From Peter Boockvar:
Will the Court influence the Fed's rate decision?/Ueda, Takaichi coffee talk/Consumer talk from Home Depot, J & J Snack Foods and Amer Sports
It is not often that we hear from Fed Governor Philip Jefferson and when I hear a Fed member talk about tariffs when discussing their inflation outlook, I wonder how the Supreme Court’s decision on the President’s use of IEEPA will influence the December meeting. Jefferson said this yesterday in a prepared speech, “The latest available readings show that inflation is running at a rate similar to that of a year ago, a bit below 3 percent, indicating that progress toward our 2 percent target has stalled. This lack of progress appears to be due to tariff effects, with signs that inflation excluding the effects of tariffs may be continuing to make progress toward 2 percent. Some firms have indicated that they expect pass-through of pricing pressure from tariffs to pick up in the fourth quarter as the inventory of non-tariffed merchandise is depleted.”
But then this, “A reasonable base case is that tariffs result in a one-time shift in the price level, not an ongoing inflation problem.” So, if the court rules against the President and many tariffs disappear, I would think Jefferson would be on board for a rate cut. On the other hand, if the court removes the use of IEEPA to implement tariffs and many tariffs go away, will that lift economic activity that should result in the Fed standing pat? An interesting dynamic they could face if the court rules before December 10th. We know Jay Powell himself has said that without the tariffs, inflation would be closer to 2%.
BoJ Governor Ueda met the new Japanese PM Takaichi and that is another interesting global monetary relationship to watch. To reporters after the coffee talk, Ueda said “The mechanism for inflation and wages to grow together is recovering. Given this, I told the Prime Minister that we are in the process of making gradual adjustments to the degree of monetary easing.” He also said they are watching the moves in the FX market with the yen around the 155 level, and down a touch again today notwithstanding what sounded like Ueda is laying the ground for a December 19th hike. Rate hike odds are at just 28% as the market won’t believe a rate increase is coming until they actually see it. Meanwhile, the 10 yr yield rose another 1 bp to a fresh 17 yr + high.
Home Depot had a mixed quarter and said in their earnings release:“
Our results missed our expectations primarily due to the lack of storms in the third quarter, which resulted in greater than expected pressure in certain categories. Additionally, while underlying demand in the business remained relatively stable sequentially, an expected increase in demand in the third quarter did not materialize. We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand.”
This was from J & J Snack Food which reported yesterday. They make Super Pretzel soft pretzel bites, Dippin’ Dots, ICEE, Slush Puppies, Hola Churros, Luigi’s Italian Ice and Funnel Cake, among other indulgences.
“The macro environment, if I start there first, we still think that there is a consumer sentiment that is cautious. And so we’re going to continue to watch that especially as it relates to our retail side of our business, but we’re really feeling some good momentum as we exit ‘25 and enter into ‘26 with some of the great things that we have going on.
”Some of their products are sold in movie theaters and “we think the theater industry is bouncing back some.”
Amer Sports is jumping about 10% pre market after what looks like a good quarter. They said “Amer Sports’ strong momentum continued in the third quarter, as our unique portfolio of premium technical brands continues to create white space and take share in sports and outdoor markets around the world. All three segments performed extremely well led by exceptional Saloman footwear growth, an Arc’teryx omni-comp reacceleration, and solid growth from Wilson Tennis 360 and our Winter Sports Equipment franchises.
”Their customer is definitely on the upper end with brands like Arc’teryx, Saloman, Wilson, Peak Performance, and Atomic and helps to understand the sales strength.
