SOTS 2nd Hour: China Tariffs Impact, Swiftonomics, and Dogecoin Spikes 11/13/24

Sara Eisen (0:00)

Good Wednesday morning, and welcome to another hour of Squawk on the Street. I'm Sara Eisen with Carl Quintanilla and David Faber, live as always from Post 9 of the New York Stock Exchange. Stocks, giving up some early gains here. The S&P 500 just going negative, masking some of the strength under the surface. We've got gains in groups like real estate, consumer discretionary, industrials, financials up again, some of those cyclical groups, utilities and healthcare all higher today. It's communication services and technology that's weighing on the overall index, and that's why you have the Nasdaq, for instance, down two-tenths of one percent. Tech a little bit of an underperformer today. They're nothing extreme. Take a look at Treasury's digestion of the CPI report that we got this morning on inflation, which we'll talk about in depth, but we are seeing some buying today. Yields move lower. The two-year goes down to 427, the 10-year at 4.4. We're 30 minutes here into the trading session. Here are some big movers we're watching. Shares of CAVA surging. The restaurant chain beating earnings estimates thanks to strong demand. The company also raising its annual sales forecast for the third time this year. The stock's been on a tear. It's been a big winner in the restaurant space. Rivian is also rallying. The EV maker says the size of its joint venture with Volkswagen has increased to up to $5.8 billion. That's up from an initial investment of up to $5 billion. And then watching shares of Liberty Media, they're higher. Lots of news out of the media company, including CEO changes and spin-offs. David's all over it. We're going to have more for you on that one coming up. But guys, I think we should talk about the big number of the day, which was inflation, the overall CPI number. There's good news and there's bad news. The good news, it was a consensus number and it doesn't really throw us off our trend of lower inflation. The bad news, there's evidence of sticky inflation under the hood. So if you look at the overall number, we're looking at, there's a look at some of the core numbers. The overall number, if you look at a line, goes down to 2.6% year over year. So again, that was pretty much in line. The monthly changes, month to month, they were also in line, 0.2% gain in October. There's the line and you can see, still progress, but we're kind of stuck around these levels and we're not at 2%, which is where the Fed wants to be. Though, they do target PCE, not necessarily CPI, but those two are correlated. I just want to point out the core index, because the core index, and I don't like to round on this, because it's very important, 0.28% monthly gain. And that was compared to 0.3% in September. So a little bit better, but also, that year over year number, core CPI, Carl, 3.3%, it's basically where it was in June. So if you're looking for evidence of stickier inflation that the Fed should be worried about, you see it there, and it's in the services sector, and it's still in housing. And if you look at where the inflation was and where the inflation wasn't, we broke it down by category. Used cars and trucks had a weird monthly surge, 2.7%.

Electricity was a big component, shelter, food still rising. And where the subtractions of inflation or the disinflation is coming from, it's in fuel, gasoline and apparel, with a 1.5% decline in prices on the month. So again, interestingly, the market took it as increased odds of a rate cut in December. They went up to in the 70s percent. But I'm not sure there's anything in there that makes me more confident of a rate cut in December, because if you are worried about stickier prices, you do see that in some of these especially core numbers. If, you know, Fed paid attention to core services, ex-housing, that was the super core that they wanted to look at, and that's still elevated above 4% year on year.

Carl Quintanilla (3:36)

Jim mentioned auto insurance, just the 50% gain in a few years, food away from home up 3.8 year on year. The only bright spot is that if inflation's running 2.6, wages running above it for an 18th consecutive month.

Sara Eisen (3:49)

Very good, real wages, real wage growth that we would like to see, wages higher than inflation. It keeps consumer spending up. But the overall inflation numbers, are they coming down fast enough for this Fed? That's going to be the question if they don't have to worry about it. Another bright spot, if we're looking at bright spots, remember all the angst about grocery prices, paying more. Food at home has been running cheaper than food away from home. And if you look, there's a great bar chart where you can see just how much progress we've made. It's only gaining 1.1% now from last year. And that, as you can see, is a very steep decline from where we were at the very high levels just as recently as last year or the year before. So the grocery prices are showing some good signs. I think on the not so good sign, people are watching, Carl, these break even rates, which is basically the market telling you expectations about inflation, especially the five year break even rate has really perked up in the last few days. So I think the combination of Trump tariffs, better growth is making people in the market rethink the inflation trajectory. And they cause the Fed to pause or do a lot less.