I expect the Federal Reserve to continue to try talking back some of the enthusiasm that greeted its December 13 meeting and the release of a new set of Dot Plot projections showing that the median forecast of staff and policy makers at the U.S. central bank called for three interest rate cuts in 2024.
Costco Wholesale (COST) reported earnings for its fiscal first quarter of 2024 and declared a long anticipated special dividend of $15 a share. The stock closed up 4.61% on Friday, December 15.
Today sure sounded like policy-makers remorse from the Federal Reserve. New York Fed President, the vice-chair of the Federal Reserve’s interest-rate setting Open Market Committee, said that central-bank policy makers weren’t actively debating when to cut interest rates. That’s sure not what the stock market heard on Wednesday.
In its December revision of its Dot Plot projections for interest rates in 2024, the median projection by the U.S. central bank’s staff and policy makers estimated three interest rate cuts by the end of 2024. The market, which had been hoping for exactly this news, cheered, and stocks moved to record or near record highs. And in reaction to the Fed’s news, Wall Street moved its forecasts to match the new projection. Barclays, for example, is calling for three cuts in 2024 and JPMorgan Chase moved its forecast for the start of cuts to June. But, on Wall Street nothing exceeds like excess so projections are pushing beyond the Fed’s median view.
Electric vehicle inventories on lots at U.S. dealers reached a new high in December. With a 114-day supply, the bloated inventory of electric vehicles is up from a 53-day supply a year ago and compares to 71-days worth of inventory for the overall auto industry.
Among today’s big stock market winners today: SolarEdge Technologies (SEDG), the biggest maker of inverters used in turning sunlight into electricity, closed up 16.67%, and Sunrun (RUN), a leader in the installation of residential solar systems, closed up 19.92%. This rally had absolutely nothing to do with any news out of the recently ended COP28 United Nations Climate Conference. It was a pure reaction to the signs in yesterday’s Dot Plot from the Federal Reserve that the central bank was looking to cut interest rates at least three times in 2024. Makes perfect sense.
Shares of Moderna (MRNA) closed up 925% today, December 14. A personalized vaccine developed by Merck and Moderna helped prevent the recurrence of severe skin cancer for three years, according to new results released today. Patients with severe melanomas who got the vaccine and Merck’s cancer drug Keytruda were 49% less likely to die or have their cancer return than those who got Keytruda alone. The news is especially important for Moderna.
Today, the Federal Reserve caught up with the financial markets. The Fed’s Open Market Committee kept interest rates steady at a benchmark 5.25% to 5.50%, as expected. And the Fed’s Dot Plot projections showed that the median projection expects three interest rate cuts in 2024. That’s a huge shift from the September Dot Plot and moves the Fed toward the current Wall Street hope for 4 cuts or more in 2024. The Dot Plot also projects that the unemployment rate would rise slightly next year, to 4.1%, from a recent 3.7% rate, and that inflation would continue to improve in 2024 but not reach the Fed’s 2% target. Stocks soared on the confirmation of the consensus hope. At the close, the Dow Jones Industrial Average jumped 512.3 points, or 1.4%, to a record high of 37,090.24. The S&P 500 index climbed 1.37%, and the Nasdaq 1.38%.
GREATER Growth Stock Pick #7: ASML Holding (ASML). ASML Holding is priced like a stock that owns 90% of the market for cutting edge photo lithography chip-making equipment. I want to own this stock as one of my 10 GREATER Growth Stocks, but I worry about paying that kind of multiple (35 times trading 12-month earnings per share), especially ahead of what is shaping up as a challenging 2024 for chip equipment makers in general and ASML in particular. But 2025 looks like a great year for chip equipment makers in general and ASML in particular. So timing is the key issue on buying this one.
If you follow the headline numbers (what’s known as All Urban Consumers) for the Consumer Price Index (CPI), you’d say, “See inflation continues to fall; the Federal Reserve will cut rates quickly in 2024.” But you’d be following the wrong CPI number.
GREATER Growth Stock Pick #6: Danaher (DHR). Danaher is a smart (that’s key) serial acquirer–and asset divester–in the life sciences space. And that makes this stock very interesting in an environment where small, young life sciences companies might be looking for help/rescue/acquisition because they can’t raise capital in a tough part of the credit cycle. I like Danaher now, as well, because the stock looks to have just about completed its re-rating after a spike in sales during the Covid pandemic led to over enthusiasm about the stock.
China slipped back into deflation in October, according to government data released over the weekend. China had shown a recovery from August deflation in September readings, but that recovery now looks temporary. As worrying as the deflation tag itself is the cause: week domestic demand.
