Wall Street Lunch: CPI Up, But No Need For Alarms Just Yet

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Annual CPI rises, but in line with expectations. (0:16) Amazon unveils its Black Friday deals. (4:02) Citi shuffles its Thematic 30 pick list. (4:51)

This is an abridged transcript of the podcast.

Our top story so far, retail inflation rose last month, but not enough to sound the sirens just yet. October headline and core consumer inflation came in exactly in line with forecasts.

Janney strategist Guy LeBas called the CPI report “pretty benign,” but noted it was the second slightly “toasty inflation print” in a row.

The Consumer Price Index rose 0.2% M/M, the same increase as in the previous three months. The annual rate came in at 2.6%, in line with expectations but up from 2.4% in September.

The index for shelter rose 0.4% M/M last month, making up more than half of the monthly all-items increase. Food also contributed to the rise, increasing 0.2%, with food at home rising 0.1% and food away from home up 0.2%.

Core CPI, which excludes food and energy, rose 0.3% M/M. On an annual basis, that comes to +3.3% vs. +3.3% expected and +3.3% in September. Super Core CPI, which is core services excluding housing, was up 0.3%.

Prices for used cars and trucks, airline fares, medical care, and recreation increased during the month, as the indexes for apparel, communication, and household furnishings and operations were among those that declined.

As far as the markets are concerned, an initial pop in stock index futures faded quickly.

Reaction in the Treasury market was more definitive, though, especially on the short end, with the 2-year yield (US2Y) moving back to 4.30%.

Odds of the Fed cutting rates by 25 bps when it meets in December jumped back above 80%, close to where they were a month ago.

Raymond James chief economist Eugenio Aleman says it “is clear that the Federal Reserve’s job is still unfinished and that markets are correct in repricing federal funds rate expectations going forward.”

“Under this environment, it is only oil and gasoline prices that are keeping inflation contained. That is, any surge in oil and gas prices could severely compromise the Fed’s inflation target. The Fed should be particularly concerned about the services less energy component of CPI.”

Skyler Weinand, chief investment officer at Regan Capital, postulates that “the Fed may have only one rate cut left in December before taking a pause from their easing path.”

“With the election behind us and the incoming administration’s fiscal policies painting a picture that may lead to increased inflation, the Fed will soon enter wait and see mode when it comes to interest rate decisions,” he said.

Among active stocks today, Groupon (GRPN) slumped as it reported Q3 revenue of $114 million, a decrease of 9.5% Y/Y. That was at the lower end of guidance.

For Q4, revenue is expected between $124 million and $131 million, or a decline Y/Y between -10% and -5% and much lower than consensus estimates of $141.93 million.

Skyworks Solutions (SWKS) shares are under the following guidance concerns. For the current quarter, it expects adjusted earnings per share of $1.57, which is less than the estimate of $1.69. It expects first quarter fiscal 2025 revenue to range from $1.05 billion to $1.08 billion, which is also below the estimate of $1.09 billion.

Morgan Stanley analyst Joseph Moore, who rates the stock Equal Weight, said: “With total Android exposure comparatively small at less than $100B a quarter, this mobile story continues to be dictated by Apple, whose revenue for September was 69% of total revenue and expected to grow 5-10% sequentially in December.”

And SoftBank’s (OTCPK:SFTBY) telecom unit will receive the world’s first AI system featuring Nvidia’s (NVDA) Blackwell chips to build Japan’s most powerful supercomputer. It also plans to use the Grace Blackwell platform for its next supercomputer.

The announcements were made by Nvidia CEO Jensen Huang during his keynote at the company’s AI Summit in Japan.

In other news of note, Amazon (AMZN) announced details on its Black Friday and Cyber Monday deals that will run during its extended holiday shopping event from November 21 to December 2.

Customers can shop millions of deals across more than 35 categories, including electronics, home, beauty, and fashion. Deals will also include some of the hottest toys of the season, including from brands like Squishmallows, Furby, and Tonies.

Beyond shopping, Amazon will also be in focus in the sports world on Black Friday as Prime Video will broadcast the Kansas City Chiefs vs. the Las Vegas Raiders.

Last year, Amazon announced that its 11-day shopping event from November 17-November 27 was its largest yet, compared to similar periods in previous years. Customers worldwide purchased more than 1 billion items on Amazon during the 11-day period.

And in the Wall Street Research Corner, Citi’s research team shook up its “Thematic 30” list, making changes that reflect shifts in market sentiment and strategic outlook.

The fundamental adjustment in Citi’s list increases exposure to infrastructure and fossil fuels and also reduces weighting towards internet-driven business models.

Baker Hughes (BKR) and Flowserve (FLS) were added with Buy rating, replacing NOV (NOV) and Q2 Holdings (QTWO).

“Both companies screen positively in our ROE decomposition work as Citi analysts model expanding margins through 2026,” they said. “Additionally, both companies could benefit from deregulation and Trump pro-drilling policy tailwinds.”

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.