Markets hesitated to continue a long rally that began in Sep. 2023. When the government posted strong GDP revisions and a strong jobs report, this morning’s inflation report mattered greatly.
Speculators will dismiss the inflation figures entirely. Fed Chair Powell expressed a willingness to accept the volatility in the jobs and inflation data in the coming months. Ahead of the CPI report, economists already expect higher energy prices to add to inflation.
Investors who sold AI stocks and bought energy firms, especially oil and gas E&Ps, are content. Canadian Natural Resources (CNQ) traded at a 52-week high on Tuesday. The stock is still inexpensive at a 14.77 times price-to-earnings multiple. Conoco Phillips (COP) and EOG Resources (EOG) are also at new highs.
Higher Inflation for Longer
The Fed will likely backtrack on its rate cut posturing. More than 20 States lifted their minimum wages this year. Wage inflation has yet to creep into the inflation data. The central bank would need to wait another four to six months before seeing inflation rise as a result. Some of the stocks under pressure include McDonald’s (MCD).
Conversely, Chipotle Mexican Grill (CMG) traded at a 52-week high. Other than a stock split, higher wages would raise prices, hurting demand.
Watch food-at-home stocks today. As restaurant, milk, and egg prices rise, firms like ConAgra (CAG) will thrive the most.
