in only 1 month going back to the fall of ’07. Prices Paid spiked to 32 from 19.8 to the highest since Sept ’08 and Prices Received rose to 2.7 from -9.2 and is positive for the 1st time since Nov ’08. The overall 6 month outlook rose to 56 from 52.6 but down from 57.9 in Nov. Net-net, this data confirms that manufacturing will continue to contribute to GDP growth for now but we need to see other surveys to determine the degree.

INTC’s modest stock response to much better than expected earnings and guidance follows the same reaction from LLTC on Wednesday and SAP yesterday, thus a sign that current stock levels in some areas of tech have priced in the news. Throw in a revenue miss from JPM on top of market weakness in Europe on concerns with Greece and we have the futures lower. Greece’s deficit plan gets seen by the EC today and Greek bonds are up a touch but their CDS is at fresh record high. After an overnight rumor that Merkel in Germany was resigning which was vehemently denied and the Greek credit concerns, the euro is falling to a one week low. Chinese bank loans in Dec were 70b yuan above estimates and totaled 9.6T in ’09, 96% above the level of ’08 and a pace that the Chinese government clearly wants to slow down based on recent policy moves.

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