Equity futures point to a mixed market open later this morning, but odds are we’ll see a subdued trading session as investors wait for what’s revealed in tomorrow’s November Consumer Price Index (CPI) report. Headline CPI is expected to tick up to 2.7% YoY from October’s 2.6% print, while the consensus view for the core reading sits at 3.3% YoY, the same as September and October, and up from 3.2% for the two prior months. Looking at an early view on December CPI, the Cleveland Fed’s Inflation Nowcasting model doesn’t offer much hope for a meaningful decline.
Coming off recent comments from Fed Chair Powell at the 2024 DealBook Summit, a 3.3% or warmer core print for November would raise questions about a December Fed rate cut. Currently, the market sees such a cut as very likely, which means tomorrow’s CPI report and Thursday’s November Producer Price Index report have the potential to throw the market a curve ball.While we wait for that report and the reverberations through market rate cut expectations or not, Taiwan Semi (TSM) reported November revenue that rose just shy of 34% YoY. While the typical seasonal pattern of a decline compared to October repeated, the company’s combined October and November revenue, which rose 31% YoY, should dampen any questions about AI, data center, or smartphone demand. It’s also a nice positive for our Digital Infrastructure and Digital Lifestyle models.Sticking with chips, this morning brings a nice data point for our CHIPs Act model in the form of a statement from Vice President Kamala Harris regarding that program and Micron Technology (MU):
“Today, thanks to our historic legislation, the Department of Commerce has finalized one of its largest awards to date with Micron Technology, the only U.S.-based manufacturer of memory chips. This more than $6.1 billion investment in Clay, NY, and Boise, ID supports the construction of several state-of-the-art memory chips facilities as part of Micron’s total $125 billion investment over the next few decades, creating at least 20,000 jobs by the end of the decade. These investments will help the U.S. grow its share of advanced memory manufacturing from nearly 0% today to 10% over the next decade.”
That overall investment bodes rather well for semi-cap equipment demand and our model, and odds are we will see more awards before we close out 2024.Despite the pressure we’re likely to see on Oracle (ORCL) shares this morning, supportive comments for our Cloud Computing and Artificial Intelligence models were made during the company’s earnings call. “ Record level AI demand drove Oracle Cloud Infrastructure revenue up 52%. But excluding legacy hosting infrastructure, cloud services revenue was up 55%. Our infrastructure cloud services now have an annualized revenue of $9.7 billion.”During the call, Oracle Chairman and CTO Larry Ellison also supported one of our thoughts that AI adoption will translate into greater investment in digital infrastructure, “… as we make our networks faster, the AI training will get faster. If we don’t — if no one makes the networking faster, then I think there’s a potential bottleneck. But we’re trying to avoid that bottleneck by speeding up our networking.” That along with the Signal below about 6G keeps us long-term bullish on our Digital Infrastructure model.Outside of Tech, homebuilder Toll Brothers (TOL) reported October quarter results that topped Wall Street expectations led by a 25% jump in delivered homes. For the current quarter, the company expects deliveries of 1,900-2,100 vs. 1,927 in the year-ago quarter. For fiscal 2025, Toll guided deliveries to 11,200-11,600 homes compared to the 10,813 delivered in fiscal 2024. Those year-over-year increases bode well for our Homebuilding & Building Products model, and we’ll be interested in comments made during this morning’s earnings call about the cadence of demand and mortgage rate expectations.More By This Author:Powell Sees A “More Cautious Fed” Ahead Of The November Employment Report Retail Investors Are Long Confidence And Short ExperienceNvidia’s Guidance Weighs On Equity Futures
