September CPI dims stocks, Fed's rate cut path: Morning Brief

On today's episode of Morning Brief, Hosts Seana Smith and Brad Smith break the latest Consumer Price Index data and analyze the market open.

The latest Consumer Price Index (CPI) report shows prices rose 0.2% in September, which was more than the 0.1% Bloomberg consensus estimate. Year-over-year prices rose 2.4% versus the 2.3% estimate. When stripping out the more volatile food and energy components, prices rose 0.3% month-over-month and 3.3% year-over-year, both higher than economists were expecting.

US stocks (^DJI, ^IXIC, ^GSPC) opened Thursday's session lower as Wall Street digested the hotter-than-expected CPI report. The Nasdaq Composite fell by over 0.40%.

Yahoo Finance Senior Reporter Alexandra Canal and Catalysts Anchor Madison Mills break down inflation's impact on shelter pricing and auto insurance costs.

Yardeni Research Chief Markets Strategist Eric Wallerstein believes that following September's CPI print, the Federal Reserve doesn't have to cut rates during the rest of 2024. He explains, "Unfortunately, we're going to get some weather impacts in the jobs data in the coming months. But I think as long as inflation isn't getting towards 2% so dramatically, and there's no crisis that unfolds in the labor market, which I don't foresee, I don't think there's anything that gives the Fed reason to cut further this year," Wallerstein explains.

Omair Sharif, Inflation Insights president, adds, “Admittedly, some things were hotter than expected today. But I think some of that stuff is more likely than not to just be a one-off in this particular month." He continues, “Given that hot print today, even though I do think some of this stuff will reverse course pretty quickly, I think that's if you were thinking 50 bps [cut at the Fed’s November meeting] that's pretty much been wiped out at this stage… I think the Fed still wants to progress slowly here. So I think 25 [bps cut] is the base case for November.”

Marvin Loh, State Street senior global macro strategist discusses how the tech sector (XLK) will be impacted by the Federal Reserve's rate-cutting cycle. Loh believes that tech will be "one of the bigger beneficiaries" of the Fed's interest rate cuts. He notes that the sector has demonstrated strong earnings growth, and it is one of the few areas of the market that hasn't experienced significant revisions. "So that kind of stronger story is still out there. You know, quality growth generating cash and really defendable moats are kind of where you want to put some of your long-term bets," he tells Yahoo Finance.

Delta Air Lines (DAL) fell short of estimates for the airline operator's third quarter, posting profits of $1.50 per share ($1.52 was expected) and revenue of $14.59 billion ($14.68 billion expected). Delta CEO Ed Bastian cited the CrowdStrike (CRWD) outage to have shaved off $0.45 from the company's adjusted earnings per share. Bloomberg Intelligence analyst George Ferguson explains, "The results are a little bit muddy from CrowdStrike, but labor costs were up 13% year-over-year. So, labor continues to be a big challenge for the airlines. And again, with this revenue, this unit revenue declining, that makes things more challenging." Ferguson highlights the struggle an airline like Delta will face as it strives to grow in the marketplace.

Oil prices tick higher (CL=F, BZ=F) as Hurricane Milton made landfall in Florida and amid ongoing geopolitical tensions in the Middle East. Andy Lipow, president of Lipow Oil Associates, explains, “The oil market is pricing in a greater probability of a war between Iran and Israel that would result in a supply disruption. And I should point out that since last year, when Hamas invaded Israel, there has been no oil supply disruption. But prices recently have been rising of a fear that one might happen.”

This post was written by Melanie Riehl

Video Transcript

Welcome to Yahoo Finance Live.

I'm Sean Smith alongside Brad Smith.

We have breaking inflation data out this morning.

September CP I print on a month over month basis.

CP I coming in slightly higher than what the street was looking for.

An increase of 2/10 of a percent on a month over month basis.

That core number on a month over month basis also coming in slightly hotter than expected.

A rise of 3/10 of a percent that was also in line with what we saw the prior month reading.

We take a look at the headline number here coming in at 2.4%.

Again, a touch hotter than what the street was looking for.

And the same is of course true for the core CP I.

And that year over year basis coming in at 3.3% the expectation was for a rise of 3.2%.

So a bit more of the inflationary pressures than we had been expecting.

Our economists had been expecting going into this print.

And again, Brad, when we talk about what exactly this means for the markets, we're seeing a bit of a reaction your play out in real time in the futures market.

But of course, a lot of questions about what ultimately this means for the fed, given the fact that this was a slightly hotter print than expected.

Yes, we were just flat, just barely to the downside right before this report.

And so just a smidge of a move to the downside off the back of this, some of the indexes here within this report, the index for Shelter that rose 2/10 of a percent in September.

And it wasn't the biggest contributor.

However, it combined with food actually did account for over 75% of the monthly all items increase that index for food that I mentioned a moment ago that actually increased 4/10 of a percent.

And so those two combined, as I mentioned, really contributing the vast majority of the monthly all items index.

You also had people who were going out getting some, some drinks with the friends or just getting some food away from home that was up by about 4/10 of a percent.

And so you are contributing to that if you decide to go out, watch your local NFL team compete at a bar or at any type of dining establishment, all those things considered food away from home index that rose 3/10 of a percent.

Food at home index that increased 4/10 of a percent.

And the energy index actually fell 1.9% over the month that after it had declined by about 8/10 of a percent the preceding month here.

And joining us now to continue this conversation around the September Consumer Price Index print.

We've got Yelena Malayev who is the senior economist over at KPMG.

And then you've also got Eric Wallerstein joining us here today, Yardeni uh Yardeni Research Chief Market strategist.

Great to have you both here with us this morning.

You know, Yelena, as you look through this print here and, and get a sense of where we saw a slight tick higher but not too far off of what the expectations were, the markets are reacting what's going through your mind right now.

Uh The same thing that has been going through my mind for the last few months.

This journey towards that soft landing uh is going to be bumpy, inflation is sticky uh especially when it comes to prices for shelter costs.

And then now we have higher spending away from home.

This just goes to show that that revision to GDP, that revision to incomes.

We got a few weeks back shows the resilience and the strength of the consumer.

We have higher incomes, higher propensity to consume more likely to go out.

And then now with the devastation of hurricanes that a drop in energy prices could be short lived and we could have a pretty rough fourth quarter when it comes to uh inflation coming down enough for the fed to be happy to get to its 2% target.

Eric, when you take a look at this number, I'm taking a look at the Federal Fund futures right now.

Not too much of a movement here, still about 80% of traders pricing in a 25 basis point cut at the next meeting.

But Eric, when you see a print like this slightly hotter than expected, does this then tell you that the fed's fight against inflation isn't done?

And actually maybe it makes sense for the Fed to stay on the sidelines at the next meeting.

Yeah, I mean, I think the bond market has been telling you that for the past couple of weeks, I think the, the fed's pivot to easing this 50 basis point cut and very dovish forward guidance was certainly premature and this quote unquote mission accomplished um based on the jobs report, the GDP revision and now today's data, um it just doesn't line up so break, even inflation has been rising, the 10 year yield is near 4.1%.

That's off of 3.6 in just a couple of weeks.

It's a very dramatic move and I think the Fed doesn't cut the rest of the year.

I think the Hawks who preferred 25 basis points last meeting have a lot more sway in November and I think the fed stands stands pat for the rest of the year.

I think we're just waiting for some calibration on the same me fed watch tool.

But as of this morning, we were taking a look at this and 20% right now, uh, uh, of, of the, well, the probability, at least 20% probability that many might see exactly what you're calling for here and, and no cut.

And what does that put on the table in terms of December?

Where would the data continue to need to trend to, in order for a cut to be back on the table in that meeting?

Yeah, I think unfortunately, we're going to get some weather impacts uh in the jobs data in the coming months.

Um But I think as long as inflation, you know, isn't getting towards 2% so dramatically and there's no crisis um that unfolds in the labor market which I don't see, I don't think there's anything that um gives the fed reason to cut further uh this year, the, the jobs and GDP data really caught them offside.

If you look at the minutes, everyone was super worried about the labor market.

And it's very clear that uh those concerns were a bit misguided, Elena, when you take a look at the categories that Brad had been mentioning before, of course, shelter continuing to pressure inflation, but also food really playing a role here in this upward movement that we did see.

I'm curious just how you're looking at that and I guess does that then point to the fact that maybe this slightly than expected.

A hotter print might be a bit more serious here for the Fed.

Definitely.

So components like food and energy are of course, outside of the fed's purview monetary policy can't uh support uh growing more food, creating more supply in the energy market.

So that's why we tend to look at the core measure which has been sticky, a lot of it due to uh shelter inflation.

But we know shelter inflation is on its way down just based on how lagged the shelter inflation indicator inside the index is real time.

Data shows us much more softening in rent, much more softening in uh home price values on an aggregate basis.

So we do expect that shelter component to continue to come down, that's just already baked into the data.

And I do agree that there's more a reason for folks on the fed to disagree with any more cuts to come.

But we do believe that, you know, based on Jerome Powell's comments just last week that they're not looking to uh bring us back down to any sort of level uh consistent with the recession.

We're definitely not entering a recession, but they are looking to recalibrate policy.

They do realize that real rates are higher than neutral.

They want to come back down to that neutral.

It will take some time.

There's no need to rush it.

We don't want to reignite inflation if we don't have to, but there's already some deflationary pressures in the pipeline that could help us out.

Now, the risks are to the upside based on things like food and energy which the Federal Reserve just cannot control is recalibration in policy also recalibration in what the real target for inflation that they have that 2% target, that they've set out what that should be.

No, not at this moment.

We do know that there is going to be a framework review uh at some point next year.

But the idea of moving the goalposts when we haven't even accomplished the task of getting this bout of inflation back down to target uh is just not something that they're considering, but definitely thinking about where real rates, real neutral rates should be.

I think has been a discussion.

We've seen it in the summer of economic projections, that long term fed funds rate is trending higher from uh pre pandemic levels, but it's just going to take some time to get there.

But the inflation target will not be moved.

Eric, would you take a look at the fact that inflation coming in a bit higher than expected?

We also had claims data out this morning, 258,000.

That was a huge jump here to the upside.

Of course, hurricane playing a bit of a factor within this.

But Eric I'm curious just in terms of what the FED is focused on what the fed is most worried about.

How would you stack up inflation versus the jobs market.

Yeah, I think the initial claim spike was kind of expected.

Uh It's the same thing we saw with Hurricane Barrel, but I really don't think uh disinflation is, is so guaranteed as everyone expects.

Um shelter inflation on a three month basis, annualized is right around 5%.

Uh It's been increasing for several months and I think the fed has shifted the goalposts.

I think they're much more focused on the labor market.

Uh Jerome Powell, chair, Chair Powell at Jackson Hole completely shifted to that side of the dual mandate and decided they're gonna cut off any tail risk of unemployment rising.

Uh I think it's very clear that the FED is primarily concerned with the labor market and not inflation.

So sure the target is 2% and it's not gonna move in terms of where it's set or what policymakers talk about.

But I think the Fed now tolerates higher inflation around 2.5%.

Um Much more, much more than they used to.

This whole average inflation targeting is coming back despite a 30 to 40% rise in prices cumulatively over just a few years.

So I think it points to bearish long bonds, which is very clear, it's already been happening.

I think it points to more macro volatility and for investors.

It think it makes you think about how am I hedging my, you know, primarily long stock portfolio if um bonds are gonna succumb to this higher inflation, higher volatility regime.

Just lastly what we have here, Eric, what, what is the trade coming off of a report like this?

Especially if you're thinking about some of the the tech move that we're watching right now with the NASDAQ, that's down the most on a percentage basis.

Fractional is may be XL K also moving down by about half a percent right now.

If we do see effect that cuts at a slower pace than the markets that anticipating even coming into this print and into this most recent spate of economic data.

What does that do to that tech trade, some of those really popular chip names even that have been off to the races.

Mhm.

Yeah, I'm not so worried.

I think the trade started, um, after the fed cut by 50 basis points, I mean, think about it.

We came into the year expecting seven cuts.

We didn't get any until September.

As long as the economic data is very strong and that's why we're not getting cuts.

It should be ok.

I mean, we hit record highs in the stock market yesterday.

So, um, I think the fed funds futures market pricing in us cutting all the way to 2.8% just in the next 12 months.

Uh, on September 19th was, um, crazy.

I guess it made sense from a hedging perspective, but it was certainly fable.

I think the 10 year at 3.6% was fable.

And I think from here we're still long stocks, we're still encouraged by this bull market.

Um, but from a bond perspective, I, I don't think the, I don't think it's the same hedge, the same hedging vehicle that it used to be, but I'm definitely not recommending to, to sell or underweight.

Uh, us, we're very bullish on large caps and particularly the S and P 493 as some of those productivity growth growth gains um filter into some of the other large caps.

All right, Eric Wallerstein and Yelena Maleia.

Thank you both so much for breaking down this slightly hotter than expected inflation point here that we're getting this morning.

Our very own Jared Bookery is sitting by for a closer look at that move lower that we're seeing across the markets, Jared.

Thank you, Sean.

Uh Well, a little bit of red here and I'll pull up some charts uh looks kind of bad, but in perspective, it's not quite so uh the Russell cap.

Now that is the uh excuse me, the small caps Russell 2000.

That is down the most, that's down 1%.

And let me bring that up here.

You can see definitely at the lows of the day or the night.

And then if you take a look at the four day, uh you can see it is at the lows there, but it's only down 7/10 of 1%.

Now you look at the S and P 500.

This is a similar time period, four days this week, it's up 1.26% and today's decline right there.

I'm going to show you a day chart uh is uh as big as it looks there.

It's really just a blip.

So I'm not seeing a lot of outsized movement here, but I do want to check in on the bond market.

These are gonna be two year us Treasury note futures and these move inversely to yield.

So we saw a little bit of a down draft here.

Let me just put it on an intraday basis.

That was four or five days.

Here we go.

Uh We actually saw rate, the uh futures go up, which means rates were going down, but then they've zigzagged and I think long story short, they really haven't done that much.

And the real thing that we're looking at here is this probably makes case for the fed to only do 25 basis points as opposed to 50.

And that's just cementing that really good news that we had last week or last week with the non farm payrolls.

I want to take a look at the VIC and uh here we go.

I don't think it's calibrated just yet, but that has been on the decline.

So that's definitely a trend worth noting the bib of a move index now that's, that's a V for the bond market that has actually been elevated and it is still at the highest point of the year.

So that's a little bit concerning, but nevertheless, we do want to get a look at the sector action.

Now, tech was leading yesterday.

I'm going to add the overnight quotes and you can see actually energy, energy up about 24 basis points.

Utilities also in the green.

For the most part, we're seeing some red and that is led by tech.

Yesterday's leader is today's Laggard Jared.

Thanks so much.

Appreciate it.

We're uh of course, just inside of one hour from the start of today's trading activity just about 45 minutes at this juncture, everyone on the other side of this short break, we're gonna have much more in a breakdown on September's inflation prints.

We'll be right back.

The price of food and dining out rising once again in September, food prices up 2.3 percent from a year ago.

Now, one of the products in the biggest jump, that's the price of eggs.

The cost of eggs up 8.4% in the month of September.

That's on a easily adjusted basis.

That other number that you're seeing on your screen, it was up 39.6% from a year ago on an unadjusted basis here at the fact of higher prices on the restaurant industry we wanna bring in Brian Will, he's the founder and CEO of Will Restaurants Investment Group and will, it's great.

To have you here this morning.

Thanks so much for taking the time to speak with us.

So we, we, we thought you'd be a great person to get your perspective here.

You've been in the restaurant industry now for 14 years.

Just give us a sense of how problematic or how challenging higher inflation continues to be for your business.

You know, Shana.

And by the way, thanks for having me on the show this morning.

It's been a, a dramatic shift from what we call PRE COVID to post COVID.

Now, whether that's political or whether it was just the economy.

We have seen prices jump astronomically in the last three years.

Everything from rent and utilities to maintenance, to, to food cost, to labor costs, everything is just skyrocketing and it's driven, it's driven our wholesale costs up to the point where we can only raise our prices so much before people stop coming in.

So while we've had price increases over the last two years of about 25% we've actually seen our ticket sales or our, our revenues go down at the same time.

It's been an interesting uh thing to watch.

Yeah.

Well, it makes me appreciate the Bodega that's kept the prices the same for me uh over the past several months here at this juncture.

So all these things considered when you think about that, that passing on of the price to consumers, how many times have you had to do that.

We've done three price increases in the last two years.

We did a 10% a 10% and a 5%.

And even with that 25% increase, you know, our revenues have dropped about 11% over that period of time.

So, it's, it's been interesting to watch, well, when it comes to how you are continuing then to make those adjustments, obviously, higher prices, you've been forced to raise, uh, your menu prices a couple of times, I believe three times.

Are, are you gonna be forced to raise it again?

You know, we've, unfortunately, in my opinion, have come to a point in the pricing scheme where we can't raise them much more.

You know, we jokingly say that our, our bacon lettuce tomato sandwich now is $16.

That's expensive for a bacon lettuce tomato sandwich.

But when you figure all the cost in, we don't make that much profit on that $16 because we have so much overhead that has to get covered.

So, yeah, we, I, I think the economy is gonna have to catch up with us a little bit before we're going to be able to do any more price increases.

In the meantime, we've done things like lower labor costs by cutting staff, having people do more things than they used to do, um, to try to get our overall wholesale prices down or under what we're charging so that we can keep our profit margins back up and, and where have you had to change suppliers that you work with as well?

You know, we do a cost plus it's like a cost plus 6 to 10 on everything that we buy from our suppliers.

And in our industry, there's really three big suppliers.

So you're constantly shopping, those suppliers uh trying to find the best prices.

Um But because of that cost, plus we work on what's called a dynamic pricing.

So our pricing can change literally week to week.

In fact, I I've seen months where chicken has gone up 100% and then back down 100% the month after that.

And unfortunately, in the restaurant business, you can't just reprint menus every week to adjust for pricing.

So we end up eating a lot of the volatility in the price of uh our food, um which sometimes is good and sometimes is bad.

What, what is the most costly ingredient or item that's on the menu where, where you're just having to, to eat that cost?

Our staple products are gonna be ground beef chicken and then fish.

We sell a lot of salmon.

So those are our three most expensive items.

I mean, there are items like cheese, which is very expensive, but those are our staple items that we sell the most of.

And those are the costs that get us most of the time.

Brian, give us a better sense of the traffic that you're seeing.

We've talked so much about the fact that consumers are under pressure.

Maybe they're not actually going out and dining as much as they once were inside restaurants.

Is that something that you're seeing at your business?

Yeah, you look at revenues in the past three years we went from, I'll give you one restaurant.

We've got four, the one restaurant that's closest to me went from 2.7 million to 2.5 million to 2.2 million in the last three years.

So that's a half a million dollar drop in gross revenues on one location while your costs have gone up 20 25% between labor and food.

All right, will restaurants.

Investment group founder and Ceo Brian Will.

Brian, thanks so much for taking the time describing what you're seeing in your business.

Thanks, Brent.

Certainly, September's inflation print coming in a little hotter than expected, rising two tons of percent month over month and then 2.4% on a yearly basis.

Here, we're also taking a deeper dive into specific sectors joined now by our very own Alexandra Canal and Madison Mills.

Ali, let's start with you and one of the stickiest segments of inflation here.

What are we seeing on the shelter front?

Yeah, shelter, a consistent headache for the Federal Reserve, a consistent headache for economists.

And we did see shelter once again come in sticky, although we did see a bit of a deceleration from August in September we saw Shelter rise 4.9% on an unadjusted annual basis.

In August, we saw a rise of 5.2% so slightly better there.

The index did rise 0.2% month over month after rising 0.5% in August.

So again, that deceleration narrative now shelter along with the food index which rose 0.4% month over month in September, that can attributed about 75% of the monthly increase in overall inflation.

So, Shelter food two things that Americans consistently need to pay for, that's what's keeping prices higher.

Now, uh we did see rent rise 0.3% from August to September, same with owners equivalent rent otherwise known as o that's a hypothetical rent a homeowner would pay for the same property, the lodging away from home index, it actually fell 1.9% in September after we saw a rise of 1.8% in August.

So we are seeing some disinflationary trends within housing.

However, it is still incredibly, incredibly sticky and, and we know that shelter along with things like core services and core goods is keeping inflation really hot, right?

So Ali I'm curious, how do you think economists are reading this?

You talked about the owner's equivalent R, right?

We spend so much time talking about that especially over the last several months.

Given the fact that it's been so sticky, that increase that we did see the smallest that we've seen in a couple of months, it's going back to June, I guess is this then viewed, even though it, it does remain very sticky, is actually pretty substantial progress here.

Yeah, coming into this print, economist did expect that and they do see throughout the end of the year that we are going to see further moderation and inflation, especially when we talk about things like shelter.

So that could be something that as the notes trickle in could be a, a big positive for economists out of this report, especially considering that we were hotter than expected in a lot of other areas.

All right, Matt, you, you're closely watching motor vehicle insurance out there.

One of those people that just had to renew you are, this isn't going to come as a huge surprise because you're paying a lot more for your car insurance these days.

Yeah, and it's up 16.3% over the last year, which sounds like a really huge bump but year over year, that's actually the lowest level increase that we've seen since April of last year, right.

So this is a huge trend of increases in car insurance here.

The index rose 1.2% in the month of September, that was up six of a percent from the prior month here.

You can see that on your screen and this is just one example of the many data points under the hood that point to all of these little things inside of people's, you know, monthly budgets that are having to take up.

And that is contributing to a negative sentiment about the broader economy.

Speaking of that negative sentiment, guys, I want to point out jobless claims, obviously that number coming in very hot here.

I took a look at the breakdown state by state and we saw a big drop in jobless claims in those states that were impacted by hurricane, uh, ha not hurricane Melton here and there is about a two week delay here.

So it could be the case that some offices were closed because of that hurricane.

And then we could see an even bigger uptick over the next couple of weeks as those individuals who lost their jobs due to that extreme weather event are able to go to unemployment offices and file so that could spell even more bad news for the labor market moving forward.

Yeah, it's been a while since I've had to insure a car.

So, you know, I, I, you know, on that in a couple of bucks.

Exactly.

But you, you gotta wonder how this is also impacting other elements of this report as well.

I was taking a look at the used cars, the trucks, seeing if it also factors into the new vehicles that people are buying, whether that be new to their household or actually physically new and ultimately how they're kind of leaning into that warranty, leaning into what they would typically get with a purchase like a new car versus a used car and factoring in the insurance piece that you were just breaking down as well.

It kind of mirrors what we saw in the housing market and the challenge that we're constantly talking about there where even if you see a decline in prices, mortgage rates are also a huge factor for individuals.

So you have to look at the totality of the data like the Fed loves to do to suss out really how people are parsing through these prices because the broader picture continues to be really expensive.

And a quick bonus category here, guys, energy that actually decreased 1.9% in September after falling just under one in August gas prices declined 4.1% last month.

But we've seen the Middle East tensions over the past few weeks that I wonder next month if we're going to see that reflected and probably likely see an uptick there to your point matty.

We like the FED are data dependent.

We wouldn't have been live at 830 if we weren't anyway.

Thank you so much Alexandra Canal, Madison Mills breaking down all of the CP I data points here.

Just a quick recap of the latest inflation, print futures.

They are lower right now off of the September CP I month over month, we saw a move higher by about 2/10 of a percent and year over year up by about 2.4%.

And then additionally, here you're taking a look at the futures reaction.

Those are lower across the board here down by about 2/10 of a percent for the dow the S and P 500 lower by about 3/10 of a percent.

NASDAQ features down half a percent.

We are just outside of 30 minutes away from the opening bell.

You're watching Yahoo Finance.

We'll be right back.

It's 9 a.m. here in New York City.

I'm Brad Smith alongside Sean Smith and this is Yahoo Finances flagship show the morning brief.

Let's get to the three things that you need to know today.

That features are lower after September CP I report coming in slightly hotter than expected.

Headline inflation rising 1/10 of a percent on a monthly year, 2/10 of a percent on a monthly basis on a year over year basis.

You're looking at a rise of 2.4%.

Now, now on those core numbers that you're seeing on the screen, that was a rise on a month over month basis of 3/10 of a percent on a year over year basis.

Looking at an increase of 3.3% in terms of what this means here for traders.

Traders are now pricing in higher odds of a 25 basis point cut in November and Delta Airlines earnings and sales falling short of expectations in the third quarter, the carrier disclosing a 45 cent per share loss due to the crowd strike cost outage Ceo Ed Bastion touting a strong outlook for the fourth quarter.

But he did tell Yahoo finance about a possible headwind.

The election coming in November historically has been a period where we've seen some consumer choppiness.

So there will be a little bit of pause in consumer spending, Wall Street.

Now looking ahead to Tesla's high stakes Robo Taxi event tonight, C Elon Musk is expected to unveil details about the company's autonomous Cyber C A business.

He says could represent a $5 trillion market opportunity.

This comes with Tesla shares negative to flat on the year of the event called the robot will happen tonight in Burbank California that kicks off 7 p.m. pacific time.

We're starting with a fresh read on inflation out this morning.

September CP I rose more than anticipated a sign of slowing progress on disinflation with more on what the print means for the central bank's next rate decision.

We've got Yahoo Finance Fed correspondent Jennifer Schonberger.

Hey Jennifer, good morning, Brad.

That's right.

A warmer reading on inflation keeps the federal reserve on pace for gradual interest rate cuts.

Taking a look at those numbers this morning.

The consumer price index for the month of September clocking in warmer than expected.

Headline inflation rose 2.4% versus expectations of 2.3%.

That's down 1/10 of a percent from 2.5% in August looking at that number month, over month, it clocked in at 2/10 of a percent versus expectations 1/10.

And again, that's down from the 2/10 expected clocked in in August, excuse me.

Now, core inflation which eliminates those volatile food and energy prices.

That's the fed's preferred way of assessing this metric also hotter than expected clocking in at 3.3% versus expectations for 3.2.

That's up 1/10 of a percent from August month over month.

CP I grew by 3/10 of a percent on a core basis.

Uh holding that same level with what we saw in expect in August and dashing expectations um to drop to 2/10 of a percent.

Now take a look at those fed funds futures this morning, they've been pretty volatile but edging up for chances of a 25 basis point rate cut as of a couple of minutes ago, they were trading around an 85% chance for a 25 basis point rate cut and that leaves about 14% chance of no cut next meeting.

Now, this definitely feeds the Hawks on the FO MC who have had lingering concerns about inflation, including the fed Governor Michelle Bowman, who has really led this pack uh with concerns about upside risks to inflation.

Atlanta fed President Rafael Bostic is one who was also voiced lingering concerns and it goes back to the Fed minutes that were released on Wednesday.

Right, which showed that a very robust debate between going 25 or 50 last meeting this report bottom line here guys unlikely to change the calculus for the gradual path going forward back to you, Jennifer.

Thanks so much for bringing that down.

We wanna talk about this just ultimately what this could mean for the feds path forward.

And for that, we want to bring in our next guest and that is Omar Sharif Inflation insights, a president and er it's great to talk to you.

So when you see this slightly hotter than expected inflation print, that was the case on the headline number.

That was the case on the core number here.

Does this at all change your calculus or the Feds calculus for their path forward?

I don't think so.

Um I think the number was a little bit harder than expected, as you said, um I would really zero in on the encouraging news today, which is that the one piece that we've been sort of, you know, the last shoe to drop we've really been waiting for was housing inflation.

Uh The last couple of months, it was really elevated even though I think we had been seeing a lot of relief in the first half of the year.

Um Today it did finally cool down a bit more.

So, you know, we, we ended up 0.3 on both um rent and what's called owner's equivalent rent together, that's 40% of the core CP I basket.

Um, and it moderated from around, you know, o, was 0.5 last month back down to 0.3 today.

Um, and Sherp Powell said, look, I've been waiting for this.

I thought it would happen more quickly.

It's taking a while.

But he did note that, you know, core goods have slowed down, core services outside of housing have slowed down and really they were waiting for housing to slow.

And so that happened today, I think that's the encouraging takeaway.

Um And admittedly, some things were hotter than expected today, but I think some of that stuff is more likely than not to just to be, you know, a one off uh, in this particular month.

I mean, some of the things that were hotter than expected were areas where consumers will see it on a cyclical week in week out basis.

And I'm thinking of and harkening back to our conversation that we just had, um, with one CEO of, of a restaurant group here.

And he was pointing to these five of six major grocery store food group indexes increasing over the month, meats, poultry fish eggs rising 8/10 of a percent in September as the index for eggs actually increased 8.4%.

All these things considered, you know, that seems to be one of the areas that might be most pressing for consumers where we hear them pushing back on some of the discretionary purchases in order to just make sure that they can meet the regular spends that they need to also have on a week in week out basis.

Yeah.

Look, I think that's, that's a very fair point.

Um, as you said, that's just, you know, that's something people go shopping every week for groceries.

You're going to see those price increases.

Um, a couple of things I would just say about that though.

One is that, um, egg prices have been obviously extremely volatile because of the ongoing impact of the avian flu.

So that's continuing to affect what's happening with, with eggs on a, you know, pretty regular monthly basis.

Um And because those swings are so large, I mean, quite frankly, 8.4% is a smaller number than we've seen in recent months for egg prices, you know, moving up and down, that's impacting the overall uh food basket.

But I would say if you look at food prices over the course, especially grocery store prices in particular over the last year, um, you know, we're running around 1 1.5% year over year growth.

So obviously, since COVID hit that level that you're paying is much higher than it was previously.

Um However, over the last year, that growth has really kind of flattened out for grocery store prices.

You're seeing more and more sales now at grocery stores um than you did even last year.

So, yes, you're going to see some of that yes, consumers will, will notice when it takes up.

But I think over the course of the last year, you know, grocery store prices have essentially really, you know, mostly flattened out and I will say the USDA expects them for the balance of this year to run only at about 1%.

Oh Mayor, when you take a look at the fact that energy costs at least for last month declined 1.9%.

There's been so much focus on the rise that we've seen in crude costs over the last couple of weeks, maybe.

Ultimately.

What, how that could play into upcoming inflation prints?

Are, are you at all worried about that?

And I guess how should investors then be thinking about the impact that this could have on future prints?

Yeah, you know, I I'll say what I normally say about this which is with, with geopolitical risks.

Um the impact from the hurricane like impact prices in Florida.

Um You know, this, this tends to ebb and flow and so yes, we're likely to see some increases.

We've seen them in retail the last several days because of what you just mentioned, which is crude oil shifting higher.

Um But prior to that, we have seen really, really good deceleration in retail.

Um You know, the the national average is down around to about 20 or so.

Um And so we are seeing good relief, you know, I'm a if this continues, obviously, you know, I'm not going to sit here and predict what's going to happen with geopolitics.

But if, obviously, if that continues to push crude upwards, that's going to be a worry.

Um, I don't think we're at the point yet where the fed is really going to be overly concerned about what's happening with crude.

Um, I think again, they're really focused on, you know, what's going on with core inflation.

You know, food prices went up so much right after COVID, they've come down quite a um or at least flattened out quite appreciably in the last year, energy generally had been coming off up until very recently.

So I still think overall those are positive signs uh housing coming down would really just be a huge, huge help overall for the Fed.

But I think given that hot print today, um even though I do think some of this stuff will, will reverse course pretty quickly.

You know, I think that if you were thinking uh 50 Bs that's pretty much been wiped out at this stage, I think most likely, you know, don't forget two weeks ago, we were, we were talking about pricing in almost 50% odds for a 50 basis point cut.

Um And now as Jennifer just mentioned, about 14% odds of no cut at all in November.

But I think the Fed still wants to progress slowly here.

So I think 25 is the base case for November, ok. And So with that in mind for the FED and, and how they're kind of looking through data points like this going into that November meeting, it seems like there's, there's still going to be, be having, you know, some consideration around where the natural disaster, some of the events that are taking place in the form of hurricanes could have a more outsized impact as well.

How, how do they back that out from what you've seen in the past and, and try to kind of create the best co comparable scenario, comparable metric, uh especially given some of the systems that have and are currently moving through as well.

Yeah, so, I mean, the one big report coming up and we'll be in the blackout period for the fed at that point, but obviously, it's the jobs report on November 1st ahead of that meeting.

Um That report is obviously going to be uh you know, extremely hard to read, not just because of the impact of hurricane Milton and likely Hurricane Helene as well.

Um But some of the strikes that have been going on, you know, Boeing machinists and so on.

So it's going to be very difficult for them to get a clear read there um on the labor market from that, that jobs report, but don't forget they get extremely granular data at the county level that they can take a look at to see, you know, try to isolate the effects of the hurricane um within, you know, Florida and parts of the Mid Atlantic.

Um And they also get to a ton of other data from, you know, AD P they have their own index internally that they keep as well to take a look at what's happening with, with the job market.

So there's a lot of the, the main, the main indicators might be a bit muddy, but they have a lot more granular data to sort of parse um to get a clear picture of what's happening with the labor market.

So, you know, I think they'll still have a decent beat on that.

But again, I think the fact that you don't quite know, some of the data will be a bit choppy.

Um It again, sort of, you know, uh in terms of risk management argues probably towards being a bit more cautious in terms of uh pushing ahead with rate cuts.

So again, I think it sort of argues for a 25 basis point cut.

Uh moving forward at the November meeting, Omar Sharif, who is the inflation insights, President Omer?

Thanks so much for the time and the context here on this report.

Appreciate the breakdown.

Meantime, here we're also following the latest developments on Milton which made landfall last night as a category three hurricane, the storm making landfall near Siesta Key Florida and turned across the state leaving a trail of destruction.

Cities were pounded by intense winds and rain even sparking a blitz of tornadoes.

So far, at least four deaths have been reported.

Florida.

Governor Ron desantis saying Milton was a significant storm but they are not facing the worst case scenario.

And he went on to say that the worst storm surge appears to be in Sarasota County.

Milton has moved across the state and is pulling away from the east coast of Florida.

But storm surge warnings for that area are still in place.

And for southern Georgia across Florida right now, more than 3 million people are without power according to power outage.us with the central part of the state along the gulf coast, hardest hit.

That statistic Brad has us checking on shares of Genack.

Now, this is a stock we have been talking about time and time again, especially over the last several days, given that out performance that we have seen.

Now, we are looking at a bit of a give back here this morning off just about 3%.

But I wanna pull up a one year chart because that really tells a story about demand for Genack and what we tend to see in the price of Genack here.

Now, leading up to these types of hurricanes, like the one we had with Helene, like the one we had with Milton.

We normally typically very much out performance here in a name like Genack.

We actually typically see a rally of about 20% in the three months leading up to a hurricane Now, here we are at the highest levels we pushed above that resistance level of 160 earlier this week or at a 52 week high.

We closed up yesterday just above 100 and 72 bucks a share.

And now the big question is where we go from here.

So bespoke compiled historical data about how JAC tends to trade these types of hurricanes.

And this is some of the info that really stuck out to us if we could put up a full screen here, telling us about the likely uh the likely movement that we're going to see from here.

Now, the week before the hurricane landfalls, JAC has gained an average of 3.8%.

We typically see out performance about 74% of the time.

Now, we certainly did outperform that or exceed that in the last week here.

Now, if it was a category four or category five, which Milton was in anticipated to be, we typically see gains of at least 5% with an out performance there or gains, I should say positive returns 100% of the time.

So where do we go from here?

Well, the next month, if you do hold shares of Jac, you actually might not see a future gains one month after we have no real out performance.

Actually, the month after a hurricane four or five storm, that is when you typically see actually a decline of 2.2%.

Now, Hurricane Milton did hit at a category three.

So it not necessarily, maybe we will see more of a, a trend here or drift uh sideways here rather than the decline of an average of 2.2%.

But again, the out performance in Genera certainly something that investors have been noting and very important uh for investors to keep in mind here as we try to figure out whether or not there is more room to run to the upside.

We will also be speaking with Genera Ceo that he's coming up.

He will be joining Yahoo Finance live next hour, Brad and shifting gears here to the EV space.

Tesla's Robo Taxi Day is finally here.

Investors eagerly looking to get insights on the company's developments in autonomous technology here shares ahead of the event.

They're up fractionally in pre market trading as there are a lot of things to keep tabs on here.

Notably, whether or not we see perhaps some humanoid take the stage.

This is gonna be taking place in Hollywood.

We do know.

So it sounds like something that you would see in a movie and it's gonna have a backdrop that carries that same type of, of tenor and at least feel and vibe to it.

But overall, this is an event where not only Tesla shares might be reactive but some of the other competitors that have also lined up their Robo Taxi ambitions.

Most notably, you might see some outsized movement in Uber as the announcements are taking place there.

Of course, this is gonna be more of an extended hours activity.

But then additionally, here keep a close tab on Google even in alphabet as Waymo falls under some of the other bets category for the business there.

Yes, certainly.

I mean, the out performance that we've seen in the stock shares are up about 70% since April when we first heard a Musk really start to focus on A I.

So that really tells you how much is riding on this event and to new surprise, more and more analysts have been coming out over the last couple of days saying that they actually expect this to be a sale, the news type of event.

So you might see actually some uh give back here in the recent out performance that we have seen in shares and to put this out performance that we've seen in Tesla in perspective here for the viewers for you at home, uh electric vehicle makers, they, the market cap here for Tesla is about 800 billion, more than eight times bigger than GM and Ford com, their combined value.

So that is how much is hardy baked in to the current price of Tesla.

We certainly have seen this massive run up.

Of course, a lot is riding on this event whether or not it's gonna live up to expectations.

I think that is a big question.

Many analysts are asking themselves right now and as a result, maybe no matter or despite or in light of whatever it is that is announced today, we could actually see a move to the downside here in the stock.

Yeah, and what the timelines are that are announced as well?

How soon could we see this Robo Taxi service come to reality?

Let's remind folks out there that this is something that Elon Musk has talked about for the better part of.

Oh yeah, five years now we heard first back in 2019 that by 2020 he had said next year and back in 2019, for sure, we will have over a million Robo taxis on the road.

Well, ok, maybe they get a pass for 2020 given the pandemic and all of the pandemonium that ensued thereafter.

Plus delaying plans and even demand for the core vehicles that they already had in the market.

All right.

So you take that and sands that from the equation here.

Now, looking at the future and what a service would cost, what pricing they would put is that?

Do you have to be a subscriber?

Do you need to be giving over some type of data to Tesla?

What is the consumer experience of this that the company is going to have to communicate as well?

Uh And how is it competitive to some of the other offerings that are in the market on the ride sharing front?

As well.

All of these questions, hopefully we'll have a few more answers on this evening.

Coming out of California.

All right.

Coming up on morning Brief Delta Airlines miss no profit expectations in the third quarter.

Whether an expensive hit from the crowd, strike, computer outage in July we will discuss and we count down to the opening bell on Wall Street where we are zeroing in on tech and video of more than 20% in the last month alone.

Do you look at how stocks perform during election years are very and mills breaking down the history and what we can expect come November, we'll be right back time now for some of today's trending tickers, you can scan the QR code below to track the best and worst performing stocks of the session with Yahoo Finance's trending tickers page one major trending ticker this morning, Delta Airlines missing third quarter expectations.

The company taking a significant hit from the crowd strike outage in July that forced the airline to cancel thousands of flights.

I spoke to Delta Ceo Ed Bastian and walked away with three keys to the trade for investors here, premium consumer spending fourth quarter, choppiness tied to the election aircraft manufacturing headwinds at Boeing and Airbus to round that out.

So let's start with the consumer and the demand, the profile they're seeing there.

Uh Bastian had cast this upbeat note about the fourth quarter.

Guidance here.

Take a listen.

I think it's going to be a strong fourth quarter.

The demand looks, looks quite healthy, should be one of it's not the best fourth quarters in our history.

So we're looking forward to delivering for our customers.

The holiday periods look, look quite healthy.

Business travel has been strong and Bastian reiterated that consumers are confident in Delta and spending remains strong.

But even within that optimism, the company is watching two outlier events, storms and the election, the impact of hurricane Milton in Florida and how they're going to monitor how quickly airports can be restored there.

You'll remember, of course, Florida only accounts for less than 5% of Delta's overall flying as told to us by Ed Bastian and reminded the also said that the presidential election could cause some consumer choppiness in November.

Here's what he had to say.

The election coming in November historically has been a period where we've seen some consumer choppiness.

So there will be a little bit of pause in consumer spending.

And lastly, the third area that investors should watch for closely is deliveries of aircraft and the timelines there.

Now, Boeing labor negotiations, they approach the one month mark while Airbus supply chain disruptions are challenging their deliveries leading them overnight to adjust the actuals in those deliveries.

And this all means extended timelines for when Boeing will ultimately be able to deliver some of their orders to companies like Delta for what Ed Bastian told us about the 737 max 10, which has yet to be certified and they were anticipating in best case scenario could be delivered by 2025.

He told me that that could look more like 2026 perhaps even beyond that, Shana.

All right, Brad from Warren Delta's outlook, we have Bloomberg intelligence analyst, George Ferguson joining us now, George, it's great to have you.

So Brad was speaking with Ed Bastian and, and laying out a number of things here for investors to still remain positive.

But when you take a look at the share price today, you're looking at pressure that third quarter miss the softer than expected guidance is really worrisome here for investors.

I'm curious what you see as a set up heading into that very important holiday quarter and whether or not maybe this is just management being a bit conservative.

Yeah, so we continue to see decline in yields in all the major markets, right?

So the most important market being domestic, but Atlantic is also a big driver of profits.

Yields are price paid per mile flown or down.

Uh You know, D Delta commented that those had inflected better near the end of the quarter.

I guess we're going to see if that carries through four Q.

Uh But yeah, revenue is softer than we thought the the results are a little bit muddy from crowd strike, but uh labor costs were up 13 percent year over year.

So labor continues to be a big challenge for the airlines.

And again, with this revenue, uh this, you know, unit revenue declining, that makes things more challenging.

They're all trying to continue to try to grow in the marketplace, you know, into this quarter, I think we saw Southwester jetblue pairing capacity year over year, but most of the airlines are growing, they're all going to be growing.

It's hard to see sort of that softness and demand, not equal uh lower fares.

Um If fuel was a nice tail end for Delta during the quarter, we've had problems in the Middle East where we got war in the Middle East.

We've started to see oil prices tick back up.

The question is, will that be as good of a tailwind?

We'll have to plug that into our, our model for four Q and see what we think.

Uh And there was a little bit of also messy messiness in the quarter where Delta sold an investment and clear that really improved some of the results.

But again, kind of what we saw was revenue looks under pressure.

Uh costs are higher fuel was the tail end and that could be pretty volatile.

So we'll see how this develops in four Q. Yeah.

And, and on the fuel side, it, it's interesting, especially given the fact that Delta is really one of the only us airlines or us air carriers that has their own refining operations here as well.

So all those things considered here, George, I I wonder on the pricing mechanism and the levers that they can pull there as they go towards and and really message towards a premium consumer and engage with a more premium consumer.

How you think this might play out for some of the other airlines over the course of the earnings season, especially those who are on the low cost side of the business.

Yeah, so for sure premium did outperform as Delta showed us right.

Premium was up year over year.

I think it was 5% mid mid single digits where the basic cabin was down sort of uh you know, low single digits.

Um I think it does bode well probably for United, I would expect the United you know, will have similar kind of results.

American doesn't seem to be as well leverage to premium.

And so I think American may not see as much of that gain from the stronger premium customer.

And then I'm I'm concerned when you get into the other low cost, especially the ultra low cost sort of frontier spirit airlines, they're going to be most challenging that can result Southwest jetblue were cutting capacity.

So I think the quarter will be challenging, but usually when you're in a cutting capacity mode or at least sort of growing less fast, I think with Southwest, you'll see firmer fares that will help some of their results.

But that extreme low cost I think is still going to be very challenged this quarter, George, it's very, very early in Hurricane Milton and obviously the assessment of the damages is still underway.

But from historically speaking, a category three storm that's hitting that type of population hitting routes that are very important here to Delta.

What do you think the impact is going to be given the fact that they did say that the profit was hit by about three cents here on a per share basis from hurricane Helene.

Yeah.

So I mean, we have to see what the ultimate results are here, right?

But it went through a swath of Florida that includes Orlando.

Orlando is a super important market for almost every airline.

Uh So we'll have to see sort of as, as the day, you know, breaks and we figure out what's going on, what it's done to sort of Disney world, the resorts area there and Orlando.

Uh look, I think it's pretty equally serviced by almost every airline.

So if Delta, we have to go look at the Delta impact, but I assume you'd see similar impacts for all the other airlines in the US.

George, as I'm looking through one particular area that it seems like there's going to be a longer term impact that investors may not have priced in fully yet.

It's, it's really on the supply chain here for getting new aircraft as well.

Um We had seen Airbus come out overnight and have to adjust some of the, the actuals versus the estimates of what they were going to produce and deliver upon and, and then even more so the Boeing strikes continuing to go on that impacts how quickly they're able to deliver upon some of the existing orders they have.

You know, just how do you believe that's gonna pass through to some of the airlines here?

Yeah.

So we've looked at this a bunch, right?

And if you look at Delta's results, for example, they're down year over year and they haven't achieved the profitability of 2019 yet.

Right?

And so, so whatever shortage of aircraft there are in the marketplace now, it's, it's not boosting results at US.

Airlines.

So I don't know that there's really a shortage.

A lot of, a lot of these airlines are refreshing.

A lot of the US airlines were taking deliveries from Delta, sorry, from Airbus and Boeing were coming out of the pandemic.

They were one of the, some of the stronger airlines in the world.

Now.

That's right.

Now, if this persists right, the Boeing strike persists if Airbus continues to have problems with the supply chain, you're right.

We looked at deliveries yesterday for Airbus, they were lower than we would have expected.

I think, you know, out into 2025 that's where I think we could see more problems if supply chains don't get back in, don't, you know, don't get back in better shape and these aircraft manufacturers boost output.

But right, now in the US market, I think as we close the year down, I don't see a big impact.

Plus we're going to the shoulder seasons of Q four and Q one.

Just typically less demand, a little more peak demand around holidays.

I don't think it impacts it there.

I think we'll watch it closer for next summer.

George Ferguson Bloomberg, intelligence analyst, George.

Great to catch up with you and thanks so much, Appreciate some of the time and insights.

Thank you, certainly.

All right, we've got the opening bell on Wall Street.

Let's do a check of the market some downward pressure across the board.

On the heels of that slightly hotter than expected inflation print out this morning.

You've got the dow and the SNP both pulling back from record highs.

You got the dow off just about 75 basis points here.

But the SNP also moving to the downside off just about 3/10 of a percent.

Again, both of them, both of these indexes coming off of those record closing highs.

The NASA also under a bit of pressure this morning after about a half of a percent and taking a look at the bond market activity.

A bit of a pricing going in just in terms of the odds of the fed going 25 at the next meeting.

Those odds, a slightly increasing year.

Many people are saying that many traders, many investors strategists the early reaction that we're hearing from the street this morning is that this slightly hotter than expected inflation print might actually take that 50 basis point conversation off the table.

At least for now.

We're seeing a slight move higher in yields.

You got the 10 year yield up just a fraction here still right around that 47 level 4.07 level right below 41.

When you take a look at that sector action that you are seeing this morning, it's a bit of a mixed picture.

You still have energy and utilities outperforming there.

We have seen out performance here from energy over the last couple of day over the last couple of weeks.

So the last couple of days have been under a bit of pressure.

So a bit of a rebound here this morning on the flip side, real estate technology and also industrials among the worst performing sectors here and taking a look inside the NASDAQ as we closely track the reaction here of some of those larger cap tech names we've got nvidia that had reached uh just shy right around those record highs pulling just a bit back here today off about 3/10 of a percent.

Amazon, one of the only of the uh larger tech giants hanging on to gains here this morning, up just about 8/10 of a percent.

But again, this move lower and you can see across the board, there's a lot of red on your screen.

Let's kick it over to Jared B Blackery for a closer look at some of this movement that we're seeing.

Jared.

Thank you, Sean.

Uh Well, I'm gonna start with the S and P 500 here.

We also have some movement in the bond market, but I've been tracking, uh that was a year to date chart.

I was tracking this big consolidation we've had, which was above the prior highs and we just broke out of it.

So we were in a long term trend.

We're in a bull market and it was resolved to the upside here.

We're seeing looks like a little bit of down movement today.

But again, we are staying above the breakout level.

So that is bullish.

Want to take a look at the 10 year T note yield because that has now hit the highest level since July.

This is just a two month chart.

So you don't see it.

You can see it on a year to date.

And uh all this means is that the fed probably going or at least invest, expect the fed is going to cut only 25 basis points as opposed to 50 higher yields, especially higher long term yields that can act as a headwind for stocks sometimes and especially when it's coinciding with a higher US dollar.

I'm going to dial this down to a three month chart and you can see we just poked a higher here to an eight week high.

But now we are down a little bit just down uh a little bit on the day.

So taking that into consideration with the T note, the 10 year T note yield, which really didn't rise that much in relation to the report.

Uh I think it's uh pretty, pretty good.

Here, here are the gold futures wanted to track that real quickly up one third of a percent, not at the record high just yet.

Um And Shana was talking about energy leading and tech lagging looks, utilities are leading now, but energy and tech have just been switching places.

And one thing I want to show everybody before I go is the software sector.

And this is represented by IGV uh ISHA software ETF down a little bit today, but it just broke to a record high.

Look at that there on a five year chart.

It just put in a very long base with a little bit of a hand here.

So this is a long term play that a lot of investors are looking at and uh I'll show you another play.

This is in semiconductors, but Broadcom A VGO that also hit a record the first in uh a little bit of time here guys.

All right, Jared B Booky, laying out the overall picture ahead.

Well, actually during today's trading session as we've just kicked things off.

Thanks so much, Jared.

Well, let's zero in on technology, the NASDAQ composite opening lower this morning coming off.

Of a winning session after the major averages slid on that hotter than expected inflation report here.

But tech is doing well over the course of the month as it's the second strongest performer so far coming in just behind energy.

The XL K hitting its highest level since July joining us now in studio on the tech trade and much more.

We've got Marvin Lowe who's the senior global macro strategist over at State Street, Marvin.

Great to have you back in studio here with us.

Thanks for having me.

Let's dive into this.

I mean, a as we're thinking about where investors are, are still placing the most emphasis within this market, it seems still like technology is, is getting a lot of the, the, the luster right now.

How much of that do you think is tied to what we've seen in the past where when the fed begins to cut rates?

Technology is one of the biggest beneficiaries.

Yeah, I mean, it's certainly uh gonna be one of the bigger uh beneficiaries for sure.

Um It's where we're seeing earnings growth.

So when we kind of look at maybe some of the revisions that we've seen in the third quarter, tech hasn't been one of those that have experienced revision revision on the downside.

So that kind of stronger story is still is is out there.

Um you know, quality growth, generating cash um and really defendable moats are, are kind of where you wanna put some of your long term bets.

So what do you think the upside then looks for some of these tech names, you know what, um you've got to be a believer, right?

You've got to be a believer in A I and these valuations are kind of hard to get your hands around if you don't believe they were really hard to get your hands around back in 2000 and kind of look at how those models evolved.

So, um if you have the luxury of looking at your portfolio that way and you believe, um you know, and I am a believer, um then, you know, you, you know, you sit, hold, hold on if you will.

Um But the story still has many chapters to be uh to be played out.

Do you think 50 basis points by the fed in September was really just lighter fluid for the markets and getting to some of the all time highs that we've seen recently, you know, what, um the market actually, when you kind of think about right after the Fed announced the 50 didn't move that much.

Certainly since then when we, when we had the 50 we got data that didn't necessarily just to find that data, uh the, the fifties.

So generally fifties come around.

Um and you don't have many starts of cutting cycles with fifties.

It's usually from a position of weakness.

You, you know, we, we had a 50 during GFC we had a 50 during the pandemic and we had 50 right before the uh the dot bomb.

So we don't have any of that situation.

So the fact that we got a 50 plus data that really shows the economy isn't um struggling the way a 50 would imply.

I think in combination uh really puts lighter fluid on what was already a pretty good rally Marvin.

What do you think the fed should be focused on because traders are trying to find that balance between some of that weakness that we've seen in the labor market.

And then when you get this slightly hotter than expected inflation, pro what do you think the focus should be for the Fed?

Yeah, you know, I mean, they have a dual mandate, right?

Uh um Price stability and full employment, full employment.

Um if you will after they kind of changed their mandate back in 2020 I think that they do still need to focus on both sides of that.

Um Today's inflation number shows that that dragon hasn't been tamed yet.

Um And the jobs market is still showing that there's some strength, they pivoted very aggressively to not caring about inflation.

I think that that wound up potentially being the mistake around a 50.

But, you know, for the most part, they need to start normalizing.

And I think um as we kind of debate 50 in November 25 in November, you know, we've got 23 basis points for the price in November.

Um, you know, let's focus on the path that we're still going down and that's important.

Um, the other thing that we need to really get a sense of and the fed certainly, um, and the market will come along with it is just how low yields can ultimately get.

You know, we call that the terminal rate, you know, our star kind of all this, um, academic stuff.

But you know, what's the balancing interest rate for an economy that still seems to have some strength with that in mind?

I mean, in the early innings of this rate cutting cycle, what is, what is your favorite non sexy sector that you've been tracking and that you've been recommending, you know what?

So, um you know, our recommendations are, are more within kind of the macros sphere, right?

So we're kind of looking for those um intersection between what we're seeing uh from the data as well as what's going on globally.

Utilities are really non sexy.

Um, they generate yield even with how far utilities have already run.

You know, everything's run that, that that's the real problem with it.

But when I kind of look at some of these data center needs and um potential volatility that might come into the market, it still seems like a, a fairly interesting thing.

And of course, you know, quality growth still is, is top on that list.

All right, Marvin Lowe.

Great to have you, especially here in studio this morning.

Thanks so much for joining us.

Keep right here on Yahoo Finance.

We've got much more coming up next.

We'll be right back, less than a month out from the election presidential election and a tight race has some investors bracing for an uptick in volatility.

We're taking a look at how stocks tend to perform during election years and Madison Mills has a closer look at that man.

Hey, thanks so much.

I want to take a look at volatility heading into elections versus other years.

So this is a chart from the price.

They took a look at volatility in November heading into elections and took a look at volatility in November in other years.

You can see here, the main takeaway is that the volatility, it's basically the same across the board, whether you are a month prior a month after three months after an election in and out of election years.

Volatility is very similar.

So what does that tell us?

Well, it's part of this broader story that we have been talking about, which is that the market doesn't necessarily know a what to do with elections.

That's what Marvin Lowe just told me offset that the market is just confused a little bit about how much to be pricing and volatility heading into the election.

And also that they don't tend to look at the political and the fiscal as much as they look at the macro and the monetary policy in the Federal Reserve, at least at this time is really driving this market much more than the White House is having said that earlier this week, CB which has the V the volatility index that we monitor.

They said that they see the future spiking ahead of November 6 but in November 5th, but they are not seen uh volatility continuing after the election and they think that's a mistake.

They think we're going to see a contested election result and that without a result for a long time, that could mean that the market is mis pricing, potential volatility to come on the heels of a result.

But I talked with Kevin Gordon about that earlier this week and he said, look at the year 2000 when we didn't have an election result for a couple of months, we were already in a bear market.

So this time around, we're in a bull market.

It even if for some reason, we do get a contested result and we don't know who is going to be the president for a little while.

This market, it's a bull market and therefore the Federal Reserve and the A I names are going to be driving the market to continue to get new all time highs as opposed to seeing more downward pressure following any contested election result, potentially.

All right, Matty, we're all gonna be watching closely the countdown clock, set your kitchen timers.

Thanks so much, Matty.

Appreciate it coming up, oil prices rising this morning, we discuss what risks might be ahead for the market.

That's right after the break, crude and Brent both moving higher this morning.

The move is reflecting the continued geopolitical tensions playing out in the Middle East and also a movement from hurricane Milton making landfall in Florida that drove a spike in fuel prices to discuss what risks might be ahead for the market.

We want to bring in Andy Lipow, he's a president of Lipow Oil Associates.

Andy, it's great to see you.

So we are seeing oil uh recover from some of that downward pressure that we saw recover a bit from some of that downward pressure that we saw over the last two treating days.

But really the narrative surrounding oil has very much changed over the last two weeks amid this fear of escalation of war playing out in the Middle East.

Where do you see the prices of oil headed?

Well, that's exactly right.

The oil market is pricing in a greater probability of a war between Iran and Israel that would result in a supply disruption.

And I should point out that since last year when Hamas invaded Israel, there has been no oil supply disruption but prices recently have been rising of a fear that one might happen.

I think that's why it's difficult to predict where the oil market is going to go.

On.

The one hand it could spike higher if we were to see something like the strait of hormones being shut.

But on the other hand, there is more than adequate oil supply in the market and you couple that with OPEC deciding to restore some of its production cuts in December means that the oil market is being weighed down.

I think that overall absent hostilities in the Middle East, you'll see oil trade below $70 once again in the next few weeks.

I mean, you also have this week and the EI A cutting their own forecast for 2025 and what the oil demand growth profile could look like.

What type of overhang do you think that's having on prices as well?

Well, I think between the EI A, the IE A both revising their forecast downward coupled with poor demand growth in China, which is estimated to be only about 200,000 barrels a day this year.

I think the overhang next year could still be 500,000 to a million barrels a day.

And that is really going to force OPEC plus to continue and defer the restoration of their production cuts into 2025.

And so what does that mean for your longer term target here as well?

What what, what pricing should, should people who are looking at the oil market start to anticipate or at least start to price in from what you're seeing?

Well, for the balance of the year it's going to be difficult for wt I prices to get above 80 to $85 a barrel.

But as we go through 2025 and world oil demand does start to pick up.

I think that we could see wt I prices in around the $85 level.

Indeed, the disruption from the hurricanes.

You have Hurricane Helene, hurricane Milton.

Of course, we're expecting a very active continuation here of this hurricane season.

Do you see that?

We, we haven't really talked about that yet.

How significant of a factor is it not that significant of a factor?

Just in terms of the potential of what this could do to supply disruption?

Well, as far as both Hurricane Helene and Milton, the impact on the refining industry on the US Gulf coast was minimal for hurricane Helene.

We did see some oil production shut ins in the Gulf of Mexico that were restored very quickly.

And for hurricane Milton, what I would tell you is that the production impacts and the refining impacts were eligible.

The biggest impact in the oil industry is really on the supply and distribution of gasoline and other refined products into Tampa.

And we'll have to wait and see whether any of those terminals along the waterfront there were damaged.

But meanwhile, we already have tankers who loaded gasoline making their way into the Miami area.

So resupply is going to to happen.

It's whether the infrastructure, the power grid and and uh employees being available are going to be able to distribute that gasoline to the local retail service station.

What, what is the typical timeline that that takes Andy, I mean, Chevron had already, they had taken proactive measures with, within their own Tampa terminal to shut that down.

We should think about it this way.

The Coast Guard has to get out into the Tampa Bay area and make sure there is no debris in the channel, then they have to replace the navigation buoys.

If the terminals are ok, then you could start seeing resupply show up as early as Sunday, maybe, possibly Saturday night.

But you need these other steps to be put in place before the tankers can actually show up at the terminal.

Assuming the terminal do have power, we'll be able to start loading gasoline actually almost immediately because those terminals never empty their supply prior to the hurricane.

You don't want those tanks being blown off their foundations.

So you need refined products to stay in the tank.

It's great context and background.

Andy, appreciate the time.

Andy Lipow, who is from Lipow Oil Associates and is the president over there as well.

Thanks so much, Andy, appreciate it coming up.

Everyone.

We're breaking down some of the biggest analyst calls of the day.

That's right after the break.

Let's get to three big analyst calls today.

Those are paypal, Nike and CV S. Let's start things off with pypl shares, right.

Now, let's take a look.

They are sliding right now by about 2.9% Bernstein downgrading the fin tech company to market perform from outperform the firm bearish showing the company's long term growth trajectory and rising competitive pressures here.

And that is impacting the stock right now.

And ultimately, uh they said and cited a few things, they tactically upgraded the stock at the end of July due to better products, velocity and execution under new management stock path though appears to be more uncertain though from these levels they say in this note, all right, let's take a look at Nike Truest, upgrading the company to buy from hold raising its price target on the firm.

They're optimistic on Nike's turnaround effort saying that the company's team is going to move in the right direction.

They're saying that essentially right now that the street, it's a little bit more realistic about the opportunity that lies ahead.

They're very encouraged by the new Ceo Elliott Hills return to uh to Nike and what that could mean here for the company going forward.

One thing that caught my eye in this note here from Truest was some of the things that they see a short term catalyst or short term wins for the company.

Among them, the deal with W NBA Star Ken Clark and saying that that should add or should be enough to show investors that there are better times ahead.

There are, there are Caitlin and Juju Fresh Steel there.

All right, let's talk about CBS, Barclays bullish on CBS, the firm upgrading CV S um to overweight and raising its price target, reflecting a 24% upside to the stock here.

Barclays citing a positive margin outlook for the company.

Take a look at CV S shares here early in trade.

They are up right now by about 1.7%.

We'll round that off to here, uh, especially, uh for CV S as we're gonna continue to await some of the earnings that are coming forward over the course of the season CV S one will bring your way.

All right.

Keep it right here on Yahoo Finance coming up, NVIDIA.

Now, the second largest company by market cap, we will dive into the tech giants, climb higher.

Talk about whether or not there's enough momentum to keep that momentum to the upside that's coming up next here on catalyst.