Markets Strong Ahead of CPI Report; Oracle Beats in Q2 – December 12, 2022

Major stock markets rose sharply across the board on this week’s first trading day, led by the blue-chip Dow index +528 points on the day, or +1.58% – back from the 34K again. The S&P 500 gained +1.43%, while the Nasdaq gained +139 points, or +1.26%. Even the small-cap Russell 2000 reached +1.20% in the session. It’s an excellent start to rebounding from the worst single trading week since September.

Transportation stocks rose the most today, around +3%, thanks in part to cheaper oil prices lately, especially diesel (although the Keystone pipeline shutdown has something to say about that). But it is more likely that this shows the market participants are expecting something positive in the future Consumer Price Index (CPI) report for November: headline annual CPI consensus is currently +7.3%, down 40 basis points (bps) month over month. If, for some reason, we find ourselves lower in the CPI every year, we may see the “Santa Claus Rally” that we have not seen so far.

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June of this year saw a 41-year peak in the CPI metric, which lowered interest rates to +9.1%. Last month, four months later, we have already turned +7.7% – still high, but -140 bps from the peak, and a clear downward path over time. We have not seen a below-7% CPI number in the last 12 months. But while last week’s sister report, the PPI, missed consensus estimates, they still fell on a monthly basis — a good thing.

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An added benefit of a lower CPI print tomorrow is the assurance that the Fed will not reverse course at the last minute and raise interest rates by 75 bps; 50 bps is currently added to the market forecast. So, we finally got “very good news”—lower inflation leading to better Fed results—rather than “good news and bad news,” as we’ve been experiencing for a while. many months.

Austin, TX-based Oracle Corp. (ORCL Free Report) reported fiscal Q2 results after the closing bell, automatically in the earnings report. It didn’t disappoint: earnings of $1.21 per share beat expectations by 4 cents, while revenue of $12.28 billion beat expectations of $12.03 billion. Oracle has not only had two earnings in the past five years, but both in the past three months.

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Oracle said its earnings per share would have been 9 cents higher, had it not been for foreign exchange costs. The company’s deferred earnings came in hotter than expected, which was not the case for other big tech names during the last earnings season. ORCL shares rose nearly +3% in late trade; the company currently ranked No. 2 Zacks has been down half a percent year-to-date.

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