Breakfast News: Softer Inflation Celebrated
January 16, 2025
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Source: Image created by JesterAI.
1. Core CPI Cools
Core Consumer Price Inflation (CPI) dropped to 3.2% in December, with the headline reading of 2.9% as expected, helping to spur on a sharp rally for stock markets. Fool analyst Seth Jayson noted the inflation report stirred optimism "among rate-cut cheerleaders ... at least for a rate cut by July."
- Stripping out food and energy: The drop in core inflation to the lowest level since August helps to alleviate some of the worry that had been building, with recent speculation that there might be no interest rate cuts this year.
- Moderate inflationary trends: The move higher in the headline number from November's 2.7% reading was partly blamed on rising energy prices, with gasoline jumping by 4.4% over the period measured. This accounted for 40% of the overall monthly CPI rise.
2. TSMC Provides Upbeat Outlook
Taiwan Semiconductor (TSM 2.44%) beat analyst expectations for both revenue and profit in the latest quarterly earnings release, as the business still rides on the AI boom. Both TSMC and Stock Advisor rec ASML Holding (ASML 0.45%) rose over 4% in pre-market trading.
- "We observed robust AI-related demand from our customers throughout 2024": Taiwan Semi's CFO Wendell Huang flagged the key driver that helped to push quarterly net income up an impressive 57% versus the same period last year. The chip manufacturer benefited from key client demand from the likes of Nvidia (NVDA 0.83%) and Apple (AAPL -0.46%).
- Up 254% over five years versus 79% for the S&P 500: The party could keep going, with the forecast for future sales and capital expenditure beating expectations. It highlights the unprecedented AI spending cycle we're in, although there is uncertainty with the ongoing U.S.-China trade issues.
3. Notable Short Seller Calls it a Day
Well-renowned short seller Hindenburg Research is disbanding according to founder Nate Anderson, after several years of going after "man-made disasters" that have cost his targets billions of dollars in share price losses.
- "We shook some empires that we felt needed shaking": Hindenburg reports focused on companies with potential fraud or mismanagement, with pieces in the past two years on Gautam Adani's empire, Jack Dorsey's Block (XYZ 5.29%), and Carl Icahn's Icahn Enterprises (IEP -0.12%). The three businessmen at one point saw their collective wealth drop by $99 billion.
- "There is not one specific thing – no particular threat, no health issue and no big personal issue.": Anderson said the all-consuming nature of his work means he sees it as a chapter in his life that it's now time to move on from. Investors will need to look for alternative sources of information for corporate red flags going forward.
4. What to Watch on Thursday
UnitedHealth Group (UNH -2.13%) will release results before the opening bell. Analysts are expecting both revenue and earnings to rise versus the same period last year, with investors looking out for the impact of the recent cyberattack and plans to deal with further rising medical costs.
- How does UnitedHealth grow from here?: There appears to be growing dissatisfaction with large healthcare companies, and any mooted legislation to perhaps break up some conglomerates in this sector would likely change the growth outlook.
- U.S. consumer in a good place: Retail Sales data for December is due out today, with the market consensus for a 0.6% rise versus the previous month, which would mark the fourth consecutive month of sales growth of at least 0.5%. This would provide further signs that the consumer is healthy as part of the broader economy.
5. Foolish Fun
Warren Buffett has said that finding great companies is like scouting basketball players: You could fuss over touches, net points, or turnover ratio, but which metric truly matters most? Starting with a player that's 7-foot tall!
What is the equivalent, singular trait you look for in a potential investment that quickly narrows down your research process? Discuss with friends and family, or become a member to hear what your fellow Fools are saying.
