CNBC Daily Open: Inflation and dot plots

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

U.S. government shutdown suspended
The U.S. government narrowly avoided a shutdown after President Joe Biden signed a stopgap government funding bill on Saturday. President-elect Donald Trump and Elon Musk thwarted an initial, negotiated funding plan Wednesday by harshly criticizing its provisions, and specifically insisted on suspending the U.S. debt limit for two years.

Slight chill in price increases
U.S. headline inflation in November rose just 0.1% from October, according to the personal consumption expenditures price index. On an annual basis, prices increased 2.4%. Both readings were 10 basis points lower than expected. Core inflation also came in 10 basis points below forecast. The PCE is the U.S. Federal Reserve’s preferred gauge of inflation.

U.S. and Asia-Pacific markets rise
On Friday, the S&P 500 rose 1.09%, the Dow Jones Industrial Average added 1.18% and the Nasdaq Composite climbed 1.03%. But all indexes fell on the week. Asia-Pacific stocks rose on Monday, following a positive finish on Wall Street on Friday. Japan’s Nikkei 225 advanced around 1.2% as Honda, Nissan and Mitsubishi reportedly informed the country’s industry ministry about beginning merger talks.

CEOs see the door
Blue-chip companies, such as Boeing, Intel and Starbucks, announced changes in their chief executive officers this year. They’re not alone. There were 327 CEO departures in U.S. public companies this year through November, according to outplacement firm Challenger, Gray & Christmas. That’s the highest level since the firm started tracking data in 2010.

[PRO] Betting on Broadcom
Nvidia is undeniably the king of the artificial intelligence chip space, and it’s hard to see any company dethroning it in terms of market capitalization. But one portfolio manager told CNBC that Broadcom is “the next Nvidia in terms of outperformance potential

Stocks sold off on Wednesday after the Fed indicated it sees two quarter-point rate cuts in the year ahead, fewer than the four previously projected. “We have been moving sideways on 12-month inflation,” said Fed Chair Jerome Powell at his news conference.

But November’s PCE came in cooler than expected. “Sticky inflation appeared to be a little less stuck this morning,” said Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley.

The Fed has emphasized again and again that it’s “data-dependent.” Would the Fed, then, have presented the world with a slightly different dot plot, if they’d had the chance to review the PCE data first?

Giving slight credence to that train of thought, Chicago Fed President Austan Goolsbee told CNBC’s Steve Liesman he’s hopeful November’s inflation reading “suggests that the couple of months of firming were more of a bump than a change in path.” In other words, the economy is “still on path to get to 2%,” said Goolsbee.

Then again, Powell said in July that the central bank would be “data dependent, but not data-point dependent” in determining when to cut rates. Even if November’s PCE index did signal inflation returning to its downward trajectory, one month’s data wouldn’t have shifted the dots around. Perhaps two consecutive months of cooler reading might have?

Those questions are rhetorical. Conditional questions are unanswerable, especially in markets. But in their indeterminacy and circuitous nature, they highlight the fact that trying to time or game the market, especially in volatile times like these, might not be the best idea.

Instead, dig deep into the fundamentals — earnings, cash flow, future income — which sway stocks even as inflation and interest rates rise and fall. Remember the days when inflation reports and Fed meetings were just another day in markets?

— CNBC’s Jesse Pound, Brian Evans and Sean Conlon contributed to this report.