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How ORCL Earnings Explain the Opportunities and Risks in AI

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What’s in Today’s Report:

  • How ORCL Earnings Explain the Opportunities and Risks in AI

Futures are slightly higher following a mostly quiet night of news as investors digested the better than expected PPI report and looked ahead to today’s all-important CPI.

Economically, the only notable number was Japanese PPI which was better than expected, rising 2.7% y/y vs. (E ) 2.8% y/y.  Japanese stocks rallied 1% in response.

Today brings the highlight of the week, CPI, and expectations are as follows:  0.3% m/m, 2.9% y/y.  A better-than-expected headline will solidify rate cut expectations and push back on stagflation concerns and that should be a solid market positive.  A “hot” number, however, will put three rate cuts before year-end in doubt and almost certainly pressure stocks.

Other events today include an ECB Rate Decision (E: No Changed), Jobless Claims (E: 234K) and some notable earnings reports:  KR ($1.00), ADBE ($4.21), RH ($3.20).

 

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • MMT Levels S&P 500 Chart – September Update

Futures are solidly higher this morning thanks to strong tech earnings as traders await key U.S. inflation data.

ORCL shares are surging 30%+ in the pre-market as a measure of future revenue jumped $455B or 359% Y/Y in Q2 thanks to new AI-related cloud contracts.

Economically, Chinese CPI fell -0.4% vs. (E) -0.2% which is helping ease worries about a global resurgence in price pressures due to the trade war.

Today, trader focus will be on inflation data early with the August PPI report due out ahead of the bell (E: 0.3% m/m, 3.3% y/y).

After the open, the Treasury will hold a 4-Month Bill auction at 11:30 a.m. ET and a 10-Yr Note auction at 1:00 p.m. ET and investors will want to see ongoing signs of strong demand for Treasuries to shore up increasingly dovish Fed expectations.

Finally, earnings season continues to wind down but there is one notable company reporting quarterly results today: CHWY ($0.14).

 

Headline and Core CPI – The Important Difference

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Difference Between Headline and Core CPI: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Important Difference Between Headline and Core CPI
  • NFIB Small Business Optimism Index Contradicts the “No-Landing” Scenario

U.S. stock futures are tracking global shares lower this morning following more disappointing economic data in the Eurozone and continued pressure on the tech sector.

AAPL shares are extending yesterday’s post-product launch declines this morning, therefore, weighing on the tech sector broadly in pre-market trading.

Economically, U.K. GDP dropped to -0.5% vs. (E) -0.2% in July after hot wage data yesterday, bolstering stagflation fears while EU Industrial Production fell -1.1% vs. (E) -0.7%. Despite the recently soft data, rates markets continue to price in a 75% chance of an ECB rate hike this week.

Today, focus will primarily be on inflation data and how Treasuries react to the release: CPI (0.6% m/m, 3.6% y/y), Core CPI (E: 0.2% m/m, 4.4% y/y).

There are no Fed speakers or Treasury auctions today so a “hot” CPI report will likely spark cross-asset volatility while a Goldilocks release will setup a possible extension of the early September relief rally.

Headline and Core CPI

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CPI Preview (Good, Bad & Ugly)

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What’s in Today’s Report:

  • CPI Preview (Good, Bad & Ugly)

Futures are little changed despite solid tech earnings and more Chinese stimulus, as markets await the CPI report at 8:30 a.m. ET.

ORCL posted solid earnings and rallied 5% overnight and that’s adding to overall tech and market momentum.

Chinese authorities cut the reverse repo rate to 1.9% from 2.0%, and that move increased market expectations for future additional stimulus.

Today focus will be on the CPI report and expectations are as follows: 0.2% m/m, 4.1% y/y, Core CPI (E: 0.4% m/m, 5.3% y/y).  Additionally, “Super Core” CPI (which is core CPI less housing) will also be in focus and markets will want to see a drop to (or ideally below) 5.2% y/y.

Bottom line, markets need CPI to confirm accelerating disinflation to continue to rally, while a sticky inflation number will result in real market disappointment (although the looming FOMC decision should keep any market moves more muted than they otherwise would have been).