Inflation is showing absolutely no signs of stopping.
The consumer price index, a widely followed measure of prices paid by consumers, rose 0.4% in September. That’s more than the expected 0.3% gain economists expected, according to Dow Jones. The so-called core CPI, which strips out volatile food and energy prices, also increased more than expected. The producer price index, a gauge of wholesale prices, increased more than forecast too, advancing 0.4% last month.
Inflation has been on the rise even as the Federal Reserve raises rates at a quick pace. Last month, they hiked rates by 75 basis points to a range of 3% to 3.25%.
Minutes from that September meeting released Wednesday also showed that, with inflation “showing little sign so far of abating … they had raised their assessment of the path of the federal funds rate that would likely be needed to achieve the Committee’s goals.”
Still, there are some stocks that could do well as inflation keeps rising. |
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CNBC Pro screened the S&P 1,500 for stocks that met the following criteria -
Gross margins increasing by at least 1 percentage point in the past year
- 2022 earnings per share growth set to rise by at least 10%, according to analysts
- Low volatility: beta multiple lower than 1
- Up year to date
Exxon Mobil is one of the stocks that made our list. The energy giant is up 60% year to date, and its margins are up 4 percentage points over the past year. Earnings for the company are also set to rise by 140.8% in 2022.
Other stocks that made our list include Cal-Maine Foods, Arcosa and Lamb Weston. Check out CNBC Pro later in the day for the full story.
Overall, inflation has been a massive headwind for the stock market — especially tech stocks. The Nasdaq Composite has fallen more than 30% this year, is riding a six-day losing streak and is trading at its lowest levels in roughly two years.
But, perhaps counterintuitively, this could signal a huge buying opportunity has emerged.
Data compiled by Sundial Capital Research shows the Nasdaq has done well after these three conditions have been met: - Year-to-date drop of more than 30%
- Five-day losing streak
- Index trading at two-year lows
These conditions were met earlier this week, and the index’s median performance six and 12 months out is nothing short of astounding. In the six months after meeting the criteria, the Nasdaq has previously seen a median gain of 13.7%. Twelve months out, that gain grows to 20.3%, the data shows. Elsewhere on Wall Street this morning, Citi downgraded American Express to sell, citing the potential risk of a recession ahead.
“While the recession is projected to be mild, the impact to our EPS can be rather large as we are coming off of record low credit losses and are now forecasting slightly higher than normal credit losses in 2024,” analyst Arren Cyganovich said in a note. |
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TRADER TALK WITH BOB PISANI |
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You can't even say inflation has peaked yet. One of the only crumbs bulls have had is the "inflation is peaking," narrative, even though it remains at a high level. Even that is in doubt. Today's September consumer price index was up 8.2% year over year vs. 8.1% expected. Not helpful. Neither was the month over month change: up 0.4% (vs. 0.3% expected), and up 0.6% ex-food and energy (vs. 0.4% expected).
S&P 500 futures dropped 110 points on that. That, for the moment, is the premium between "inflation has not peaked" and "inflation has peaked."
It's a shame, because markets had rallied over vague reports that UK Prime Minister Liz Truss may do a (partial?) about face on her budget program. That lifted European stocks, with the iShares United Kingdom ETF (EWU) up about 2% pre-open.
The CPI will also drown out what is turning out to be a very good morning for earnings reports. All the major reporters, Blackrock, Delta, Fastenal and Walgreens Boots Alliance, posted numbers above expectations and all were trading up prior to the CPI announcement.
Blackrock, in particular, had a large beat, although profits were down 16% from the same period last year. However, the massive iShares ETF business still saw inflows, which helped limit the decline in assets under management, down 5% from the prior quarter. Not bad, considering the carnage in the market. |
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Data as of Thursday, Oct. 13 at 9:20 a.m. ET
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| The chipmaker's stock fell more than 5% after Applied Materials lowered its current-quarter revenue forecast, citing regulations restricting U.S. exports to China. |
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| Shares of the lingerie maker rose more than 2% after the company said current-quarter earnings and revenue would come in at the higher end of Victoria's Secret forecast range. |
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Watch the latest "Halftime Report" where traders answered questions including how to put your money to work during the volatile market and if you should be looking at high-dividend stocks and TIPS. These videos are available on CNBC Pro every Thursday.
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Data also provided by THOMSON REUTERS |
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