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- U.S. to Allow South Korean, Taiwan Chip Makers to Keep Operations in China
- Inflation Has Likely Been Cut in Half but Is Still Too High
- Fed Rate Pause Set to Get Support From Moderating Inflation Data
- Fed-Rate Projections Could Rise to Underscore Inflation Anxieties
- JPMorgan’s Foil to the Bonds-Are-Back Crowd Is Sticking to Cash
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Todays Open Interest Change
With the Federal Reserve determined to bring inflation down, May's Consumer Price Index, to be released at 8:30 AM, will give central bankers fresh data on how much progress they've made in their mission to combat price pressures. Year-over-year rates have pointed in that direction, with CPI numbers coming in smaller each month since the figure peaked at 9.1% in June 2022. The report will come out just as the FOMC begins its two-day monetary policy meeting, with a rate decision and dot plot announcement coming later on Wednesday.
By the numbers: The headline CPI is expected to slow to a 0.2% M/M increase in May from its 0.4% advance the previous month. The progress looks even better on a Y/Y basis, with CPI growth expected to moderate to 4.1% from 4.9% growth in April, marking the lowest level in more than two years. Excluding food and energy, the core CPI is expected to rise by 0.4% M/M, unchanged from April's rate, showing just how sticky inflation can be. On a Y/Y basis, core CPI is anticipated to rise 5.3%, down from 5.5% in April.
To note, Fed officials prefer to look at personal consumption expenditures because that takes into effect the changes consumers make in response to higher prices. For example, people may trade down to store-brand products rather than remain with higher price name brands. While the CPI measures the prices of a set basket of goods, and is a solid metric in terms of categories, the PCE measures what consumers are actually spending. However, the PCE report for May won't come out until June 30, meaning the Fed won't have that data this week to incorporate into its view of the U.S. economy.
SA commentary: There are other pieces of information the central bank calls “data," adds SA analyst Mark Grant, so be on the lookout for the Producer Price Index tomorrow. "Whatever the number, it could have a significant impact on the Fed's announcement, especially if the Consumer Price Index is problematic." While the "disinflationary process in services and shelter has started," SA analyst Damir Tokic also cautions that there is likely a long and bumpy road ahead toward the Fed's 2% inflation goal. (43 comments)
As bulls continued to cheer on Big Tech, Apple (AAPL) closed at its highest-ever closing price on Monday, though some of the skeptics are doubling down. Shares settled 1.6% higher at $183.79, before paring some of those gains in premarket trading today as UBS downgraded the stock. It's still hard to argue with the robust balance sheet, buybacks and solid revenue streams of the company led by CEO Tim Cook, who unveiled the Vision Pro headset last week. SA author Michael McGrath believes Apple's technological lead will likely keep competition at bay for a long time, but Investing Group leader JR Research raises concerns over Vision Pro's use cases. (4 comments)
JPMorgan Chase (JPM) has agreed to pay $290 million to settle a lawsuit with the sexual abuse victims of Jeffrey Epstein. "Any association with him was a mistake and we regret it," the bank said in a statement. "We would never have continued to do business with him if we believed he was using our bank in any way to help commit heinous crimes." JPMorgan still faces an outstanding lawsuit with the U.S. Virgin Islands, where Epstein had a home, and has accused former executive Jes Staley of repeatedly thwarting efforts to cut ties with the disgraced financier. Altisource Asset Management (AAMC) also had some news to share in light of the development. (26 comments)
Oil prices are continuing to fall sharply, with Brent crude (CO1:COM) sinking yesterday to its lowest settlement since late 2021. Worries range from Chinese demand and a potential U.S. recession to strong crude flows from Russia. Even Saudi Arabia's recent pledge to cut production in July has failed to prop up prices, with Brent crude dropping 5.5% since the announcement eight days ago. The moves have even forced Goldman Sachs to cut its year-end forecasts for oil as the energy sector remains under pressure. (67 comments)
In Asia, Japan +1.8%. Hong Kong +0.6%. China +0.2%. India +0.7%.
In Europe, at midday, London -0.1%. Paris flat. Frankfurt +0.1%.
Futures at 7:00, Dow flat. S&P +0.1%. Nasdaq +0.3%. Crude +1.9% to $68.41. Gold +0.5% to $1,979.10. Bitcoin +0.7% to $26,161.
Ten-year Treasury Yield -4 bps to 3.73%.
Today's Economic Calendar
What else is happening...
WSB survey results: A recession in the U.S. is still on the table in 2023.
Microsoft (MSFT)-Activision (ATVI): FTC files for injunction to block deal.
Alphabet (GOOG, GOOGL) to be slapped with ‘massive’ EU antitrust penalty.
Intel (INTC) in talks to be anchor investor in Arm's (ARMHF) coming IPO.
Oracle (ORCL) rises to all-time high as cloud growth aids earnings beat.
Fox News (FOX, FOXA) sends Tucker Carlson cease and desist letter.
Kroger's (KR) acquisition of Albertsons (ACI) opposed by Teamsters.
Nasdaq (NDAQ) acquires Adenza: Thoma Bravo is the real winner.
EV stocks are sized up after Tesla's (TSLA) Supercharger disruption.
Boeing (BA) to debut 737-10, 777-9 commercial jets at Paris Air Show.
Trump heads to court as first ex-president facing criminal charges.