Why Apple Can Hold the Line on iPhone Prices, as Smartphones Defy Soaring Inflation and Keep Getting Relatively Cheaper by Jay L. Zagorsky
September 14, 2022
Introduction:
(The Conversation) Inflation in the U.S. is surging to near a 40-year high, with prices on food, fuel and pretty much everything seeming to rise more every month.
Smartphones may be an exception.
Conclusion:
With a gross profit margin of over 40% – meaning that’s how much it makes over the cost of producing all its products and services – Apple can probably afford to absorb increased chip and other component costs.
My best guess, since the smartphone market is fairly competitive, is that Apple is keeping prices the same to build market share in the U.S. – beyond the record 50% it recently hit – so the iPhone remains one of the best-selling smartphones.
So while the cost of almost everything we buy is rising, you can take some comfort in knowing at least one item is getting both better over time and not succumbing to an inflationary price spiral.
Nasdaq Drops More Than 1% as Market Comeback Stumbles, Dow Closes at Lowest Level in Two Months by Jesse Pound and Tanaya Macheel
September 15, 2022
Introduction:
(CNBC) U.S. stocks dropped in choppy trading on Thursday as investors mulled over several economic reports that showed a muddy picture of the U.S. economy.
The Nasdaq Composite shed 1.43% to close at 11,552.36, while the S&P 500 fell 1.13% to 3,901.35. The Dow Jones Industrial Average outperformed but still dropped 173.27 points, or 0.56%, to 30,961.82 for its lowest close since July 14.
Shares of Adobe weighed on the Nasdaq and S&P 500. The software stock lost more than 16% after the company announced a $20 billion deal to buy Figma. The weakness spread to other tech stocks, with Apple falling 1.9% and Salesforce sliding 3.4%.
Bank stocks were a bright spot, with Goldman Sachs and JPMorgan rising more than 1% apiece. UnitedHealth Group rose 2.6%.
Wall Street is still trying to find its footing after a surprise increase in August’s consumer price index report sparked a decline of more than 1,200 points for the Dow on Tuesday. A minor rebound on Wednesday was wiped out by Thursday’s declines.
Fed raises rates by another three-quarters of a percentage point, pledges more hikes
Source: CNBC
The Federal Reserve on Wednesday raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level. In its quest to bring down inflation running near its highest levels since the early 1980s, the central bank took its federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008, following the third consecutive 0.75 percentage point move.
Stocks had given up earlier gains after the announcement, with the Dow Jones Industrial Average dropping more than 200 points. But have since cut losses as Fed Chairman Jerome Powell discussed the outlook for interest rates. Traders have been concerned that the Fed is remaining more hawkish for longer than some had anticipated. Projections from the meeting indicated that the Fed expects to raise rates by at least 1.25 percentage points in its two remaining meetings this year. The increases that started in March and from a point of near-zero mark the most aggressive Fed tightening since it started using the overnight funds rate as its principal policy tool in 1990.
The only comparison was in 1994, when the Fed hiked a total of 2.25 percentage points; it would begin cutting rates by July of the following year. Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point of 4.6% in 2023. That implies a quarter-point rate hike next year but no decreases. The “dot plot” of individual members’ expectations doesn’t point to rate cuts until 2024. Fed Chairman Jerome Powell and his colleagues have emphasized in recent weeks that it is unlikely rate cuts will happen next year, as the market had been pricing.
Federal Open Market Committee members indicate they expect the rate hikes to have consequences. The funds rate on its face addresses the rates that banks charge each other for overnight lending, but it bleeds through to many consumer adjustable-rate debt instruments, such as home equity loans, credit cards and auto financing. In their quarterly updates of estimates for rates and economic data, officials coalesced around expectations for the unemployment rate to rise to 4.4% by next year from its current 3.7%. Increases of that magnitude often are accompanied by recessions.
Markets Seesaw After the Fed Lifts Rates by Jacob Sonenshine and Jack Denton
September 21, 2022
Introduction:
(Barron’s) The stock market wavered Wednesday after the Federal Reserve raised short-term interest rates. The central bank also signaled its intention to remain aggressive in lifting rates going forward.
The Dow Jones Industrial Average had declined 203 points, or 0.7%, while the S&P 500 had fallen 0.6%, and the Nasdaq Composite had dropped 0.7%. All three indexes were solidly in the green to start the day.
The Fed lifted the federal funds rate by three quarters of a percentage point, in line with the expectation. A slight majority of Fed members see the rate going to at least 4.5% in 2023, a touch higher than the peak fed funds rate that markets had expected prior to the announcement.
The move is sending bond yields to new heights. The rate hike, itself, was expected, but the Fed’s indication that it will remain aggressive in lifting rates is causing a sell-off in the bond market, moving yields higher.
The announcement “shows the very high level commitment on the part of the Fed to cut the inflation rate sharply from here and that is what markets are responding to,” wrote Peter Boockvar, chief investment officer of Bleakley Advisory Group.
caltrek wrote: ↑Wed Sep 21, 2022 8:14 pm
Markets Seesaw After the Fed Lifts Rates by Jacob Sonenshine and Jack Denton
September 21, 2022
Introduction:
(Barron’s) The stock market wavered Wednesday after the Federal Reserve raised short-term interest rates. The central bank also signaled its intention to remain aggressive in lifting rates going forward.
The Dow Jones Industrial Average had declined 203 points, or 0.7%, while the S&P 500 had fallen 0.6%, and the Nasdaq Composite had dropped 0.7%. All three indexes were solidly in the green to start the day.
The Fed lifted the federal funds rate by three quarters of a percentage point, in line with the expectation. A slight majority of Fed members see the rate going to at least 4.5% in 2023, a touch higher than the peak fed funds rate that markets had expected prior to the announcement.
The move is sending bond yields to new heights. The rate hike, itself, was expected, but the Fed’s indication that it will remain aggressive in lifting rates is causing a sell-off in the bond market, moving yields higher.
The announcement “shows the very high level commitment on the part of the Fed to cut the inflation rate sharply from here and that is what markets are responding to,” wrote Peter Boockvar, chief investment officer of Bleakley Advisory Group.
• The S&P 500 Index dipped 1.7% Friday to end the trading day well in bear-market territory at 3,693, just shy of its June 16, 2022 low of 3,667.
• …WTI oil declined 5.4% to $79 per barrel (a low last seen in January 2022) as fears of a hard landing in the US heightened and as the dollar met multi-year highs relative to other currencies due to the relative strength of the US economy.
• The fight against global inflation led many central banks to raise interest rates nearly 650 basis points this week, according to FactSet, showing a willingness to push ahead into an economic slowdown to win the battle. Meanwhile, Japan's decision to hold rates flat drove the need for currency intervention. Subsequently, today in the UK, the finance minister's announcement of significant tax cuts to stimulate growth led to growing concerns regarding the level of funding these measures require when rates are headed higher. UK markets responded with a sharp pull-back; the British pound tumbled to $1.09 (a 37 year low) while UK bond yields surged the most in years. Markets priced in a Bank of England rate increase of 100-basis-points in November, following the Bank of England's 50-basis-point increase yesterday.
• As the end of the third quarter nears, we believe U.S. equity markets will continue to weigh the effect of elevated inflation, higher rates, and slowing growth on corporate earnings and valuations.
• All 11 S&P 500 sectors declined, with Health Care (-0.5%) and Utilities (-1.2%) the relative outperformers, while Consumer Discretionary (-2.3%) and Energy (-6.7%) underperformed.
Spain Plans Tax Hike on Millionaires to Help Those in Need September 23, 2022
Introduction:
MADRID (AP via Courthouse News) — Spain’s Socialist-led coalition government is planning a temporary higher tax rate on the richest 1% of the country from next year, in addition to its windfall taxes on large energy companies and banks.
“We are proposing a redistribution of the effort, among those who have the most, to fund the welfare state, which is everybody’s,” Socialist Prime Minister Pedro Sánchez said in a speech Friday.
Finance Minister María Jesús Montero says the measure targets only millionaires. The expected increase in tax revenue will be used to alleviate hardship brought by higher prices for energy and food, she says. The annual inflation rate climbed to 10.5% in Spain last month.
The exact increase and scope of the tax measure are still being worked out, the government says.
The Socialists’ junior coalition partner, Unidas Podemos (United We Can), is pushing for the new tax to be permanent.
Inflation hits record 10% in 19 EU countries using euro
The Associated Press
September 30, 2022, 7:10 AM
FRANKFURT, Germany (AP) — Inflation in the European countries using the euro currency has broken into double digits as prices for electricity and natural gas soar, signaling a looming winter recession for one of the globe’s major economies as higher prices undermine consumers’ spending power.
Consumer prices in the 19-country eurozone rose a record 10% in September from a year earlier, up from an annual 9.1% in August, EU statistics agency Eurostat reported Friday. Only a year ago, inflation was as low as 3.4%.
Price increases were beyond what market analysts had expected and are at their highest level since record-keeping for the euro started in 1997. Energy prices were the main culprit, rising 40.8% over a year ago. Food, alcohol and tobacco prices jumped 11.8%.
“I’m already looking a lot more for special offers,” said Myriam Maierhofer, a 64-year-old trainer and coach for staff development, who was shopping Thursday at weekly outdoor market in Cologne, Germany. “I don’t throw away so much so quickly, so I’ve become more economical with food. And this morning, I also turned down the heating in the rooms again.”
'Evidence of a slowdown': US consumers spurn big-ticket items like cars, couches, cruises
Mehr Bedi
Fri, September 30, 2022 at 1:36 PM · 2 min read
(Reuters) - U.S. consumers are exhibiting fragility ahead of the peak period for corporate results next month, as some are struggling to pay bills and others are slowing purchases of cars, sneakers, and household goods, the week's earnings show. ... Data released on Friday showed U.S. consumer spending increased more than expected in August, but aggressive interest rate hikes from the Federal Reserve as it battles stubbornly high inflation are slowing demand.
{snip}
"We are seeing evidence of a slowdown in spending across a wide swath of the consumer space, with the combination of inflation and rising interest rates pressuring household budgets," said Garrett Nelson, VP and senior equity analyst at CFRA Research. ... Big-ticket items like furniture and cars that are typically financed have been hit particularly hard, he said.
Rent-A-Center Inc, a retailer that rents televisions, sofas and appliances to lower-income customers, cut its profit forecast for the third-quarter on Thursday, citing a weakening economy.
{snip}
Used-car retailer CarMax Inc on Thursday said higher interest rates and inflation were starting to take a toll on vehicle demand, a warning that spooked investors in the wider autos sector.
US job openings post biggest drop in nearly 2 1/2 years in August
Tue, October 4, 2022 at 10:14 AM
WASHINGTON, Oct 4(Reuters) - U.S. job openings fell by the most in nearly 2-1/2 years in August, though staying at high levels as demand for labor remains fairly strong, which could keep the Federal Reserve on its aggressive monetary policy tightening path.
Job openings, a measure of labor demand, dropped 1.1 million to 10.1 million on the last day of August, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday.
August's decline was the largest since April 2020, when the economy was reeling from the first wave of the COVID-19 pandemic. Data for July was revised lower to show 11.170 million job openings instead of 11.239 million as previously reported.
Economists polled by Reuters had forecast 10.775 million vacancies.
(Morgan Stanley)
What Happened in the Markets?
• The S&P 500 Index rose 2.6% Monday to close at 3,678. With the rally, the index is now down 22.8% year to date.
• Stocks surged on Monday as the first day of the fourth quarter commenced. After closing the month of September down 9.3%, the S&P 500 Index recorded its best day since July. It appeared short-term oversold conditions contributed to today's bounce, as just 3% of S&P 500 constituents traded above Friday's 50-day moving averages (DMA). This compares with over 90% of constituents trading above their 50-DMA's in mid-August. Additionally, sharply lower interest rates and rallying commodity prices helped buoy sentiment Monday.
• Reports of OPEC+ plans to scale back production helped WTI oil rally nearly 5%.
• All 11 S&P 500 sectors improved, with Energy (+5.8%) and Materials (+3.4%) the relative outperformers, while Consumer Staples (+1.7%) and Consumer Discretionary (+0.2%) underperformed.
• As of the 4pm equity market close, the 10-year Treasury yield declined to 3.66%. Gold prices gained over 2% to above $1,700 on the back of lower interest rates. The US Dollar Index modestly declined.
caltrek’s comment: In all honesty, I missed posting a couple of One Percent Swing Reports in which the market went down. In such cases, pay attention to “the index is now down 22.8% year to date” which is typically a part of the first bullet.
America’s national debt has now surpassed $31 trillion
By Alicia Wallace, CNN Business
Published 6:31 PM EDT, Tue October 4, 2022
Minneapolis (CNN Business) — America’s national debt has climbed north of $31 trillion for the first time, a milestone that comes at a time of historically high inflation, rising interest rates and growing economic uncertainty.
The nation’s total public debt outstanding closed at $31.1 trillion on Monday, according to Treasury Department data published Tuesday.
The US government went on a borrowing spree during the Covid-19 pandemic to help shore up the nation’s economy as the deadly virus upended lives, labor markets and supply chains. Outstanding debt has climbed nearly $8 trillion since the beginning of 2020. And it has jumped by $1 trillion in just eight months.
The borrowing that occurred under the Trump administration and early on in the Biden administration came at a time when interest rates were low. Now, during a period of historically high inflation and a series of steep interest rates hikes by the Federal Reserve in its battle to tame rising prices, borrowing costs are far higher.
US mortgage rates hit 16-year high
Source: The Hill
Mortgage rates reached a 16-year high last week, further dampening demand from home buyers, according to data from the Mortgage Bankers Association released Wednesday.
The 30-year fixed mortgage rate rose to 6.75 percent in the final week of September, the highest figure since 2006. Mortgage rates have climbed a whopping 1.3 percentage points over seven straight weeks of increases.
Mortgage applications fell 14.2 percent from the week prior, according to the MBA, amid rising mortgage rates, which stem from the Federal Reserve’s persistent interest rate hikes aimed at fighting inflation.
“The steep increase in rates continued to halt refinance activity and is also impacting purchase applications, which have fallen 37 percent behind last year’s pace,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.
Jobs report: U.S. payrolls grew by 263,000 in September, unemployment rate falls to 3.5%
Source: Yahoo! Finance
Job growth slowed for a second month in September as a series of supersized interest rate hikes permeated the U.S. economy, but the softer nonfarm payroll gain is still unlikely to deter policymakers from aggressive monetary action to fight inflation that remains at a decades-high. Here are highlights from the latest monthly jobs report released by the Labor Department on Friday, compared to consensus estimates from Bloomberg.
Non-farm payrolls: +263,000 vs. +255,000 expected
Unemployment rate: 3.5% vs. 3.7% expected
Average hourly earnings, month-over-month: +0.3% vs. +0.3% expected
Average hourly earnings, year-over-year: +5.0% vs. +5.0% expected
The cool-off in September employment data is a welcome sign for Fed officials trying to tamp down an extraordinarily tight labor market that has placed upward pressure on wages and contributed to soaring prices. However, the print remains well above estimates and leaves room for the U.S. central bank to proceed with hefty rate increases. “Today’s job number is a hawkish reading, with almost all the elements of the report moving in the wrong direction for the Fed," Principal Global Investors Chief Global Strategist Seema Shah said in a note.
Stock futures plunged and Treasury yields spiked immediately following the report. "Payrolls were broadly in line with expectations but, importantly in this good news is bad news: markets were hoping for a downside surprise today," Shah added. "Instead, the number only confirms that the Fed needs to hike rates by a fourth consecutive 0.75% in November.” Despite the drop off in jobs added during the month, the unemployment rate fell to 3.5%, while economists had expected the figure to hold at 3.7%. The labor force participation rate in September ticked down only slightly to 62.3% from 62.4% the prior month.
Democrats Say Bill to Kill Price Controls Shows GOP 'Wants You… to Spend More' on Meds by Jessica Corbett
October 7, 2022
Introduction:
(Common Dreams) Democratic leaders on Friday blasted a new Republican bill that would roll back modest prescription drug pricing reforms that U.S. President Joe Biden recently signed into law.
Republican Sens. James Lankford (Okla.), Mike Lee (R-Utah), Cynthia Lummis (Wyo.), and Marco Rubio (Fla.) introduced a bill that would repeal the medication-related provisions—including Medicare drug price negotiation—of the Inflation Reduction Act (IRA), which Democrats sent to Biden's desk without GOP support using the budget reconciliation process.
In a statement slamming the GOP's so-called Protecting Drug Innovation Act, White House Press Secretary Karine Jean-Pierre invoked former President Donald Trump's Make America Great Again (MAGA) campaign slogan.
"Today, MAGA congressional Republicans introduced legislation that puts special interests before working families," she said. "Their new bill is a giveaway to Big Pharma at the expense of seniors by ending Medicare's new ability to negotiate lower drug prices. Their vision for the country is extreme and out of touch with working families across the country."
caltrek’s comment: This is yet another example of how the Republicans love to complain about inflation, and yet are unwilling to do anything about it except resort to the same old tied rhetoric regarding tax breaks and trickle down economics. We have seen a recent example of that in Great Britain. Notice how the “smart money” (investors) reacted to that nonsense there.
• The S&P 500 Index declined 2.8% Friday to close at 3,640. With the sell-off, the index is now down 23.6% year-to-date.
• Stocks extended the losing streak to three straight sessions on Friday. However, even with the recent downside, the S&P 500 Index ended the week higher for the first time in a month. Nonfarm payrolls were above expectations today, while the unemployment rate declined to 3.5%, the prior cycle low. A better-than-expected employment report caused markets to adhere to the narrative that the Federal Reserve will continue its swift hawkish tightening path. As a result, interest rates rose across the curve today.
• Next week Q3 earnings season will kick off with several large cap banks scheduled to release results.
• All 11 S&P 500 sectors declined, with Energy (-0.7%) and Consumer Staples (-1.6%) the relative outperformers, while Consumer Discretionary (-3.5%) and Information Technology (-4.1%) underperformed.
• As of the 4pm equity market close, the 10-year and the 2-year Treasury yields rose to 3.89% and 4.31%, respectively.
Core US Inflation Rises to 40-Year High, Securing Big Fed Hike
Reade Pickert
Thu, October 13, 2022 at 8:37 AM · 2 min read
{snip}
A key gauge of US consumer prices advanced to a 40-year high in September, underscoring persistent, elevated inflation that’s squeezing households and pushing the Federal Reserve toward another steep interest-rate hike. ... The core consumer price index, which excludes food and energy, increased 6.6% from a year ago, the highest level since 1982, Labor Department data showed Thursday. From a month earlier, the core CPI climbed 0.6% for a second month. ... The overall CPI increased 0.4% last month, and was up 8.2% from a year earlier. The median forecasts in a Bloomberg survey of economists had called for a 0.4% monthly rise in the core and a 0.2% gain in the overall measure. {snip} Shelter, food and medical care indexes were the largest of “many contributors,” the report said. Gasoline declined.
The report stresses how high inflation has broadened across the economy, eroding Americans’ paychecks and forcing many to rely on savings and credit cards to keep up. While consumer price growth is expected to moderate in the coming months, it’ll be a slow trek down to the Fed’s goal.
Policy makers have responded with the most aggressive tightening campaign since the 1980s, but so far, the labor market and consumer demand have remained resilient. The unemployment rate returned to a five-decade low in September, and businesses continue to raise pay to attract and retain the employees needed to meet household demand.
On the heels of a solid jobs report last week, the CPI report likely cements an additional 75-basis point interest rate hike at the Fed’s November policy meeting. Traders solidified bets for the jumbo-sized hike next month. Stock futures fell sharply and Treasury yields rose following the report.
US Jobless Claims Reach Six-Week High in Wake of Hurricane Ian
By Augusta Saraiva
October 13, 2022, 12:34 PM UTC | Updated on October 13, 2022, 12:39 PM UTC
Applications for US unemployment insurance increased to a six-week high, driven in part by a jump in Florida claims in the aftermath of Hurricane Ian.
Initial unemployment claims rose by 9,000 to 228,000 in the week ended Oct. 8, Labor Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for 225,000 new applications.
Even in What Seems Like a Bear Market, Stocks Can Go UP by Matt Phillips
October 14, 2022
Introduction:
(Axios) Sometimes Wall Street makes sense. Other times, it doesn’t. Thursday was the latter.
The big picture: Stocks rallied sharply, despite a worse-than-expected inflation report that all but ensured the Fed's relentless rate-hiking would continue.
• As we’ve written about all year, rate hikes have been the key driver of what, through Q3, has been the worst year for the stock market since 2002.
• And the S&P 500 did, in fact, plunge after the inflation report, opening down 2%. However, it then boomeranged, closing up 2.6%.
Context: Yes, stocks go up and down all the time. But the size of the swing from the opening tick was highly unusual.
CEOs Are Literally Bragging About Raising Prices by Jim Hightower
October 12, 2022
Introduction:
(Other Words)Today, CEOs of big corporations are playing the tricky “Inflation Blame Game.”
Publicly, they moan that the pandemic is slamming their poor corporations with factory shutdowns, supply chain delays, wage hikes, and other increased costs. But inside their boardrooms, executives are high fiving each other and pocketing bonuses.
What’s going on? The trick is that these giants are in non-competitive markets operating as monopolies, so they can set prices, mug you and me, and scamper away with record profits.
In 2019 for example, before the pandemic, corporate behemoths hauled in roughly a trillion dollars in profit. In 2021, during the pandemic, they grabbed more than $1.7 trillion. This huge profit jump accounts for 60 percent of the inflation now slapping U.S. families!
Take supermarket goliath Kroger. Its CEO gloated last summer that “a little bit of inflation is always good in our business,” adding that “we’ve been very comfortable with our ability to pass on [price] increases” to consumers.
