Breakfast News: Rate-Cut Hopes Boost AI Rally
December 12, 2024
| S&P 500 6,084 (+0.82%) |
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| Nasdaq 20,035 (+1.77%) |
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| Dow 44,149 (-0.22%) |
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| Bitcoin $101,293 (+4.32%) |
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Source: Image created by JesterAI.
1. Tech Stocks Embrace Inflation Print
At 2.7%, headline Consumer Price Index (CPI) inflation for November was higher than last month's 2.6% figure, with groceries prices rising notably. However, the overall increase came in line with expectations, giving investors renewed confidence of an interest rate cut from the U.S. Federal Reserve next week. The core CPI figure at 3.3% means it's unchanged for three consecutive months, easing concerns of a material move higher.
- New highs for an index that's doubled in the past 4.5 years: Optimism for a rate cut announcement at the Fed's meeting on 17-18 December helped to fuel fresh record levels for the Nasdaq, pushing beyond 20,000 for the first time, while four of the 'Magnificent Seven' hit new all-time highs.
- "My prediction for inflation and interest rates is that they won't be easy to predict": Analyst Seth Jayson shared his Foolish (capital F) advice: "The most recent inflation reading shows price increases a continuing risk to the big and/or frequent rate cuts many investors are hoping for to drive returns higher ... Don't anchor investing decisions to these unknowables."
2. Adobe Illustrates Its Evolution
Adobe (ADBE 2.24%) is down over 9% in pre-market trading, despite posting revenue and earnings that were better than analyst expectations.
- Keeping pace with competition: The results showed good progress on reaching milestones for releasing AI-driven enhancements for the Firefly product family. Fool analyst Kirsten Guerra recently noted "for professional usage at scale, Firefly's expanding genAI suite is an overall value-add to Adobe's already sticky ecosystem."
- Disappointing outlook: Driving the stock down was the weak growth forecast for the current quarter. Management's revenue guidance of $5.63-$5.68 billion is below the Wall Street consensus average and only marginally ahead of this latest quarter's results. Adobe is ranked 26th in The Motley Fool's Moneyball database.
3. China Back in Focus
Hidden Gems rec Nvidia (NVDA 3.08%) is boosting hiring in China as it seeks to increase R&D capabilities with regards to autonomous driving technology, according to a Bloomberg report.
- Fertile ground for expansion: China's strong backing of domestic electric vehicle (EV) makers has made it somewhat of a hub for new EV technologies. Nvidia already has ties with the country, with $5.4 billion worth of sales in the latest quarter.
- Pivoting to a loose monetary policy: Fresh stimulus measures to support economic growth are expected later this week, as China's Central Economic Work Conference meeting draws to a close. Related stocks and commodity prices have already nudged higher amid expectations.
4. What to Watch on Thursday
Investors are waiting on results from companies including Costco (COST -0.08%) and Broadcom (AVGO 1.13%) later today, plus more economic data points.
- Since its 2009 IPO, the stock has risen over 10,500%: Rule Breakers recommendation Broadcom is due to release quarterly results after the market closes. AI-related sales are expected to help fuel a 51% surge in revenue, with investors keeping a close eye on the 2025 growth forecast.
- A second dose of inflation: Today sees November's Producer Price Index (PPI) inflation data released, with expectations for both the headline and core figures to increase from the previous month. Initial Jobless Claims for the start of December are also due, with investors getting a feel for the health of the labor market.
5. Foolish Fun
The Nasdaq began 2024 below 15,000. When do you believe the index will reach 25,000? What catalysts might drive that, or weigh on its growth? Debate with friends and family, or become a member to hear what your fellow Fools are saying!
