Market News: Inflation, GE, PG, and 10yr Yield

January 22, 2026

Macro Update

As a reminder, there’s a monthly Fed meeting next week.  However, the market is pricing in a near zero chance of a rate cut.  This is due to the relatively tame data on both inflation and the job market recently.

This morning, we got the Fed’s “preferred” measure of inflation – PCE inflation, which is reported by the Bureau of Economic Analysis.  

The punchline – it was right inline with expectations.  However, that’s not really a surprise.  PCE is a derivation of the monthly consumer price index and producer price index.  And we knew both of those numbers already.  PCE inflation was +2.8% y/y.  For two full years now, core inflation has remained in a tight band between 2.5% and 3.0%.   The problem for the Fed is that it’s stubbornly above its 2.0% long-term target.  If you need an easy answer why the Fed is reluctant to cut rates more, this is why.

P&G (PG)

P&G (PG) is the 26^th largest stock in the index and the largest of the consumer staples product makers.  The company reported Dec-qtr results this morning.  However, mgmt. previewed results at a conference in early December.  So the stock is not reacting much.

Total organic sales were unchanged.  Margins fell year/year due to product mix shift, lower prices, and “higher costs from tariffs”.  P&G maintained its guidance for 2026.  Total sales 1-5%.  Organic sales 0-4%.  EPS guidance was maintained, but it assumes sales accelerate in the back half of the year.

Overall, PG is suffering from slower sales growth – mostly due to a slower consumer end market plus margin pressure.  That’s a tough 1-2 punch.  Earnings estimates have fallen only modestly however.  The drop in the stock last year was due almost entirely due to a falling PE multiple.  At 20x earnings, PG is now trading at the lower end of its range over the past 10  years. 

GE Aerospace (GE)

GE Aerospace (GE) is the 30^th largest stock in the index and the largest stock in the industrial sector.  As a reminder, the old conglomerate GE broke up.  The “GE” ticker now includes only the aircraft engine business – ie, GE Aerospace.

GE Aero reported a very strong quarter, driven by better parts and service on commercial engines.  Commercial aftermarket grew 31% (!) vs last year.  Management gave preliminary 2026 guidance for “low double digit” revenue growth, which is inline with consensus. 

The abnormally strong growth in aftermarket commercial engines is still a long leftover lag from the COVID pandemic shutdown.  Airlines are playing catch up with engine maintenance after a prolonged period of no activity during the pandemic.  Growth should return to a more reasonable “low double digit” level this year.

The stock is weak at the moment (-6%).  That seems to be from disappointment that management did not increase their 2026 guidance.  But historically, management is conservative with their outlook.

10 Year Yield

Lastly, the Japan drama seems to have cooled off.  But US bond rates are rising again today.   The 10yr yield is now back to 4.27%.  For most of last year, the 10yr yield was trending lower.  It seemed as if we would finally break back into the 3’s.  However, in November, rates turned a corner and are now trending back higher.  (See the chart below.)

There are lots of possible reasons, but the most obvious one might have been the stabilization of the job market.  Monthly payroll growth was falling in a steady fashion since the spring of last year.  But it seems to have stabilized (at flat or slightly positive).

As a general rule of thumb, a lower 10yr  yield is a positive thing for stock prices.  So I wanted to call it out.