Wrapping Up August Markets, PCE Inflation Watch, Big Spotlight on AI 8/30/24

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.

David Faber (0:08)

Good Friday morning and welcome to Squawk on the Street. I'm David Faber with Wilfred Frost. We're live from Postline at the New York Stock Exchange. Jim and Carl have the morning off. Let's give you a look at futures and get ready to wrap up the week, wrap up the month of August, kind of wrap up the summer. Sorry to say that. You can see that we are headed for a bit of a higher open.

Wilfred Frost (0:27)

You're going to Provence next week.

David Faber (0:28)

Yes, thank you for telling everybody you know my travel plans. Wilfred, let's get to our roadmap, though. My summer is not over, but there's may be. Our roadmap begins with the Fez Preferred Inflation Indicator. The PCE increased 0.2 percent in July. That was as expected. We're going to discuss that with Wharton Professor Jeremy Siegel. He'll join us in just a moment. Plus, Apple and Nvidia reportedly in talks to invest in OpenAI, they would join Microsoft as well as Thrive Capital in what is a significant funding round, of course valuing that company at over a 100 billion. Speaking of AI, Chesedale, they are up in the pre-market company seeing its AI server sales soar by some 80 percent. Let's start with that market reaction to the PC as we head into the final trading session of the month. Wolf, look like it more or less came in, in line, so to speak, with what the market had anticipated.

Wilfred Frost (1:17)

Absolutely in line and that's why the market reaction is pretty muted. 2.5 percent year over year, the expectation was 2.5.

The core, fractionally better than the expectation, 2.6 percent year over year, the forecast was 2.2 percent. I mean, the bottom line of this is quite clearly that inflation is not going to be a factor that stops the Fed cutting at the next meeting in a couple of weeks. A rate cut is coming, it's priced in. You could get a jobs number all to the size of that next week. If it's very weak indeed, maybe 50 basis points, but at least 25 seems priced in and you're not seeing much market reaction from this. As you said, last trading day of the week, last trading day of the month as well, the only index that's down for both week and month is the NASDAQ. The only index that's up for both week and month is the Dow, the S&P splits of it, which kind of tells the story really of the last week and the last month. It'll be interesting to see if there's much further action from here. Just mention a little bit as well on the inflation front in Eurozone. We got the numbers out of there this morning as well. Also in line with expectations, but a bigger deltron improvement there. So 2.2% coming in. That's down from 2.6%. It was in line with expectations, but it's a three year low now, the print that you're seeing at Eurozone as a whole. And the stock 600 Europe hit a fresh intraday high during the session as well. So again, speaking to the picture there, Germany and Spain had bigger falls than expected. France had a tad hotter number than expected, but still at 2.2%. So again, what you're seeing there is all of the data that the ECB needs to see to cut. They've of course cut already. They're at 3.5% their rate. Bank of England's already cut. But this theme with the PCE data coming in and what we expect from the Fed is now pretty much developed market globe. Apart from Japan, which is going in the opposite direction, as we all know. But it's certainly a very big change of tone to where we were a couple of months ago with all these people cutting. And the one thing I think is really interesting is what happens, not so much in the next couple of months because clearly cuts are coming, but is by the end of the year, do we start to see inflation pick up again, which some have forecast? And there's two little balancing data points, I'd say, on that coming out of it. So from the European data, the services side rose to 4.2 percent year on year, last month was 4 percent. So even though the headline is looking good, that's almost certain to cut in a couple of weeks time. Once again, it's the one factor you've got to look out for. And I wonder about the same thing with the Fed. PC is good, they're going to cut in a couple of weeks time, perhaps 50 basis points of the job number is terrible.