Inflation Situation and Markets, Oracle Surges on AI, Southwest's Boeing Challenge 3/12/24

Carl Quintanilla (0:00)

Market moving insight and analysis. Join Jim Cramer, David Faber, and me, Carl Quintanilla on the opening bell hour of CNBC Squawk on the Street.

Good Tuesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Mike Santoli here at Post 9 of the New York Stock Exchange. David Faber is at HQ. Cramer has the morning off. Futures holding onto some gains here, even though monthly core CPI does come in. About a 10th hot, more than half driven by shelter and gas.

Yields bound, settling a little bit. June rate cut odds largely stable here. Our roadmap begins with a macro picture. Future swing as inflation does take higher. And Jamie Dimon says the economy is booming, but that a recession may still be on the table.

David Faber (0:37)

Plus, quote, enormous amounts of demand. Oracle's cloud revenue surging fueled by growing AI needs.

And the Boeing challenge, citing delayed aircraft delivery, Southwest cuts capacity and therefore rethinks its 2024 financial forecast.

Carl Quintanilla (0:53)

Let's begin with this market reaction to CPI. We mentioned a 10th hot at four tenths.

Shelter and gas, about 60% of that. Some surprises in here, Mike, apparel up six tenths is a topic of discussion.

Mike Santoli (1:07)

Yes. I think what the market did, and there was a real quick reflex where it said, okay, this is hotter than expected. You have to run more of the bearish playbook. Bond sold off, yields higher, stocks backed off. Then the rethink was, well, the things that matter, and that will translate into what the PCE inflation number is going to say, combined with how high a threshold was set by Powell last week for changing their premise that they are preparing for likely rate cuts in the summer. So I think all that fit together.

The core services stubbornly firm, inflation readings there, do not necessarily translate into the PCI is going to go the same direction. So that's part of the mix. We are also kind of geared for shelter being stubborn.

And I do think even, you didn't see that uptick like we saw in January. So all that mixed together, combined with I think the equity market saying that the AI trades back on. For all these different reasons, Nvidia is going to bounce today. It was a whole day and a half of weakness.

You got the Oracle numbers. You have AMD saying happy things. You have BofA raising its overall S&P earnings forecast because of AI. So in other words, we got CPI out of the way. We'll see if we can make something of it beyond that.

Carl Quintanilla (2:21)

Yeah, we're going to get to the BofA going to 250 That's a street high on the top down. David, as for more CPI, I guess people will look to some relief in food where we got a couple of goose eggs.

David Faber (2:31)

Yeah, there, you know, again, I sort of leave it to you guys and a lot of our other experts to go through the numbers themselves in terms of why transportation services was up nine, nine. Shelter, obviously, we also keep an eye on up five, seven as you take a look at futures. Mike, I got to come back to you though.

So it was a day and a half. It was what, 36 hours of concern about the AI trade and now we're back. I heard you say that. I want a little more.

Mike Santoli (2:57)

I mean, I think, I don't even know if it was concerned about the big picture trade. It was concerned that the leading stocks in that area had become too overheated, over owned, crowded, vulnerable.

Now, I'm not saying it's over, but you had two days of almost pitch perfect rotation out of the big leaders. And there was a benefit on some of the recent weak stocks like Alphabet and Apple. People have talked about this. My favorite poster child for all this effect in general, not so much AI, but the momentum effect has been Costco, which was down 10% off of its Friday morning high because it's in the NASDAQ 100 I mean, that's kind of the silliness. And it was also at a record high valuation going into its own earnings.

So no real change of the underlying story, either with AI or Costco, but you did have this mechanical effect or at least a repositioning effect that maybe has, I'm not saying run its course, but it's definitely giving way to the old playbook of by the leaders today, at least in the pre-market action.

Carl Quintanilla (4:01)

We mentioned Jamie Dimon's comments, covered a lot of ground in this digital meeting, talking about the broad economy, saying that the US is in kind of a boom, covered the possibility of recession, covered the fact that he will never buy Bitcoin himself. Take a listen.