The Fed's favorite inflation measure is seen ticking up. (0:17) CoreWeave IPO will gauge AI trade demand. (1:55) GameStop earnings on tap. (2:48)Show NotesStocks that weather downturns the bestEarnings 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 are the key economic projections for inflation this week?
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 23rd, and I'm your host, Kim Kahn. Investors will be looking through a new lens at the latest income and spending figures out at the end of the week.
Last week, Fed Chairman Jay Powell said, tempting fate, some would say. that inflation from tariffs would likely be transitory. On Friday, the Fed's favorite inflation gauge, the Core PCE Price Index, arrives along with the Personal Spending and Income Report.
Wells Fargo economists say, inflation remains a big hurdle for consumers, and we forecast some sticky price pressures in the February data, which should keep the headline deflator at 2.5% and nudge the core deflator, or PCE, up a tenth to 2.7%. But even if the inflation measure comes in hot, traders could give it a pass, assuming that the Fed is already pricing in a tariff boost to prices.
The March summary of economic projections showed forecasts for core PCE at 2.8% for this year, up from 2.5% forecast in December. Markets are still pricing in a quarter-point rate cut in June and are split between two and three cuts for the year. So, if inflation is losing the wow factor, the attention will likely turn to growth.
Chapter 2: How are durable goods orders influencing the manufacturing sector?
February durable goods orders arrived Wednesday, with a 1% decline expected in headline and a 0.2% rise in core orders ex-transportation. Orders shot up in January, and for a manufacturing sector beset by more bad news than good in the past few years, purchasing managers wonder if this is promises of what seemed to be or a genuine uptick in activity, Wells Fargo's team said.
Core capital goods orders have shown some signs of life more recently, suggesting a more sustained albeit slower rebound in activity. It's hard to see conditions overly supportive of a broad and sustained recovery in capex spending, though, amid elevated uncertainty and still high rates, they added.
Chapter 3: What is the significance of the CoreWeave IPO for the AI market?
It's been a while, but focus this week will also be on the new issues market, with what could be a litmus test for tech IPOs and the AI trade. As listeners heard on Wall Street Lunch last week, CoreWeave, a hyperscaler startup backed by Nvidia, looks to raise as much as $2.7 billion with its deal. The IPO will price Wednesday night and trade Thursday under the symbol CRWV.
The price range is a wide $47 to $55 per share, but that could narrow as the pricing nears. The deal has been scaled back from initial estimates, and a lower pricing could further underscore skittishness in investors putting cash back into AI names. One hedge fund manager told the FT that no one knows where Coral Reeve is going to be in three years' time.
Chapter 4: Which notable earnings are expected this week?
Uncertainty is also the devil of all good investments. It may be fine, but it may not be. but another manager called it the WeWork of AI data centers due to its long leases but short-term customer commitments. Earnings season continues to wind down, but retail names are still in the picture. Dollar Tree reports on Wednesday and Lululemon on Thursday. Mean Favorite GameStop reports Tuesday.
Shares are down 25% year-to-date, reflecting overall market selling pressure and concern regarding potential Bitcoin integration into its business model. Wall Street analysts continue to maintain a strong sell rating on the stock, while Seeking Alpha's quant ratings recently downgraded the stock to hold from buy.
Seeking Alpha author The Gaming Dividend says GameStop's stock price remains disconnected from fundamentals, with weak Q4 earnings expected due to declining hardware and software sales. While speculation about GameStop adopting Bitcoin could provide a short-term boost, the timing may be unfavorable given the current crypto cycle.
Additionally, shifts in the gaming industry and growing competition from digital platforms, such as Microsoft's Game Pass, continue to challenge GameStop's long-term business model, reinforcing the bearish outlook. Also on the earnings calendar, KB Home and Oklo report Monday. Joining GameStop on Tuesday are McCormick, Smithfield Foods, and Pony AI.
Cintas, Paychex, Chewy, and Jeffries Financial weigh in on Wednesday with Dollar Tree. Winnebago reports along with Lululemon on Friday. In the news this weekend, AI search startup Perplexity AI said it wants to acquire TikTok from ByteDance and open source its algorithm, as the short video app nears its April 5th ban deadline.
Perplexity is singularly positioned to rebuild the TikTok algorithm without creating a monopoly, combining world-class technical capabilities with little tech independence, the company said in a blog post. The NVIDIA-backed startup wants to rebuild TikTok's algorithm from scratch in America data centers with American oversight.
It also plans to make TikTok's recommendation system transparent and open source. Perplexity first made its bid for TikTok in January, but it faces much bigger rivals like Oracle, Microsoft, and a consortium of investors led by former Dodgers owner Frank McCourt. For income investors, Best Buy goes ex-dividend on Tuesday, paying out on April 15th.
Humana, Keurig Dr. Pepper, and Ralph Lauren all go ex-dividend on Friday. Humana has a payout date of April 25th, while Keurig Dr. Pepper and Ralph Lauren pay out on April 11th. And in the Wall Street Research Corner, B of A says investors should look for stocks with proven track records of navigating past downturns and also have low crowding risk and minimal earnings volatility.
Analysts screen for stocks that have outperformed in the last 80% of market pullbacks of 10% or more since the early 1980s. These stocks are also considered high quality, with an S&P quality rating of B-plus or higher, and are underweighted by active fund managers. Among the names are Verizon, AutoZone, Pepsi, Costco, ConAgra, J&J, General Mills, and Hormel Foods.
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