When Joe Biden told Americans on Thursday (9 December) that the cost of goods and energy was starting to ease, but this ‘wouldn’t necessarily be reflected’ in Friday’s CPI inflation data, he wasn’t joking. Inflation hit an almost four-decade high 6.8% in November, up sharply on October’s 6.2%, leaving investors with plenty to chew over.
This was in-line with the consensus and, thankfully for markets, no worse but the fact that price hikes are broadening across the CPI basket can be put down as ‘got away with it,’ according to Hinesh Patel, portfolio manager at Quilter, and left investors befuddled on the final trading day of the week. Major US markets first fell, then recovered as the impact sank in.
This piles pressure on the Fed to accelerate its tapering of asset purchases, and in this pressure cooker, the Fed isn’t afraid to be more hawkish, with markets already pricing in three interest rate hikes next year.
US markets this week | ||
| S&P 500 | Nasdaq Composite | |
| 3.22% | 2.93% | |
| Dow Jones | Russell 2000 | |
| 3.58% | 2.27% | |
| Source: Google Finance, prices at 7pm UK time, 10 December | ||
The balancing act now is communication to markets needed to not upset the precious S&P 500 green arrow. There’s been little worry on that score this week, with US markets enjoying their best day since March on 7 December, and the best two-day gain for the S&P 500 since May.
This demonstrates that investors are apparently happy to discount Omicron fears, deciding that the variant won’t be that bad for the global economy. But seasoned investors know all too well that the market mood music can change on a six-cents, For now rotation magic can seemingly keep the wheels turning in the right direction and dip buyers are still aplenty.
Stock of the week: Oracle
It’s a tech name that smacks of a bygone age but new life has been breathed into the database company thanks to its belated Cloud shift. Shares of the software company soared 16% on the back of better-than-expected second quarter results, beating market expectations with solid growth from its infrastructure and applications cloud businesses. The stock has rallied more than 60% so far this year and is almost 150% up on its dot com bubble peak.
Reported this week: GameStop
The meme stock dropped nearly 15% this week, hitting a four-month low, in the wake of the videogame retailer’s third-quarter report. The company reported late Wednesday wider than expected losses for the quarter to 30 October 2021 as sales rose above forecasts but cost of sales outpaced revenue growth to knock gross margins by nearly three percentage points. Wedbush analyst Michael Pachter is still ‘quite optimistic’ that GameStop can crank out a profit next year, but that the share price remains ‘completely disconnected’ with fundamentals.
Reported this week: Costco
Costco shares jumped nearly 10% after the wholesale retailer posted its latest quarterly numbers soared beyond forecasts. The company saw earnings of $2.98 per share on revenue of $50.4 billion, well beyond the $2.59 per share and $48.9 billion predicted by analysts. Membership fees, closely followed because that’s where the majority of Costco’s profits come from, increased nearly 10% year-on-year to $946 million, beating estimates of $929.6 million.
Big movers this week | |||
| Oracle | 16.5% | Moderna | -5.6% |
| Ford Motor | 8.0% | Etsy | -4.6% |
| Broadcom | 7.4% | Southwest Airlines | -4.4% |
| Costco | 6.9% | Penn National Gaming | -3.3% |
| General Motors | 4.8% | Monolithic Power Systems | -3.1% |
| Prices at 7pm UK time, S&P 500 10 December | |||
