August CPI Comes In Hotter Than Expected
In his Daily Market Notes report to investors, Louis Navellier wrote:
Shaking Off CPI
CPI came in slightly higher than forecast, stocks and bonds shake it off.
Higher energy prices bumped the inflation data higher, but that was information everyone knew was coming. Core CPI y-o-y came in at 4.3% as expected. After the initial volatility when the numbers rolled out the markets went from modestly lower to modestly higher.
There's been no change in the expectation that the Fed will not increase a week from today. If anything, the market seems to be relieved that the bonds are not trading down, as it's pretty clear that getting inflation down to the Fed's 2% target is going to be tough sledding.
The soft landing forecast will likely have to live with the higher for longer interest rates, unless the Fed moves off the 2% target. The challenge will be how long will the yield curve stay inverted if the likelihood of a Fed cut keeps getting pushed down the road.
Earnings is Key
For now, the key is earnings, as it should be. 2024 has double-digit earnings growth modeled and as long as that holds stocks should hold on to the very strong YTD gains.
Yesterday, Apple Inc (NASDAQ:AAPL) rolled out their new iPhone 15 models and new watches. Reviews have been tepid and the stock did not bounce off its recent pullback. Crude oil is higher today but the sector is modestly lower after a two-week surge higher. Regional banks are lower and have been all month. The higher for longer inverted yield curve hits them harder, as does a slow housing market, than the major banks and brings concerns about local lending.
Tomorrow we get PPI, retail sales, and jobless claims numbers, looking for more color on inflation trends and the strength of the consumer. As the day moves on, stocks are grinding higher despite slightly elevated interest rates.
We're almost halfway through September with minimal damage. The year remains bullish.
Coffee Beans: Spotted Spotless.
Another spotless giraffe has been discovered - this time, on a reserve in Namibia. The only other known living spotless giraffe was born at a zoo in Tennessee in late July. Source: NPR. See the full story here.