People walk along 5th Avenue in Manhattan, one of the country’s main shopping streets, on February 15, 2023 in New York City.
Spencer Platt | Getty Images
This report comes from today’s CNBC Daily Open, our new international markets newscast. CNBC Daily Open updates investors on everything they need to know, wherever they are. Like what you see? You can subscribe here.
What you need to know today
- Retail sales in the United States jumped 3% in January, against 1.9% expected. That figure beat a 1.1% drop in December hands down. Moreover, industrial production remained stable in January. Analysts estimated a gain of 0.4%.
- “BYD is so far ahead of Tesla in China…it’s almost ridiculous,” said Charlie Munger, vice president of Berkshire Hathaway. He called the Chinese electric vehicle maker his favorite stock. However, Berkshire doesn’t seem to like TSMC so much anymore, dropping nearly 86% of that stock between the third and fourth quarters of 2022.
- PRO Investors are “taunting the Fed with crypto, meme stocks and unprofitable companies that respond best to Fed communications,” said JPMorgan’s Marko Kolanovic, who correctly called the March 2020 low. warned that “this divergence cannot go any further”.
The bottom line
It’s as if investors no longer worry about inflation and higher interest rates. The strength of the US economy – which would imply further rate hikes – translated into market gains.
Yesterday I mentioned how sustained consumer spending could support the economy. Indeed, January’s year-over-year increase in retail sales – 6.4% – is exactly the same number as the year-over-year rise in the consumer price index. consumption. It seems that the prospect of sustained economic growth is also injecting optimism into stocks. The Dow Jones Industrial Average edged up 0.11%, the S&P 500 added 0.28% and the Nasdaq Composite rose 0.92%.
Recent economic activity and market movements are forcing economists and investors to reconsider the effect of interest rates. The higher cost of borrowing typically slows economic growth by reducing spending and increasing unemployment, which in turn depresses stocks. Still, “monthly reports on industrial production, retail sales and employment were generally better than expected and point to a recovery in economic activity in early 2023 after a period of slowdown in late 2022,” as the said Bill Adams, chief economist at Comerica Bank. he.
This upside-down relationship between higher interest rates and an upturn in economic activity has some investors, like Santori Fund founder Dan Niles, predicting that the Federal Reserve could raise rates to more than 6 %. What if the price of everything continues to rise even then? It’s hard to imagine what the Fed would do next.
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