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This morning’s pre-markets looked solid following a modest sell-off across major indexes Tuesday, more than making up for the previous day’s losses. Then we saw the latest Consumer Price Index (CPI) report for July, and early trading has only gotten better from there. The headline CPI number came in at +0.6%, 20 basis points higher than expected, and equal to the CPI headline reported a month ago.
Subtracting volatile food and energy costs gives us the “core” read on CPI, and here is where we see the real positive news: +0.6% remains the number — 3x the 0.2% expected and the 0.2% reported for June. This core read represents stronger economic narratives, and a cursory glance below the headline we see plenty of good news: Energy was up 2.5%, Vehicles +2.3% and Apparel +1.1% — and these are not year-over-year, but month-over-month figures.
Considering the economic crater that befell our economy this past spring, when we see year-over year CPI growth of 1.0% on headline, +1.6% on core — both higher than analysts were expecting — we need to recognize that the American reopening, spotty though it has been, is a real force for the greater economy. Accommodative financial policy from the Fed is obviously at the heart of this rebound, and a new congressional relief package — assuming one is coming — furthers this pro-growth narrative.
Do we now pivot toward concerning ourselves with inflation entering the picture in a way that might bring an end to current policy? Too soon to tell, in our estimation. A couple months in a row of pent-up vehicle demand is not the same thing as a full-fledged economic rebound. We are still seeing schools and sports leagues shuttering their doors after planning to have put the pandemic crisis behind them.
And COVID-19 continues to rage through the country. We are seeing few positive new cases of the disease, but we’re also seeing fewer tests being performed. Again, it’s too soon to tell whether the coronavirus is abating, and until a vaccine is proven and proven safe, we may remain in this sort of economic purgatory.
Tesla Announces 5-to-1 Stock Split
Yesterday afternoon, Tesla (TSLA - Free Report) shares spiked 6% on news the company will be splitting its shares by 5 to 1, creating a more affordable entry point to the electric vehicle leader, which has grown 250% from the start of the year. This would bring the price per share down to around $275 from its current $1374. This split is scheduled to take place August 28th, to begin trading on a split-adjusted basis on the 31st, so who knows how much higher the stock can go in the next 2 1/2 weeks.
Tesla follows Apple’s (AAPL - Free Report) announced 4-to-1 stock split earlier this month. These moves are reminiscent of the tech boom in the stock market back at the turn of the millennium, when companies would routinely see big gains, then split off into smaller bits. This was useful for retail investors especially, as well as company employees. One notable exception to this stock-split discipline is Warren Buffett’s Berkshire Hathaway (BRK.A - Free Report) , which cost around $56,000 at the start of the year 2000, and now has a price tag of more than $319,000.
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Core CPI at +0.6% Spikes Pre-Market Trading
Wednesday, August 12, 2020
This morning’s pre-markets looked solid following a modest sell-off across major indexes Tuesday, more than making up for the previous day’s losses. Then we saw the latest Consumer Price Index (CPI) report for July, and early trading has only gotten better from there. The headline CPI number came in at +0.6%, 20 basis points higher than expected, and equal to the CPI headline reported a month ago.
Subtracting volatile food and energy costs gives us the “core” read on CPI, and here is where we see the real positive news: +0.6% remains the number — 3x the 0.2% expected and the 0.2% reported for June. This core read represents stronger economic narratives, and a cursory glance below the headline we see plenty of good news: Energy was up 2.5%, Vehicles +2.3% and Apparel +1.1% — and these are not year-over-year, but month-over-month figures.
Considering the economic crater that befell our economy this past spring, when we see year-over year CPI growth of 1.0% on headline, +1.6% on core — both higher than analysts were expecting — we need to recognize that the American reopening, spotty though it has been, is a real force for the greater economy. Accommodative financial policy from the Fed is obviously at the heart of this rebound, and a new congressional relief package — assuming one is coming — furthers this pro-growth narrative.
Do we now pivot toward concerning ourselves with inflation entering the picture in a way that might bring an end to current policy? Too soon to tell, in our estimation. A couple months in a row of pent-up vehicle demand is not the same thing as a full-fledged economic rebound. We are still seeing schools and sports leagues shuttering their doors after planning to have put the pandemic crisis behind them.
And COVID-19 continues to rage through the country. We are seeing few positive new cases of the disease, but we’re also seeing fewer tests being performed. Again, it’s too soon to tell whether the coronavirus is abating, and until a vaccine is proven and proven safe, we may remain in this sort of economic purgatory.
Tesla Announces 5-to-1 Stock Split
Yesterday afternoon, Tesla (TSLA - Free Report) shares spiked 6% on news the company will be splitting its shares by 5 to 1, creating a more affordable entry point to the electric vehicle leader, which has grown 250% from the start of the year. This would bring the price per share down to around $275 from its current $1374. This split is scheduled to take place August 28th, to begin trading on a split-adjusted basis on the 31st, so who knows how much higher the stock can go in the next 2 1/2 weeks.
Tesla follows Apple’s (AAPL - Free Report) announced 4-to-1 stock split earlier this month. These moves are reminiscent of the tech boom in the stock market back at the turn of the millennium, when companies would routinely see big gains, then split off into smaller bits. This was useful for retail investors especially, as well as company employees. One notable exception to this stock-split discipline is Warren Buffett’s Berkshire Hathaway (BRK.A - Free Report) , which cost around $56,000 at the start of the year 2000, and now has a price tag of more than $319,000.
Mark Vickery
Senior Editor
Questions or comments about this article and/or its author? Click here>>
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Four Zacks experts each announce their single favorite pick with potential to gain +100% and more in the months ahead. Today, download the private Special Report that names these stocks and spotlights why their upside is so exceptional. See Stocks Now >>