Revised CPI: Will Fed sways on Interest Cuts?
In between the merry making and feasting on Chinese New Year goodies, I have to take a breather, away from the calories-rich offerings.
I need some “me-time” to help distract me even if it’s for a few minutes.
Started swiping the “selectively curated” news articles (for me) by my trusting Huawei mobile.
The first news article that greeted me was ….
Finally, the $S&P 500(.SPX)$ index managed to close Fri, 09 Feb 2024 trading day above the 5,000 mark for the first time ever. (see below)
In fact, the index has been attempting to close above the 5,000 mark for the past few days.
Unfortunately, it just did not have the fire power to close above it. Fortunately, it mustered enough mojo.
Like the saying goes, “what Wall Street wants, Wall Street gets”.
On Friday, US 4:00pm closing time:
DJIA: -0.14% (-54.64 to 38,671.69). Marginally lower.
S&P 500: +0.57% (+28.70 to 5,026.61).
Nasdaq: +1.25% (+196.95 to 15,990.66). Star index of the day.
Catalyst of the Day?
Not too difficult to narrow down because on Friday, below were the two significant factors:
Mega cap stock $Pepsi(PEP)$ Q4 2023 earnings results.
Consumer Price Index (CPI) revision report for December 2023.
Plain and simple, Pepsi was not the contributing factor.
It reported mixed quarterly results as North American demand for its food and drinks weakened.
Company actuals versus market expectations (based on a survey of analysts by Refinitiv):
Earnings per share (EPS): $1.78 adjusted vs. $1.72 expected.
Revenue: $27.85 Billion vs. $28.4 Billion expected.
Net Income: $1.3 Billion vs $518 Million YoY.
Net Sales: fell < 1% to $27.85 Billion YoY, marking Pepsi’s first quarter decline since 2020.
Pepsi’s 2024 Outlook:
Pepsi is predicting a weaker H1 2024, as:
Product recalls dent its North American Quaker Oats business.
International conflicts hurt sales in some regions.
Just like that, Pepsi closed lower on Friday, by -3.55% to $167.67 per share. (see above)
It is certain that it did not have a hand, helping the S&P 500 index to close at its record high.
Yes, it was the revised data for US Consumer Price Index (CPI) for December 2023’s data that helped propelled the 500 index to stay above the 5K mark.
Consumer price index (CPI), data could be segregated into:
CPI
Core CPI (less food & energy components).
Difference between CPI & Core CPI. (see below)
Within CPI & Core CPI, it could also be further distinguished by:
Monthly change.
Annual change.
CPI revised data.
If you read the news in the media, you will find that there’s a lot of words used to describe something straightforward.
Initially, I was “confused”.
When I figured out what was the message, I further condensed it into table format. (see below)
Hopefully it is clear at a glance.
Friday’s official revision centred on CPI inflation data only.
Both monthly and annual percentage change has been revised downwards by -0.1%.
My viewpoints : (mine & mine only)
Downwards revision of US’s December 2023 CPI data offers a slightly more optimistic perspective on inflation.
However, it is equally important to consider the limited size of the revision.
Not to mention, ongoing uncertainties surrounding inflation in the broader economic context.
The “-0.1%” inflation reduction gave US market the alibi to rally on Friday, that’s all.
Will the latest revision help to nudge the Fed along into cutting interest rate during the March 2024 FOMC meeting? Personally, I doubt it would.
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Do you think the S&P 500 index will continue to rally the following week?
Do you think the Fed will have a change of mind and cut interest rate, starting in March 2024?
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