8 Key Items Shaping the Stock Market Friday
January CPI on deck, AI disruption or vaporware? and other headlines moving the stock market this morning.
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These are the early headlines and other items poised to influence the market at the start of the trading Friday. As we share this collection of market drivers, U.S. equity futures across the board point to a weaker open, but we will want to check back after this morning’s January CPI report, out at 8:30 AM ET.
And with that in mind…
1. U.S. consumer prices likely maintained a steady pace of increase in January as businesses raised prices at the start of the year, which together with a stabilizing labor market could allow the Federal Reserve to keep interest rates unchanged for a while. (Reuters)
We’ll get that January CPI report at 8:30 AM ET, and a closer look at consensus expectations shows the market is looking for a 0.3% sequential increase in the closely watched core CPI. That would be a tick higher than the 0.2% figure booked for December, but we’re more closely watching the year-over-year figure, which is expected to dip to 2.5% from 2.7% in December. Following the consensus-smashing January Employment Report, should the January core CPI figure fall more than expected, we could see renewed chatter about the next rate cut coming sooner than the June one expected by the market per the CME FedWatch Tool.
2. C.H. Robinson shares had been on a roll until the AI fears surfaced… The company issued a statement late Thursday to rebuff what it called “perceptions of artificial intelligence … influencing recent market activity.”… The AI fears appear to have been stoked by a couple of claims by Algorhythm Holdings, a Florida-based holding company that says it builds AI platforms and until recently was better known for its karaoke machines... the company claimed that the platform had shown a 70% reduction in empty trucking miles, based on what the company called a white paper. (MarketWatch)
This speaks to the comment we made in Thursday’s Portfolio video about uncertainty in the market and the knee-jerk reactions we are seeing. We’ve seen this before when companies like Amazon (AMZN) would wade into a new business, but it’s another thing for companies to drop as much as 14% based on a white paper. TBD how much "there is there" or if it is vaporware and if people are just jumping at shadows, but there is little question that it is helping fan the flames of market uncertainty.
3. Amazon Web Services CEO Matt Garman suggested that investors might be worrying too much about the risk of artificial intelligence models slowing the growth of major software companies. “Look, my own opinion is that much of the fear is overblown,” (MSN)
Garman joins CEOs from Nvidia (NVDA) , Advanced Micro Devices (AMD) , Arm Holdings (ARM) , Databricks, and others making similar comments in recent days. While we are likely seeing an overreaching knee-jerk reaction in the moment, one that has plopped many stocks into an oversold condition, we continue to think that software companies that are embedding AI into their tools and services, and can show continued growth in RPOs, backlog, and contract value as AI enterprise adoption accelerates, will be the ones to own.
4. The USS Gerald R. Ford aircraft carrier and its escort ships are expected to head from the Caribbean to the Middle East, three U.S. officials told CBS News, adding a second aircraft carrier to the region as tensions between the U.S. and Iran continue to simmer. (CBS)
This is going to extend the timetable for a potential deal between the U.S and Iran from days to weeks, keeping another geopolitical overhang on the market.
5. Senators left Washington this week without a deal to fund the Department of Homeland Security (DHS) past Friday, signaling how far apart Senate Democrats and White House negotiators are on a potential agreement to reform Immigration and Customs Enforcement (ICE)… Funding for DHS, which employs more than 260,000 workers, will expire at midnight on Saturday. (The Hill)
The shutdown is expected to impact the Transportation Security Administration, better known to travelers as the TSA. Just in time for the long weekend. Best of luck to those of you who are traveling this weekend.
6. The Trump administration is working to narrow its broad tariffs on steel and aluminum products that companies find difficult to calculate, and the European Union wants to be reined in as part of its pending trade deal with the US, a person familiar with the matter said. (Bloomberg)
If those tariffs are curtailed or eliminated, that would be a potential positive for companies such as Coca-Cola (KO) , PepsiCo (PEP) , and other beverage companies, as well as others that count steel and aluminum as key inputs. It would also likely help foster some progress on converting the U.S.-Eurozone trade framework hammered out last year to a more fully implemented agreement.
7. Economic data today per TipRanks: Consumer Price Index (January).
8. Companies reporting today per TipRanks: Advance Auto Parts (AAP) , Magna (MGA) , Moderna (MRNA) , Sensient (SXT) , Wendy’s (WEN) .
At the time of publication, TheStreet Pro Portfolio was long AMZN and NVDA.
