While FOMC officials are no longer forecasting a recession, the latest Federal Reserve economic projections in December suggest a sharp drop in U.S. As prices continue to rise, it is hard to find signs of cooling in the hot U.S. labor market. Shelter prices continue to account for a large portion of CPI inflation. Rob Swanke, senior equity strategist for Commonwealth Financial Network, says he expects the first Fed rate cut will not come until June. Inflation, interest rates and the labor market will likely continue to dominate Wall Street headlines in March.
AI chipmaker Nvidia (NVDA) reported a staggering 265% revenue growth in the fourth quarter, sending its stock price up more than 60% year-to-date. Despite an uncertain economic outlook, the S&P 500 has rallied to new all-time highs in 2024 driven by remarkably strong underlying economic fundamentals. S&P 500 companies have reported their second consecutive quarter of year-over-year earnings growth in the fourth quarter. https://www.day-trading.info/the-difference-between-data-information-and/ Fewer earnings reports are scheduled this week, as earnings season has largely concluded, but there are a few tech companies scheduled to report. Intel will be the latest chipmaker to host a launch event that points toward its AI offerings. Utility stocks, consumer staples stocks and healthcare stocks are typically considered defensive investments and may be relatively insulated if economic growth slows to a crawl.
- However, the market is pricing in a 66.1% chance the FOMC will cut interest rates by at least 25 basis points by June.
- As prices continue to rise, it is hard to find signs of cooling in the hot U.S. labor market.
- The most recent readings have been promising, as the Personal Consumption Expenditures (PCE)—the Federal Reserve’s preferred inflation gauge—showed inflation falling to 3% year-over-year in November.
The former president’s investment in the social-media company is worth roughly $3 billion, potentially easing his current financial struggles. Investors are concerned that the Federal Reserve’s response to Tuesday’s report could hurt the US economy — possibly sending it into a recession. That prompted Glenmede chief investment officer of private wealth Jason Pride to note in a report that these are the most dramatic annual price increases for food since Sony released the Walkman portable cassette player.
Consumer, Wholesale Price Data to Show Path of Inflation.
The market’s early-year performance has been impressive up to this point, and investors are hopeful that momentum can continue in March. March and April have historically been a strong two-month stretch for the S&P 500. For now at least, analysts are anticipating S&P 500 earnings growth will continue to accelerate in the first half of 2024. Analysts project S&P 500 earnings will grow 3.9% year-over-year in the first quarter and another 9% in the second quarter. While investors have cheered impressive earnings and all-time highs for the market, the S&P 500’s forward price-to-earnings ratio has crept up to 20.4, about 15% above its 10-year average of 17.7. At its last meeting in January, the Federal Open Market Committee opted to maintain interest rates at their current range of 5.25% to 5.5%, its highest target range in 22 years.
In the Fed’s January meeting minutes, officials noted they will not be comfortable cutting interest rates until they have “greater confidence” inflation is still declining. In addition, FOMC members highlighted the “risks of moving too quickly” on rate cuts. The US Consumer Price Index Tuesday showed prices in August rose a bit. Although annual inflation fell compared to July, it didn’t fall as much as economists expected. That could give the Fed license to hike interest rates even faster and higher than forecast. The S&P 500 was down more than 3% and just four stocks in the blue chip index were in positive territory.
It may be very difficult for the FOMC to justify a rate cut until the jobs market cools down. The longer the Fed is forced to maintain interest rates at current levels to get inflation under control, the higher the likelihood of economic fallout at some point down the line. This risk is reflected in the New York Fed’s U.S. recession probability index, which still projects a 61.5% chance of a recession within the next 12 months. The technology sector has reported 20.8% earnings growth in the fourth quarter as the rally in artificial intelligence stocks has continued in early 2024.
Economists are expecting the FOMC to continue to maintain interest rates at current levels at its next meeting that concludes on March 20. Meanwhile, fourth-quarter earnings numbers have been better than expected as companies are effectively managing rising costs https://www.topforexnews.org/investing/what-are-the-risks-from-investing-in-early-stage/ and interest rates that are at 22-year highs. Economists expected prices would fall very slightly in August as gas prices have dropped for 91 straight days. Instead, prices rose, giving investors a collective heart attack over the Fed’s plans to curb inflation.
Former Lordstown Motors CEO Settles Charges of Misleading Investors
Another decline in inflation would meet consumer expectations, with the most recent Michigan Consumer Sentiment Index showing that the public believes price increases will continue to slow over the near and long term. Investors will also get more signals over the path of inflation when the Consumer Price Index (CPI) is released on Tuesday, which comes as other recent inflation reports have shown that prices have been increasing at a slower pace. On Wednesday, the Producer Price Index (PPI) will show wholesale prices for business, another inflation indicator. Wayne Duggan has a decade of experience covering breaking market news and providing analysis and commentary related to popular stocks. News & World Report and a regular contributor for Forbes Advisor and USA Today. “The AI hype is not sustainable because much of the stock gains seen due to AI are about the marketing of AI and the hype, and only one or two companies have actually experienced a specific revenue bump from AI,” Bahnsen says.
As stocks settle after the trading day, levels might still change slightly. The latest reading of the Consumer Price Index on Tuesday will be another step toward answering that question, as economists will be looking to see whether inflation continues its downward trend. In addition, since 1950, when the S&P 500 is higher in both January and February of the same year, it has continued higher over the next 12 months 27 out of 28 times and generated an average return of 14.8% during those 12 months.
Investors Watching Fed Meeting for Market Signals
The US government will release figures for the producer price index, which measures prices at the wholesale level…as opposed to today’s consumer price index report. Investors will also get a look at some retail sectors, with an earnings report from Costco and an investor call with pet-products seller Chewy. Also, U.S. drugmaker what is business analytics Regeneron will update investors with results from the 2023 American Society of Hematology (ASH) conference. Computer graphic software maker Adobe could shed light on consumers’ appetite for AI products with its earnings report on Thursday, which comes after it introduced new AI tools for Photoshop and other products this year.
The headline CPI reading was also up 0.3% on a monthly basis, the highest monthly gain since September. Only one stock in the tech-heavy Nasdaq 100 index was higher Tuesday…and not by much. “As long as they keep delivering on earnings results in the same manner as last quarter, most of these stocks should keep outperforming and driving the S&P higher. Even if we get more incremental rate volatility, investor confidence in their underlying fundamentals should support big tech names better than most large/super cap alternatives,” Rabe says.
Which Way Is Inflation Trending?
In February, the Fed factored mixed data into its efforts to secure a soft landing for the U.S. economy. The S&P 500 gained 5.34% in February, bringing its year-to-date total return up to 7.11%. Investors are increasingly optimistic the Federal Reserve will achieve its goal of a soft landing for the U.S. economy. Regulators allege Stephen Burns had made misleading statements to investors about the EV maker’s customer base and its number of pre-orders.