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Stocks can’t quite decide what to make of today’s CPI inflation report
Inflation, measured by the headline CPI (Consumer Price Index) fell 0.1% in December versus November. That brought the annual headline inflation rate to 6.5%. That was exactly what a consensus of economists was looking for. The core DPI, which strips out more volatile food and energy prices, rose by 0.3% in December from November. That brought the annual core inflation rate to 5.7%. Again, exactly what economists had forecast. (Remember, the inflation rate peaked at 9.1% this summer.) The stock market didn’t know quite what to do with this inflation reading, however.
Please Watch My New YouTube Video: Caution! Margin Shake-Up Ahead!
Today I posted my two-hundred-and-twenty-second YouTube video: Caution! Technology Margin Shake-Up Ahead!
This starts off as an Apple (NASDAQ: AAPL) story. Apple recently announced that it would be moving away from using Broadcom (AVGO) chips for Wifi and Bluetooth in its iPhones, and begin using its own chips in 2023. This will of course make for better margins for Apple and speed up the company’s ability to implement new technology. This is a big blow for Broadcom which relies on Apple for 20% of its revenue. Apple also announced it’ll be moving away from QUALCOMM as they project it will have Apple chips to replace the QUALCOMM modem chips by late 2024-2025. (We’ve heard this before. And Apple had to call off the switch because of technology glitches.) You can expect more technology (and other) companies to shake up their own product designs and supply chains as they look at inflation and costs. Corporate profits have been at historic highs protecting profit margins at current levels won’t be easy.
Flying blind: Don’t bet on Wall Street knowing what’s about to happen with the economy, inflation, or interest rates
Let’s be honest, everybody from the experts down to you at your home computer is flying blind right now. Trends are so event dependent that I’m not sure there actually is a trend that’s worth buying into for more than a day or two. This will all resolve itself one day–I’d estimate by the middle of 2023–but until then my advice is to NOT get caught up in any of the waves of conflicting short-term sentiment rolling through the market.
Financial markets resist Fed calls to recalibrate interest rate peak
Despite comments from the head of the Atlanta and San Francisco Federal Reserve Banks that peak interest rates may need to go above 5%; despite comments from Federal Reserve chair Jerome Powell that fighting inflation may require unpopular interest rate moves; and even despite comments from JPMorgan Chase CEO Jamie Dimon that there’s a 50% chance that the peak rate may need to climb above 6%, the financial markets are clinging to a belief that interest rate increases will top out at no higher than 5%.
Please Watch My New YouTube Video: Trend of the Week Watch Credit Card Debt After Christmas
This week’s Trend of the Week: Watch Credit Card Debt After Christmas. Christmas is a huge anomaly when it comes to the stock market and consumer spending. Jobs numbers and data predictions that come out in December are massively adjusted for the season–and the published numbers are almost always wrong. This December, you can look at consumers, already stretched by inflation, taking on more credit card debt because “It’s Christmas” and they want to make sure there are presents under the tree. The thinking may be, “I’ll blow up my credit cards at Christmas, and then start to cut back in January.” The time to look at the default and bad debt rating numbers from banks is in January and February. This will give us a better picture of where the economy and consumers are for 2023 than the skewed December numbers might. Another good indicator of the consumer market is Wal-Mart (NYSE- WMT). As we come out of the holiday spending season, keep an eye on Wal-Mart to get a better idea of how the economy is doing. If Wal-Mart can stay steady, I think other consumer stocks will follow. (Alth9ugh today’s (January 9) rocky numbers from Macy’s, Chico’s, and Lululemon aren’t good signs.)
3 Retail Stocks Say Bah, Humbug to Christmas Sales
Disappointing holiday sales and margin pressures. Not a good combination for any stock. And today shares of Macy’s (M), down 6.39% as of 2 p.m. New York time; Lululemon (LULU, down 9.01%, and Chico’s FAS (CHS) down 9.41% are paying the price for disappointing Wall Street.
Apple’s plans for AR headset point to fewer product launches than usual in 2023
News, rumor, and speculation from the Consumer Electronics Show point to a second half of 2023 launch for Apple’s (AAPL) AR “metaverse” headset. Apple has been “launching” this high-performance AR headset since 2017 but plans for a launch were put off in 2020, 2021, and 2022. The launch has even slipped in 2023 from plans to introduce the headset in January with the product shipped later in 2023. But now it looks like a spring announcement
Will next CPI inflation report on Thursday send stocks tumbling or soaring?
On Thursday, before the New York market opens, the Bureau of Labor Statistics will report CPI inflation for December. This report will be the last before the Federal Reserve meets to set interest rates on February 1. The Fed already knows what the report says about inflation, but financial markets will react as if this new CPI inflation data will make the difference between a 50 basis-point increase (in line with the 50 basis-point increase on December 14) or will see the central bank send a positive signal on inflation and interest rates by slowing to a 25 basis-point increase. Right now the CME FedWatch Tool says the Fed Funds market is pricing in 86.6% odds of a 25- basis -point move and just 23.4% odds of a 50-basis-point increase.
Saturday Night Quarterback says, For the week ahead expect…
I expect stocks to start looking ahead next week to the earnings season that begins on January 13 when JPMorgan Chase (JPM) and Bank of America (BAC) report fourth-quarter 2022 earnings. Right now fourth-quarter earnings results and guidance for first-quarter 2023 earnings are shaping up as the next big challenge to stock prices. That’s because consensus earnings projections for 2023 have turned negative in the last few weeks.
Trick or Trend: Put these dates on your calendar for the next government cliffhangers
Anybody who has watched the circus of obstructionism unfold in the House of Representatives over the past few days as Republicans struggled to elect a new Speak should have been convinced that the best outcome to watch for in the upcoming battles to raise the debt ceiling and to fund the government for 2024 is a walk to the cliff of default and shutdown that produces just enough votes to avoid disaster. After yielding enough chaos to rattle global financial markets.
Please Watch My New YouTube Video: Quick Pick Watch Tesla
Today I posted my two-hundred-and-twenty-first YouTube video: Quick Pick Watch Tesla This week’s Quick Pick isn’t a “buy,” it’s a “watch.” Tesla (NASDAQ: TSLA) saw its stock down 37% in December–not for the year, but in ONE MONTH. The stock is down 65% for the year. If you want to look for some support for the current low of 107, you’d have to look years back. Throughout the year there has been steady support and resistance at 206-217 but around November, the stock took a major dive and doesn’t look to be recovering any time soon. Monday, Tesla announced its delivery news for the fourth quarter of 2022. While it delivered a record 405,278 cars that was below the consensus. One of Elon Musk’s problems is he continues to over-promise and under-deliver. So while Musk promised a delivery growth of 50%, the actual 40% growth-although extremely impressive-is diminished since it missed company-generated expectations. On top of this, Tesla has announced it’s coming out with a $7500 discount in China, where sales are slumping, and the company also said it would reduce production in China. Tesla also has to figure out how to handle the lower-priced end bottom of the market where companies like GM have moved in. The Inflation Reduction Act offered subsidies, credits, and incentives to buy electric cars, but only one Tesla model made the list due to their high prices and battery packs that didn’t meet made-in-American standards. I’m not shorting Tesla after this tumble. It’s a good car company with impressive technology. But the valuation problem remains. I’ll be keeping my eye on Tesla’s share price, and you should too.
Stocks rise as investors decide slowing wage gains outweigh higher than expected job growth
At the close today, the Standard & Poor’s 500 was up 20.28% to 3903. The Dow Jones Industrial Average had added 2.12%. The NASDAQ Composite was higher by 2.56% and the NASDAQ 100 was ahead 2.78%. All this on the heels of a December jobs report from the Bureau of Labor Standards that showed the economy added 223.000 jobs in December. (Economists had projected 202,000 jobs.) And on greater than-expected moderation in the pace of wage gains. Average hourly earnings climbed 0.3% month over month against expectations for a gain of 0.4%. Average hourly earnings rose 4.6% year over year against an expected 5.0% increase.
Stocks stumble on interest rate fears ahead of Friday’s big December jobs report
U.S. stock indexes finished lower today, Thursday, January 5, on news that pointed to solid job growth and hawkish comments on interest rates from the Federal Reserve. The Standard & Poor’s 500 closed down 1.16% and the Dow Jones Industrial Average finished off 1.02%. The NASDAQ Com opposite dropped 1.47% and the NASDAQ 100 was lower by 1.59%. The small-cap Russell 2000 closed down 1.09% The ADP private payrolls report for December showed 235,000 jobs created that month. The total beat expectations among economists surveyed by the Wall Street Journal for a gain of 153,000 jobs for the month. The ADP data doesn’t always track the official jobs report, due tomorrow, but a report that came in above expectations certainly raises the possibility that tomorrow’s official report will also run hot.
Please watch my new YouTube video: Everybody (Well, Almost Everybody) Hates 2023
(Almost) everybody hates 2023. We’re just four days into 2023 and we’ve already had some negative reporting come from the IMF, (International Monetary Fund) stating that a third of the world will likely be in recession in 2023. The US may escape the recession, but just barely, with the Fed projecting a .5% GDP growth rate for 2023. All this bad news is actually good news because it means we may finally see a bottom. Once we can remove the “almost” and definitively say EVERYONE hates 2023, that’s when we can get back to investing. I think we’re about six months away from that. The S&P was at 3816 on January 3, inching closer to the October low of 3583 and the June low of 3674. If we get back down to those lows, or lower, I’d say it’s time to start putting your money back to work.
More bad news from Europe strikes at heart of Meta’s Facebook business
On Wednesday, January 4, European Union regulators decided that Facebook and Instagram, both properties of Meta Platforms (META), had illegally forced users to accept personalized ads. The fine of 390 million euros ($314 million) isn’t by any means the most damaging part of the decision. The company could be forced to make costly changes to its advertising-based business in the European Union, one of its largest markets and home to 450 million people. And the company could either be forced by regulators in other countries or decide to make the changes on its own to its global business that would turn the European Union decision into a defacto global standard.
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