🔔Week Overview: Powell & CPI/PPI
And will Uber's founder join TSLA?
Happy Belated Fourth of July!
As we approach the second week of July, seasonality seems to be matching the tune of past performances. We hit new highs in the first week of July, with SPY 0.00%↑ hitting a high of $555.05.
Key things to pay attention to this week:
July 9 & 10: Powell Testimony
July 11 & 12: CPI & PPI
July 12: JPM 0.00%↑ , WFC 0.00%↑ , and C 0.00%↑ Earnings
⭐Week Overview TLDR:
Powell’s testimony will give some more clarity on when the next rate cut will be. No matter what, we are projected to see at least one rate cut before the end of 2024. CPI and PPI numbers should reaffirm the most recent unemployment numbers that inflation is slowing down alongside a cooling down labor market.
👉Powell’s Testimony
Jerome Powell, the Chairman of the Federal Reserve, is set to testify Tuesday and Wednesday of this week (July 9 & July 10) in front of the Senate Banking Committee. As usual, I don’t expect the market to make any real moves until after his testimony and until after CPI/PPI numbers on July 11. This upcoming testimony from Powell will be pretty impactful because it is after the most recent Unemployment number report, which showed the unemployment rate increasing to 4.1% from 4.0% in May. This represents a 2.5 year high, demonstrating a slowing labor market. All the signs are now pointing towards an easing of the Fed’s monetary policy, and the market chugged higher as confidence for lowering rates grows.
Despite the anticipation of Powell’s commentary from the recent unemployment update, it’s likely Powell will reiterate the importance of seeing more confirmation that inflation is slowing down. Powell and the Federal Reserve are essentially balancing between a fine line of causing a recession and hitting their target goal of bringing inflation back down to 2%.
This aligns well with the anticipation of the Fed cutting rates at the September FOMC meeting.
Of course, because we are seeing labor market growth slowing, Powell and the Federal Reserve will be faced more criticism for holding off on cutting rates. Regardless, it seems in the grand scheme of things, the world economies will begin to all normalize somewhat within the next 12 months. We will get at least one rate cut most likely before the end of 2024.
With rebalancing and profit taking usually in September (seasonality wise), it would be fitting that the Fed announces their first rate cut at the September FOMC meeting.
Would the rate cut imply the stock market will go down?
You have to remember that the stock market is always forward looking, that’s why you’ll hear people say “a company’s great quarter performance was baked into the stock price already.” Another great example is the S&P 500 pushing to new all time highs on anticipation of rate cuts.
Now this is all educated conjecture, but it’s possible that the first rate cut will lead to a bit of a downturn in the stock market. I believe that the stars are kind of aligning in this scenario. We will most likely have the first rate cut announced at the September FOMC meeting, which is cyclically usually a bearish time for stocks with portfolio rebalancing. Of course, lowering rates in the long run is beneficial for the economy. Lowered rates leads to more liquidity since the cost of borrowing goes down and risk on assets become more enticing. My plan of action is to enter more longs after the initial reaction from the announcement of rate cuts.
We will revisit this theory in September, maybe I am completely wrong and the first rate cut just sends us to the absolute moon. But with where we are in the stock market, there is more risk going long than hedging a bit to the short side.
👉CPI/PPI
With a slowing labor market, the intended effect is that inflation should be cooling off as well. The Federal Reserve utilizes CPI as one of its key economic metrics in terms of measuring inflation.
CPI vs PPI
CPI - Consumer Price Index
PPI - Producer Price index
You can think of CPI as the measure of inflation from a consumer’s standpoint and how much things cost. Meanwhile PPI is a measurement of inflation from the perspective of producers and the prices they are able to sell at. With CPI dropping to 3.3% in May, June’s inflationary number under 3.3% would bode well for rate cuts.
👉TSLA RoboTaxi
Over the weekend, there were rumors that Elon Musk hired Uber’s founder for TSLA 0.00%↑’s RoboTaxi advancements. However, these rumors were quickly squashed by Elon Musk denying these claims with a simple “False.”
Tesla is expected to introduce its RoboTaxi line on August 8th as well as its Full Self Driving outside of the NA.
It’s interesting because the current CEO of Uber, Dara Khosrowshahi, stated Uber is positioned well to work with any and all autonomous vehicle (AV) companies. Since Uber has tools like pricing and scheduling, Dara sees it as a financially sound reason to partner up. Not sure how onboard Musk would be, especially since Tesla has already teased some of the UI their RoboTaxi’s would utilize. It seems that the company has a decent handle and are working towards a working system by themselves.
Total deliveries Q2 2024: 443,956 vehicles
439,000 was the expected number of delivered vehicles, and this beat on vehicle deliveries sent the stock soaring. This is because vehicle deliveries is the closest thing to representing sales of Tesla vehicles.
With Tesla’s stock price soaring in the past couple days after delivery numbers, a successful unveiling of more details of the RoboTaxi division on August 8th will fuel the fire for their stock price to continue upwards.
Thank you for sticking with me, I will be aiming to push out more weekly updates alongside articles about various financial events/companies. Great bthings are coming! Make sure to stay tuned :)