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OPEC+ members agree to cut an additional 1 million barrels per day. (0:15) The Fed’s favorite inflation gauge hits lowest level in 2 years. (1:26) Here are the most and least reliable autos. (3:57)
This is an abridged transcript of the podcast.
Our top story so far
Oil prices are higher as word from the OPEC+ meeting is that further production cuts are on the way.
Delegates say OPEC+ has agreed to an additional cut of 1 million barrels per day, and Saudi Arabia will also extend its 1 million barrel cut announced in June. Specific cuts by member countries were not yet clear.
Crude prices look on track for a third day of gains. WTI (CL1:COM) for January delivery is up +1.5%, and January Brent (CO1:COM) is up +1.2%.
In today’s trading
The major averages are mixed. The Dow (DJI) is popping, driven by a post-earnings price jump in Salesforce. The Nasdaq (COMP.IND) is lower, and the S&P (SP500) is little changed.
November will go down as one for the bulls. The broader market is on track for its best monthly gain since last July, up around 8%.
Treasury yields are higher after some very strong data on Midwest manufacturing. The 10-year yield (US10Y) is back around 4.35% after recently sliding below 4.25% for the first time since mid-September.
The Fed’s favorite inflation gauge, the core PCE price index, rose 0.2% in October, with the annual rate falling to 3.5%, which is a 2-year low.
Kathy Jones, who is the chief fixed income strategist at Charles Schwab, says, “After fears of ‘sticky’ and ‘persistent’ inflation, the month-to-month slowing in the core pce readings is encouraging. Core PCE has risen by 0.3% or less for 8 consecutive months. On a 3-month annualized basis, Core PCE is near the Fed’s 2% target.”
The 6-month annualized core inflation rate dipped to 2.5%. It was at 4.5% six months previously.
To be precise, core PCE rose 0.16% last month. Renaissance Macro says
In order to hit the Fed’s Summary of Economic Projections forecast for Q4/Q4 inflation of 3.7%, there’d need to be rises of 0.5% or higher in both November and December.
They say simply, “Not happening.”
And adding softer momentum to core inflation may push estimates for 2024 lower, too.
In the headline numbers, consumer spending and income both rose 0.2% in August, as expected.
Wells Fargo says their “estimate of inflation-adjusted ‘non-discretionary’ spending growth has started to outpace ‘discretionary’ consumption, a pattern that may suggest a more budget-conscious mindset among consumers and indicate early signs of moderation in overall spend.”
Among active stocks
Salesforce (CRM) popped 9% as investors and analysts lauded the company for a terrific quarter and even better news to come. Buys were reiterated by analysts on a stock that has one single Sell rating as artificial intelligence helped push its earnings and forecasts higher. JP Morgan bumped its price target to $260 from $240, seeing the growth outlook improve “materially.”
AbbVie (ABBV) has agreed to acquire Immunogen (IMGN), a developer of a novel cancer drug class called antibody-drug conjugates, for about $10 billion in cash. AbbVie will acquire all outstanding ImmunoGen shares for $31.26 per share. The transaction is expected to close in mid-2024.
Walt Disney (DIS) CEO Bob Iger reiterated that he plans to step down at the helm of the company in 2026. “I’m definitely going to step down,” Iger said at the New York Times Dealbook Summit. “We are aggressively pursuing succession.”
In other news of note
Consumer Reports issued its annual report on automobile brand reliability on Wednesday. The firm studied 20 trouble areas, from nuisances such as squeaky brakes and broken interior trim to major issues that included potentially expensive out-of-warranty engine, transmission, EV battery, and EV charging problems.
Asian automakers led the reliability rankings by a wide margin once again, with an overall reliability average score of 63 for the region on a scale of 1 to 100. Lexus (TM) was the overall top brand for predicted reliability, while Toyota (TM), Acura (HMC), Honda (HMC), Subaru (OTCPK:FUJHY), Mazda (OTCPK:MZDAY), and Kia (OTCPK:HYMTF) all ranked in the top ten.
European automakers are in second place at 46, with Mini (OTCPK:BMWYY), Porsche (OTCPK:POAHY), and BMW (OTCPK:BMWYY) ranking in the top ten.
Domestic brands trailed with an average score of 39. Chrysler (STLA), Rivian Automotive (RIVN), and Jeep (STLA) were all in the bottom five brands for reliability. Ford (F) ranked 22nd out of 30 brands, and Tesla (TSLA) ranked 14th.
Electric cars and electric SUVs did not impress, with average reliability scores of 44 and 43, respectively. At the bottom of the vehicle-type rankings are electric pickup trucks, with an average score of 30.
And in the Wall Street Research Corner
J.P. Morgan Chase is out with a bearish target for stocks next year. The equity team predicts an 8% decline for the S&P from current levels to close out 2024 at 4,200.
The team says: “While it is difficult to pin down the start date and depth of a recession ahead of time, we think it is a live risk for next year, even though investors are not pricing in this uncertainty consistently across geographies, styles, and sectors yet.”
That’s now the low number among Wall Street predictions, eclipsing Morgan Stanley’s prediction for a sideways year ending at 4,500.
Deutsche Bank and BMO Capital Markets remain the most bullish, with year-end targets of 5,100. The median with J.P. Morgan’s latest is now 4,750, which would be a rise of just 4% from where we are.
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