Breakfast News: Oil's Inflation Impact

Breakfast News: Oil's Inflation Impact

Source: Image Created by Jester AI.

1. Crude Oil Raises Stagflation Fears

The conflict between Israel and Iran led to oil prices soaring 7% on Friday. The WTI Crude price is up 11% over the past week, though futures have fallen back 0.7% this morning. Oil stocks rose in step, with ExxonMobil (XOM -0.18%) lifting 7.5% in a week and Chevron (CVX -0.21%) gaining 4.1%.

• "A sustained $10 increase in oil prices is expected to increase inflation by 0.4% and lower GDP by 0.4%": Apollo Global Management's (APO 1.77%) chief economist Torston Slok says oil is fueling U.S. stagflation fears, adding to the effect expected from import tariffs.
• G7 summit starts today: S&P 500 and Nasdaq futures rose 0.4% this morning on trade talk hopes. The S&P closed down 0.4% last week, with the Nasdaq dipping 0.6%. Markets are closed on Thursday for the Juneteenth holiday.

2. Fed Faces Two-Way Pressure

The Federal Reserve interest rate decision is Wednesday, due 2 p.m. ET. The latest Summary of Economic Projections will be out – giving forecasts on GDP, inflation, and unemployment – together with the Fed's "dot plot" showing interest rate expectations. Fed chair Jerome Powell's press conference will follow at 2:30 p.m.

• "There's a chance you'll have stagflation": JPMorgan (JPM 2.31%) CEO Jamie Dimon spoke to the Fed's dilemma, as high interest rates help to control inflation but can also damage economic growth. President Trump now says he wants a cut of 2%.
• Core retail sales rose 4.2% year over year in May: The National Retail Federation's estimate is optimistic ahead of Tuesday's official Retail Sales update, expected to show a 0.6% fall following April's 0.1% rise.

3. This Week's Key Earnings To Watch

Lennar (LEN 0.37%) will report its second quarter after today's market close. The homebuilder beat revenue estimates last time with a 4.4% rise over the same quarter the previous year. But this time, with interest rates still high, analysts expect a 5.5% fall year over year to $8.29 billion, with adjusted earnings of $1.94 per share down 42% on last year's Q2.

• "An elevated level of uncertainty, including in our federal business": Hidden Gems recommendation Accenture (ACN 0.70%) will post Q3 earnings on Friday, after voicing concerns due to cuts in government spending at Q2 time, though it did beat estimates for revenue and earnings.
• Up 43% since July 2023 Dividend Investor rec: Friday also brings a Q1 update from Kroger (KR 0.32%), after the groceries giant posted a Q4 earnings beat even though revenue fell short. At the time, the company predicted identical sales (excluding fuel) growth of 2%-3% in fiscal 2025. There's a 1.95% forecast dividend yield.

4. Southwest Partners With Honeywell to Boost Safety

Southwest Airlines (LUV 1.81%) has installed a new cockpit alert system in nearly all of its 800 airplanes, The Wall Street Journal reports. The system, designed by Honeywell (HON 0.22%), warns pilots if they're on the wrong runway, for example.

• An estimated annualized return of -11% to 9% for LUV: After a number of incidents, Southwest says the system could have prevented a close call in March when an air-traffic controller diverted one of its planes from a taxiway at Orlando International Airport.
• Boeing down 5% in the past week: The news comes after Boeing (BA 0.90%) stock was hit by last week's Air India crash, though the cause is currently unknown.

5. Your Take

e.l.f. Beauty (ELF 1.69%) is up 60% in just a month, boosted by a price increase, an acquisition, and improved trade talks between the U.S. and China (its primary source of goods).

What other stocks have shot up considerably in the last month or so, which you still believe can easily beat the market over five years from now, and why? Discuss with friends and family, or become a member to hear what your fellow Fools are saying.