To The Moon

On Thu, 14 Nov 2024 US market continued to head south amid US economic reports released over the past 2 days.

Although looking superficial, the data nonetheless, has traders worried.

By the time 4:00pm came around: (see above)

• DJIA: -0.47% (-207.33 to 43,750.86).

• S&P 500: -0.60% (-36.21 to 5,949.17).

• Nasdaq: -0.64% (-123.07 to 19,107.65).

In fact, US market has been falling steadily since Mon, 11 Nov 2024.

Looks like, the post presidential election ‘euphoria’ has dissipated, and US economic reality have taken over.

It does not help too that incoming president trump, has been updating his lineup of staffers, making up the next administration, each a hardliner.

This has sent chills down the spine of the US market, with many predicting the next 4 years, will be a painful one.

Fortunately / unfortunately it’s the people’s choice that saw to the return of the ex-president.

Good or bad, they will have to lie on the bed they made.

US Economic Reports.

Both consumer and producer inflation reports have been released on Wednesday and Thursday respectively and they tell a story.

US consumer price index for October 2024

(1) Consumer Price Index (CPI) - October 2024.

Headline inflation.

• MoM : came in at 0.2% vs analysts’ forecast of 0.2% vs September data of 0.2%. Status quo.

• Annual: came in at 2.6% vs analysts’ forecast of 2.6% vs September data of 2.4%. Up by +0.2%. (see above)

Core inflation.

• MoM : came in at 0.3% vs analysts’ forecast of 0.3% vs September data of 0.3%. Status quo.

• Annual: came in at 3.3% vs analysts’ forecast of 3.3% vs September data of 3.3%. Status quo. (see above)

Sticky Services Inflation: A significant driver of persistent inflation is the continued strength in services inflation, particularly in sectors like (a) shelter and (b) electricity.

This suggests that underlying inflationary pressures remain resilient.

Note: It is ‘alarming’ to learn that electricity is 2nd most active component, keeping inflation above the 2% target, amid a weak oil price of $67.71 per barrel.

Should oil price rises to above $74, it will definitely exert pressure on US inflation all over again.

(2) Producer Price Index (PPI) - October 2024.

Headline PPI.

• Monthly: came in at 0.2% vs 0.2% analysts’ estimates vs September data of 0.1%.

• Yearly: came in at 2.4% vs 2.3% analysts’ estimates vs September data of 1.9%. (see above)

Core PPI.

• Monthly.came in at 0.3% vs 0.3% analysts’ estimates vs September data of 0.2%.

• Yearly. came in at 3.1% vs 3.0% analysts’ forecast vs September data of 2.9%.

A rise in the headline PPI to 2.4% and the core PPI to 3.1% indicates that producer prices are also increasing.

This could lead to higher consumer prices in the future as businesses will pass on the increased costs to consumers.

(3) US Weekly Jobless claims.

For week ending 9 Nov 2024, US weekly jobless claims has fallen by -4,000 to 217,000 claims vs analysts’ expectations of 224,000 vs the week prior’s claims of 221,000.

Incidentally, this is the lowest claims level in 6 months.

The 4-week average of weekly claims, which evens out some of the weekly ups and downs, fell by -6,250 to 221,000.

The latest data suggests that the labour market continued to chug along and the abrupt slowdown in October 2024 job growth was an aberration.

Data Analysis.

The increase in both CPI and PPI suggests that inflationary pressures are still present in the US economy.

Rise in the headline CPI to 2.6% indicates that consumer prices are increasing at a faster rate than in previous months.

Core CPI remaining steady at 3.3% suggests that underlying inflation, excluding food and energy, is not easing.

Likewise, the rise in the headline PPI to 2.4% and the core PPI to 3.1% indicates that producer prices are also increasing.

This could lead to higher consumer prices in the future as businesses pass on the increased costs to consumers.

Cooling Inflation ?

Latest data confirms inflation:

• Is not accelerating (unlike early 2024) but it is not falling either.

• The steady core CPI and the increase in both headline CPI and PPI suggest that inflation remains a concern.

The Fed 's recent rate cuts (September & November) indicate that they are aware of the need to manage inflation while supporting economic growth.

In conclusion, while there are signs that inflation is not accelerating as rapidly as before, it is still present and needs to be monitored closely.

The latest CPI and PPI data suggest that inflationary pressures remain in the US economy, and it is too early to declare that inflation is falling significantly.

If there is one industry that is “insensitive” to inflation, deflation, stagflation etc.. it is “Food”; not fine dining but everyday food accessible to the man in the street.

Perhaps it was precisely this reason that $Berkshire Hathaway(BRK.B)$ decided to take a stake in in $Domino's Pizza(DPZ)$ during Q3 2024, Mr Buffett cut back on some long-held investments eg. $Apple(AAPL)$ .

Berkshire Hathaway has acquired about 1.3 million shares in the pizza retailer, giving it a 3.6% stake valued about $550 million, in Domino’s Pizza as stated in its 13F regulatory filing on Thu, 14 Nov 2024.

Upon filing reveal, Domino’s added more than +7% in after-hours trading immediately. (see above)

Looks like it will be a busy Friday for Domino’s Pizza.

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