CNBC Daily Open: The good and the bad of the U.S. CPI — nothing seems ugly

Gas prices are seen at a Chevron gas station in Los Angeles on September 28, 2023. 

Robyn Beck | AFP | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Prices mostly in line
The U.S. consumer price index climbed 0.1% in November and rose by 3.1% from a year earlier. The monthly increase is higher than expected, as economists had predicted prices to remain unchanged. The yearly rate, however, is still lower than the 3.2% in October, signaling a steady downward trajectory. A 2.3% drop in energy prices helped keep inflation in check.

Holding pattern
U.S. stocks closed higher Tuesday as investors digested CPI data and awaited results of the Federal Reserve meeting ending Wednesday. Europe’s Stoxx 600 lost 0.21%, dragged down by the oil and gas sector, which fell 1.28%. Separately, U.K. regular wage growth slowed from an annual 7.8% in October to 7.3% in November.

First cut in June?
The economic outlook for next year’s looking rosier, according to respondents to the CNBC Fed Survey. They think the Federal Reserve’s going to slash rates by around 85 basis points — with most expecting the first cut in June — as inflation declines to an average of 2.7% by the end of next year. Furthermore, respondents lowered the probability of a recession to 41%, the lowest since spring of 2022.

OpenAI’s revenue: $44,486
OpenAI may be valued by private investors at $86 billion, but its revenue from its nonprofit operation in 2022 was just $44,485, according to a filing with the U.S. Internal Revenue Service. OpenAI is a nonprofit — but the company launched a “capped-profit” firm, OpenAI Global, which is responsible for ChatGPT and drew billions in investment from Microsoft.

[PRO] S&P to pull back?
The S&P 500 has been rallying for the past month — and even hit its yearly high — but that upward trend isn’t going to last, according to Evercore ISI. The firm thinks the broad-based index will experience a big pullback in the first half of 2024 as a recession “materializes and politics [amplify] volatility.”

The bottom line

The U.S. consumer price index report for November came in a smidge higher than expected, compared with the previous month. However, the annual increase, as well as the monthly and yearly core inflation rates came in exactly as expected. That’s both good and bad.

The positives: Investors don’t like surprises. They could swallow the 0.1 percentage point rise in the monthly inflation rate because the CPI, overall, “was very consistent with expectations,” as Adam Crisafulli, founder and president of Vital Knowledge, put it. And November’s annual rate is slightly lower than the previous month’s, showing that disinflation is, indeed, in progress.

On to the negatives. Although the CPI was “somewhat in line,” said Liz Ann Sonders, chief investment strategist at Charles Schwab, the month-over-month figure was “not as good as some might have hoped.” Indeed, that the number was so “consistent with expectations” means it “changes little,” added Crisafulli.

But investors seemed to take the good where they could, pushing stocks higher. The S&P 500 rose 0.46%, the Dow Jones Industrial Average climbed 0.48% and the Nasdaq Composite gained 0.7% Tuesday. All three indexes touched new intraday 52-week highs.

The rally could be spurred by falling oil prices, which means upcoming CPI reports are likely to show faster disinflation. U.S. crude oil dropped more than 3% yesterday, and gasoline prices in the U.S. are experiencing their first year-over-year decline since 2020, according to Citi.

That’s good news for consumers and central bankers worried about inflation, but a blow to oil companies — Exxon Mobil dropped to a 52-week low on flagging oil prices.

Attention now turns to the Federal Reserve’s last rate-setting meeting for the year. While market consensus is for the central bank to leave interest rates untouched, investors will comb through Fed Chair Jerome Powell’s press conference and a new dot plot — a chart that shows each Fed member’s rate expectations — for hints on when the first cut might come.

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Source: CNBC