This week ahead || Dec 11th - Dec 15th 2023
Inflation and the Fed: What to watch
Investors are gearing up for the last major macro events of 2023, with the release of November's Consumer Price Index (CPI) report on Tuesday and the Federal Reserve's final policy announcement on Wednesday. The CPI report will provide the latest insights into inflation, with economists expecting a 3.1% rise in headline CPI and a 4% increase in core CPI on a year-over-year basis. The Federal Reserve is widely expected to keep interest rates unchanged, with a focus on the updated Summary of Economic Projections, including the "dot plot" and forecasts for inflation, GDP growth, and unemployment. Fed Chair Jerome Powell's press conference will be closely watched for hints on the central bank's future policy direction. The stock market enters the week with strong momentum, and investors will be keen on economic data and corporate earnings, with reports from Costco, Adobe, and Lennar on the schedule. The S&P 500 is less than 5% away from its record closing high, reflecting a year-to-date gain of nearly 20%.
US oil production will keep booming in 2024, setting up a possible showdown with Saudi Arabia
US oil production is expected to reach new highs in 2024, putting pressure on Saudi Arabia to manage crude prices. Analysts at Rapidan Energy estimate that US oil output will average 13.3 million barrels a day in 2024, exceeding the current all-time record of 13.2 million reached in September. Exxon Mobil and Chevron recently announced increases in their capital expenditure budgets for 2024, directing more funds into the Permian Basin, a key area of the shale boom. The surge in US oil production coincides with output cuts from OPEC+ nations like Saudi Arabia and Russia. Some experts caution that Saudi Arabia may consider flooding the oil market with supply to depress prices, similar to its strategy in 2014. However, Rapidan Energy does not currently expect OPEC+ to take such action, as ministers remain optimistic about supply-demand fundamentals supporting prices. The US oil industry's changing landscape includes increased shareholder returns through buybacks and dividends, reflecting a shift in priorities for oil companies.
5 big analyst AI moves: Chipmakers in focus once again
- Meta Platforms Inc (META): Bank of America analysts noted that Meta is conducting trials of over 20 new GenAI features, emphasizing their belief that Meta's underappreciated AI assets will drive innovation, offering new user experiences and recurring revenue models.
- NVIDIA Corporation (NVDA): Piper Sandler designated NVIDIA as its top large-cap pick, citing compelling valuation compared to AMD and highlighting NVIDIA's full compute stack and potential for significant contributions from software licenses.
- Alphabet Inc Class A (GOOGL): Alphabet gained with the introduction of Gemini, its advanced AI model. KeyBanc analysts view this as a culmination of Alphabet's major AI announcements, though they anticipate the impact on growth and profitability may take time.
- Advanced Micro Devices Inc (AMD): AMD surged after introducing accelerator chips to compete in the AI market dominated by Nvidia. Bernstein analysts note ongoing investor interest in AMD's AI story as a perceived lower-risk alternative to Nvidia.
- Verint Systems Inc (VRNT): Verint's stock rose following positive remarks about its pipeline and AI adoption by clients. Oppenheimer analysts flagged the strong demand for AI bots but expressed the need for more tangible evidence of sustained growth before taking a more constructive stance.
China proposes trading cost cuts for mutual funds, to regulate commissions
China's securities regulator, the China Securities Regulatory Commission (CSRC), has released draft rules aimed at reducing trading commissions for mutual funds and addressing conflicts of interest in brokerages' securities trading and fund sales businesses. The move is part of broader efforts to boost confidence in the country's stock market. The proposed rules include reductions in trading commissions for both passive and active fund products, with estimates suggesting an overall cut of about a third in commissions. The rules also prohibit fund managers from paying trading commissions for third-party services and seek to ensure the independence of mutual fund sales teams in choosing brokers. The CSRC aims to guide the brokerage business back to its core focus on research. Additionally, the regulator published draft rules to tighten scrutiny of China's $2.9 trillion private funds, including raising the threshold for qualified investors to participate.