4 Stocks I'm Buying as a Hot CPI Shakes Things Up
The average person is struggling with higher prices, but does the market care about the delay in rate cuts this time?
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The market was surprised by a hotter-than-expected CPI report Wednesday morning. Both the core and headline numbers ticked up and undercut the narrative that inflation is on a steady downward trajectory.
The areas where the data say prices are rising the most were as follows:
1. Car Insurance Inflation: 22.2%
2. Transportation Inflation: 10.7%
3. Car Repair Inflation: 8.2%
4. Hospital Services Inflation: 7.5%
5. Homeowner Inflation: 5.9%
6. Rent Inflation: 5.7%
7. Electricity Inflation: 5.0%
8. Food Away From Home Inflation: 4.2%
If you don’t drive a car, live in a house, or eat food then you aren’t impacted much but the average person is struggling with higher prices and that is why surveys about the economy are so negative.
The big issue now is how hotter-than-expected CPI will impact interest rates and Fed policy. Bonds are lower as yields increase and odds of a rate cut in March have dropped to less than 20% from more than 60% a week ago. It is now anticipated there will be only two rate cuts in 2024 starting in the fall but those numbers will be called into question if inflation continues to surprise to the upside.
Does the market care about the delay in rate cuts this time? As I’ve discussed quite a bit, the most remarkable thing about the action since October is how the indexes have trended higher, although just four months ago the market expected six to eight cuts in 2024 starting in March. Now we are down to just two but the indexes are still close to the highs.
So far, the market just hasn’t cared much about delays in rate cuts because folks feel good about corporate earnings. We already have dip buyers stepping up Wednesday morning and we are well off the early lows.
I used the early weakness to re-establish a position in Nvidia NVDA for the first time in more than a month. I expect the stock to continue to attract strong support in anticipation of another fantastic earnings report.
I also added to my position in Uber UBER. Uber is one of my core longer-term positions and I believe the company will post another strong report in a few weeks.
A number of my favorite small-cap plays that are drifting lower but I’m staying patient with additional buys. I did add this morning to ADMA Biologics ADMA, which is close to testing its 50-day simple moving average.
I also added to Hims & Hers HIMS, which I highlighted here on Monday. The stock received a "buy" recommendation and a $20 target from Canaccord Wednesday morning, with the analyst stating he sees a "healthy long-term opportunity, supported by a recurring and rapidly growing online subscription revenue stream, expanding margins, and positive free cash flow.”
The good news about the hot CPI report is that it shakes things up and creates new opportunities.
At the time of publication, Rev Shark was long NVDA, UBER, ADMA and HIMS.
