Stock investors have all eyes on the Consumer Price Index (CPI) this morning. Economists expect headline CPI slowed to +3.0% in January from +3.4% previously, while the “core” (strips out food and energy) slowed to +3.7% from +3.9%.

The results will no doubt influence investor expectations for Federal Reserve rate cuts, which have recently been dialed back a bit from where they started the year. The market was forecasting six quarter-point rate cuts, now most of the talk is revolving around three or four quarter-point rate cuts. That’s largely because recent US economic data has been much stronger than expected, which provides less incentive for the Fed to cut rates.

In fact, job and wage gains in January were so strong that some bears and bond insiders have worried about the possibility of another Fed rate hike if the economy starts to gain more momentum.

While most on Wall Street think that is unlikely, most also believe the Fed will remain hesitant to cut rates with wages climbing at an annual clip of more than +4% because it runs the risk of reigniting inflation. Fed officials have made it clear that easing policy too soon is one their biggest fears as history has shown that if/when inflation returns, it typically roars back worse than before. Meaning the current rate of inflation may mean less to the Fed than the underlying drivers of inflation, such as wage growth and wholesale prices, for instance. So even if CPI slowed in January as expected, it may not be enough to materially shift the outlook for Fed policy just yet, with investors preferring to see a little more data first.

A stronger than expected read will obviously rekindle worries that the US economy is still “too hot” and likely lead to further adjustments to rate cut expectations.

I should mention that semiconductor maker Arm Holdings’ stock yesterday soared nearly +30%, extending a rally that has now pushed the company’s shares up more than +90% since it released Q4 earnings on February 8. Not surprisingly, the main driver behind the climb is "artificial intelligence".

Nvidia stock price has now soared past the +$720 mark on all of the AI-buzz and is up +46% already this year after skyrocketing +239% in 2023. There is no doubt a lot of concern that investors are getting way ahead of themselves on all the talk surrounding AI.

On the earnings front today, Airbnb, Biogen, Coca-Cola, Global Foundries, Invitation Homes, Marriott International, Moody’s, Restaurant Brands, and Zoetis are the highlights. For full disclosure, 

Nvidia Now Worth More Than Amazon:  Four years ago, Nvidia Corp. didn’t even rank among the top 20 U.S. companies by market capitalization. Now it’s poised to take over the No. 4 spot, having just passed Inc. based on intraday action Monday. Nvidia’s stock rally as of midday Monday comes as Amazon’s stock is off 0.6%. Nvidia hasn’t finished a session worth more than Amazon since April 2002, when Nvidia was worth $5.73 billion and Amazon was worth $5.32 billion, according to Dow Jones Market Data. Now, Nvidia is on track to finish Monday’s session with a $1.82 trillion market value, while Amazon is on pace to close with a $1.80 trillion valuation. The chipmaker’s continued climb illustrates the company’s dominant position in the market for artificial-intelligence hardware and Wall Street’s growing confidence about the sustainability of its momentum. Not only is there increased optimism about next calendar year, but also Nvidia is gaining more respect for more “nascent” parts of its business besides its graphics processing units used for artificial-intelligence applications. These include AI enterprise software and networking offerings. Nvidia’s stock has gained nearly 250% over the past 12 months, while Amazon’s has advanced almost 80%. Source Market Watch

AI Is Starting to Threaten White-Collar Jobs: The list of white-collar layoffs is growing almost daily and includes jobs cuts at Google, Duolingo and UPS in recent weeks. While the total number of jobs directly lost to generative AI remains low, some of these companies and others have linked cuts to new productivity-boosting technologies such as machine learning and other AI applications. Generative AI could soon upend a much bigger share of white-collar jobs, including middle and high-level managers, according to company consultants and executives. That includes managerial roles, many of which might never come back, the corporate executives and consultants say. They predict the fast-evolving technology will revamp or replace work now done up and down the corporate ladder in industries ranging from technology to chemicals. Some of the job cuts taking place already are a direct result of the changes coming from AI. Other companies are cutting jobs to spend more money on the promise of AI and under pressure to operate more efficiently. Since last May, companies have attributed more than 4,600 job cuts to AI, particularly in media and tech, according to outplacement firm Challenger, Gray & Christmas. Meanwhile, the number of professionals who now use generative AI in their daily work lives has surged.   Nearly two-thirds of those white-collar workers said their productivity had improved as a result, compared with 54% of blue-collar workers who had incorporated generative AI into their jobs.  Source WSJ

Hershey Cuts Jobs Amid Slower Consumer Spending, High Cocoa Costs: Hershey plans to cut jobs, the confections and salty snacks company said in an SEC filing. It expects to incur employee severance and related separation benefits of up to $60 million. The Reese’s and Dot’s manufacturer did not disclose how many jobs would be lost or when the cuts would take place. The planned reduction in staffing — part of a broader multi-year productivity initiative at the CPG giant — comes as Hershey and other food makers face sales pressure from consumers looking to curtail spending amid high prices at the grocery store due to inflation. Hershey’s business also is being weighed down by sugar and historic cocoa prices that are “expected to limit earnings growth this year,” Michele Buck, Hershey’s CEO said. The executive didn’t rule out the possibility of further price hikes. She added that “given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.” Source Fooddive

Uber, Lyft, DoorDash Drivers to Strike on Valentine's Day for Fair Pay: Thousands of drivers for ride-sharing platforms Uber, Lyft, and food delivery app DoorDash are expected to go on strike across the United States on Valentine's Day for fair pay, drivers' groups said on Monday. The demonstrations are set to take place about a week after Lyft said it would guarantee weekly earnings for drivers, a first in the U.S. ride-hailing industry as it looks to lure more drivers to its platform. The drivers, considered independent contractors, have accused the platforms of taking disproportionately high amounts as commissions. Uber said only a minority of its drivers participate in such strikes, which rarely have an impact on business.  Source Reuters

Demand for Robots Slows: After two years of flying high, industrial robot orders dropped by nearly one-third last year. Per the Association for Advancing Automation (A3), 31,159 industrial robots were purchased by North American companies in 2023, down from 44,196. That marks a 30% drop for this key market. The number is also down (albeit less so) from 2021’s 39,708. These numbers throw a bit of cold water on what has been regarded as a white-hot industry dating back at least to the beginning of the pandemic. There is, no doubt, some cause for concern among robotics manufacturers. But all of this needs to be caveated by the fact that both 2021 and 2022 marked record sales for the industry. But the story behind the numbers is far more complex than a slowdown in adoption following a pandemic-fueled automation spree. As robust as the category has appeared at times, it’s not immune to the same macroeconomic headwinds as the rest of the tech world. In fact, in some ways, it may be more tenuous. Source TechCrunch

Most Expensive Cities for Romance: Here are some fun facts to woo your date this Valentine’s Day: the event is believed to date back to lusty fertility rituals in ancient Rome; Iran banned any celebration of Valentine’s Day in 2011, lest it spread promiscuous Western behavior; and it is one of America’s most lucrative festivals. The National Retail Federation (NRF) predicts that the average American will spend $186 on their Valentine this year. That total will stretch much further in some cities than others. Using data from its latest cost-of-living index, The Economist created a “cost-of-loving index,” which ranks the world’s most expensive cities in which to go on a romantic night out. Their fancy date night includes drinks at a swanky hotel, followed by a lavish two-course meal, a movie, a taxi home, and a nice bottle of wine to cap things off. Couples in Shanghai spend the most on romance, where residents can expect to blow roughly $600 on their fancy evening. Paris is the most expensive city in Europe; New York the priciest in North America. At $567, couples in the Big Apple would each have to spend around $100 more than the NRF’s forecast spending in order to enjoy the Economist’s basket of items. These prices have increased over the past five years: the average cost of love in the top 15 cities has gone up by +10% since 2019, with prices in Caracas, Venezuela’s inflation-ridden capital, rising by the most.  Source The Economist


EIU Source 

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