Darren415
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The September CPI arrives hotter than expected. (0:15) Jobless claims hit highest level in more than a year. (1:20) Apple and Amazon team up on streaming. (4:25)
This is an abridged transcript of the podcast.
After a week of little macro data to swing stocks, today’s numbers left traders still in limbo.
Retail inflation came in hotter than anticipated, but with a much-hoped-for decline in shelter costs. But a spike in claims for unemployment benefits put the health of the labor market back in play.
The headline September CPI rose 0.2% on the month, a little higher than the 0.1% expected. The annual dipped to 2.4%, slightly above the expected drop to 2.3%.
The index saw a broad rise of prices, with food up 0.4%. But while shelter also rose, up 0.2%, that was down from the 0.5% jump in August. Combined, the two indexes contributed more than 75% of the monthly all-items increase.
Core CPI, excluding food and energy, rose 0.3%, higher than the 0.2% monthly rise forecast. The annual rate was expected to stay at 3.2% but ticked up to 3.3%.
Wells Fargo economists say the numbers are consistent with their view that while “the overall trend in core inflation remains lower, further improvement is likely to be slower-going.”
Meanwhile, weekly initial jobless claims jumped to 258,000 from 225,000 the week before, well ahead of the 231,000 consensus.
Pantheon Macro economist Oliver Allen says the rise to the highest level in more than a year “can be mostly put down to disruption caused by Hurricane Helene, which made landfall late on September 26. Ongoing furloughs and strikes at Boeing have probably played a role too.”
What does that mean for a data-dependent Fed? The inflation figures pushed the odds of no change at the November rates meeting above 10%. And chances of a 50 basis points cut look DOA now.
Skyler Weinand, chief investment officer at Regan Capital, says: "Before last Friday's strong jobs report, the market was pricing in four cuts this year and more than eight over the next year. Since then, the market has become more aligned with the Fed's thinking and is now pricing in two cuts this year and five over the next year. The Fed lowering rates 4-5 times over the next year will be healthy and productive towards steepening the yield curve and bolstering asset prices."
"Only a rise towards 4% inflation or a few hot inflation prints in a row would alter the Fed’s course of continued rate cuts over the next year."
Among active stocks today. Delta Air Lines (DAL) reported quarterly revenue of $14.6 billion vs. $13.9 billion consensus and earnings per share of $1.50 vs. $1.55 expected.
Delta CEO Ed Bastian says he anticipates “seeing a little choppiness around the election, which we’ve seen in past national elections."
"Consumers will, I think, take a little bit of pause in making investment decisions, whether it's discretionary or other things. I think you’re going to hear other industries talking about that as well."
Domino's Pizza (DPZ) fell slightly short of revenue estimates and set cautious guidance. The company said revenue increased 4.9% to $1.08 billion in the quarter, primarily due to higher supply chain, U.S. franchise advertising, and U.S. franchise royalties and fees revenues.
Looking ahead, Domino's expects about 6% annual global retail sales growth in 2024, approximately 8% annual income from operations growth, and global net store growth of 800 to 850.
Former Pfizer (PFE) CEO Ian Read and CFO Frank D'Amelio have left an activist campaign against the company that hedge fund Starboard Value started, despite initially pledging their support for the effort.
Their exit from the campaign marks the latest twist in Starboard's activist drive, which reportedly launched early this month following the investor's roughly $1 billion stake in Pfizer with the support of Read and D'Amelio. Starboard Value alleged that people within Pfizer and/or company representatives threatened Read and D'Amelio with possible legal action unless they publicly endorse current CEO Albert Bourla.
Bernstein downgraded PayPal (PYPL) to Market Perform from Outperform, but raised the price target to $80 from $75.
Analyst Harshita Rawat said: "While product velocity is improving, we remain worried about competitive pressures on the cash-cow core button, which often is still richly priced vs. peers."
In other news of note. Amazon (AMZN) and Apple (AAPL) struck a deal that will bring Apple TV+ under Amazon's Prime Video streaming service later this month for $9.99 per month in the U.S.
The deal is seen as a strategic effort by both companies to expand their reach, especially when the iPhone maker is lagging behind Netflix (NFLX), Disney+ (DIS), and Prime Video.
Apple TV+ joins Prime Video’s add-on subscription options in the U.S., which include Warner Bros. (WBD) Discovery’s Max, Paramount Global’s (PARA) Paramount+, Sony’s (SONY) Crunchyroll, and Amazon-owned MGM+.
This development marks a notable shift for Apple (AAPL), which has traditionally bundled Apple TV+ with its other services like Apple Music and Apple Arcade.
The subscribers will gain access to Apple's (AAPL) popular original collection, including acclaimed series like Ted Lasso, The Morning Show, and Severance, as well as live sports events such as Major League Soccer matches.
And in the Wall Street Research Corner. Piper Sandler released its 48th semi-annual Taking Stock With Teens survey. The survey took in more than 63 million data points to summarize teen preferences and spending trends. Teens self-reported spending at $2,361, a 4% increase from the spring.
Among highlights: Nike (NKE) holds strong as the number one brand for all teens in both apparel and footwear.
Core beauty spending reached the highest levels seen since 2018 at $342, which could be a positive for Ulta Beauty (ULTA) and e.l.f. Beauty (ELF).
TikTok was the favorite social app, while Instagram (META) came in second and Snapchat (SNAP) ranked third. As expected, Netflix (NFLX) is the top choice for teens when it relates to daily video consumption. As for tech trends overall, Piper Sandler sees positives for Meta Platforms (META), Roblox (RBLX), Uber (UBER), Pinterest (PINS), and DoorDash (DASH).
Chick-fil-A continues to be the preferred chain restaurant among teens, followed by McDonald's (MCD) and Chipotle (CMG). Monster Beverage (MNST), Red Bull, Celsius (CELH), and Alani Nu held down the top four spots for beverages, collectively gaining mindshare over Starbucks (SBUX).
Campbell Soup's (CPB) Goldfish brand was still the top preferred snack.
