Tracking Palantir, Inflation Expectations, an Iran Tariff?
Let's see what could happen when all the 'pros' are on the same page on this Sarge fave; also what I see for the CPI and Trump's newest tariff plan.
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He stares silently from a blackened window, as has been his way. Zero dark-thirty. Hours pass. So many hours. Even the creatures of the night are still. For now. Wisdom? Lack of sentient thought? He knows not. For how could he? He is a man. Driven to succeed for the same reasons as most. Love.
Still silent. Always has been. Older. So much older than he seemed not so long ago. Looking back from the darkness. Somewhat illuminated by a bluish light. Guidance? More like assurance. Speak. Tell us what we don't know. Still quiet. Time to work. Straps on the saber of responsibility. Stands against the rising tide. God bless you and yours. This I mean. This I will defend. The Sentinel rises.
Inflation
Happy December CPI Day to all who celebrate! The Bureau of Labor Statistics will release the December edition of their consumer price index at 8:30 this morning. Wall Street is looking for a month-over-month increase of 0.3% at both the headline and the core. I may be wrong, but as readers can see, I am expecting "just" 0.2% at the core.
The consensus view of public and private sector economists is for annual growth in December of 2.7% at both the headline and core levels. Again, I am below consensus. While I too see growth of 2.7% at the headline, I see growth of 2.6% at the core. You have seen gasoline prices, haven't you?
The truth is that I think that if there is to be a surprise, it may be on the low side, especially at the core, and I think that if the data were to be reported out to a second decimal that core inflation might round up to 2.6% not down to that level.
The fact is that unless the models I use and the external models that I pay for and trust are wrong, the U.S. is experiencing a period of disinflation that the media appears slow to pick up on. Even if I am wrong about what I would call a "stabilization" of inflation for this December data, I see it as a near certainty that inflation slows further when the January numbers are released and further still for the first quarter on the whole.
New Tariff
Pres. Trump has been supportive of the widespread protests against the current regime in Iran. On Saturday, the president posted to social media: “Iran is looking at FREEDOM, perhaps like never before. The USA stands ready to help!!!”
On Monday evening, after it was reported that hundreds of Iranian protesters had been killed and that more than 10,000 had been arrested, the president returned to social media...
"Effective immediately, any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America. This Order is final and conclusive. Thank you for your attention to this matter!"
No, we still have no news from the Supreme Court concerning the legality of the president's tariffs in the first place. Any day now. I guess.
Resilient Monday
Overnight, Sunday into Monday, after news had broken that Fed Chair Jerome Powell was under criminal investigation in relation to his testimony this past June before U.S. legislators concerning cost overruns at two Washington buildings operated by the central bank. This was seen as politically motivated by many and markets appeared to show a broad disapproval. That is until the twin opening bells actually rang down at 11 Wall St. and up at Times Square. Equities opened at the lows of the regular session on Monday morning and literally rallied for more than five hours. Climbing above the unchanged mark for the day before hitting resistance.
By the time the dust had settled, the S&P 500 had gained 0.16% for the session, as the Nasdaq Composite tacked on 0.26%. None of the mid-major to major indexes really had a strong day, but none of them really got their doors blown off either. The KBW Banks gave up 0.95% on the credit card cap news, but nothing else really strayed all that far from where markets closed on Friday afternoon.
The Russell 2000 gained 0.44% for the day, which could lead investors to believe that small caps out-performed large caps. The only problem with that is that the S&P 600 under-performed at +0.09%. Semiconductors were again the backbone of U.S. equity markets on Monday. The Philadelphia Semiconductor Index gained 0.47% on Monday as the Dow Jones U.S. Semiconductor Index gained 0.42%.
Those gains were, as they've been for a good while now, driven by storage and memory. Not surprisingly, Western Digital (WDC) and Seagate Technology (STX) were the top two finishers in the S&P 500 on Monday.
Breadth
Market-wide breadth was generally positive on Monday. Winners beat losers by a rough four-to-three margin at the NYSE and by about five to four at the Nasdaq. Advancing volume took a 54.8% share of composite NYSE-trade and a similar looking 55.6% share of composite Nasdaq activity on Monday. The difference was in aggregate trading volumes. On a day-over-day basis, trade ebbed by 2,8% across NYSE-listings but managed to expand by 7.2% across Nasdaq-listed securities.
Interestingly, activity across the membership of the S&P 500 has surpassed the 50-day trading volume simple moving average for that index for six consecutive trading days and five of those days have been green-candle sessions. Yes, Mortimer, that's a positive going forward.
Anyone Else Notice...
On Monday, analyst Tyler Radke of Citigroup upgraded beloved Sarge-folio holding Palantir Technologies (PLTR) from a "neutral" rating to a "buy." Radke, who is rated at four stars out of five by TipRanks, increased his target price from $190 to $235.
That's nice. It's not the highest target on Wall Street. We still have a $238 target and Mariana Perez Mora of Bank of America (5 stars) has a $255 target. Mariana is great, by the way. If you're not following Mariana and you are trading defense and government services stocks, I think you're batty. Dan Ives of Wedbush has a $230 target.
Am I concerned that Wall Street is really starting to catch up to what was our best trade of 2024 and 2025? No, concerned is not the right word. We're up 2,664% on that trade. Nobody on Wall Street can touch that.
That said, when I would think that once the supposed "pros" are all on the same page, which they are not yet, this stock will reach a point of at least temporary investment saturation. Investors who have been on the ball have been in this name all along.
Once the aircraft carrier that is the slow-motion world of Wall Street (Yes, been there, done that. I have the right to throw punches) turns into the wind and launches, the lemmings will all jump on board, and we will experience one more pop. At that point, the market for this name will become imbalanced, and we'll have to start trading the stock rather than simply investing it.
Note the Chart ...
The line of support for the S&P 500 has continued to rise beyond the closure of our "ascending triangle" of bullish continuance.
This is where the recent attempt at a breakout has come from. Yes, I see U.S. equity index futures trading lower on Tuesday morning. Is it real? Only if they are still lower after the CPI print hits the tape, cowboy. Note that relative strength remains supportive, but close to overbought. Not that the daily moving average convergence divergence is postured about as bullishly as it could be.
Economics
(All Times Eastern)
06:00 - NFIB Small Biz Optimism Index (Dec): Expecting 99.5, Last 99.0.
08:15 - ADP Employment Change (weekly): Last 11.5K.
08:30 - CPI (Dec): Expecting 0.2% m/m, Last 0.3% m/m.
08:30 - Core CPI (Dec): Expecting 0.2% m/m, Last 0.2% m/m.
08:30 - CPI (Dec): Expecting 2.7% y/y, Last 2.7% y/y.
08:30 - Core CPI (Dec): Expecting 2.6% y/y, Last 2.6% y/y.
08:55 - Redbook (Weekly): Last 7.1% y/y.
10:00 - New Home Sales (Sep): Expecting 712K, Last 800K, SAAR.
10:00 - New Home Sales (Oct): Expecting 700K SAAR, Last?
1:00 p.m. - Thirty Year Bond Auction: $22B.
2:00 - Federal Budget Statement (Dec): Last $-173B.
4:30 - API Oil Inventories (Weekly): Last -2.8M.
The Fed
(All Times Eastern)
10:35 - Speaker: St. Louis Fed Pres. Alberto Musalem.
4:00 p.m. - Speaker: Richmond Fed Pres. Tom Barkin.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (BK) (1.98), (DAL) (1.55), (JPM) (4.86)
At the time of publication, Guilfoyle was long JPM, PLTR equity.
