Daily Brief - Steering the Fed's rate cut roadmap

TLDR: The curtains have just been drawn on December's CPI report, and the stage is set for a financial drama that could sway the FED's future interest rate cuts. December 2023 witnessed a pivotal moment for the CPI, not just as a mere statistical release, but as a potential game-changer in the intricate dance of economic policy and market expectations.

The CPI, climbing 3.4% from the previous year, hints at a modest acceleration compared to November's 3.1% rate, yet remains significantly lower than the peak levels seen earlier in 2023. This data puts the spotlight on the Fed, challenging its next move in the high-stakes game of rate adjustments.

Market expectations, previously leaning towards imminent rate cuts, might now be standing on shaky ground.

The CPI's slight uptick, particularly in core inflation excluding housing - stubbornly high and potentially indicative of a 'pause' in the disinflationary trend - throws a curveball at the anticipation of a dovish shift from the Fed.

Analysts are sounding alarms about the risk of a reacceleration in inflation, especially if oil prices start climbing, painting a complex picture for the second half of 2024.

On the flip side, a lower-than-expected CPI could have signaled a green light for the Fed's rate cut strategy, spurring growth and market optimism.

However, the actual figures present a nuanced narrative. They suggest an inflation trajectory that's neither aggressively climbing nor steeply falling, but rather, hovering in a delicate balance.

Market Movers: If US 10 Year surpasses 4%?

Leading the pack, Arista Networks (ANET) has emerged as a formidable force, boasting an impressive 6-month return of 54.16%.

Not far behind, META (formerly known as Facebook, Ticker: META) has made a remarkable comeback with a 6-month return of 46.16%.

Rounding out the top three, Netflix (NFLX) continues to enthrall investors and audiences alike, yielding a 44.31% return over six months.

Facing the Heat: The Underperformers

On the flip side, Las Vegas Sands (LVS) leads the list of underperformers, with a significant 6-month downturn of -56.33%.

Following closely is Live Nation Entertainment (LYV), enduring a 6-month loss of -51.23%.

TE Connectivity (TEL) also finds itself in troubled waters, with a 6-month decline of -49.71%.

Earnings Update: Goldman Sachs reports tomorrow

Analysts expect Goldman Sachs' to report a 32% drop in profits compared to previous periods due to a decrease in deal-making and trading activities.

If EPS estimates can be beat, history shows the stock tends to exhibit the highest median returns in the subsequent week post announcing the beat.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.

Asset Spotlight: Don't forget about oil

Toggle analyzed 12 similar occasions in the past where macro indicators shifted, which historically has been followed by median upside in Light Sweet Crude Oil's price over the following 6 months.

If geopolitical tensions were to further escalate, we could likely see oil and shipping prices rise - both factors that could affect the fight against inflation.