VIDEO: How March CPI Could Weigh on the Market and News From the Tech World

In today’s Daily Rundown video, Chris Versace discusses market expectations for tomorrow’s March CPI report and why it could weigh on rate-cut expectations. 

He also discusses Google’s (GOOGL) announcement it is developing more of its own chips, Microsoft’s MSFT data center news, and IDC’s first-quarter 2024 PC findings and why it’s a positive for Apple AAPL. 

Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here, Tuesday April 9, better known as one day after the total solar eclipse, one day before the March CPI Report. And as we talked about yesterday, the market's kind of treading water yesterday and again today because of the importance of that March CPI Report. And we touched on it quickly in our opening comments this morning, kind of laying out the expectations for a downtick on a year-over-year basis in the March data compared to February.

But we also pointed out that if you trace the data back as far as October, there really hasn't been a demonstrative change, a demonstrative move lower in the core CPI. And candidly, given what we've seen in the data of late March PMI reports, wages and things like that, it's kind of hard to see a big move down in the March core CPI print. That's going to mean six months with little progress. That's not going to go unnoticed by the Fed.

And odds are it means that when we hear Fed heads come out after the March CPI Report, they're going to be a little more cautious sounding about the movement towards rate cuts. And I think this is going to weigh on the market. It's why we've kind of been standing pat with the portfolio yesterday, today. Although, we have been enjoying the continued upward move in our energy or XLE shares, as well as gold or GLD shares. But what we want to do is to get through this core CPI print, this March CPI Report.

But remember, we also have the March PPI Report coming on Thursday. Odds are, that's going to show a greater impact for the upward move we've seen in oil and gas prices. And that data could also, again, move the wrong way. So we're going to want to take a very careful approach. If we do see a pullback start to emerge, we've got our shopping list. We know what we want to buy.

But we're not in a hurry, we want to let those prices come to us preferably-- preferably showing up with some nice technical supports. With that, we've been talking about the shares of PepsiCo hovering between this $168, $169 level. We'll continue to watch that, as well as others on our shopping list.

So again, we have our plan. We have our shopping list. But let's talk about some things that are unfolding today. Let's check in on Google. As I talked about yesterday, Google Cloud Next is going to kick off later today. We will be looking for an update on the cloud business and any updated financial targets as well. But as we get ready for that, Google announced that, yes, following on the path of Microsoft, Meta, and Apple it is furthering its own efforts, developed its own chips, rolling out hardware that can handle apparently everything from YouTube advertising to Big Data analysis. Why?

Well, it says it's trying to combat rising AI costs. And look, we know that NVIDIA is currently capacity constrained. The demand is so strong for those AI chips, it's not surprising that pricing could be a little inflated, a little extreme if you want to call it like that. But here's the thing, is Google going to manufacture these chips?

No. No, they are not. Odds are it's going to be somebody else. Could it be Marvell? Could it be Taiwan Semiconductor or GlobalFoundries? Those are the likely candidates. But we'll have to ferret that answer out.

As we do that, we do have some other comments that we want to talk about relating to positive demand for chips and data centers. Yes, Microsoft announced this morning that it's going to invest $2.9 billion in Japanese data centers over the next several years. And I will say this, on its own it is not the biggest announcement. But when we view it against a growing list of new data center announcements, it is, at minimum, an incremental positive because it means more chips going into more boxes going into those data centers.

The reports also suggest that Microsoft will be using quote "advanced" AI semiconductors. It's going to be a positive either for our shares of Nvidia or Marvell, no question about it. And sticking with Microsoft, we've got an update on the PC market. This comes from IDC.

And it said that PC shipments actually rebounded in the March quarter. They posted their first quarter of positive year-over-year growth in about two years. Now on its face, up about 1.5% year-over-year. 59.8 million shipments. Nice.

Apple did grow far stronger taking share. According to IDC, Apple shipments in the March quarter were up just shy of 15%. That's actually a positive data point for Apple. And it points to that their Mac business is probably going to do well when they report their March quarter in the coming weeks.

Now, we continue to think that there's a larger upgrade cycle coming. Yes, as AI becomes embedded on devices, this is going to be good not only for Microsoft, it's also going to be good for Qualcomm and some other holdings in the portfolio. Remember, we do want to hear all about Apple and its plans for AI on Macs, iPhones, iPads, and potentially other devices as well.

That's going to come at WWDC 2024 in June. I expect that after Apple reports, the rumor mill will start to churn. We'll start to hear a lot more about what they may announce, what they could announce. But let's remember Apple doesn't say anything officially until they unveil it at one of their events.

So that event will be key, I think, for Apple. But I do see them participating in the upgrade cycle really as it gains steam in the back half of this year. So folks, with that, I'd say please remember to check your emails, check your inboxes for our latest thoughts. And thanks for watching today's video.

At the time of publication TheStreet Pro Portfolio is long GOOGL, MSFT and AAPL.