Key Takeaways
- Markets Remain Flat As Traders Await Clarity On Economic Policies
- Higher Than Expected CPI Data Delays Potential Interest Rate Cuts
- Intel Rallies, While Tesla And Netflix See Profit-Taking Drops
On Wednesday, stocks were relatively flat with the one exception being the Russell 2000 which fell by 0.6%. For many traders, this week feels as if the market is waiting on something, but what that something is, isn’t yet clear.
With earnings season winding down, it could be that traders are waiting to see just how Trump administration policies impact the economy. The tariff war that’s breaking out is too new to have any quantifiable impact just yet, but I think everyone is waiting on that in order to realign expectations. That same uncertainty was expressed Tuesday by Federal Reserve Chair Jerome Powell during day one of his two days of testimony on Capitol Hill when he said the Fed is in no rush to cut interest rates further. Perhaps during his testimony Wednesday, Powell will be able to address today’s Consumer Price Index report.
Core CPI, which excludes things like food and energy, came in at 3.3% on a year-over-year basis and month-over-month, the rate was 0.4%. Both of those readings were above forecasts of 3.1% and 0.3%, respectively. If we don’t exclude anything, CPI on a year-over-year basis was up 3%, slightly higher than the 2.9% forecast and 0.5%, above the 0.3% estimate. The bottom line with respect to CPI is that the readings were higher than expected. While no one was expecting a rate cut when the Fed meets in March, the chances of a cut look as though they wouldn’t come until the second half of this year, if they happen at all.
Turning to some individual stocks, shares of Intel rallied on Tuesday. The company received positive reviews for its latest chip, the Core Ultra 9 275HX. Shares gained 6% on Tuesday and were indicated higher by another 5% today. Meantime, both Netflix and Tesla fell yesterday. Netflix dropped nearly 2% while Tesla shares fell 6%. There was no important news for Netflix, and I think we just saw some profit taking after an impressive run of late. With respect to Tesla, there is growing concern about Elon Musk’s ability to juggle all the balls he has in the air, including the latest in which he is a part of a group offering $97.4 billion for OpenAI. While that offer doesn’t seem like it is something that will happen, I think it’s fair to have concerns about Elon’s ability to continually take on more projects. One last company I’m watching is John Deere. It will report earnings before the open Thursday and I think this is one to watch because of the tariff war. China has imposed tariffs on farming equipment in response to Trump’s tariffs, which is something I expect to hear about on their earnings call. In addition, I think this is a good company for taking a pulse of the global economy and China in particular. So, we may get some more information about how the Chinese economy is looking.
For Wednesday, markets are looking weak following the release of the CPI report. While we do still have a number of companies reporting earnings, there are few household names left. Tomorrow, as I mentioned, we’ll hear from John Deere. But I think the one company the market is waiting on is Nvidia, who doesn’t report until February 26. As I mentioned on Monday, I think their report is going to be an important one as artificial intelligence has been a driving force over the past couple of years for the market. Also, on Thursday, we’ll get the Producer Price Index and if the CPI is any indication, we may be looking at a hotter than forecast reading. As always, I would stick with your investing plans and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.