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đź“Š Inflation Cools, Fueling 94% Chance for a Fed Rate Cut
| From | Irving Wilkinson <[email protected]> |
| Subject | đź“Š Inflation Cools, Fueling 94% Chance for a Fed Rate Cut |
| Date | July 15, 2024 1:10 PM |
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Good morning,
The stock market managed to eke out some gains this week, but it wasn’t without its fair share of drama. We had some heavy-hitting economic data to digest, namely the June Consumer Price Index (CPI) and Producer Price Index (PPI).
Here’s the skinny:
* Total CPI actually deflated by 0.1% month-over-month, slowing the year-over-year growth to 3.0% from 3.3% in May.
* Core-CPI, which excludes food and energy, decelerated to 3.3% year-over-year from 3.4%.
* PPI was a bit of a mixed bag, with total PPI up 0.2% (versus an expected 0.1%) and Core PPI up 0.4% (versus an expected 0.1%).
The CPI report stole the show, fueling optimism about inflation and Fed policy. In fact, the Fed funds futures market is now pricing in a **94.4% probability of a rate cut at the September FOMC meeting,** up from 77.7% just a week ago. Talk about a shift in sentiment!
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Have a great week!
Irving Wilkinson, Editor
[AlphaBetaStock.com]([link removed])
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## **LAST WEEK’S MARKET OVERVIEW**
----------Treasury yields took a nosedive in response to the data, which provided some support for equities. The 10-year note yield fell eight basis points to 4.19%, while the 2-year note yield declined 14 basis points to 4.46%.
We also saw the kickoff of earnings season, with **JPMorgan Chase**, **Wells Fargo**, and **Citigroup** reporting results. Despite beating earnings estimates, their quarterly results were met with a less-than-enthusiastic response from the market.
**Fed Chair Powell** gave his semiannual monetary policy testimony, but it didn’t cause much of a stir. He did acknowledge that the “likely next direction” of policy will be a loosening, which is Fed-speak for “we’re probably done hiking rates for now.”One interesting trend I noticed was the rotation away from mega-cap stocks. The **Vanguard Mega Cap Growth ETF** actually declined 0.7% this week. It seems like investors are taking some profits off the table and moving into areas of the market that have lagged so far this year.
The **Russell 2000** was a big winner, jumping 6.0%, while the **S&P Mid Cap 400** gained 4.3%. The rate-sensitive real estate and utilities sectors also had a good showing, along with materials and industrials.
## **US Market Highlights**
1. The market is now pricing in 2-3 rate cuts by the end of 2024, up from 1-2 cuts expected just a month ago. This shift in expectations is largely due to the softer-than-expected inflation data.
2. Inflation unexpectedly declined 0.1% in June, bringing the annual inflation rate down to 3%, the lowest level in over three years. This is good news for consumers and could potentially lead to a more dovish Fed stance.
3. Consumer credit increased by $11 billion in May, slightly ahead of estimates. Revolving credit, which includes credit card debt, is now up to $1.35 trillion, a 6.3% increase year-over-year. This could be a sign that consumers are feeling more confident, or it could indicate that they’re stretching their budgets thin. It’s something I’ll be keeping a close eye on.
4. Money market funds hit a new record of $6.15 trillion. This suggests that investors are still seeking safety and higher yields in the short-term market.
5. **Costco** is hiking its membership fees for the first time since 2017. While this might ruffle some feathers, it’s worth noting that Costco’s membership retention rates are typically very high.
6. **Pfizer**Â is moving forward with a once-daily weight loss pill after seeing promising early-stage trial results. With analysts expecting the GLP-1 industry to be worth around $100 billion by the end of the decade, this could be a significant move for Pfizer.
## **Global Highlights**
1. The UK economy grew by 0.4% in May, continuing its rebound from the minor recession seen in Q1. This positive news sent the British pound surging to a four-month high against the U.S. dollar.
2. **Apple** is opening up its tap-and-go payments system to rivals in Europe, avoiding a potential €36 billion fine. This decision could shake up the mobile wallet market in Europe.
3. **Tesla** is hiking Model 3 prices in Europe due to tariffs on EVs imported from China. The price increase of €1,500 (about $1,622) will affect buyers in Germany, Netherlands, and Spain.
4. China’s inflation numbers missed expectations, rising just 0.2% from a year ago, while producer prices fell by 0.8%. This has caused some economists to be worried about the risk of deflation in China.
5. Saudi Arabia is flexing its financial muscles, threatening to sell its European debt holdings if G7 countries decide to use frozen Russian assets to fund Ukraine’s reconstruction.
6. France’s new leadership is proposing a 90% tax on income over €400,000. This is a bold move that could have significant implications for high earners in France.
7. **Dyson**Â announced it will cut around 1,000 jobs in the UK, citing increasingly fierce and competitive global markets.
8. **SoftBank** is continuing its push into AI, buying British AI chip company **Graphcore**. This follows their recent $1.1 billion investment in self-driving car startup **Wayve**.
----------
## Commodities & Crypto
----------View image: ([link removed])
Caption:
Oil prices are taking a breather despite positive global data and optimistic forecasts from OPEC. Brent is trading around $86, while WTI is hovering near $82.40. The divergence between OPEC’s demand growth forecasts and those of the International Energy Agency underscores the uncertainty in the energy markets.
View image: ([link removed])
Caption:
In the metals market, we’re seeing a split between industrial metals and precious metals. Copper retreated in London to $9,780, while gold celebrated the fall in US inflation, trading above $2,400 an ounce.
View image: ([link removed])
Caption:
Bitcoin has finally broken its losing streak, rebounding 3.16% this week to around $57,500. This rise can be partially attributed to new funds entering Bitcoin Spot ETFs, which recorded $737 million in positive net inflows in the US this week. Ethereum, Binance Coin, and Solana also saw gains.
----------
## Calendar
----------Next week, we’ll be shifting our focus to the second quarter earnings season. We’ll be hearing from several Dow 30 components, including **Goldman Sachs**, **UnitedHealth**, **Johnson & Johnson**, and **American Express**, as well as streaming giant **Netflix**.
We’ll also be getting some key economic data, including retail sales and industrial production reports. And don’t forget, we’ve got a packed schedule of Fed speakers just before the pre-monetary policy meeting blackout period.
* Tuesday, July 16: Retail Sales (MoM) (June)
* Thursday, July 18: Philadelphia Fed Manufacturing Index (July)
Here’s a quick rundown of some key earnings to watch:
* Monday: Goldman Sachs, BlackRock
* Tuesday: UnitedHealth, Bank of America, Morgan Stanley
* Wednesday: Johnson & Johnson, U.S. Bancorp, United Airlines
* Thursday: Netflix, Abbott Laboratories, Taiwan Semiconductor Manufacturing
* Friday: American Express, Halliburton, Travelers
As we wrap up, I want to leave you with a little-known fact about investing: Did you know that the stock market has historically gone up about 70% of the time on an annual basis? That’s why I always tell my clients that time in the market beats timing the market. Remember, investing is a marathon, not a sprint. Stay informed, stay diversified, and, most importantly, stay patient. Until next week, this is Irving Wilkinson signing off. Happy investing!
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Good morning,
The stock market managed to eke out some gains this week, but it wasn’t without its fair share of drama. We had some heavy-hitting economic data to digest, namely the June Consumer Price Index (CPI) and Producer Price Index (PPI).
Here’s the skinny:
* Total CPI actually deflated by 0.1% month-over-month, slowing the year-over-year growth to 3.0% from 3.3% in May.
* Core-CPI, which excludes food and energy, decelerated to 3.3% year-over-year from 3.4%.
* PPI was a bit of a mixed bag, with total PPI up 0.2% (versus an expected 0.1%) and Core PPI up 0.4% (versus an expected 0.1%).
The CPI report stole the show, fueling optimism about inflation and Fed policy. In fact, the Fed funds futures market is now pricing in a **94.4% probability of a rate cut at the September FOMC meeting,** up from 77.7% just a week ago. Talk about a shift in sentiment!
View image: ([link removed])
Caption:
Have a great week!
Irving Wilkinson, Editor
[AlphaBetaStock.com]([link removed])
----------
## **Advertisement**
----------### For Those Who Seek Unbiased News.
View image: ([link removed])
Follow image link: ([link removed])
Caption:
Be informed with [1440]([link removed])! Join 3.5 million readers who enjoy our daily, factual news updates. We compile insights from over 100 sources, offering a comprehensive look at politics, global events, business, and culture in just 5 minutes. Free from bias and political spin, get your news straight.
[Join for free today!]([link removed])
----------
## **LAST WEEK’S MARKET OVERVIEW**
----------Treasury yields took a nosedive in response to the data, which provided some support for equities. The 10-year note yield fell eight basis points to 4.19%, while the 2-year note yield declined 14 basis points to 4.46%.
We also saw the kickoff of earnings season, with **JPMorgan Chase**, **Wells Fargo**, and **Citigroup** reporting results. Despite beating earnings estimates, their quarterly results were met with a less-than-enthusiastic response from the market.
**Fed Chair Powell** gave his semiannual monetary policy testimony, but it didn’t cause much of a stir. He did acknowledge that the “likely next direction” of policy will be a loosening, which is Fed-speak for “we’re probably done hiking rates for now.”One interesting trend I noticed was the rotation away from mega-cap stocks. The **Vanguard Mega Cap Growth ETF** actually declined 0.7% this week. It seems like investors are taking some profits off the table and moving into areas of the market that have lagged so far this year.
The **Russell 2000** was a big winner, jumping 6.0%, while the **S&P Mid Cap 400** gained 4.3%. The rate-sensitive real estate and utilities sectors also had a good showing, along with materials and industrials.
## **US Market Highlights**
1. The market is now pricing in 2-3 rate cuts by the end of 2024, up from 1-2 cuts expected just a month ago. This shift in expectations is largely due to the softer-than-expected inflation data.
2. Inflation unexpectedly declined 0.1% in June, bringing the annual inflation rate down to 3%, the lowest level in over three years. This is good news for consumers and could potentially lead to a more dovish Fed stance.
3. Consumer credit increased by $11 billion in May, slightly ahead of estimates. Revolving credit, which includes credit card debt, is now up to $1.35 trillion, a 6.3% increase year-over-year. This could be a sign that consumers are feeling more confident, or it could indicate that they’re stretching their budgets thin. It’s something I’ll be keeping a close eye on.
4. Money market funds hit a new record of $6.15 trillion. This suggests that investors are still seeking safety and higher yields in the short-term market.
5. **Costco** is hiking its membership fees for the first time since 2017. While this might ruffle some feathers, it’s worth noting that Costco’s membership retention rates are typically very high.
6. **Pfizer**Â is moving forward with a once-daily weight loss pill after seeing promising early-stage trial results. With analysts expecting the GLP-1 industry to be worth around $100 billion by the end of the decade, this could be a significant move for Pfizer.
## **Global Highlights**
1. The UK economy grew by 0.4% in May, continuing its rebound from the minor recession seen in Q1. This positive news sent the British pound surging to a four-month high against the U.S. dollar.
2. **Apple** is opening up its tap-and-go payments system to rivals in Europe, avoiding a potential €36 billion fine. This decision could shake up the mobile wallet market in Europe.
3. **Tesla** is hiking Model 3 prices in Europe due to tariffs on EVs imported from China. The price increase of €1,500 (about $1,622) will affect buyers in Germany, Netherlands, and Spain.
4. China’s inflation numbers missed expectations, rising just 0.2% from a year ago, while producer prices fell by 0.8%. This has caused some economists to be worried about the risk of deflation in China.
5. Saudi Arabia is flexing its financial muscles, threatening to sell its European debt holdings if G7 countries decide to use frozen Russian assets to fund Ukraine’s reconstruction.
6. France’s new leadership is proposing a 90% tax on income over €400,000. This is a bold move that could have significant implications for high earners in France.
7. **Dyson**Â announced it will cut around 1,000 jobs in the UK, citing increasingly fierce and competitive global markets.
8. **SoftBank** is continuing its push into AI, buying British AI chip company **Graphcore**. This follows their recent $1.1 billion investment in self-driving car startup **Wayve**.
----------
## Commodities & Crypto
----------View image: ([link removed])
Caption:
Oil prices are taking a breather despite positive global data and optimistic forecasts from OPEC. Brent is trading around $86, while WTI is hovering near $82.40. The divergence between OPEC’s demand growth forecasts and those of the International Energy Agency underscores the uncertainty in the energy markets.
View image: ([link removed])
Caption:
In the metals market, we’re seeing a split between industrial metals and precious metals. Copper retreated in London to $9,780, while gold celebrated the fall in US inflation, trading above $2,400 an ounce.
View image: ([link removed])
Caption:
Bitcoin has finally broken its losing streak, rebounding 3.16% this week to around $57,500. This rise can be partially attributed to new funds entering Bitcoin Spot ETFs, which recorded $737 million in positive net inflows in the US this week. Ethereum, Binance Coin, and Solana also saw gains.
----------
## Calendar
----------Next week, we’ll be shifting our focus to the second quarter earnings season. We’ll be hearing from several Dow 30 components, including **Goldman Sachs**, **UnitedHealth**, **Johnson & Johnson**, and **American Express**, as well as streaming giant **Netflix**.
We’ll also be getting some key economic data, including retail sales and industrial production reports. And don’t forget, we’ve got a packed schedule of Fed speakers just before the pre-monetary policy meeting blackout period.
* Tuesday, July 16: Retail Sales (MoM) (June)
* Thursday, July 18: Philadelphia Fed Manufacturing Index (July)
Here’s a quick rundown of some key earnings to watch:
* Monday: Goldman Sachs, BlackRock
* Tuesday: UnitedHealth, Bank of America, Morgan Stanley
* Wednesday: Johnson & Johnson, U.S. Bancorp, United Airlines
* Thursday: Netflix, Abbott Laboratories, Taiwan Semiconductor Manufacturing
* Friday: American Express, Halliburton, Travelers
As we wrap up, I want to leave you with a little-known fact about investing: Did you know that the stock market has historically gone up about 70% of the time on an annual basis? That’s why I always tell my clients that time in the market beats timing the market. Remember, investing is a marathon, not a sprint. Stay informed, stay diversified, and, most importantly, stay patient. Until next week, this is Irving Wilkinson signing off. Happy investing!
———————————————————————————
Share AlphaBetaStock.com Market Cheat Sheet
You currently have <strong>0</strong> referrals.
Or copy and paste this link to others: [link removed]
———————————————————————————
Copyright © 2023 [AlphaBetaStock.com]([link removed]) All Rights Reserved | [AlphaBetaStock.com]([link removed]) is a financial news publisher that does not offer any personal financial advice or advocate the sale or purchasing of any investment/security. Please contact us for any errors in stories by [clicking here]([link removed]). For more information, please read our full [disclaimer.]([link removed])
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