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US stocks were mixed on Tuesday as investors trod carefully on the eve of a closely watched consumer inflation report seen as key to the path of interest rates.
The Dow Jones Industrial Average (^DJI) was the lone index in the red, hovering just below the flat line. The S&P 500 (^GSPC) was up about 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) rose almost 0.6% after all three gauges started the week with small losses.
While stocks are faltering, they are still holding not far off record highs as investors wait for Wednesday’s update on consumer prices. Hopes are that the November inflation reading will provide further evidence of a “soft landing” for the economy, justifying widespread bets on a Federal Reserve rate cut in December.
In individual stock moves, Alphabet (GOOG, GOOGL) shares jumped more than 4%, leading the Nasdaq higher, after the Google parent claimed breakthroughs in quantum computing through the use of its new Willow quantum chip.
Meanwhile, Oracle (ORCL) shares fell about 8% after its quarterly revenue fell short in the face of tough cloud competition.
Investors also weighed chipmaker Taiwan Semiconductor Manufacturing Co.’s (TSM, 2330.TW) report of a 34% year-on-year jump in revenue in November. While the sales number suggested sustained AI demand, it was also a decline from the previous month’s reading. The Apple (AAPL) and Nvidia (NVDA) suppliers’ stock slipped about 1%.
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The Fed’s ‘final 5-pound’ issue with inflation points to gradual rate cuts
The focus is back on the inflation front in markets this week, with the release of the November Consumer Price Index. The CPI print on Wednesday is expected to show price increases continue to make little progress toward the Federal Reserve’s 2% goal.
Wall Street economists expect headline inflation rose 2.7% annually in November, up from 2.6% in October.
On a “core” basis, which strips out food and energy prices, CPI is expected to have increased 3.3% last month, versus last year. That would mark the fourth straight month with a 3.3% reading for core CPI.
Zoom out to mid-2022 and CPI’s 9% peak, and the “significant progress” is clear, as Fed Chair Jerome Powell has reminded us.
Look closer at the past few months, though, and the Fed appears to face an issue experienced by many of us.
Some have likened the final push to 2% inflation to the struggles of the “last mile” in a race. But ADP chief economist Nela Richardson sees the Fed’s predicament as akin to that in a weight-loss program.
“The labor market is slowing. Wage growth looks like it’s plateauing, and the Fed is still trying to get inflation down,” Richardson told Yahoo Finance. “So I liken that to trying to lose the last five pounds: It’s usually the hardest, and getting from two-and-a-half percentage points of inflation back to 2%, it’s probably going to be the trickiest part.”
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Oracle slides more than 7% after earnings miss
Oracle stock (ORCL) slid about 8% early Tuesday after the database and cloud services company posted a weaker revenue outlook than Wall Street had hoped.
In the second quarter, Oracle’s revenue hit $14.06 billion, below Wall Street estimates of $14.12 billion, per Bloomberg data.
Oracle stock had been up about 80% year to date entering the print, and some analysts on Wall Street remain optimistic about the name.
UBS analyst Karl Keirstead noted that the “solid tone” tone on revenue in the coming quarters keeps UBS bullish on the stock. UBS boosted its 12-month price target to $210 from $200 previously, while maintaining a Buy rating on the stock.
The “growth acceleration story is intact,” Keirstead wrote.
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Alphabet rallies more than 5%, leading Nasdaq higher
US stocks opened mixed on Tuesday as investors trod carefully on the eve of a closely watched consumer inflation report seen as key to the path of interest rates.
The Dow Jones Industrial Average (^DJI) slid about 0.3%, while the S&P 500 (^GSPC) was just above the flat line. The tech-heavy Nasdaq Composite (^IXIC) rose about 0.4% after all three gauges started the week with small losses.
In individual stock moves, Alphabet (GOOG, GOOGL) shares jumped about 5%, leading the Nasdaq higher, after the Google parent claimed breakthroughs in quantum computing through the use of its new Willow quantum chip.
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Small business optimism sees largest monthly jump since 1980
Small business optimism skyrocketed following Donald Trump’s Election Day victory.
The NFIB Small Business Optimism Index rose by 8 points in November to 101.7, marking the largest monthly increase since 1980. The index is now at its highest level since June 2021 and is sitting above its 50-year average of 98 for the first time in nearly three years.
“The election results signal a major shift in economic policy, leading to a surge in optimism among small business owners,” NFIB chief economist Bill Dunkelberg said in the release.
“Main Street also became more certain about future business conditions following the election, breaking a nearly three-year streak of record high uncertainty. Owners are particularly hopeful for tax and regulation policies that favor strong economic growth as well as relief from inflationary pressures. In addition, small business owners are eager to expand their operations.”
A rise in small business optimism was a theme seen in Trump’s first presidency and has some strategists bullish on companies exposed to small business revenues in 2025.
“We expect an improving small business operating environment will boost the sentiment and spending of small business in 2025, and lift the earnings and valuation of stocks with revenues tied to that spending,” Goldman Sachs chief US equity strategist David Kostin wrote in his 2025 equity outlook.
Kostin recommended a basket of 60 mid- and large-cap companies with at least 50% of their revenue tied to small businesses. The largest stocks in that list include Meta (META), Deere & Company (DE), Intuit (INTU), and Shopify (SHOP).
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