Technology is back this week as Advanced Micro Devices unveiled its latest artificial intelligence chip and Alphabet unveiled its latest AI model. Friday’s gains pushed the S&P 500 to a new 2023 high, while the market composite index, Dow and Nasdaq all extended their weekly winning streaks to six straight. Last week, we saw what appears to be the beginning of a rotation out of the tech industry. But we weren’t convinced it was sustainable. It could have been a fake head after all. The latest information from AMD and Alphabet certainly helped the Nasdaq regain leadership status, but we also got some important economic reports ahead of Friday’s November jobs report, so the Federal Reserve is on the sidelines. There’s no reason to do that. October factory order statistics released last Monday were slightly lower than expected. On Tuesday, ISM Services’ results for November were slightly ahead, while job openings in October fell to their lowest level in more than two years. The November ADP jobs report released on Wednesday was a lower-than-expected 103,000 jobs. Adding to the weak headlines about hiring at U.S. companies, annual payrolls rose 5.6%, the smallest increase since September 2021. We always caution against reading too much into ADP data as a means of predicting government employment. The report, released Friday, showed nonfarm payrolls growth of 199,000 jobs in November, slightly stronger than expected. The increase in October was unchanged at 150,000, but the total for September was revised down by 35,000 to 262,000. Additionally, the unemployment rate fell to 3.7% in November, although it was expected to remain flat. But perhaps the most important indicator as far as the market is concerned revealed that wage inflation is in line with forecasts of 4% growth. Putting all this together, it is true that the economic picture is mixed, with some regions proving more resilient than others. But we think this is something of a Goldilocks for stocks as we head into the end of the year. The labor market is holding up even as the economy slows. This is exactly what a soft landing should be, and it supports the idea that the Fed should continue policy, especially given the lag effects of monetary policy changes. Markets remain focused on 11 rate hikes from March 2022 to July 2023 to combat inflation, raising the overnight federal funds bank lending rate from near zero percent to its current target range of 0.5 percent. After that, I think the Fed’s next step will be to cut interest rates sometime next year. 5.25% to 5.50%. Looking ahead, it’s all about profits and the economy. The Federal Reserve will hold its last regular meetings of the year on Tuesday and Wednesday. Important inflation data will also be released on both days. Meanwhile, on Monday and Thursday, we receive earnings reports from two of the club’s portfolio companies. Inflation and the Fed: Next week’s key economic report will be the November Consumer Price Index (CPI), which is expected to be released before the market opens on Tuesday and at the start of the Fed’s December meeting. While not the Fed’s preferred measure of inflation, core CPI is the second-best measure we know of as a direct reading of prices. As of Friday, core CPI excluding the food and energy sectors was expected to rise 4% year over year, which would be on par with October’s forecast. As we’ve noted previously, unless the indicators are weak enough to raise concerns that a hard landing for the economy is on the horizon, a weaker-than-expected or closer to the Fed’s 2% target could be a risky investment. It would be a welcome addition to the home. In addition to core interest rates, the 12-month increase in house prices is noteworthy as housing inflation remains higher and proves to be an unavoidable high cost for consumers. become. We have been seeing disinflation since March 2023, and we expect it to continue, so we will breathe a sigh of relief if it falls below the 6.7% we saw in October. On Wednesday, the second day of the Fed meeting, the November Producer Price Index (PPI) will be released before the opening bell. As mentioned earlier, while CPI is a more meaningful report for the market, PPI is still important as it provides insight into a company’s input costs. Of course, the dynamic between input costs and selling prices determines profits. Therefore, what we don’t want to see is a significantly It’s a backlash. On Wednesday afternoon, the Fed leaves its board meeting virtually certain that interest rates will remain unchanged. The focus will be on comments by Federal Reserve Chairman Jerome Powell at a post-meeting press conference and a summary of central bank officials’ quarterly economic outlook. Current thinking is that the overnight federal funds bank lending rate has peaked and, as mentioned earlier, the next step will be a rate cut (although a rate cut should come soon). (I’m not saying that). So we want to hear that the Fed remains reliant on data, as any hint that it is considering further rate hikes is sure to surprise the market. November’s retail sales report will be released on Thursday, which is notable because it includes the huge holiday shopping period from Black Friday to Cyber Monday. The result is valuable insight into the state of consumer purchasing power. Remember that roughly two-thirds of the U.S. economy is driven by consumption. It could have the same weight as the CPI in terms of predicting the health of the economy, but it will be released after the Fed meeting. Sales are expected to decline 0.2% in November, exceeding the previous month’s 0.1% decline. Rounding out the week on Friday will be industrial production and capacity utilization for November, which will help provide a deeper understanding of the situation in manufacturing, mining, and electricity and gas. Together, they account for about another 14 percent of the U.S. gross domestic product. Industrial production is expected to rise 0.4% last month, after falling 0.6% in October. Capacity utilization is expected to be 79.2% in November, slightly above last month’s level. Club earnings: Oracle releases its quarterly report after the closing bell on Monday, and Costco releases its earnings after the closing bell on Thursday. ORCL YTD Mountain Oracle YTD Key comments from Oracle regarding customer interest related to Oracle Cloud Infrastructure (OCI). Analysts at J.P. Morgan say that recent research shows that OCI is “gaining mindshare” and that “when discussing the big three clouds – Microsoft, Amazon, and GCP – Azure, AWS, and GCP. “People are starting to include Oracle’s OCI in the conversation,” he added. Google. Meanwhile, Mizuho analysts said that “many investors continue to underestimate the appeal of Oracle’s OCI products in terms of both price and performance,” adding that “as a basic computing service, Amazon Web It pointed out that it is about 33% cheaper than Services. At Morgan Stanley, analysts also said OCI was a top focus for investors, but Oracle’s fiscal 2024 first-quarter results released in September showed mixed results and weaker-than-expected guidance. As a result, analysts’ expectations have eased slightly. . Certainly, easing expectations should give us a better setup heading into the second quarter of this fiscal year than the last setup when stocks hit all-time highs. In addition to his general commentary on OCI, I would like to know if there is any discussion of moving existing on-premises customers to the cloud. COST YTD Mountain Costco YTD Remember that when it comes to Costco, sales are usually not the focus of their releases. Not because sales aren’t important (it absolutely is), but because Costco reports sales on a monthly basis. As a result, the real focus is on margins and what influences them, such as input cost inflation, consumer activity (including foot traffic and basket size), and sales mix, i.e. where consumers are concentrating their purchasing power. It is located in Costco is scheduled to release first quarter results for its new fiscal year in 2024. After the club sent out three trading alerts on four stocks this week, here’s a full rundown of key domestic data for the week ahead. After Friday’s close, the S&P 500 short range oscillator moved from an overbought state to a more neutral market. Monday, December 11th After earnings: Oracle (ORCL), Casey’s General Stores (CASY) Tuesday, December 12th, 8:30 a.m. ET: Consumer Price Index FOMC meeting begins Before the bell: Johnson Controls (JCI) Wednesday, December 13th 8:30am ET: Producer Price Index 2:00pm EST: FOMC Meeting Ends After the Bell: Adobe (ADBE) Thursday, December 14th 8:30am ET :New Unemployment Insurance Claims 8:30 a.m. ET: Retail Sales Bell: Jabiru (JBL) After the Bell: Costco (COST), Lennar (LEN) Friday, Dec. 15, 9:15 a.m. ET : Industrial Production and Capacity Utilization Before the Bell: Darden (DRI) (See here for the complete list) Trade before Jim makes trades as a subscriber to Jim Cramer’s CNBC Investment Club Receive alerts. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in a charitable trust’s portfolio. If Jim talks about a stock on his CNBC TV, he will wait 72 hours before executing the trade after issuing a trade alert. 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People walk near the Nasdaq Market site in Times Square on July 12, 2023 in New York City.
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