Waiting For February Inflation Data

Last week was the worst week in the market since October and is being chalked up to profit-taking following its stellar run. Tipping the scales for that decision is the growing realization that while the Fed still expects to cut rates this year, the timing for the start of that process continues to slip. 

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The hope is this week’s February Consumer Price Index and Producer Price Index will help the market pin down that timing. If those figures surprise to the upside as their January reports did, it will reinforce not only the Fed’s measured pace to rate cuts but could mean it wants to see that much more data confirming a sustained move closer to the Fed’s 2% inflation target. Should rate cut expectations get pushed out to the middle or back half of 2H 2024, investors will begin to question 2H 2024 GDP and EPS forecasts more carefully.

  • Goldman Sachs (GS) now expects S&P 500 companies to repurchase $925 billion in 2024, up 13% year over year and higher than the initial forecast of 4% growth. The firm sees buyback usage rising another 16% in 2025 to $1.075 billion.

  • Linde plc (LIN) will become a component of the Nasdaq-100 Index (NDXreplacing Splunk (SPLK) in that index as well as in the Nasdaq-100 Ex-Tech Sector Index, and the Nasdaq-100 ESG Index before the market open on Monday, March 18.

 

Model Musings

Artificial Intelligence

“Meta’s development of a new AI model, designed to enhance video and user Feed recommendations, marks what could be a significant shift in the online commerce landscape. The new AI model could benefit advertisers by directing viewers to more relevant results, experts say. Meta’s progress unfolds amid a widespread industry effort to improve online search outcomes through the application of AI.” Read more here

Consumer Inflation Fighters

“As ongoing economic pressures shrink the middle class, retailers are being challenged to either cut prices and step up their deals and discounts or make a play for high-income consumers. Indeed, years of financial challenges are eating away at the middle class’s spending power. A PYMNTS Intelligence study from October found that middle-income consumers had seen their readily available savings in real terms plummet by 18% in the last year. Against this backdrop, middle-tier retailers are taking a hit.” Read more here

“These pricing trends likely explain why nearly 58% of today’s consumers across nearly every income level say they are cutting back on nonessential spending because of rising grocery costs. Nearly half of U.S. consumers earning north of $100,000 each year say they decrease nonessential spending whenever possible. Sixty-one percent of consumers earning less than $50,000 annually and nearly two-thirds of those earning between $50,000 and $100,000 each year do the same.” Read more here

 

Homebuilding & Materials

“The company also forecast a 2% to 3% drop in sales for the years ahead, as consumers step back from do-it-yourself (DIY) home repairs and remodeling projects amid higher inflation and a slowing real estate market… That meant a decrease in demand for big-ticket items for kitchen and bathroom projects, along with appliances and flooring.” Read more here


 

 


More By This Author:

Will The February Employment Report Support The Current Market Narrative?
Powell Says Fed Funds Rate At Its 'Peak' But...
Waiting On Powell's DC Testimony

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