The U.S. inflation report risks derailing the record rally of 2023. Higher housing prices will give the Federal Reserve pause in cutting interest rates. At best, the bank will keep rates at currently high levels.
The Consumer Price Index advanced by 0.3% M/M and 3.4% Y/Y. Shelter costs increased by 0.5% M/M. This contradicts reports from Redfin (RDFN), which reported falling rental costs. RDFN stock is the winner from the report because firm prices and falling mortgage rates will drive home sales volume.
Inflation for home building and construction will hurt demand. Lowe’s (LOW) and Home Depot (HD) risk posting weaker profits in the next quarter.
Streaming platform price increases offer a mixed outlook for media firms. The U.S. entered the 2024 election year. Election-related advertorials will lift cable companies like Comcast (CMCSA). Paramount’s (PARA) cable content will also draw more advertising revenue. Warner Bros. Discovery (WBD) and Sony (SONY) also benefit as the ad spending budget improves this year.
Rate Hike Risks
Though an unpopular view, the sticky inflation at above 3% lowers the chances of rate cuts in the first half of 2024. Interest rates could go up by 25 bps in that time. This decreases the attractiveness of Treasury bond ETFs like IEF and TLT stock.
