January 8, 2025
What You Need to Know Today:
Pending home sales climb again. Is this another negative sign for 2025?
Pending sales of U.S. homes increased for a fourth month in November to the highest level since early 2023. But why? That’s the key question. If it’s because potential buyers have given up waiting for the Federal Reserve to cut interest rates further, then this “good news” is another negative indicator for 2025
Consumer debt soared in October–are consumers trying to beat the Trump tariffs?
U.S. consumer credit rose by $19.2 billion in October, smashing through the $10.1 billion consensus forecast. And surging from $3.2 billion in September, according to Federal Reserve data released Friday. One in three Americans are stockpiling daily necessities like toilet paper and non-perishable food out of fear that President-elect Donald Trump’s pledge to add tariffs to imported goods will lead to higher prices, according to a new survey by CreditCards.com
Saturday Night Quarterback says (on a Sunday), For the week ahead expect…
All eyes will be on the Consumer Price Index inflation report for November due out on the morning of Wednesday, December 11. It’s the last big inflation data dump before the Federal Reserve meets on December 18.
U.S. electricity demand set to soar–this is a very big deal
U.S. electricity demand could rise by128 gigawatts over the next five years, driven by data centers and manufacturing growth primarily in six regions of the country, according to a report published Thursday by Grid Strategies. That result is a five-fold increase in electric demand load forecasts from estimates just two years ago.
Jobs report locks in one more rate cut from the Fed
The U.S. economy added 227,000 jobs last month, the Labor Department reported Friday morning, December 6. In addition, revisions added 56,000 jobs to the totals for October and September. Which adds up to a strong recovery from the shocking low 12,000 new jobs initially reported for October. Initial analysis that the almost non-existant growth for October was due to hurricanes and strikes now looks correct. At the same time, the unemployment rate, which is calculated in a survey separate from that which produces the jobs total, ticked up to 4.2% from 4.1%. The jobs total and the unemployment rate were broadly expected by economists. The complete picture is of an economy showing a continued modest expansion. In my opinion, that’s enough to lead to a 25 basis point cut at its December 18 meeting in the Federal Reserve’s benchmark short-term interest rate from the current range of 4.50% to 4.75%. The CME FedWatch took today put the odds od a 25 basis point cut at the December meeting at 85.1%. That’s up from 66% odds a week ago
Watch my new YouTube video: What if the economic consensus on tariffs is wrong?
Today’s video is What if the economic consensus on tariffs is wrong? It would be really bad news for stocks. The current consensus among economists is that tariffs will be inflationary as companies pass on rising prices to consumers. However, as Nir Kaissar recently wrote in an opinion piece for Bloomberg, this may not be correct. He used McDonald’s as an example. In February, McDonald’s CEO Chris Kempczinski said that the fast food restaurant has been losing low-income customers–houseold income of $45,000 or less– as the cost of its meals has risen. The price of a Big Mac, for example, has risen 25% since 2019, even though the price of raw materials has not risen at that rate. The operating margin at the company gone up and Wall Street expects that to continue, even as the company has lost customers. The company announced that they’d be offering a new, low price menu in an effort to retain a larger low-income consumer base. If more companies go in the direction of cutting costs to retain customers rather than passing on the cost of tariffs to consumers, Wall Street will be in for a big, unwelcome surprise in earnings since the current analyst consensus looks for operating margins to continue to climb in 2025 and 2026. 2025 is sure to come with volatility and uncertainty until we have a better idea of how high and far reaching the tariffs will be, and how companies will respond to them.
Adding ServiceNow to Picks and AI Phase 2 Special Report
I will be adding shares of ServiceNow to my 12-18 month Jubak’s Picks Portfolio tomorrow June 27.
Live Market Report (20 minute delay)
Saturday Night Quarterback says, For the week ahead expect…
The Federal Reserve will cut its benchmark interest rate at the Wednesday, September 8, meting off its Open Market Committee. It will be the first in a series of cuts that is likely to include 3 cuts in 2024 (at the September, November and December Fed meetings. The odds of a rate cut are a solid 100%. But there is high drama about the size of the initial cut to the Fed’s benchmark interest rate, now at a target range of 5.25% to 5.50%.
Consumer sentiment points to healthy spending; lower inflation fears
U.S. consumer sentiment rose to a four-month high in early September. The sentiment index from the University of Michigan increased to 69 from August’s 67.9, preliminary figures showed Friday. The median estimate in Bloomberg’s survey of economists called for a reading of 68.5. The biggest contributors to the improved sentiment reading were the tamest short-term inflation expectations since the end of 2020 and anticipation of a drop in borrowing costs as the Federal Reserve begins to cut interest rates.
Weak Chinese economy takes toll on copper demand, prices–wait to buy SCCO
China’s copper imports in August dropped by 12.3% from the previous year, preliminary official Chinese customs data showed on Tuesday, September 10. It’s yet another sign that the slowdown in Chinese economy is rippling out into the global economy.
All-items CPI inflation falls; core inflation above expectations
Definitely a mixed bag in the Consumer Price Index inflation report for August released today. I think the mixed results lower the odds of an aggressive 50 basis point interest rate cut at next week’s Federal Reserve meeting. But they keep the odds of a cut–most likely 25 basis points–at 100%.
Lithium stocks jump on reports of possible cut in Chinese supply
In a report today, September 11, analysts at UBS reported the potential suspension by Chinese electric vehicle battery maker Contemporary Amperex Technology (CATL) of production at its massive lepidolite lithium mine in eastern China. The suspension would amount to an 8%, or roughly 5,000-6,000 metric tons, reduction of China’s monthly lithium carbonate equivalent production. And lithium stocks, depressed by low prices as a result of oversupply in the lithium market, were off to he races today.
Even long-term China bulls are throwing in the towel on Chinese stocks
With Chinese stocks looking at an unprecedented fourth consecutive losing year, even some of Wall Street’s most conspicuous China bulls are throwing in the towel.
Over the past two weeks, long-standing China bulls UBS Global Wealth Management, Nomura Holdings, and JPMorgan Chase have all downgraded the country’s stocks. And there’s a growing consensus that China will fail to meet its economic growth target of around 5% this year. The money NOT flowing into China has made this a good year for stocks in India, Japan, and Taiwan.
Apple loses its appeal of $14 billion EU tax judgment
Apple (AAPL) today lost its court fight over a €13 billion ($14.4 billion) Irish tax bill. The European Union’s Court of Justice in Luxembourg backed a landmark 2016 decision that Ireland broke state-aid law by giving Apple an unfair advantage by awarding the company a lower tax bill. Apple will now be forced to pay $14 billion in back taxes.
Congress faces another shut down deadline on September 30
Congress returned to Washington today facing a September 30 deadline to pass legislation to keep the government open after the last stop-gap funding measure expires on September 30, the end of the 20214 fiscal year. The consensus view seems to be that there’s little to worry about and that Congress will, of course, cobble together another extension so close to the Presidential election. But we are talking about Congress, remember. It’s never a good idea to completely discount an act of astounding stupidity from Capitol Hill.
Saturday Night Quarterback says, For the week ahead expect…
There’s a good possibility of an AI “nothing-burger” from Apple (AAPL) on Monday, September 9, when the company rolls out its latest iPhones. Which are supposed to mark Apple’s advent as a serious smartphone AI player. All indications are, however, that Apple’s AI features on the iPhone will be distinctly underwhelming. And that’s a potential problem for the stock-up 15.08% for 2024 and ahead 13.67% for the last three months as of the close on September 6.
Jobs number weak enough to raise fears for the economy but not weak enough to cement 50 basis point cut on September 18
Today’s employment t report from the Bureau of Labor Statistics was the worst of both worlds. The increase in jobs of just 142,000 in August, coupled with downward revisions from June and July was enough to raise fears that the economy is stalling. And that the Federal Reserve had waited too long to cut interest rates. The median forecast in a Bloomberg survey of forecasters called for 165,000 new jobs win the month. But the employment number, which left the three-month average of new jobs created at the lowest since mid-2020, wasn’t bad enough to convince traders and investors that the Fed would cut interest rates by 50 basis points at its September 18 meeting.
Adding Kenvue (KVUE) to my Dividend Portfolio
Kenvue (KVUEO) isn’t exactly new. As a stand-alone stock, Kenvue dates back only to May 2023, but the company is a spin off of Johnson & Johnson’s (JNJ) consumer division. The owner of household consumer names that include Tylenol, Nicorette, Listerine, and Zyrtec, Kenvue is the world’s largest pure-play consumer health company by sales. The stock closed on September 5 with a yield of 3.64%. Morningstar calculates that the shares are 16% undervalued and puts a $26 target price on the shares. The stock closed at $22.51 on September 5. I’m adding the stock to my Dividend Portfolio tomorrow. With the Federal Reserve extremely like to begin cutting interest rates at its September 18 meeting, a lot of investors are looking for higher yield with slid safety. I think Kenvue offers exactly that combination.
JOLTS survey shows job openings drop to lower level since 2021
U.S. job openings fell in July to the lowest since the start of 2021 and layoffs rose, according to the Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS).
August deja vu? Bank of Japan says it will raise rates; U.S. stocks tumble
Coincidence? On Tuesday September 3 Bank of Japan Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates if inflation continues in Japan. And on Tuesday U.S. stocks plunged. Sure seems like a replay of the August rout when U.S. markets fell as the Bank od Japan raised interest rates, the yen gained, and traders looked to close speculative yen carry trade bets by selling dollar-denominated assets in order to pay back yen loans that threatened to get more expensive with a rising Japanese currency.
Nvidia drops another 9.5% on the day
Yesterday the DOJ sent subpoenas to Nvidia Corp. and other companies seeking evidence that the chipmaker violated antitrust laws. The DOJ, which had previously delivered questionnaires to companies, is now sending legally binding subpoenas that require recipients to provide information. That takes the government a step closer to launching a formal complaint.
Saturday Night Quarterbacks says (on Labor Day), For the week ahead expect…
the next big jobs report, the Employment Situation from the Bureau of Labor Statistics for August will hit the wires before the stock market opens on Friday, September 6.
Has the 100% certainty among investors and traders that the Federal Reserve will cut interest rates at its September 18 meeting drained all of the drama out of the August jobs report?
The last inflation report before the Fed meets leaves a September rate cut locked in
Today August 30 the Personal Consumption Expenditures index, the Federal Reserve’s preferred measure of inflation, showed core prices rose by just 0.2% in June. On a three-month annualized basis, core inflation, which doesn’t include volatile food and energy prices, climbed at a 1.7% rate, the Bureau of Economic Analysis reported. That’s the slowest rate of increase this year.
Buying more Nvidia on the best dip I think we’ll get
I was hoping that Nvidia (NVDA) would take a bigger dip on its “disappointing” earnings news last week. But a 7% or so drop looks like the best we’ll get. And I certainly want to own these shares before the revenue from the new Blackwell chips kicks in during 2025. I already own these shares in my long-term 50 Stocks Portfolio. Today I’m adding them to my 12-18 month Jubak Picks Portfolio. The bad news out of Nvidia last week in its August 28 earnings report?
Looking backward: In Q2 the economy did better than we thought
The U.S. economy grew at a stronger pace in the second quarter than initially reported. Gross domestic product, GDP, rose at a 3% annualized rate during the April-June quarter, up from the previous estimate of 2.8%, the Bureau of Economic Analysis reported Thursday, August 29.
The big thing to watch for in today’s Nvidia after-the-close earnings report: Blackwell delays
A report Saturday said one of Nvidia’s next generation chips will be delayed by a just-discovered design flaw. Tech news site The Information, citing a couple of industry sources, said volume shipments of the Blackwell B200 chip would be delayed some three months.
This market has an AI problem–AI companies aren’t making money
Remember the good old days–say, 2023–when all you had to do was slap AI in the name of a company and the stock would soar? I kept waiting for AI Burgers made from AI cows, or AI Shoes, which used AI machine learning algorithms to tell you what size shoe you needed. This investor embrace of all things AI led to the fear that there was an AI-stock market bubble that would send the entire stock market into a very painful bear market when it broke. The appetite for AI stocks is still huge–witness the rebound in Nvidia (NVDA) shares that added $400 billion to the stock’s market cap in a four-day recovery from the “sky-is-falling, we’re-headed-to-a-recession stock market retreat. But this stock market still has a big AI problem. We will find out how big when Nvidia reports earnings after the close tomorrow, August 28. Here’s the problem: Most AI companies aren’t making money.
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