Inflation Slows More Than Expected, Leading to Bets on Earlier Rate Cut; Nike Shares Drop

Inflation slowed more than expected, supporting bets the Federal Reserve would cut interest rates as early as March, but Nike suffered a setback after it revised its full-year financial outlook, dampening market sentiment. (22nd). , plunged sharply and turned into the black during the last two hours of late trading, and then pared some of the losses, closing slightly down by almost 20 points.

After experiencing low trading volume ahead of the Christmas break, the three major US stock indexes closed in the red for the eighth consecutive week, the first time since 2017 for the S&P and the first time for the Dow Jones since 2019. The S&P rose 0.8% this week, while the Dow Jones rose 0.2%. The Nasdaq gained 1.2% over the same period.

The latest data shows that the core personal consumption expenditure (PCE) price index, the Federal Reserve’s most favored inflation indicator, fell to 3.2% in November, the lowest since April 2021 and below the expectations of the market. The PCE price index rose 2.6% year-on-year in November, below market expectations of 2.8%.

At the same time, the preliminary monthly rate of US durable goods orders in November was 5.4%, the biggest increase since December 2022. Signs that inflation is accelerating and slowing have reinforced investor expectations for an earlier interest rate cut and deeper next year.

CME’s FedWatch tool shows an 85% chance of a rate cut in March. Investors currently expect the Federal Reserve to cut interest rates by 7 percentage points before the end of next year, with the range expected to be between 3.5% and 3.75%. This is much more than the three rate cuts expected in 2024 by the Federal Reserve at its meeting in December.

The performance of the major US stock indices on Friday (22nd):

• The Dow Jones Industrial Average fell 18.38 points, or 0.05%, to close at 37,385.97 points.
• The Nasdaq rose 29.11 points, or 0.19%, to close at 14,992.97 points.
• The S&P 500 index rose 7.88 points, or 0.17%, to close at 4,754.63 points.
• The Philadelphia Semiconductor Index rose 14.27 points, or 0.35%, to close at 4,132.85 points.
• The NYSE FANG index fell +27.02 points, or 0.31%, to close at 8,728.23 points.

Among the S&P’s 11 major sectors, only the consumer discretionary sector ended in the black, with consumer staples and materials leading the gains. (Image: finviz) Focus Stocks

The five tech kings in the NYSE FANG+ index were mixed. Apple (AAPL-US) fell 0.55%; Alphabet (GOOGL-US) rose 0.76%; Meta (META-US) fell 0.20%; Microsoft (MSFT-US) rose 0.28%; Amazon (AMZN-US) fell 0.27%.

Dow Jones stocks led the decline, led by Nike. Nike (NKE-US) plunged 11.83%; Intel (INTC-US) rose 1.95%; Amgen (AMGN-US) rose 1.73%; Merck (MRK-US) rose 1.23%; Walmart (WMT-US) rose 1.2%.

Most of the constituent stocks closed higher. Micron (MU-US) rose 0.59%; AMD (AMD-US) fell 0.22%; Broadcom (AVGO-US) fell 0.47%; Qualcomm (QCOM-US) rose 0.74%; NVDA (NVDA-US) fell 0.33%; Applied Materials (AMAT-US) rose 0.41%; Texas Instruments (TXN-US) rose 0.86%.

Taiwan stock ADRs surged upwards. TSMC ADR (TSM-US) rose 0.59%; ASE ADR (ASX-US) rose 0.88%; United Microelectronics ADR (UMC-US) rose 0.63%; Chunghwa Telecom ADR (CHT-US) rose 0.45%.

Corporate News

Nike (NKE-US) plunged 11.83% to $108.04 a share. Citing factors such as cautious consumer spending, Nike lowered its full-year financial forecast and announced a plan to cut costs by US$2 billion over the next three years, including reducing the number of key product licenses to control costs.

Affected by Nike, Foot Locker ( FL-US ) fell 3.93%, Under Armor ( UAA-US ) fell 3.34%, Lululemon ( LULU-US ) fell 0.20% and other footwear and apparel manufacturing stocks fell.

Tencent (TCEHY-US) fell 9.84% and NetEase (NTES-US) fell 16.07% after Chinese authorities on Friday introduced more regulations aimed at limiting players’ online gaming spending. Other Chinese concept stocks listed in the US also fell, including Alibaba (BABA-US) and Pinduoduo (PDD-US).

Tesla ( TSLA-US ) fell 0.77% to $252.54 a share. The National Highway Traffic Safety Administration (NHTSA) said on Friday that Tesla ( TSLA-US ) will recall 120,423 vehicles in the United States because the doors could be unlocked in a collision. The recall includes Model S and Model X cars manufactured between 2021 and 2023. NHTSA also said Tesla released an OTA software update to fix the problem.

Economic data

• The US PCE price index in November reported an annual rate of 2.6%, expected 2.8%, and a previous value of 2.9%

• The US PCE price index in November reported a monthly rate of 0.1%, expected to be 0.2%, and the previous value was 0.2%.
• The annual rate of the US PCE core price index in November was 3.2%, which was expected to be 3.3% and the previous value was 3.4%.
• The US PCE core price index in November reported a monthly rate of 0.1%, which was expected to be 0.2% and the previous value was 0.1%.
• The initial monthly rate of US durable goods orders in November was 5.4%, expected to be 1.7%, and the previous value was -5.1%
• The final value of the US Consumer Confidence Index in December was 69.7, which was expected to be 69.4 and the previous value was 61.3

Wall Street Analysis

Greg Bassuk, CEO of AXS Investments, said: “The personal consumption expenditure data that the Fed will focus on in its inflation review further confirms the path of inflation moderation. We believe this is another catalyst for investor excitement today, and the economy is making a soft landing. It seems closer to certainty.”

“This highlights the breadth and depth of this holiday season’s rebound, which we believe bodes well for investors heading into 2024,” Bassuk said.

Miller Value Partners analyst John Spallanzani said: “Basically, the trend is investors’ friend, and the current trend in the stock market is up. Small and mid-cap stocks are very welcoming of the Fed’s easing policy.”

Juheng Warm Reminder: December 25 (Monday) is the US Christmas holiday, and US stocks and US bonds will be closed for a day.

All figures are updated before the closing date, please refer to the actual quote.

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