Nvidia, August PPI and jobless claims ahead of Fed cut: Morning Brief

US stocks were mixed heading into Thursday's session, with the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) up, extending Wednesday’s gains, while the Dow Jones Industrial Average (^DJI) hovered below its flat line. Top Wall Street experts join Morning Brief hosts Seana Smith and Brad Smith to discuss the latest economic data, demand for Nvidia’s (NVDA) chips, a potential Boeing (BA) union strike, and top trending stocks.

The Producer Price Index (PPI) showed prices increase by 0.2% month-over-month and 1.7% year-over-year in August. Initial jobless claims also came out above estimates for the prior week at 230,000, compared to the 227,000 expected. The new data comes after Wednesday’s in-line Consumer Price Index (CPI) print and ahead of the Federal Reserve's September FOMC meeting next week.

Oxford Economics chief economist Ryan Sweet tells the Morning Brief team that the data is a "slam dunk" for a 25-basis-point interest rate cut from the Fed next week.

KeyBanc Capital Markets equity research analyst John Vinh joins the Morning Brief to discuss competition among chipmakers during the ongoing artificial intelligence (AI) race after Nvidia CEO Jensen Huang’s comments about demand outpacing supply sent the chipmaker’s stock higher.

Investors are watching Boeing (BA) as factory workers vote on the tentative labor agreement today, with a potential strike of 33,000 union members still looming.

The Morning Brief team examines the morning's stock moves of the top trending tickers, including Kroger’s (KR) earnings-fueled gains and Moderna’s (MRNA) tumble. Other top trending stocks on the Yahoo Finance platform include Norfolk Southern (NSC) and 7-Eleven parent company Seven & I Holding (SVNDY).

This post was written by Naomi Buchanan

Video transcript

It's 9 a.m. here in New York City.

I'm Shana Smith alongside Brad Smith and this is Yahoo Finance flagship show the morning brief.

Let's get to the three things that you need to know today.

Starting with the markets, stock futures are relatively flat.

After a mixed inflation reading, wholesale prices came in a bit hotter than expected on a monthly basis in August.

But on an annual basis, the number is in line with expectations and is cool significantly from July's revised level initial jobless claims though ticking up slightly last week coming in above estimates, the data comes as more investors pricing a 25 basis point cut from the fed later this month in video leading A I stocks high.

The chip giant is back in favor on Wall Street after Ceo Jensen won to incredible demand for its black.

It's so great.

Uh And everybody wants to be first.

Yeah, and everybody wants to be most and everybody wants to be and so that the intensity is really, really quite extraordinary.

NVIDIA is just below the flat line and pre market trading, but it did close up 8% yesterday on Wednesday and Boeing faces the threat of a strike as 33,000 union members head to the polls to vote on a critical labor contract.

The chief executive Kelly or beg is making final pleas to avert the strike saying it would put the company's recovery in jeopardy.

Here.

Boeing has been struggling to come back from series of manufacturing incidents including one in January when a door plug blew out on an Alaskan Airlines flight.

The current labor contract was reached in 2008 after a two month strike and the tentative agreement includes a 25% wage bump over four years.

We got 28 minutes to go until the opening bell.

You're looking at a mixed picture when it comes to the major averages.

Now this move on the heels of the jobless claims report that we just got and the latest inflation reading with PP I out just about 30 minutes ago, you are looking at dow features on track to start the trading day in the green just above the flat line.

That is also the case for the S and P as well.

When you take a look at the NASDAQ 100 features that is trading just to the downside here, giving back some of those gains that we certainly saw yesterday.

I also want to point out some of the action that we're seeing in the bond market because this is really as uh important to note here.

We are seeing a rise in prices, meaning some pressure on yields.

And the significance of this is this really shows that the bond market might be paying a bit more closer attention to the labor market than it is that inflation when it comes to claims out this morning.

So something to note here in today's trading action also, when we flip over to some of the action that we are seeing on an individual basis ahead of the open, I wanna point out to the strength that we saw in technology yesterday that that really was a reversal that we saw following the CP I pri yesterday.

A lot of that on the heels of the much of a more bullish commentary from an NVIDIA Ceo Jensen Wong, we saw NVIDIA close up today up just about 8% here.

We are in early trading.

We're not trending too far from the flat line up just about 2/10 of a percent.

But again, when you take a look at the broader tech space, a bit of a mixed picture he got in Microsoft, just the flat line as well as Amazon Apple and Google.

Not, not uh drifting too far from the flat lines meta that is the case there as well.

Take a look at the sector action here this morning.

We are looking at some gains almost across the board.

When you take a look at communication services, energy utilities there leading the way as of this morning, a bit of a bounce back here from energy.

So a bit of a reversal from what we saw yesterday.

So again, important to keep your eye on here today.

All right, let's talk about NVIDIA as well.

Here, shares are relatively flat in pre market trading after closing higher by 8%.

On Wednesday, the surge coming after Ceo Jensen Huang touted the extraordinary demand for A I chips at the Goldman Sachs Communic Copia and Technology Conference on Wednesday.

Demand is so great that that delivery of our components and our technology and our infrastructure and software is really emotional for people because it directly affects our revenues.

It directly affects our competitiveness.

Huang pointing to the intensity of the demand being so great that their customers get emotional when the supply can't always meet what they want here.

And that demand has certainly benefited NVIDIA to this point.

And some of the entrenchment that they've been able to put forward for themselves has really come back to uh C A which we've talked at length with several analysts about Stacey Razon, one of them, we talked about C A with and how that compute unified device architecture would sense for how that's really been part of the thesis around NVIDIA.

But then you start to think about OK, if NVIDIA is unable to meet some of that demand, who were some of the other players that could win or at least take some market share in the near term period is it competitors like a MD, they have a company that they bought called ZT Systems, helps bring in systems expertise.

Um, it was kind of a, an engineer acquisition but all, all these things considered an aqua hire as some people would call it all these things.

It's looking at some of the other stock plays that could potentially benefit as NVIDIA is trying the best it can to meet demand and where other players can at least pick up some of the the chips that are falling off their plate.

Yeah, and I think that's exactly been the narrative surrounding NVIDIA stock, right?

Just the fact that they have such a dominant position right now.

When you take into account, the estimates here for A I grows down the line, the chip sector, exactly their role clearly critical here to the adoption of A I going forward.

NVIDIA is far from the only name in the game right now.

They are the leader, but there certainly are other opportunities for some of those smaller players relative to NVIDIA to chip away at that market share.

But I think just taking a look at the move yesterday, the significance of an 8% pop on the heels of really Jensen Wong almost just reiterating what we've heard time and time again.

Yes, he did say some interesting commentary when it comes to the fact that customers are a bit more emotional because they everyone wants to be first when it comes to this technology.

But the fact that he did once again reiterate that quote unquote inc demand for chips also went on to talk about the fact that every dollar a company spends on NVIDIA infrastructure could be turned into $5 in cloud computing revenue.

And I think that almost validates some of the concerns that had been validates the initial euphoria that we did see play out within the A I trade.

It almost puts to ease some of those concerns that we did have over the last several weeks when it comes to, I guess how quickly some of these companies are able to make money when it comes to their A I investments.

All right, we're gonna get investors take on the chip demand picture.

Later on this hour, we will be speaking with John Vin.

He's key bank, capital markets, equity research analyst that's coming up in just about 30 minutes.

Another big story that we're watching today.

A crucial vote union vote for Boeing.

33,000 union members will vote on their first comprehensive labor contract in 16 years.

Here at the latest is our very own pros Subramanian pro.

Certainly a lot riding on this vote.

Yeah, big vote today Thursday.

Uh for potential.

If they don't pass it, it could, they could go on strike on Friday that a decision could be made by the members.

And you know, the members of the people that have the final say not the actual bargaining committee and, and, uh, the head of Boeing's Union said that we don't think the workers will actually accept this deal, but this is the best deal we could get and looking at the deal here, uh, what workers would get is a 25% pay raise over four years.

Uh, $3000 lump sum payments and some, some contributions to their, to their pen to their pension, Uh sorry, tore accounts.

Uh and the promise to build the next jet in, in, in their Boeing facilities.

But the U the workers wanted a 40% raise over three years.

They wanted traditional pensions, things like that.

This is the kind of things that other unions have asked for too.

And you know, this is something that Boeing is, is concerned about because they said that in a letter to employees, even though we're $60 billion in debt, uh We're offering what we think is what we say is the largest ever pay hike because we know it's important we gotta do right by workers.

But uh as you can tell Boeing is sort of against the eight ball here.

They have to actually service their debt, pay the workers and also get their, their production back online.

So why is the union pressing their hands this time around then?

You know, so last, I guess last pay pay negotiation period, they lost a lot of concessions and this time they say Hey, look, look at what the UAW is.

Look at what Hollywood has done with their successful union negotiations and, and there's a new, a New Gallup poll came out recently that showed that uh union approval hit its highest since the 19 sixties at 70%.

So they're pushing their advantage, the public is behind them in that sense.

And Boeing isn't exactly a sympathetic character here.

Right.

So I think that's sort of what's happening here.

And that kind of begs the question I was going for here when it comes to so many issues he is facing Boeing right now.

Kelly Warburg, certainly there's no shortage in the list of issues and challenges that he has before him.

But when it comes to how far, I guess these talks have progressed so far, there certainly seemed like initial analyst reaction was that they were very encouraged by the fact that we might be able to avoid a strike.

How disastrous could it be if we do see some sort of fallout that wouldn't be welcomed by Boeing?

You know, there's been talk about will this affect my commercial travel, traveling?

And that's not going to be the case, there's plenty of planes already out.

So there's already a backlog of places already built, so probably not right away, but it could affect their earnings could affect sort of their uh guidance for the next year in 2025.

So we'll see how long a potential strike could be.

But you know, talking about Boeing, a lot of analysts have said this in the past, they're not going anywhere anywhere, right?

They're not gonna go out of business.

So it's, it's sort of what, how fast can be done.

We'll see.

All right, Boeing shares down right now, pre market by about 4/10 of a percent price.

We'll continue to watch these negotiations and uh this critical union vote here appreciate the breakdown.

Also everyone.

August producer price index data coming in slightly hotter than expected on a monthly basis while July's data was revised to the downside.

Meanwhile, on the employment front weekly us, jobless claims coming in at 230,000, that's above the estimate for 227,000.

Joining us now to break down what this means for the Federal Reserve and the economy.

We've got Ryan Sweet, who's the Oxford economics, chief economist?

Great to have you here on set with us today.

Thank you for having me.

Absolutely.

So I mean, let's break this down because it's more than just these data points that we're getting here today on producer price index coming after we got CP I coming in largely in line with expectations earlier this week.

And then of course, thinking back to the employment situation last week that really sent the market into a little bit of a tailspin, it seems.

So we're getting a little bit more pulse pulsing news from at least jobless claims at this juncture.

But how much does that move the discussion for the fed at this point?

Not too much.

But uh initial jobless claims is my favorite economic indicator outside of hurricanes and strikes that typically doesn't send false signals because it can provide a pretty uh quick in real time.

Look at the state of the labor market and the key catalysts or the causal relationship between a rising unemployment rate and a recession are layoffs.

And that's what jobless claims are measuring the number of people that are filing for unemployment insurance benefits.

And right now they're still pretty low.

They're below that break even level, which is consistent with no monthly job growth.

So I think this is a good sign for the fed that, you know, even though the labor market has risen, it's not because of a lot of layoffs.

And I think that's uh an encouraging sign for them.

So then what does that tell us about the Fed when we do see some of the softening that we have seen in the labor market?

Does it warrant fed action?

Oh, it does.

Uh, the, it's a slam dunk that they're gonna cut next week and it's gonna be 25 basis points in, in our view.

I think it's gonna be, you know, there's not gonna be any dissents.

I think they're all gonna be on the same page for the first cut and then in subsequent meetings it's gonna be a little bit more of a lively discussion about whether or not they go 25 or 50.

But they need to get this, this party started.

They need to start cutting interest rates, kind of ease their foot off the brake to engineer the soft landing on the inflation front.

As you referenced with the PP I this morning, you know, mapping it with the CP I.

The PC deflator is gonna come in pretty soft on in August.

And you know, you don't wanna ever say mission accomplished when it comes to inflation, but the fed is very close to mission accomplishment.

And so how does that set up if we're close to mission accomplished?

How does that set up with the pathway for those cuts might look like from your perspective?

So our current baseline is uh cut every other meeting until they get back down to the neutral rate, which, you know, no one really knows where the neutral rate is until you get there.

Uh But I think the fed can clearly lay out that we're gonna be, you know, you know, meticulous about cutting interest rates.

You know, they're gonna pause if they need to with the inflation data.

Uh because one thing to keep out uh look out for is that the comparisons get a little bit more difficult uh going forward.

Uh But in the end, if you look through the kind of like the vagaries of the data, inflation is getting back down to their target in short order.

You know, it, it's interesting when you take into account you were talking about how, um, you love to look at or one of your favorite indicators to look at is jobless claims.

And we certainly have seen more emphasis on some of these, I guess other prints and maybe historically have been speaking and I bring that up because of retail sales out next week following the CP I print that we got yesterday and, and just cut some of the volatility that we've seen around some of these other prints giving us a better idea.

Is, is there more emphasis, do you think placed on next week's print when it comes to retail sales and why or why not?

A little bit?

I mean, the consumers, you know, as the consumer goes so goes the US economy.

But keep in mind that retail sales only makes about, you know, one third of overall consumption, most of our spending for you and I and uh is on services.

So we get that data later in the month, but the retail sales is kind of like jobless claims because you have your first look at consumer spending in the month.

Uh So I do think the Fed will pay close attention to that.

But, you know, every little wiggle in retail sales, you gotta kind of take with a grain of salt.

And so with that in mind, I mean, going forward from here, assume that we start to see some of the 25 basis points cuts and then additionally going out into next year, what the pathway for those cuts could look like?

Does that signal to you that, that the fed feels like we're encroaching on recession territory or that we'll be able to revert, avert one in entirety here?

Yeah.

So a recession is in our, in our baseline forecast.

I mean, the economy is in transition.

We were booming over the last couple of years.

We're creating 203 100,000 jobs per month.

GDP growth was well above the economy's speed limit.

We're just now kind of in a transition period, we're settling into a more sustainable period of growth.

Uh And that feels uncomfortable.

I mean, it feels like a recession to a lot of people.

It feels like a recession to many industries, but it doesn't necessarily mean that we're, we're in one the interest rate sensitive parts of the economy, housing autos, they've been taking it on the Chin recently.

But you know, as the fed starts to ease interest rates, housing should find its footing.

So the interest rate sensitive parts of the economy should start to to improve.

In theory, then if you have more, more volume that comes back into the the bidding for homes or more purchasing activity that uh jolts up because of the mortgage rates becoming more famous because of the Fed initiating some of their cutting then wouldn't that mean housing would remain more elevated as, as part of one of the inputs and inflation for a longer period of time?

And if so, then when would we finally start to see that debate?

What would have to take place?

Yeah, you're right.

So housing has been in the thorn of our, in our inflation side.

Uh But that matters more for the consumer price index than the PC deflator, which is the Fed's preferred measure of inflation.

Uh But uh you know, the housing market is, has been struggling.

I mean, as interest rates do come down, we'll see more housing activity but you kind of see a lot of housing disinflation that's in the pipeline.

I mean, economists, we've been waiting for this.

It's, you know, you know, before it was like being a Cubs fan, you know, just wait till next year.

Uh it's coming, it's eventually coming.

Uh I'm a Red Sox fan so I had to wait 8080 something years, ok?

But it ain't got to run for the inflation from housing is coming.

But you know, even just a little drop, you know, some more activity in housing would do well, uh for the economy, the other thing to keep in mind is that homeowners have, you know, a boatload of money uh built up in equity in their home.

So as interest rates do come down, you might start to see some more uh cash out, uh, refining activity and that's good for consumer spending.

Ryan real quick.

Two part question here.

One, if the fed does go 50 next week, is that a mistake?

Why?

And then two, you talked about the fact that maybe some of the meetings that we will get before the end of the year beyond September might be a bit more lively in those discussions.

What do you think would warrant a larger cut before the end of the year?

So I don't think it would be a mistake either way.

As long as they cut, uh, you know, the feds or the markets have been clamoring for a rate cut since the beginning of the year.

You know, markets have been, you know, uh whipsawed by fed communication, devolution of the data.

Uh So if they go 50 I don't think that sends a signal to the market that, you know, they know more than we do.

I mean, the fed knows, you know, roughly everything that economists and, and markets know.

Uh So I don't think it would be a mistake, I think, you know, but they do need to get this process started.

What would lead to larger rate cuts later this year is any further deterioration in the job market.

So, if jobless claims start to head up, get above 250,000, you know, per week on a sustained basis, I think that's a red flag.

If the number of permanent job losers is rising in the employment data.

I think that's a red flag.

So they're really kind of, you know, they're, they're not turning their back on inflation, but, you know, the labor market is taking, you know, a higher priority for them right now.

Very interesting, great insight, Ryan.

Sweet, good to have you here in the studio.

Thanks so much for coming on and joining us here this morning.

Well, coming up a quick look at some of Yahoo Finance's top trending stocks here ahead of the opening bell on Wall Street.

You got the names up on the screen right now.

We've got more when we come back.

Now.

Time for some of today's trending tickers, you could scan the QR code below to track the best and worst performing stocks of the session with Yahoo Finance's trending tickers page.

Well, let's start with Kroger lifting the lower end of its full year comparable sales x fuel forecast as consumer spending on essentials.

It remained resilient during the second quarter.

Grocery store chains adjusted earnings per share, the EPS figure topped estimates while revenue fell short sort of expectations during the period there.

You're taking a look at the actuals versus the estimates there and you could see that mixed bag here.

That's a shopping joke.

But anyway, all things considered, I was looking through what the com the company is saying right now because let's remember as well that this is a critical time for us to, uh, and to, for them to track the closure of what's one of your favorite news pieces.

And Kroger and Al, I mean, this is the shaw of trade folks, Kroger and Albert on it and it becomes your be.

Well, yeah, I, I think you take a look at Kroger Albertsons exactly what's playing out in court right now, Kroger within the statement defending obviously to no surprise, there are acquisition plan, acquisition here when it comes to Albertsons talking about the fact that it's actually going to make uh going to make the industry more competitive, allow them to compete with some of the other larger players out there when it comes to Walmart.

When it comes to Amazon here again, that was the proposed $24.6 billion merger here for Albertsons that we're talking about, which is in court right now.

But when you take a look at what is playing out in reaction in the stock price here this morning, a lot of this has to do with the spending patterns that we've been talking about time and time again here of consumers right now who are under pressure from persistent higher inflation, sticky inflation, they're then trading down, they're focusing on deals, they're focusing on value.

It's something that Kroger CEO also mentioned within this release that did give them a boost this last quarter here as people are still spending on their necessities.

And as a result, they're looking past some of the weaker points within this print and focusing on where they did outperform.

And that's a big reason why we are looking at shares up just about 1.5%.

Yeah, it's a great point.

And one of the things that this kind of draws my attention back to, I was actually reading a report this morning from Deloitte, talking about grocery shoppers and how they're craving convenience and fresh.

Right now, grocery retailers they say are working to navigate new wave of change, challenging their conventional business models.

Stressors and, and if you're got your pen and pad out, these stressors are huge, emerging forms of competition.

And that's not even just other players in the space.

Sometimes it's the retailer themselves that's actually carrying the items, the rising shopper expectations, tightening consumer wallets.

Despite this traditional strengths, like fresh food convenience, they play an increasingly important role in many consumers purchase decisions and that comes back to sourcing too here.

And so we'll see how well the uh uh the two things that you called out before we start talking about this apples and potatoes, how they continue to keep doing.

Exactly.

Yeah, both down prices.

Prices are lower than they were a year ago.

All right, let's take a look at the next trending stock here this morning.

And that is Norfolk Southern.

We're looking at losses of just about 1.4%.

The railway company firing its CEO Alan Shaw for engaging in a consensual relationship with a subordinate.

Now, Norfolk Southern's chief legal officer with whom Shaw was said to have a consensual relationship was also terminated.

So what comes next?

And that is a big question for investors at this point when it comes to uh President and CEO effective immediately, that will be Mark George the streets quick uh first reaction to this Bank of America's analyst, Ken Hocker was out with immediate reaction saying that they actually believe the management transition will be seamless as the CEO or continues the operational overhaul.

And the new CEO George provides continuity in the transition.

So again, looking past some of the um upheaval that we are seeing at least in the short term, they also talked about the fact that Norfolk reaffirmed its full year 2024 targets provided on July 25th.

So again, reasserting some of the outlook that we have gotten before.

But despite all that, to no surprise, I don't think it could be a lot worse than it is here this morning with shares off just over 1%.

Yeah, you know, I was talking about this one with um you know, our executive editor, Brian Si, who had interviewed Alan Shaw last year at the investment and really got a lot of his story, a lot of his upbringing.

And you know, one of the kind of takeaways after hearing a lot of that is, you know, all of that, it, it comes to a head at this point now with not being able to continue to carry on leadership in this position because of, uh of what's taking place as a result of these findings too.

But also just the, the actions that he and the chief legal officer decided to take all these things considered Norfolk Southern has been incredibly embattled over the past two years.

Here.

You think about that defendant, uh, status that they've had in a class action lawsuit.

They settled that for $600 million.

They also um ha have to figure out what to do with this compensation too.

I mean, $13.4 million compensation last year.

And then additionally, there's a retirement comp compensation that he was supposed to be entitled to about $9.6 million if he left the company.

And so we'll see what this ultimately means for any of that compensation.

I imagine shareholders will have a lot to say about that.

I don't believe and I fact check this, but I don't believe he's getting the compensation because he was fired with cause he had no to those compensation.

But again, I got to fact check that, but I'm pretty sure thanks for that correction.

I appreciate that guys, Moderna, let's also talk about this one moderna slashing its research budget in a push to reach profitability amid disappointing vaccine sales.

The company plans to trim its R and D spending by 20% starting in 2025 and then after Moderna's pandemic era boom, of course, you'll remember diminishing demand for COVID shots that has weighed on revenue projections back in August, Moderna cut its full year guidance, citing low vaccine sales and tight composition as well.

Um They're implementing some portfolio prioritization, these cost efficiencies as they call them.

Uh stop me if you've heard that before to reduce that R and D expense by about $1.1 billion from $4.8 billion.

Uh In 2024 here, the new range by 2027 3.6 to $3.8 billion is what they're looking for that to come in at.

Yeah, I mean, and, and I think when you take into account what the street has wanted to see here from Moderna, they wanted them to cut costs, they wanted the company to kind of realign going forward, given the fact that they, that they have seen some of that weakness here, especially on the heels of what they saw revenue wise coming out of Europe when it comes to weaker than expected performance from their COVID vaccine again.

So they're making some of these strategy changes, cutting their budget by about 20% over the next three years.

Looking to find the path to profitability, very similar to what we've heard from analysts here over the last couple of quarters, Jeffrey out recently saying that Moderna needed to cut as much as actually a billion dollars in expenses to quote, regain investor confidence.

So get a move like that, you could argue could help regain some of that lost confidence here.

Yeah, they say looking ahead to 2026 and 2028 here, Moderna is gonna be expanding its commercial portfolio first in class vaccines.

They say therapeutics to address non respiratory diseases including and my goodness, this is uh a word here.

Science.

Cyto mega via cytomegalovirus, I believe is what it is.

Uh neuro virus propionic.

Uh I'm not even gonna go for that.

You're even giving this a shot.

Hello, science they're doing over there.

Lots of research.

All right.

Keep right here on Yahoo Finance.

We got much more coming up.

The opening bell on Wall Street looks like we're going to see a mixed picture at the open with the NASDAQ features on track to open the date just slightly to the downside.

We'll be right fast.

Clovis.

There's a live look at the opening bell and uh we're taking a look at the nyse to kick things off.

You've got Palmer Square Management, uh ringing the opening bell there, Palmer for capital management.

Excuse me, ringing the opening bell there and then you've got ex charge with the fun Fetty.

Yeah, tossing it up like lebron James before a game.

All right there.

You're seeing the bell ringers this morning.

Let's take a look at the futures.

Well, not the futures anymore.

The futures were mixed.

But now as we begin, today's trading activity, let's populate this chart for you.

Dow Jones industrial average right now flat is barely to the downside here.

We'll give you a three day look just to show you how things have been going and faring over the course of this week as a right now flats to start today's trading activity.

But here on this Friday's Eve, uh you're actually seeing a full week view and uh over the past four days trying to hold on to some gains here, the NASDAQ composite, you're seeing that flat but barely to the upside to begin today's trading activity.

But as of right now, past four days, solid move there, little rebound or a dead cat bounce whatever you wanna call it, uh just call it higher S and P 500.

You're seeing that over the past four days as well.

Holding on to some gains flat out of the gate though.

Let's take a look at some of the heat map activity here as we're taking a look at the 11 sectors in the S and P 500.

You've got some laggards, more gainers though than laggards as of right now.

Technology though.

Pulling up the caboose, it's down by about half a percent, but leading the charge.

Yeah, take a look at communication services.

It's up by about 7/10 of a percent.

Hey, since I mentioned technology, let's just take a quick look at the NASDAQ 100 here.

You got a little bit of a meg cap tech slip up right now.

NVIDIA is down by about 7/10 of a percent that was seeing some gains pre market.

We've erased the, we're now beginning the day in negative territory here and we'll give you a larger look at NVIDIA, let's say past five days, why not still up by about 8% over that period of time.

And then of course, as you're taking a look at the broader month to date for NVIDIA as well here.

Well, that's essentially uh well, actually, that's past 30 days.

It should be uh 22 days anyway uh up over that period of time, despite that little dip.

OK, that's a look at tech.

That's a look at all the sectors here.

Shawna, the look at what we need to know here as we get started with the trading day.

All right, let's talk a little bit more about that inflation print that we got out this morning, the PP I data showing a slight uptick in inflation on a monthly basis.

However, the fed does look on track to cut by 25 basis points at next week's meeting here to break all of this down.

What the data is telling us about the fed's next move.

We wanna bring in Brian Seitel.

He is the bouncing group's senior managing director and partner and we also have Omar Sharif.

He's the founder and president of inflation insights.

O may let, let me start with you ju just in terms of your reaction to the, to the inflation number that we got out this morning.

Not necessarily a huge surprise, given the uptick that we saw a slight uptick in the month, over month on CP I.

But what does that then tell us about PC and ultimately, where the fed is in its fight to tame inflation?

Yeah, good morning.

Uh So a couple things about this number, as you said, relatively benign for the most part, um you know, final demand PP I was uh about 2.1% last month, dropped to 1.7% this month.

So really what we're seeing is benign, pipeline pressures.

Um And you mentioned the CP I yesterday was a little bit, you know, firmer than we'd like to see.

It was about 0.3.

But the good news is when you take that CP I data yesterday and what we saw in the PP I today uh that combines to really make up what get the fed's preferred core P CE.

And right now that looks like it's tracking at about a 0.1 maybe a very low 0.2 depending on a little bit more information we need tomorrow, but much more benign than what we got out of the CP.

I, so quite frankly, I, you know, wouldn't be at all surprised.

Um Once people kind of crunch these numbers.

Um, you know, if you get a little bit of a, a move back, talking about 50 basis points given how benign this core PC is looking for the month of August.

Right.

Is that the case?

Should we be talking about 50 basis points?

Well, there's a 17% chance now that, that they'll go 50 basis points.

But I don't, I don't think they will, but what I would want them to do is 50.

I just don't think that they'll, they'll actually get there.

I think 25 is what we'll end up getting unless something changes.

And we're, what, 67 days away now from that decision.

So I think we'll get 25 out of this.

Why do you want 50?

Um, I think if you look at the bond market where a two year yields are compared to fed funds at 175 wide, I think the bond market is kind of crying out for a 50 cuts and I think that might be wishful thinking.

Um, I think that when you're starting at a fed funds of five and a quarter, starting at a 25 basis point cut really doesn't do a whole lot other than telegraph that you're gonna move in that direction.

And so 50 would be a little bit more meaningful on what they're trying to accomplish.

But again, I, that's what I would want and I think they'll start with 25 er, when it comes to, I guess just your assessment of the economy so far.

So here we are, it looks like overall, yes, the labor market is slowing.

We certainly have seen a bit more emphasis on the labor market rather than inflation here over the last several weeks.

Are, are you confident that we will see that soft landing has the recent data reaffirm that narrative to you?

Uh No, to put it in technical terms, I would say the recent data has kind of freaked me out a little bit.

Um You know, quite, uh I mean, the, the, the labor market numbers last month I thought were, were pretty disturbing.

Um So, you know, I'm with Brian on the fact that there's always a concept of what we think they should do and what they will end up doing.

But I agree that they ought to go 50 because the three month average of payrolls has dropped to 100 and 16,000 from about 100 and 60,000.

That's a really sharp slowdown.

And I think one of the problems is, you know, we talked quite a bit about the narrowing and job growth.

So we're seeing it really in government jobs, we're seeing it in health care mostly and a lot of the other sectors not really adding a whole lot.

Well, the problem is the three month average in terms of job gains in health care slowed by almost 30 k you know, through, through the month of August, we've seen all the downward revisions to last year, over 800,000.

Some of that will continue and will continue to affect the data from April 2024 forward.

So I think, you know, even though we haven't seen claims really pick up net hiring has slowed down, quite appreciate, people may not be laying off a lot, but they're not really hiring either.

And I think the other thing is we're, we're pretty far from the fed's own estimates of neutral.

So, you know, 50 to me would be a good step to, to start to get towards that if policy works with long and variable lags, you know, let's get moving here to make sure that we, uh, we are able to, to achieve the soft landing and not, um, you know, not kind of, uh, fumble at the one yard line here.

Where do, where do you think that, that, er, sense the sets the terminal rate expectations that if we need to get moving now?

Yeah.

Look, I think obviously if you go, 50 people are going to start to expect a faster pace.

Um, you know, I don't know that that's necessarily a bad expectation.

I mean, I think the fed knows that they're relatively far.

You've heard Chair Powell's language is kind of moved from talking about how we're, you know, close to restrictive.

We're trying to feel it out to very, you know, clearly saying we are restrictive right now in terms of policy.

Um, so I, I, I suspect, you know, somewhere around 3% probably 2.5 to 3% is a range they want to ultimately get to.

But I wouldn't be surprised at all if the September Sep, you know, if they do end up going 25 I suspect they're going to add in a third rate cut later this year because again, core PC right now is looking, it's going to finish the year around, you know, maybe 2.6% that's lower than where they had it in their June sep 28.

And don't forget when they had it at 26 in March, they already had three cuts penciled in.

So I think if they end up going 25 they're going to start to add in more cuts into the back end of this year and possibly into 2025 as well.

Brian, what's the environment then for equities for stocks at this point?

Is it favorable or, or given some of the concerns that may was just laying out, I guess, should investors be bracing maybe for more of a downside risk?

Well, I think it depends on what part of the market you're looking at.

I think part of the market is, um, quite expensive and quite overvalued.

And I think if you have growth that is going to slow again, it's, you can't really have a soft landing with the data starting to look a little softer here.

And so some of the stuff that we're seeing, I, it doesn't necessarily freak me out per se.

Um, but again, I, I think there's part of the market where it would and that is more of bigger technology names that are just trading at higher evaluations versus some of the value oriented names.

Maybe some of the staples, maybe some of the defensive, uh, names out there, utilities, uh health care, these are more reasonably priced.

And historically in the rate cutting cycle, these tend to outperform uh some of those other segments of the market, you know, that's gotten us back into the realm of thinking about growth at a reasonable price.

Brian.

So where are some of your favorite as, as you know, folks like yourselves, folks far more intelligent than me would call it the garp areas of the market that seem attractive right now.

Uh If you're looking for, uh, perhaps the best play to see reasonably priced growth in your portfolio.

Yeah, I mean, I think again, some of those names, uh whether either candidate gets into the office, I think there's a good amount of spending coming on the infrastructure side.

And so I think you can look at some of those industrial names which are in that sort of garp area, the growth at a reasonable price um in there as well.

We like the energy space also and financials as well.

I think all of those, you can get sort of high teens to maybe those low kind of 20 multiple, uh, uh, numbers out of, uh, out of those names.

And I think those will do better than some of the 4050 times, you know, technology names.

Looking ahead to next week we got retail sales.

I was asking our strategist this, uh, a similar question at the top of the hour.

How closely are you tracking that?

Just given some of the recent weakness?

Yeah, that's going to be another, uh, you know, important input and how, how we're thinking about things.

Um I think in part because we've seen the savings rate decline to sort of below pre pandemic type pace.

Um, you know, people were generally flush with cash for the most part.

Um, the last couple of years, uh wages were actually outpacing inflation in some of the, you know, lower income categories.

But now we've seen the savings rate come down quite a lot.

So we're starting to see, you know, credit card delinquencies pick up and things of that nature.

So it's becoming a bit more concerning in terms of, you know, how, how much can the consumer really continue to power, um, power the economy through, um through spending, you know, I, I think in my career, I have learned not to bet against the US consumer.

Uh, but, you know, that will be another important indicator to watch just because it does look like things are starting.

Uh you know, budgets are starting to get stretched.

Do not bet against me the consumer.

You have no idea how just easily I succumb to ads on Instagram and just purchase everything inside Brian Seitel of the Bonson Group and Omar Sharif of inflation insights.

Thank you so much for taking the time.

I appreciate it coming up chip names pulling back to kick off the session.

We'll discuss when morning brief returns.

Chip socks with their mix this morning A MD Intel and Qualcomm pulling back just a bit.

But this comes after yesterday's rally.

You can see NVIDIA up another nearly a half of a percent today gained 8% yesterday.

Some of that recent increased optimism surrounding the sector coming as CEO S in the industry tout strong demand, the demand on it is so great and everybody wants to be first and everybody wants to be most and everybody wants to be.

And so that the intensity is really really quite extraordinary.

I believe this is a market that will grow to, you know, $400 billion by 2027 which is huge and it is an A I supercycle.

So let's talk about that outlook for chip demand here going forward for that.

We wanna bring in John Vin, he's key bank capital markets, equity research analyst, John, it's great to talk to you again.

Let's start with NVIDIA given the massive move that we saw in the market yesterday closing out with an 8% gain, lots of optimism surrounding some of that commentary that we got from Jensen Wong.

Anything in there surprise you or, or pretty much much of the same and just reassuring some of the skeptics out there on the street.

Yeah, I think the balance that you saw in NVIDIA yesterday was, you know, probably, you know, a recovery based on kind of an overreaction on earnings, right?

Obviously NVIDIA just, you know, recently reported earnings that I need met and exceeded street expectations, but they kind of missed some of the higher B set expectations.

So you saw a little bit of a pull back there.

I think what really drove the recovery you're seeing more recently is that, you know, oracle came out, talked about very strong uh accelerating growth on the uh A I side.

And they also said that their outlook for next year is going to result in a doubling of Capex.

So I think that's reassuring investors that the A I trade is not over yet, is oracle in that sense, the best non chip A I play in the market right now.

Um I don't cover oracle, I cover the semiconductor.

So I would just say that, you know, oracle right now is one of the key important reads in terms of A I hyperscale demand and spend going forward, you know, obviously they're off cycle.

So they're, they're giving us the most recent read on A I chip spin at this.

I I knew you had an extremely informed read in.

I know, I know you don't cover them, John.

I just gotta uh when we're on the topic, I gotta lob it into you and see, see what we come out with.

But great insights as always as we think about though, for chips who is best positioned to really kind of catch some of the overflow that NVIDIA is not able to handle for themselves.

Um I would say kind of three names that we would throw out.

You know, right now, we think it's such a um expansive market.

We heard Lisa su talk about it being a 4 400 billion market by 220 27 the three names I would kind of highlight would be an A ND A Marvel and a Broadcom, right?

So A MD, you're gonna be, you know, we think they're going to be the lead uh second source alternative on the merchant side.

Uh Marvel and Broadcom are going to be focused more on A I hyper scale or custom as uh development.

You know, obviously Broadcom owns the Google TPU franchise there and, you know, they've got a pretty strong position whereas Marvel you're starting to see them get some good traction in the market with, with Aws John, when it comes to some of the maybe lesser known names logic, I believe is one of the names that you like when you talk about focusing on gen A I and the further destocking process, where do you see the value there?

Yeah, we like Sears Logic.

Um They're kind of a proxy for Apple, you know, 80% of their revenues is, is apple driven.

And if you look at the opportunity they had for Sears Logic, right, there is potentially a replacement cycle.

Um if Apple starts to, to really get traction with um with Apple and there, so you can start to see unit growth.

And on top of that, this is a company that has demonstrated content growth on pretty much every single new generation of iphones.

So on top of unit growth, you also have content growth that compounds and it's, it's kind of a proxy and a play on Apple.

So with that in mind, I mean, as we're waiting for some of uh especially coming from Apple, waiting for some of these generative A I features to really hit critical mass coming through either via operating system updates or other consumer technology.

Where do we still need to see a lot of the industry be built out?

Where are some of the gaps that still exist where investors would be apt to pay closest attention to?

You know, obviously, uh everybody saw the Apple launch event the other day and you know, I think they made some progress.

But I think if you take a step back, you know, I think the industry is still waiting for that kind of killer kind of A I APP and I don't know if we really saw it the other day.

So I think, um you know, you're definitely seeing some progress, but I think the the broader market um is still waiting to see what that killer application is going to be.

That's going to drive potentially a replacement in a is what, what does that mean for the future of the data center?

We've heard NVIDIA talk about this, the the possibility for 1 million chip data centers in the future.

Oracles talked about needing a, a data center to be powered by nuclear reactors.

So the the data center itself seems to be set for a massive overhaul.

How much more spending though do you think needs to come on the front end of that from some of the very companies that are looking to play in this A I space?

I think in the near term, uh we think spending is likely going to be un abated.

You know, obviously the debate and controversy is, you know, when are you going to start to see the monetization models for, for all this A I spend?

And you really haven't seen it yet.

Um You are obviously seeing some pretty good growth.

But what we love that in our perspective, at least in the near to medium term, at least going into 2025 is that all these A IH scalars are going to have to aggressively spend the next generation platform that NVIDIA is releasing.

Blackwell is going to basically lower your TCO by by 30 X.

So if we're still waiting for that monetization model, um operationally, if you're a hypercar, you've got to go with the T the lowest cost TCO solution out there until you get that monetization model.

So we don't see any sort of let up and spend over the next 12 months here, John Vin, who is the key bank, capital markets, equity research analyst, John, always a pleasure to get some of your insights.

Thanks so much for joining us.

Thank you chip.

Companies like NVIDIA have benefited greatly from the A I spending boom.

It's how they're able to more than double their revenue every quarter.

But investors also want to see evidence of A I spend paying off more broadly here with the chart of the day touching on just that is our very own catalysts co anchor Madison Mills.

Hey Maddie.

Hey Brad, thanks so much.

So I'm gonna pull up the chart of the day on the board here so that we can take a look at the hyper scalers here.

You've got Amazon Microsoft and me in that group.

This chart shows their capital expenditure quarter over quarter on A I just in the last quarter, you spending over $50 billion on A I alone.

So the big question for investors, they actually originally were looking at this spend as a positive catalyst for the stocks.

Now, they're starting to question that they're saying, hey, is this spend going to get us anywhere?

And that was the key question at the Goldman Sachs conference that I was out over the last couple of days here, we spoke with Cash and he over a Goldman Sachs and he said these are the cloud names that benefited greatly from spending a lot of money on cloud infrastructure and they're gonna have the exact same experience this time around the last day of the conference, I went to a meeting of a bunch of different VC folks who all said that these are the names that you're going to see hockey stick moves in as we move out of this seasonally bearish time of year for September and October, you're gonna see a lot of growth in these names.

And guys, I got to bring this up because I was jealous.

I didn't get to talk about it with you while I was gone.

That oracle earnings call when Larry Ellison kind of went on a little bit of a rant saying he just doesn't understand the questions about the impact of A I it's not a thing you can sell, but it's going to impact literally everything.

And that is what companies like these are banking on moving forward.

And he's trying and hoping that he's gonna get that message out there sooner rather than later.

It seems like it's working.

Now, you take a look at this.

All right, Matty, thanks so much right here on Yahoo Finance.

You got much more of your market action ahead again.

Just about 21 minutes into the trading day.

You're still looking at, we're not drifting too far from the flat lines, although all three of the major averages now back in negative territory, you got the dow off just over 130 points will be time for our stocks in 30 a look at the day trending tickers in 30 seconds or less.

Let's kick it off.

7-Eleven Parents seven and I holdings.

The company rejected uh, takeover offer from Kush Tard for nearly $39 billion this week.

But reporting from Bloomberg says that the Canadian company is considering raising its offer price for the Jack Retail giant.

If a deal were to materialize, it would be the largest ever foreign takeover of a Japanese company here.

Uh, look as long as we continue to get 7-Eleven free slurry days.

Uh I'll be fine whoever owns this.

But, uh, we'll see if that'll be the case and we'll see if this, uh, buy out offer moves forward.

7-Eleven Slurpee.

Such a throwback January July 11th every year.

I know, I know.

All right.

Let's take a look at General Mills agreeing to sell its North American yogurt business for just over 2 billion $2.1 billion in cash.

The move following a decision to sell its European Yogurt business several years ago as the company turns its attention to growth segments like premium fat food, also organic sacks.

Now that the company is a CEO uh coming out with a statement saying that by efficiently managing our portfolio and sharpening our focus, it will allow the company to focus more on global brand, global platforms and local gem brands that have stronger growth prospects and more attractive margins.

We know that the Euro good business have been struggling a little bit are facing more competition, I guess is the correct way to say that that's fair also uh leaning into and watching shares of Diao uh on the back of an upgrade at Bank of America.

Analysts upgrading to buy from neutral as they say the worst is behind the stock and there aren't many other compelling alternatives in the staples space here.

Take a look at shares of Diageo right now.

They're up by about 2% on this.

And um you know, as you're thinking about what this upgrade means more broadly here, uh the US Investment Bank saying that their earnings momentum is gaining new impetus uh growth, looking forward to that and improving in the 2024 2025 financial year.

All right, we will keep it right here on Yahoo finance the ECB European Central Bank cutting rates.

Once again, we're going to dive into what this could signal for the fed, potentially other global central banks around the world that's all coming up next on catalyst.