Monday Morning Edge Report - November 13, 2023

Will Investors Get A CPI Surprise This Week?

Author

Mark Roussin
November 13, 2023

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Market Talk ⏪

The Monday Morning Edge Report is designed to help investors of all different levels breakdown important stories/topics within the stock market. In this weekly report we will help you understand what is going on to help give you, the investor, an edge in the market.

Last week was another big week of earnings, but although the mega cap reports are largely behind us, we still have some notable names reporting earnings this week.

5 Stories Moving The Market:

  1. The Streak is OVER ⏩ Rates stay put as expected

  2. October CPI Report will rule the week ⏩ Report due out on Tuesday

  3. New record for Credit Card debt ⏩ CC debt soars to $1.08 trillion

  4. Disney bounces back…FINALLY ⏩ DIS reported a solid quarter

  5. Prime Health Benefits ⏩ Amazon launches new healthcare option

1. The Streak is OVER

The S&P 500 broke its stream of eight consecutive positive days for the index, which was the longest streak in two years. The Nasdaq had a nine day positive streak, which was also its longest streak in two years. Both streak came to an end on Thursday afternoon before both indexes surged to close the week on Friday and continue the hot start to the month of November.

2. October CPI Report to Rule the Week

On Tuesday November 14th the October CPI report is due out, which will largely determine the direction the stock market heads in the near term. Here are the estimates:

  • CPI: 3.3% year over year

  • Core CPI: 4.1% year over year

If you recall, the September report showed a reacceleration of inflation as year over year CPI grew 3.7% with 0.4% month over month growth. Anything like that again would certainly spook investors. Halloween has passed, so we do not want anything spooky. Lower prices at the pump are expected to help cool inflation, but this is one reason I put more emphasis on core-CPI because it excludes volatile costs such as food and energy.

This will be a huge report to help determine the path the Federal Reserve goes in terms of keeping rates unchanged or hiking rates in their final December meeting of the year.

According to a new report put out last week by the Federal Reserve Bank of New York, Americans now owe $1.08 trillion in credit card debt, which as you know, does not have low interest rates attached to it. Given that most credit cards have variable rates, which means they move with inflation, the average rate for a credit card is now more than 20%.

Savings piles that were stocked up during the pandemic have been wiped clean and with surging prices across the board, consumers are turning to their credit cards, which further dappens the “strength” of the consumer story.

Here is a look at how swiftly credit card debt has climbed in the past few years.

4. Disney bounces back…FINALLY

The Walt Disney Company reported their Q4 2023 earnings that excited investors as shares popped more than 7% upon release of the report.

  • EPS: $0.82 per share vs. $0.71 per share expected 

  • Revenue: $21.24 billion vs. $21.41 billion expected 

As you can see, the company BEAT on the bottom line but missed on sales. The big jump in shares was largely due to the cost cutting strategy that CEO Bob Iger has been implementing is starting to take shape. The company said it is on track to hit its annualized cost savings goal of $7.5 billion.

Revenues during the quarter were an increase of 5% over the prior year, although they came up shy of analysts expectations, largely due to weaker than expected Park & Resorts results.

Streaming had a nice bounce back quarter as the company surpassed 150 million subs for Disney+, adding nearly 7M subs during the quarter.

Operating income was up across every segment of the business from a year ago. The company still has a long ways to go, but its a good start from what has been a dismal year for DIS shareholders.

Amazon has continued their aggressive push into healthcare. This past week the company announced that Prime members will be able to sign up for a One Medical subscription for $9 per month or $99 per year.

Amazon acquired One Medical for ~$3.9 billion in July 2022. One Medical has a network of PCPs that can be accessed through their Ome Medical app. Users can also schedule virtual or in-person appointments at a brick-and-mortar location.

All of this is a push to make Prime more attractive for current Prime members while also trying to lure in new consumers to sign up for a Prime membership.

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Earnings on Deck 💰

Earnings season is still rolling this week.

Here are the companies reporting earnings this week:

Analyst Upgrades/Downgrades 📝

In this section we will highlight any recent notable analyst upgrades or downgrades.

  • KBW upgrades Bank of America to market perform from underperform

  • Bank of America downgrades Paramount to underperform from buy

  • Barclays upgrades Dominion energy to overweight from equal weight

  • UBS upgrades Clorox to neutral from sell

  • UBS downgrades Albemarle to neutral from buy

  • HSBC upgrades Palantir to buy from neutral

  • Evercore ISI initiates TJX Companies as outperform

  • Deutsche Bank initiates Merck as buy

  • Wolfe downgrades Occidental Petroleum to peer perform from outperform

Poll of the Week 📊

Economic Data This Week 📆

Monday

  • None

Tuesday

  • CPI (October) 

  • Hourly Earnings final (October) 

  • Average Workweek final (October) 

Wednesday

  • Empire State Index (November) 

  • PPI (October) 

  • Retail Sales (October) 

  • Business Inventories (September) 

Thursday

  • Continuing Jobless Claims (11/04) 

  • Export Price Index (October) 

  • Initial Claims (11/11) 

  • Philadelphia Fed Index (November) 

  • Capacity Utilization (October) 

  • Industrial Production (October) 

  • Manufacturing Production (October) 

  • New York Federal Reserve President and CEO John Williams speaks 

  • NAHB Housing Market Index (November) 

  • Kansas City Fed Manufacturing Index (November) 

Friday

  • Building Permits (October) 

  • Housing Starts (October) 

Other Resources 📺

If you have not done so yet, check out my growing YouTube community of ~39,000 like-minded investors where I publish weekly videos focused on building wealth through investing.

Here is the latest video I released: 4 of the BEST REITs To Buy Before Rates Get Cut

Here is another video I put out last week while on vacation: 4 ETFs With HUGE Yields:

Here are a few others of my latest videos:

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Happy Investing!

Mark

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