feb 15  welcome to the home for realtime coverage of markets brought to you by reuters reporters you can share your thoughts with us at marketsresearchthomsonreuterscom with inflation hitting levels not seen for four decades short sellers are focusing on consumer discretionary names short sellers have increased their bets against the sector to the highest level in over a year according to a report from sp global market intelligence as sp global sees the data there is a building market consensus that consumers are going to rein in spending on nonessential products as inflation has surged 75 over the past year among other highlights in the report sp says that short selling has been on the decline since early 2020 as equity markets hit record highs throughout the pandemic short interest in the sp 500 was at 211 at the end of january compared to 294 two years earlier while short selling in consumer discretionary continued to lead all sectors the report says that short interest in energy grew to 338 the highest level since january 2021 short interest in healthcare was 404 the highest since midoctober 2021 sp says that three of the 10 mostshorted stocks at the end of january were consumer discretionary names evgo inc evgoo big 5 sporting goods corp bgfvo and citi trends inc ctrno additionally another three of the 10 mostshorted stocks at the end of january were healthcare stocks smiledirectclub inc  heron therapeutics inc hrtxo and cassava sciences inc savao meanwhile blink charging co blnko was the most shorted stock on major us exchanges as of the end of january according to the report bulls and bears expect a lot of teeth gnashing this year 1249 est1749 gmt with the end of loose money and rockbottom interest rates behind us investors will be the losers after what has been a great bull run this according to bob doll chief investment officer at crossmark global investments in his latest deliberations this week doll says that the macro outlook is for economic growth to stay strong over the next twelve months or more with this inflation will be higher and stickier than at any point in several decades and well above current levels that are being discounted by government bond markets as doll sees it equity market valuations are still too stretched to endure rising bond yields for very long and are prone to correct as yields continue to bubble up doll does say that although credit spreads have widened a bit they are not yet worrisome for the broad equity market however he believes the tugofwar between earnings tailwinds and valuation headwinds will likely dominate the investment landscape until the next recession approaches dolls key assumptions are that the economy will grow above trend in 2022 and earnings will be good with this inflation will fall throughout the year but remain at higher than comfortable levels to him all this means stocks will be volatile in both directions without much change frustrating both the bulls and the bears chip stocks are surging on wall street on tuesday after intel announced it is buying israeli foundry tower semiconductor tsemta for 54 billion a premium of 60 over its previous stock price intel rose 1 following the announcement of its deal to acquire the semiconductor foundry the latest step in the silicon valley companys aspiration to become a major provider of manufacturing services to other chip makers read more the deal is expensive but who cares writes wedbush analyst matt bryson in a research note we believe there were few other alternatives by which intel could flesh out its perspective foundry business and if intel is successful in ramping into foundry no one will care that intel overpaid for tsem the philadelphia semiconductor index sox is surging more than 4 rebounding from some of the deep losses it has suffered in recent weeks as investors worried about rising interest rates and dumped high growth stocks investors have also been debating the risk of chipmakers building too much new manufacturing capacity in reaction to the global supply shortage thereby setting off an industry downturn nvidia nvdao is advancing 8 ahead of its quarterly report late on wednesday qualcomm qcomo and broadcom avgoo are both jumping about 4 and marvell technology mrvlo is powering nearly 7 higher with the smell of ma in the air smaller chipmakers are also rallying with chip manufacturing equipment maker amkor technology amkro jumping 95 programmable chipmaker lattice semiconductor up 71 and analog component maker monolithic power mpwro gaining 86 the sox remains down about 11 in 2022 and it is up 9 over the past 12 months no matter ukraine investors turn less bullish on eu stocks 1110 est1610 gmt even before mondays selloff amid concerns of an imminent ukrainerussia conflict investors turned less optimistic about the outlook for european equities vs last month the bofa fund manager survey for february out today showed that those expecting european stocks to rise by at least 5 over the coming twelve months fell sharply to 57 from last months 81 and thats mostly due to hawkish central banks and incoming monetary tightening which is seen as the biggest risk factor for markets by 41 of respondents only 7 consider a possible ukrainerussia conflict the most important in more detail bofa said those expecting downside for eu stocks rose sixfold to 18 while those saying the regions stock market has already peaked rose to 22 from 8 last month those expecting the bull run to continue until at least q4 however remained the majority at 29 but thats down sharply compared to last month while the smallcap russell 2000 index rut is underperforming the largecap russell 1000 index rui bofa equity and quant strategist jill carey hall still suggests buying shares of smaller companies but with caveats small caps are cheap with a 29 pe discount to large caps and in small growth stocks rlg trade at a historical pe discount to value rlv but carey hall expects growth to see better growth in the next 12 months the relative forward pe of rut vs rui fell to 072x last month  its lowest level since the 19982001 period and 29 below average so small remains cheap vs large on every metric even nonearners and outliers are included smallcap energy and financials rank highest with inexpensive relative valuations and strong ranks on revisions and technicals with both trading at historical discounts to large cap peers last month the rlg fell 13 while rlv fell 6 currently growth is down 106 ytd vs values 22 dip with the relative forward pe of small growth vs value at 128x below the longterm average of 133x carey hall says the last time the relative multiple fell from highs to similar levels in mid2002 growth performed inline with value over the next 13 months but outperformed over the next 612 months also small growth will see better earnings sales growth vs value over the next 12 months and has had better estimate revisions in the last three months according to carey hall but she cautions that the rlg has a higher proportion of nonearners and a higher exposure to healthcare which she ranks poorly while growth stocks are likely to be hurt by rising rates and tend to underperform in late cycle however after favoring value over growth in 2021 the strategist suggests a more barbelled stance in 22 she suggests sticking with quality value and stocks with attractive free cash flow because of late cyclefed hiking but add growth exposure via cyclical growth and stocks with highexpanding margins amid continued inflation data released on tuesday did little to assuage investor fears that the federal reserve will try to douse inflation flames in the coming months with an ice cold bucket of rate hikes producer prices ppi usppfdeci surged by 1 in january twice the rate analysts expected according to the labor department read more the hot ppi reading which tracks prices that us companies get for their goodsservices at the proverbial factory door suggests us companies will continue passing rising prices along to the consumer throwing gasoline on the cpi fire  the consumer price index hit its highest annual rate in four decades last month linebyline the report shows the biggest increases coming from construction services jumping 36 and processed goods rising 17 with unprocessed goods actually posting a 2 monthly drop a silver lining which suggests manufacturing input prices could start coming back to earth core ppi which excludes volatile food energy and trade services decelerated ever so slightly rising 69 after decembers upwardlyrevised 7 surge the combination of stubborn supply disruptions and elevated energy prices will prevent producer prices from reverting to more normal patterns until later this year writes mahir rasheed us economist at oxford economics adding that the reports reinforce the case for the fomc to commence rate liftoff at next months policy meeting with a rate hike of at least 25 basis points the numbers do seem to suggest that at the conclusion of next months monetary policy meeting powell  co will attack the inflation monster with big guns with the market now expecting betterthaneven odds of a 50basispoint rate hike the graphic below shows ppi along with other major indicators all of which continue to soar well above the feds average annual 2 inflation target separately factory activity in new york state increased a wee bit this month after dipping its toes in contraction territory in january the new york federal reserves empire state manufacturing index usempmeci came in at an underwhelming 310 well below the 1215 consensus still the number was an improvement of last months 07 reading which marked the indexs first dip into contraction since june 2020 an empire state number above zero signifies expanded activity versus the previous month but do two months make a trend its not clear whether the weakness in january and february marks the start of a sustained slowing in the sector or is just a consequence of the omicron wave which resulted in tens of millions of lost working days across the country and perhaps the severe weather in january says ian shepherdson chief economist at pantheon macroeconomics wall street is solidly green in morning trading as signs of a possible easing russiaukraine tensions read more enticed buyers back into the fold the rally is broadbased with growth igx preferred over value ivx and chips sox having a better day than most us equity index futures are sharply higher on tuesday on signs of a deescalation in tensions between russia and ukraine read more  and after key inflation data came in above estimates read more based on futures action the sp 500 index spx looks poised to jump more than 50 points in early trade which would put it back around its 200day moving average dma which now resides around 4455 read more  in any event with tuesdays strong move in the futures tech xlkp is a premarket winner while energy is on the losing side financials xlfp are also rallying this with the us 10year treasury yield jumping back over 2 here is your premarket snapshot for tuesdays live markets posts prior to 0900 est1400 gmt  click here read more terence gabriel is a reuters market analyst the views expressed are his own