Wall Street Brunch: Price turmoil replaces job anxiety

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Weak CPI could mean a half-point cut from the Fed, but it could also hit stocks. (0:14) Walmart leads retail sales. (2:33) Disney announces new movies and attractions. (6:50)

Below is an abbreviated version of the notation:

Remember inflation?

After focusing on the labor market, markets will look at consumer and producer prices this week.

The big show will be on Wednesday, when the July CPI is due out. The consensus is for a monthly increase of 0.2% for the headline figure, with the annual rate remaining at 3%. Core CPI is also expected to rise 0.2%, falling to an annual rate of 3.2%.

Wells Fargo economists say: “The weakening labor market may have finally outshone inflation, but the extent to which the FOMC responds to the weakening labor market picture depends in part on how price data plays out. The past two months of inflation prints have shown that the downward trend in price growth has returned to normal after the first-quarter slump. The July CPI report is likely to support the notion that inflation is calming, even if it has not yet returned to the Fed’s target.”

They say that “gasoline prices rose just over 1% over the month,” while “grocery store prices likely remained largely unchanged due to more stable input prices and increased promotional activity.”

“With core goods inflation already lower than pre-pandemic levels, further significant cooling in services is needed to continue to bring core inflation down,” they added.

The market is currently pricing in a 100% chance that the Fed will cut rates at its September meeting. But it’s now a coin toss whether the cut will be 25 or 50 basis points.

On Saturday, Fed Governor Michelle Bowman warned that the Fed was overreacting to every single data point. She called for a gradual adjustment if inflation continues on its current path to 2%, but she is arguably the most hawkish member of the FOMC.

While a lower-than-expected CPI reading could swing the pendulum toward a half-point cut, Seeking Alpha analyst Mott Capital warns it could also trigger a return to bearishness in the stock market.

Based on market data and various models, “CPI data will likely confirm that the Fed’s rate cut cycle will begin in earnest in September,” Mott Capital said. “As a result, we can expect rates to fall, which will further steepen the yield curve. More importantly, this will further worsen interest rate differentials, leading to lower USD/JPY levels and further carry trade reversal, which is negative for equity markets.”

In addition to the CPI, on Tuesday we will also find out the July PPI, and on Thursday we will find out the July retail sales.

Walmart (WMT) reports its earnings calendar this week as the retail reporting season begins.

The company reports earnings on Thursday, August 15, with high expectations after a 29 percent increase year to date.

The consensus is for revenue of $167.3 billion, earnings per share of $0.65 and comparable sales growth in the U.S. of 3.3%. The general view is that Walmart will continue to benefit as a defensive stock pick if the nervousness in global markets continues, but the entire retail sector is closely monitoring the situation and listening to the American consumer.

Morgan Stanley analyst Simeon Gutman says that given “slow retail data in July, rising risks of a consumption slowdown and the upcoming election … we think maintaining guidance should be acceptable given these uncertainties.”

Oppenheimer analyst Rupesh Parikh is a bit more cautious, saying investors should be prepared to take profits should they materialize, rather than hoping for a positive catalyst from the upcoming release.

Analyst Uttam Dey of Seeking Alpha believes the combination of higher-margin digital ad revenue and membership growth should improve Walmart’s margin profile.

Other performances this week include Barrick Gold (GOLD), monday.com (MNDY) and Rumble (RUM) on Monday.

Tuesday will bring results for Home Depot (HD), Tencent Music (TME) and On Holding (ONON).

UBS (UBS), Cardinal Health (CAH), Brinker International (EAT) and Cisco (CSCO) will take their positions on Wednesday.

Walmart (WMT) will be joined on Thursday by Alibaba (BABA), Applied Materials (AMAT), Deere (DE), JD.com (JD) and Tapestry (TPR).

Looking at the cryptocurrency space, Ryan Wilday, who runs Crypto Waves, will be on our Investing Experts podcast this week to talk about the recent volatility.

“I recently wrote an article on Seeking Alpha and it’s clear that the sentiment towards Bitcoin isn’t that great because classically speaking, on Seeking Alpha I would have a much larger audience interested in my articles and they would be more positive at this stage.

So despite my caution in the market, I would say that the sentiment towards Bitcoin is pretty muted. There are actually quite a few people who were so negative towards Bitcoin, I mean, they really – I don’t want to say they’re insulting the article, but they were kind of headed in that direction. And that just shows where we are in cryptocurrencies.

I would say, don’t listen to those voices, if you’re curious about cryptocurrencies, as we say, again, like I said before, buy Bitcoin, just buy a little bit, stay calm, and then learn how to deal with it, just treat it as a learning opportunity. And okay, maybe not 10%, maybe it annoys you, 5%, whatever, get to a comfortable level. And if you prefer ETFs, do that.

And then learn how to buy when it goes down and when it crashes and so on, learn how to do that, because that’s what makes cryptocurrency great for building wealth. I mean, it sounds crazy to some people, but you have to do it to understand it.

It’s weird that we’re not that far from all-time highs. That’s what’s really weird about this cycle. Yeah, I mean, people are kidding, we just lost 30% of it. I think, well, that’s about half of normal. It’s not a real bear market yet.

The standard in the stock market is 10%, right? A 10% correction is the beginning of a bear market. I don’t like to characterize bulls and bears that way. But just like 30% Bitcoin is definitely not – it’s a normal, real correction within the current uptrend. It’s a completely different kind of market.

I’ve been in this space for a long time, even before 2016. I think I quote 2013 the most, I think that’s pretty accurate. I wish I had just stopped Bitcoin since then. I can’t say that I did. I was still trying to learn the space up until 2015. But yeah, you have to get used to it. And don’t panic, sell. And I think it’s a very simple thing to say, okay, I’m going to have 10% exposure. And then if it goes down, that means I’m going to buy, so it goes back to 10%.

So they always buy cheaper, right? I think something like that will keep you sane. And 10% usually, for most people, allows them to handle the volatility. So if you have 10% of your portfolio in Bitcoin and it has another 50% to 75% bear market, which it should, because that’s normal, you’re buying a lot more at a very low price. But yeah, you’ve only lost about 5% to 7% of the value of your portfolio.

And that 5% to 7% loss will be returned to you, if the patterns work out, it will be returned to you 10x. When you lose 7% of that 10%. If you bought, you would soon have Bitcoin in 40% of your portfolio by the end of the next bull market. It’s really crazy, but that’s how it works.”

In news this weekend, Disney (DIS) announced that a third installment of Pixar’s hit “The Incredibles” franchise is in the works, and also provided updates on several of its other series, including “Moana,” “Avatar” and “The Mandalorian.”

The announcements came at Disney’s biennial D23 fan convention. The studio’s business is on a roll this year after mixed box office results following the pandemic. Pixar’s “Inside Out 2” and Marvel’s “Deadpool & Wolverine” became the highest-grossing films of 2024.

Disney has given a taste of “Moana 2,” which could join the billionaire club this year. “Incredibles 3” has been confirmed to be in the works. Brad Bird, director of the first two installments, will return to develop the film.

James Cameron revealed that “Avatar: Fire and Ash” will be the title of the third part of the series, and a film “The Mandalorian and Grogu” was also announced.

Disney also announced it will add four cruise ships to its fleet by 2031 and add park attractions such as a new Villains Land in Orlando, a new “Avatar”-themed attraction at California Adventure and a new “Monsters, Inc.”-themed land at Hollywood Studios.

And WeRide (WRD), a Chinese company specializing in autonomous driving technology, has filed for an IPO in the U.S.

According to SEC filings, WeRide plans to offer about 6.5 million American depositary shares at a price range of $15.50 to $18.50. With each ADS representing three common shares, the deal would value the company at $5 billion at the midpoint, raising $110 million.

The company also announced plans to raise $321 million in a private offering backed by investors including Alliance Ventures, the venture capital fund of Renault Nissan Mitsubishi Alliance.

Since launching in 2017, WeRide has launched its autonomous vehicles in 30 cities across seven countries in Asia, the Middle East and Europe.

Companies like Waymo (GOOG), Amazon (AMZN) Zoox, Baidu (BIDU) Apollo, General Motors (GM) Cruise, and Motional (APTV) (OTCPK:HYMTF) are all on the autonomous vehicle path at varying rates. Just this week, Waymo expanded its robotaxi coverage in Los Angeles and San Francisco.

Tesla (TSLA) originally planned to hold a robotaxi event on Aug. 8, but CEO Elon Musk later moved the date to Oct. 10. Tesla has talked about the robotaxi concept as far back as 2016, but the event itself is expected to clearly demonstrate the shape and form of the autonomous vehicle industry.

For income investors, Alcoa (AA) will go ex-dividend on Monday, with a pay date of Aug. 29. Conoco Phillips (COP) will go ex-dividend on the same day, with a pay date of Sept. 3.

Eli Lilly (LLY) and Diamondback Energh (FANG) are going ex-dividend on Thursday, with Lilly paying on September 10 and Diamondback paying on August 22.

Meanwhile, in Wall Street Research Corner, after a week full of ups and downs, BofA Securities analysts selected 42 high-quality, low-beta stocks from the S&P 500 “to help you sleep at night” as fund managers reduce risk.

Beta compares a stock’s volatility to a benchmark index.

Analysts say a true bear market is unlikely to occur, but they advise investors to get used to market volatility.

These stocks have a five-year beta of less than 1 and all have been rated Buy.

The names include Lockheed Martin (LMT), Procter & Gamble (PG), Kroger (KR), CMS Energy (CMS), PepsiCo (PEP), Essex Property Trust (ESS), Coca-Cola (KO), Domino’s (DPZ), Medtronic (MDT) and Costco (COST).