What to know today

  • There’s no second inflation wave.
  • Apple has some AI juice.
  • Remember Amazon.com?
markets

So Many Plot Lines

It is in fact a lot of dots.

It’s just a snapshot, as Jerome Powell emphasized during his post-FOMC meeting press conference about what the dot plot portends and the most recent incoming.

Reporters, evidently as anxious about a rate cut as investors, traders, and speculators, seemed emboldened too by a cooler-than-expected May Consumer Price Index print.

The major equity indexes gapped up at the open and were mainly higher on the day, though the Dow Jones Industrial Average closed slightly in the red.

Another big day for Apple $AAPL couldn’t overcome weakness in Nike $NKE and Salesforce $CRM, which were both down more than 2 percent.

Visa $V and JPMorgan Chase & Co. $JPM also closed lower, as financials showed further weakness amid rising expectations that “higher for longer” has a visible horizon.

It is just a snapshot. And the Federal Reserve Chair resisted multiple attempts by members of the fourth estate to frame it as some sort of plan.

And with that I’ll suggest the discussion will soon shift to whether the first quarter-point cut will come in November or earlier – more ahead of the election – in September.

The core Consumer Price Index was up 3.4 percent year over year and 0.2 percent month over month. Both figures were cooler than the consensus forecast.

The May CPI print indicates, as Discipline Funds founder and chief investment officer Cullen Roche noted on X, that disinflation is still the dominant trend.

“There's little signs of the second inflation wave,” Roche said, and higher interest rates “aren't adding to inflation, you silly gooses.”

As Powell noted multiple times during his presser, he sees the balance of risks as more balanced. He also noted the potential for a collapse in the labor market. 

Though the 3.4 percent year-over-year core reading is still too high, it’s reasonable to assume our central bankers understand the implications of their projections.

And we can reasonably assess that the Fed is poised to act on exigent circumstances that threaten economic collapse and will, more probably, cut by 50 basis points this year.

The Federal Reserve’s updated dot plot of year-end interest-rate forecasts indicates one 25-basis-point reduction in the federal funds rate target range in 2024.

It’s probably way too soon to make a John Lennon-like “inflation is over” proclamation.

But let’s observe, as Ben Carlson of A Wealth of Common Sense did, that the federal funds rate has been above 5 percent for more than a year.

Inflation was above 5 percent for 21 months straight, but the yield on the 10-year US Treasury note never got that high.

“The bond market never believed high inflation was here to stay,” Carlson concludes. “It was right.”

From Fed-watching to Elon-gazing, so the market turns…

Today we’ll find out whether Tesla $TSLA shareholders really do believe in their CEO, as they’ll vote on what’s now an approximately $50 billion pay package for Elon Musk.

That’s down from approximately $56 billion when Delaware Chancery Court Judge Kathaleen St. Jude McCormick nullified it in January.

The court cited failures to properly disclose details of the pay package to those same TSLA shareholders.

The shareholder vote carries no formal legal weight. But about 45 percent of the voters are retail investors, regular people, and their interest could create some interesting price action.

There’s that, and there’s the further digestion of the FOMC’s latest non-decision decision.

It’s not as big as Wednesday was, but, still, be careful out there this Thursday.

deep dive

AAPL Reaches No. 1 Again

Tim Cook’s vision finds its audience.

An 11th up-day in the last 13 lifted Apple $AAPL back to the top of the global market capitalization rankings on Wednesday, at least for a little while.

AAPL closed at $213.07, rising 2.86 percent after adding 7.26 percent on Tuesday.

It took a bit, but investors, traders, and speculators have picked up what Tim Cook put down during Apple’s Worldwide Developers Conference on Monday.

Microsoft $MSFT was up 1.94 percent, enough to hold on to the No. 1 spot with a closing market cap of $3.278 trillion. MSFT first took the crown from AAPL in January.

AAPL is No. 2 at $3.267 trillion. Nvidia $NVDA, still a rocket ship, was up 3.55 percent but is No. 3 at $3.079 trillion.

Apple $AAPL was up 2.86 percent on Wednesday, June 12, 2024, and briefly surpassed Microsoft $MSFT as the world’s biggest company by market capitalization.

During his keynote speech on Monday, Cook revealed Apple’s AI strategy, which, of course, includes an “Apple Intelligence” component.

Cook also announced a partnership with OpenAI to integrate ChatGPT into the software for its voice assistant, Siri.

Analysts are excited about the potential for AI to catalyze a refreshed iPhone upgrade cycle commencing as soon as this fall.

Michael James of Wedbush Securities is among the bullish, noting that Cook has answered questions on the minds of tech investors about its ability to do new things.

“Some of the specifics about AI capabilities that are going to be integrated into the upcoming iPhones made it very apparent that there will clearly be demand for a significant upgrade cycle,” James said.

Apple $AAPL was up 2.86 percent on Wednesday, June 12, 2024, following a 7.26 percent rise on Tuesday, June 11.

Former International Monetary Fund and US Treasury Department economist Mark Dow had a broader take on AAPL and a certain approach to markets in a critical post on X.

“There are a ton of smart people who just can't buy high,” Dow writes. “They're hard-wired this way. Their disposition won't let them. They are always bearish tech and always bullish things like oil, because oil is tangible and always looks relatively cheap.”

Dow writes the Behavioral Macro blog and X feed and runs the Dow Global Advisors family office.

He adds, “These types may sound smart, but they will never be great – or even good – investors if they can't ever get themselves to buy a chart like this.

“And listening to them drone on about valuations and blame the Fed whenever reality disagrees with them is never ever going to make you any money.”

So don’t buy dogma, but especially not when it comes to AAPL.

deep dive |
June 13, 2024

AAPL Reaches No. 1 Again

CONSUMER STAPLES

Where Growth and Momentum Come Together

Here’s protection against seasonal volatility.

There’s this online retailer with a cloud computing subsidiary you might have heard of, may have even shopped there, perhaps you’re a subscriber, and come to think of it, you’re probably on one of its servers right now…

Amazon.com $AMZN is seemingly lost in the ever-growing shadows of NVDA and AAPL and MSFT and even Alphabet $GOOGL.

But, From the Research Desk, we get word that it could be a nice shelter amid potential summer volatility.

Wolfe Research chief investment strategist Chris Senyek identified AMZN among consumer staples stocks in the Russell 1000 that raised earnings guidance during the recent reporting season and also scores well on growth and momentum factors.

Amazon.com $AMZN is up 23 percent in 2024, while Deckers Outdoor $DECK is up 55.52 percent and DraftKings is up 10.33 percent.

AMZN is up a crisp 23 percent so far this year, boosted by growth at Amazon Web Services and, like almost everything else, implementation of and hope for new AI initiatives.

The stock is a big favorite among Wall Street analysts; 60 cover it, and 59 rate it a “buy.” They see AMZN rising 20 percent from here over the next 12 months.

Senyek also likes Deckers Outdoor $DECK and its brands, including Hoka and Ugg. DECK has more than doubled over the last year, including a 55 percent surge so far in 2024.

Sixteen analysts rate it a “buy” and five call it a “hold.” The consensus sees relatively limited upside from here, an average of 2 percent.

DraftKings $DKNG is another name with remarkably positive growth and momentum, according to Senyek, even after rising 17 percent this year and 54 percent over the trailing 12 months.

DKNG is rated a “buy” by 30 analysts, while six rate the stock a “hold.” The consensus sees it rising 37 percent from here.

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