A dovish consumer price index could cement a June Fed cut. (0:17) Adobe set to report earnings. (2:12) DOJ still wants to break up Google. (3:41)Show NotesPiper Sandler's actionable picks amid selloffEarnings CalendarDividend RoundupEpisode transcripts: seekingalpha.com/wsb Sign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Chapter 1: What is the main topic of this episode?
Welcome to Seeking Alpha's Wall Street Brunch, our Sunday look ahead to this week's market-moving events, along with the weekend's top news and analysis. Hello, today is Sunday, March 9th, and I'm your host, Kim Kahn. Investors turned their attention to inflation once again this week, but now with a backdrop of uncertainty over government policy and real concern about growth.
In their weekly equities rundown, Goldman Sachs lists a host of things traders are fretting about, including said growth worries, tariff fatigue, weak technicals, challenging liquidity, consumer woes, and poor seasonality. If Wednesday's consumer price index again indicates sticky inflation, it could trigger a further leg down for stocks.
Economists expect that the headline CPI and the core CPI rose by 0.3% in February. That would bring the annual rate down to 2.9%, with the core rate edging down to 3.2%. Wells Fargo economists say, while February's CPI report is likely to deliver an initial taste of tariffs, it is likely to be just the start.
The implementation of a further 10% tariffs on Chinese goods and the follow-through on 25% tariffs on goods from Canada and Mexico, even with some carve-outs, is poised to stoke inflation in the near term.
Although we expect both headline and core inflation to take down on a year-over-year basis in February, we anticipate it will start moving back up this spring and remain stuck near 3% for the duration of this year despite further easing in shelter inflation and growing signs of consumer fatigue.
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Chapter 2: How could a dovish CPI affect the Fed's rate decision?
Chapter 3: What are economists expecting from the CPI report?
Economists expect that the headline CPI and the core CPI rose by 0.3% in February. That would bring the annual rate down to 2.9%, with the core rate edging down to 3.2%. Wells Fargo economists say, while February's CPI report is likely to deliver an initial taste of tariffs, it is likely to be just the start.
Chapter 4: How could tariffs affect inflation?
The implementation of a further 10% tariffs on Chinese goods and the follow-through on 25% tariffs on goods from Canada and Mexico, even with some carve-outs, is poised to stoke inflation in the near term.
Although we expect both headline and core inflation to take down on a year-over-year basis in February, we anticipate it will start moving back up this spring and remain stuck near 3% for the duration of this year despite further easing in shelter inflation and growing signs of consumer fatigue.
If the CPI delivers a dovish surprise, that could cement market expectations for a Fed rate cut in June. The odds of the Fed cutting by a quarter point that month jumped to 80% after the weaker-than-expected rise in February payrolls, and Fed funds' futures are pricing in a 1-in-4 chance now that rates could be down by 50 basis points from the current range in June.
Glenn Smith, CIO at GDS Wealth Management, says Friday's jobs report is concerning because this report doesn't account for the recent government job cuts from Doge, so it suggests that businesses are taking a pause on hiring until there is more certainty about tariff policy and the economic outlook.
Investors are starting to worry about a noticeable deceleration in first quarter GDP, which is set to be released at the end of April, and that is contributing to the past few weeks of stock market volatility. On the earnings front, Adobe will report on Wednesday the software company is expected to post EPS of $4.97 on revenue of $5.66 billion.
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Chapter 5: What are the expectations for Adobe's upcoming earnings report?
Piper Sandler said in a note earlier this week that 10% to 11% of annual growth in subscription may be partially masked by a year-on-year decline of 15% in Adobe's legacy product and service revenue. It expects margin expansion and stock repurchases to insulate EPS growth that should continue to grow double digits.
Chapter 6: How is Adobe positioned for growth amidst competition?
Adobe has a number of new AI products that could bolster growth into the next year, including Express, Acrobat AI Assistant, Firefly, DX Premium Tiers, and Gen Studio. Essay analyst DM Insights called Adobe a compelling buy on Friday. Adobe has a very reliable and predictable subscription-based business model, they said.
The company faces increased competition from other large businesses and AI productivity tools. However, Adobe's business model will remain unchallenged, at least in the near future. Their software offering and seamless integration is a huge asset, making transitioning to a different software suite very inconvenient. Adobe's valuation is very reasonable at this point.
Also on the earnings calendar, BeyondTech, Vale Resorts, and NetPower report on Monday. On Tuesday, Ferguson Enterprises, Viking Holdings, Dick's Sporting Goods, Sienna, and Kohl's weigh in. Joining Adobe on Wednesday are Crown Castle, UiPath, SentinelOne, and ABM Industries. Ulta Beauty, DocuSign, Dollar General, Futu Holdings, and Rubrik are due on Thursday. Lee Otto reports Friday.
In the news this weekend, the Department of Justice reaffirmed its demand that a federal court break up Google. The DOJ's request came after Judge Amit P. Mehta of the U.S. District Court for the District of Columbia ruled last year that Alphabet illegally operated a monopoly in online search through payments to web browsers and smartphone makers to feature Google search engines.
Google's illegal conduct has created an economic goliath, one that wreaks havoc over the marketplace to ensure that, no matter what occurs, Google always wins, the government said in its filing. The American people thus are forced to accept the unbridled demands and shifting ideological preferences of an economic leviathan in return for a search engine the public may enjoy.
However, the DOJ dropped its request that Google be forced to sell off its stakes in AI companies, including Anthropic, to promote online search competition. DOJ's sweeping proposals continue to go miles beyond the court's decision and would harm America's consumers, economy, and national security, Google told Seeking Alpha.
And Meta Platforms is working to advance the voice-controlled capabilities of its new open-source large language model, Lama 4, as it expects conversational AI agents will supplant text-driven agents. The Financial Times says Lama 4 is expected to be released in the next few weeks. The Ray-Ban Metas are already utilizing this type of technology.
Chief Product Officer Chris Cox said, So what we have now, we believe, is the best AI device on the market, which is the Ray-Ban Meta. They allow you to talk to them. You can ask questions about the world in front of you. For income investors, Allstate goes ex-dividend on Monday with a payout date of April 1st. HP and Nvidia go ex-dividend on Wednesday.
HP pays out on March 12th, and Nvidia pays out on April 2nd. Home Depot goes ex-dividend on Thursday and pays out on March 13th. And in the Wall Street Research corner, Piper Sandler is out with actionable stock recommendations amid a bearish tilt to the market over concerns of economic growth, tariffs, and other policies.
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