December 9, 2024

Stock Sparky

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S&P 500, Nasdaq slide after key Fed inflation gauge shows faltering progress

S&P 500, Nasdaq slide after key Fed inflation gauge shows faltering progress

US stocks dipped Wednesday as investors digested fresh data that showed inflation made little progress toward the Fed’s 2% target in October.

After clinching record highs on Tuesday, the S&P 500 (^GSPC) fell about 0.4%, while the Dow Jones Industrial Average (^DJI) was off about 0.3%. The tech-heavy Nasdaq Composite (^IXIC) was down roughly 0.6%.

The mood is muted in the wind-down to the Thanksgiving holiday, which will see markets shut on Thursday and close early on Friday. But the Fed is taking the fore again after being eclipsed somewhat by the debate over the impact of President-elect Donald Trump’s tariff plans and Cabinet choices.

The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases were flat in October from the prior month, raising questions over whether progress in getting to the central bank’s 2% goal has stalled.

The core Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 0.3% from the prior month during October, in line with Wall Street’s expectations for 0.3% and the reading from September. Over the prior year, core prices rose 2.8%, in line with Wall Street’s expectations but above the 2.7% seen in September.

Traders currently see a roughly 34% chance the Fed holds rates steady at that meeting, up from about 24% a month before, per the CME FedWatch Tool.

Also out Wednesday, the second estimate of third quarter GDP was unchanged, showing the US economy grew at an annualized rate of 2.8% in the period. Meanwhile, weekly jobless claims continued to move lower with 213,000 unemployment claims filed in the week ending Nov. 23, down from 215,000 the week prior.

Trump on Tuesday tapped Jamieson Greer — a veteran of his first term — as US trade representative. Given Greer was heavily involved in Trump’s original China tariffs, Wall Street is assessing what his role could mean for the big new tariffs promised for the top US trading partners.

On the corporate front, Dell (DELL) shares sank over 12% after quarterly revenue fell short amid flagging PC demand. Peer HP’s (HPQ) stock also fell post-earnings, also down more than 11%.

LIVE COVERAGE IS OVER 14 updates

  • Strong years for stocks often bring strong Decembers too

    While a holiday-shortened market day on Friday still separates investors from a fresh month of trading, December is nearly here.

    And Carson group chief markets strategist Ryan Detrick reminds us that in markets, strength often begets strength. Dating back to 1985, when the S&P 500 rallied more than 20% entering December, the benchmark index has risen further 9 of 10 times. In more recent history, since 2000, the index has risen in every December after the strong rally to start the year.

  •  Josh Schafer

    Bitcoin shoots higher, trading above $97,000

    The rally in the world’s largest cryptocurrency returned on Wednesday afternoon. After surging near $100,000 last week, bitcoin (BTC-USD) had been quieter this week.

    But late Wednesday, bitcoin quickly moved higher from a low of $91,804 to a high of $97,357. While traditional markets will be closed for the Thanksgiving holiday on Thursday, bitcoin’s $100,000 watch will roll on.

  •  Josh Schafer

    Mortgage rates tick lower to 6.81%

    Mortgage rates edged lower as financial markets reacted to President-elect Donald Trump’s slate of Cabinet picks.

    Yahoo Finance’s Claire Boston reports:

    The average 30-year mortgage rate dropped slightly to 6.81% in the week from 6.84% a week earlier. Interest rates have been hovering in the 6.8% area for four weeks straight.

    The 15-year mortgage rate rose to 6.1%, compared with 6.02% a week prior.

    “Rates have been relatively flat over the last few weeks as the market waits for more clarity on specific economic policies,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

    Read more here.

  •  Josh Schafer

    How Trump’s tariffs might warp two crucial readings on the health of the US economy

    Yahoo Finance’s Hamza Shaban reports:

    President-elect Donald Trump has been quick to promise new tariffs on imports from China, Mexico, and Canada.

    But his threats, if carried out, potentially threaten to upset inflation and investment and disrupt the broader economic cycle.

    New duties on imports could reverse some of the hard-won progress on inflation that the Federal Reserve is still struggling to maintain. Meanwhile, making it more expensive to import goods from the nation’s neighbors to the north and south may also widen the trade deficit, weighing on investments elsewhere.

    Read more here.

  •  Josh Schafer

    Key Fed inflation gauge shows PCE ‘going sideways’

    Recent inflation prints have shown little progress toward the Federal Reserve’s 2% target.

    The latest reading of the Federal Reserve’s preferred inflation measure, the “core” Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, showed prices rose 0.3% from the prior month during October, in line with the reading from the September.

    Over the prior year, core prices rose 2.8%, above the 2.7% seen the year prior. And as our chart below shows, the short-term trend hasn’t painted a better picture either. Over the past three months, core PCE has risen at annualized rate of 2.8%, well above the Fed’s 2% goal.

    While key inflation readings from the Consumer Price Index (CPI) and Producer Price Index (PPI) for November loom before the Fed meets again in mid-December, the current inflation data has some economists questioning if the central bank will pause interest rate cuts soon.

    “Core PCE has been going sideways for the last couple of months,” Paul Gruenwald, S&P Global Ratings global chief economist, told Yahoo Finance. “If you think the Fed is on a declining rate path, which we do, that’s probably leaning toward the pause [cutting interest rates] camp.”

    Gruenwald added that the Fed won’t be in a hurry to cut rates unless it sees a “more convincing decline” in core PCE.

  •  Josh Schafer

    Nvidia leads Nasdaq lower

    Nvidia (NVDA) stock slipped more than 3% on Wednesday, weighing on the Nasdaq 100 (^NDX). Shares in the AI chip giant are off about 9% in the past five days as investors have digested the company’s latest quarterly earnings release.

    Other tech stocks were lower on Wednesday, including Dell (DELL). The company’s stock fell more than 10% following its quarterly earnings release. In a call with analysts, Dell COO Jeffrey Clarke said AI spending “will not be linear.”

  • Alexandra Canal

    A ‘low-hire, low-fire’ labor market

    Fewer Americans are filing for unemployment benefits. But that doesn’t mean companies are hiring.

    New data released by the Department of Labor on Wednesday showed that jobless claims hit a seven-month low in the week ending Nov. 23, with 213,000 initial claims filed. That’s down from the 215,000 the week prior and below the 215,000 economists had expected.

    “We are in a ‘low-hire, low-fire’ environment,” Bank of America’s lead economist Aditya Bhave said in a note on Tuesday. “In the spring of 2022, there were two open jobs for every unemployed person. Now that figure is just a little more than one. In other words, there aren’t as many opportunities out there.”

    Recent data has supported that trend, confirming a gradual slowdown of the labor market. Job openings for the month of September fell to their lowest level since January 2021 while the quits rate, a sign of confidence among workers, also dropped to 1.9% from a revised 2% in August.

    In one bright spot, layoffs have remained low with the unemployment rate still hovering at a healthy 4.1%.

    “A spike in layoffs would create a negative feedback loop between consumption and the labor market,” Bank of America’s Bhave said. “For now though, the layoff rate is below pre-pandemic levels, consistent with the low level of unemployment insurance claims.”

    “So while the labor market has moderated,” Bhave said, “It hasn’t rolled over!”

    Read more here.

  • Laura Bratton

    Dell stock sinks as executive warns AI spending ‘will not be linear’

    Dell Technologies (DELL) shares dropped more than 13% early Wednesday after the company took a cautious approach to its forecast for investors while warning that AI growth “will not be linear.”

    “AI is a robust opportunity … and interest in our portfolio is an all-time high with no signs of slowing down,” Dell COO Jeffrey Clarke said during a call with investors Tuesday night following the company’s earnings report for the October period. “That said, this business will not be linear, especially as customers navigate an underlying silicon road map that is changing.”

    Dell’s AI server revenues fell 9% in the third quarter from the prior period.

    That nonlinear growth, coupled with a slower-than-expected recovery in the PC market, led the company to drop the midpoint of its guidance range for annual revenue to $96.1 billion from $97 billion since last quarter.

    Still, Dell executives and analysts pointed to pent-up demand for Dell’s AI servers using Nvidia’s (NVDA) latest Blackwell AI chips.

    Read more about Dell’s most recent earnings results and its role in the AI market here.

  •  Josh Schafer

    Key inflation gauge shows price increases stayed flat from prior month

    The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases were flat in October from the prior month, raising questions over whether progress in getting to the central bank’s 2% goal has stalled.

    The core Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 0.3% from the prior month during October, in line with Wall Street’s expectations for 0.3% and the reading from September.

    Over the prior year, core prices rose 2.8%, in line with Wall Street’s expectations and above the 2.7% seen in September. On a yearly basis, overall PCE increased 2.3%, a pickup from the 2.1% seen in September.

    Read more here.

  •  Josh Schafer

    JPMorgan issues S&P target of 6,500 for 2025 as ‘US exceptionalism’ rolls on

    Another Wall Street strategist sees a solid backdrop for the US economy and a broadening corporate earnings picture driving stocks higher in the year ahead.

    JPMorgan’s global equity strategy team led by Dubravko Lakos-Bujas sees the S&P 500 (^GSPC) hitting 6,500 by the end of 2025, joining the likes of Goldman Sachs and Morgan Stanley, who issued the same target. The target represents about an 8% increase from current levels.

    Lakos-Bujas wrote that continued “US exceptionalism,” continued earnings growth, and interest rate cuts from the Federal Reserve will be a tailwind for stocks in the year ahead. He argued the US is likely to remain the “global growth engine with the business cycle in expansion, healthy labor market, broadening of AI-related capital spending, and prospect of robust capital market and deal activity.”

    He added, “heightened geopolitical uncertainty and the evolving policy agenda are introducing unusual complexity to the outlook, but opportunities are likely to outweigh risks. The benefit of deregulation and a more business-friendly environment are likely underestimated along with potential for unlocking productivity gains and capital deployment.”

  •  Josh Schafer

    Stocks waver ahead of inflation print

    US stocks paused near record highs on Wednesday as investors waited for a reading on the Federal Reserve’s favorite inflation gauge to provide clues to the path of interest rates.

    After clinching record highs on Tuesday, the S&P 500 (^GSPC) fell about 0.2% at the open while the Dow Jones Industrial Average (^DJI) rose 0.1%. The tech-heavy Nasdaq Composite (^IXIC) was down about 0.3%.

    The October print of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, is due for release on Wednesday morning at 10 a.m. ET. The focus is on whether inflation has stalled.

    Economists expect annual “core” PCE — which excludes food and energy — to have clocked in at 2.8% in October, up from the 2.7% seen in September.

  •  Josh Schafer

    Weekly jobless claims fall, GDP steady

    Weekly jobless claims rose less than expected last week, and hit a seven-month low, as the impact of labor strikes and severe weather continued to abate.

    New data from the Department of Labor showed 213,000 initial jobless claims were filed in the week ending Nov. 23, down from the 215,000 the week prior and below the 215,000 economists had expected.

    Meanwhile, the number of continuing applications for unemployment benefits hit 1.9 million, up 9,000 from the week prior and the highest level since November 2021.

    Elsewhere in economic data, the second estimate of third quarter GDP came in unchanged, once again showing the US economy grew at annualized rate of 2.8%.

  • Jenny McCall

    Good morning. Here’s what’s happening today.

  • Brian Sozzi

    About those potential Trump tariffs

    Shares of automakers General Motors (GM) and Ford (F) were throttled on Tuesday following Trump’s tariff threats toward China, Mexico, and Canada.

    GM lost 9%, while Ford dropped 3% as both companies have a strong presence in Mexico.

    But automakers aren’t the only companies that stand to be hurt by tariffs, of course.

    Think computers and T-shirts!

    Here’s what HP Inc. (HPQ) CEO Enrique Lores and Abercrombie & Fitch (ANF) CEO Fran Horowitz told me on the tariff topic.

    Enrique Lores

    “Some of that [cost of potential tariffs] will have to go to consumers given what is the overall margin that we have in the categories. But again, we need to wait and see what the final tariffs are for us to define what the exact plan is going to be.”

    Fran Horowitz

    “When we understand truly what’s happening, we will have to make some adjustments, and we will adjust accordingly,It’s exactly what we did in 2018 when we had the same challenge. In 2024 we will not be receiving more than 5% or 6% of our US receipts from China. We’re taking a look at it country by country, but the agility that we’ve built into our supply chain is really what’s going to help us manage through this.”