Apple is likely to take its shareholders on an even wilder ride in the next six months than they’ve been on since the December all-time high at $199.62. The end result, I think is likely to be a renewed rally beginning in the fall–if you can either hold on through the volatility until then or see your way clear to timing when to buy and sell.
The week will bring lots of important news on inflation and on the auto sectors and from Adobe on developments in AI. With some strange wrinkles in timing due to the short Good Friday schedule.
The Federal Reserve unanimously voted to leave the benchmark Fed Funds rate in a range of 5.25% to 5.5%, the highest since 2001, for a fifth straight meeting. They left their projections in the quarterly Dot Plot for the Fed Funds rate by the end of 2024 at 4.6%. That was the same projection as in the December Dot Plot. And nothing in either the post-meeting press statement or in Fed chair Jerome Powell’s press remarks changed the timing on when the Fed will make its first interest rate cut.
Today’s video is Interest Rate Cut Transition Going Well. Well, so far. Until Wednesday, anyway. Last week we had another batch of bad inflation news: the inflation rate has stopped its decline, and even crept upward a bit. However, the market hasn’t panicked. Wall Street has moved the goalpost for a rate cut from the upcoming March 20 meeting to the June or July meeting. Last week’s bad news dropped the odds for a rate cut by the June 12 meeting on the CME Fedwatch Tool to 63.1%, down slightly from the previous day. The odds of no move on the June 12 meeting are on their way to 40%. Investors have set their sights on July. This will likely continue to push the market sideways until April when we get a bit of earnings excitement, again, around AI. Consolidation after the rally early in the year isn’t a bad thing for the market, and as long as no one panics, I think we’ll see a relatively smooth transition to the eventual interest rate cuts.
It’s becoming a refrain. Today another inflation measure came in hotter than expected. Which is the problem. It’s har to ignore the possibility that inflation has stopped its steady decline and its recent months has started to move up again. Is there a problem here beyond a stickiness in prices that is preventing the Federal Reserve from reaching its inflation goals? And that might be endangering even a June timetable for an initial interest rate cut? Prices paid to U.S. producers rose in February by the most in six months.
Core CPI inflation came in hotter than expected in February for a second straight month. The core Consumer Price Index, which excludes food and energy prices, increased 0.4% from January, the Bureau of Labor Statistics reported today. The year over year inflation rate rose to 3.8%. Economists had been projecting 3.7% annual rate. Core CPI over the past three months rose an annualized 4.2%, the highest annual rate since June. That adds to worries that the improvement in inflation has stalled in recent months.
Can we just agree that they way we measure the labor market is nuts? Today’s report on the U.S. economy is a case in point. Employers added 275,000 jobs in February, the Labor Department reported Friday. But the unemployment rate rose to 3.9% from 3.7%.
The coming week I expect a battle for the market’s attention between the continued AI monster momentum story and the macro story on inflation and interest rates.
On Thursday the financial markets get a new monthly PCE inflation report. The PCE, Personal Consumption Expenditures index, is the Federal Reserve’s favorite inflation measure. And Thursday’s report on January inflation could be bad news for the financial markets,
I think.the market to continue to come to terms with the likelihood that the Federal Reserve will begin to cut interest rates later than expected in 2024 and will make fewer cuts than expected.
Going into Wednesday earnings, Nvidia was the third largest short on the U.S market with about $18.3 billion in shares borrowed and then sold short, according to S3 Partners. Those short sellers wound up with $3 billion in paper loses after the stock soared Thursday on a big earnings and revenue beat.
Can you hear the barkers yelling to the crowd? It’s Wall Street analysts rushing to raise their target prices for Nvidia (NVDA) ahead of next week’s quarterly earnings report. On February 21, after the close, Nvidia is expected to report earnings of $4.18 share, up from $0.65 a share in the quarter a year ago, on revenue of $20.5 billion. And even though the stock is up 47% for 2024 as of the February 15 close and up 219% for the last year, Wall Street analysts are rushing to increase their target price on the shares.
