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Inflation could push Fed into August rate hike

Inflation could push Fed into August rate hike

CNBC’s Jim Cramer on Monday said the Federal Reserve could raise interest rates in August, before its next scheduled meeting in September, if this week’s economic data shows that inflation isn’t abating.

“The Fed is still in charge of this market. A week ago, it looked like they might ease up, but after Friday’s red-hot jobs number and the passage of the [Inflation Reduction Act]I’m worried they might lower the boom on us even before September comes,” he said.

“If both numbers are scorchers, we will get a surprise August meeting,” he predicted, referencing the consumer price index and producer price index data coming this week.

The Senate on Sunday passed the Inflation Reduction Act, a Democrat-backed package aimed at fighting climate change and extending health care coverage.

The legislation, among other provisions, allows Medicare to negotiate prices with drug companies and puts a 15% minimum tax on large corporations.

The July jobs report saw stronger-than-expected numbers last week, meaning the central bank could have to continue its path forward on raising interest rates aggressively.

“If I were Chairman Jay Powell … I’d be hard-pressed not to call a special Fed meeting this month to hit us with another 75-basis point rate hike,” Cramer said. A basis point equals 0.01 percentage point.

Investors are also looking to the University of Michigan’s consumer sentiment index this week to shed more light on how consumers are coping with inflation.

Cramer also previewed this week’s slate of earnings. All earnings and revenue estimates are courtesy of FactSet.

Tuesday: Emerson Electric, Ralph Lauren, Plug Power, Unity Software

Emerson Electric

  • Q3 2022 earnings release at 6:55 am ET; conference call at 9 am ET
  • Projected EPS: $1.29
  • Projected revenue: $5.10 billion

Cramer said he expects Emerson to perform well long term after selling its waste disposal business InSinkErator to Whirlpool, but is still curious about how the company is faring short term.

Ralph Lauren

  • Q1 2023 earnings release at 8 am ET; conference call at 9 am ET
  • Projected EPS: $1.71
  • Projected revenue: $1.40 billion

Though Ralph Lauren is a high-end store, it could still face the same inventory gluts that other retailers are dealing with, he said.

plug-power

  • Q2 2022 earnings release after the close; conference call at 4:30 pm ET
  • Projected loss: 21 cents per share
  • Projected revenue: $159 million

Plug Power will benefit from the Inflation Reduction Act because of the bill’s hydrogen tax credit, which could help the company become more than just a niche fuel cell producer, Cramer said.

UnitySoftware

  • Q2 2022 earnings release at 4:05 pm ET; conference call at 5 pm ET
  • Projected loss: 21 cents per share
  • Projected revenue: $300 million

Cramer predicted that the beaten-down stock could go even lower since Nvidia’s preliminary financial results on Monday revealed that gaming is weak.

Wednesday: CyberArk Software, Wendy’s, Disney, Dutch Bros

Cyber ​​Ark Software

  • Q2 2022 earnings release between 7:00-7:10 am ET; conference call at 8:30 am ET
  • Projected loss: 30 cents per share
  • Projected revenue: $138 million

The company should report great results since cybersecurity companies tend to be shielded from economic turbulence, Cramer said.

Wendy’s

  • Q2 2022 earnings release at 7 am ET; conference call at 8:30 am ET
  • Projected EPS: 22 cents
  • Projected revenue: $540 million

Cramer said he’s worried about how inflation could be hurting Wendy’s performance.

Disney

  • Q3 2022 earnings release at 4:05 pm ET; conference call at 4:30 pm ET
  • Projected EPS: 98 cents
  • Projected revenue: $20.99 billion

“It’s just too hated for me to believe it can stay down,” he said.

Dutch Bros.

  • Q2 2022 earnings release after the close; conference call at 5 pm ET
  • Projected EPS: 5 cents per share
  • Projected revenue: $182 million

The company is a beloved brand, but it’ll have to convince investors that its stock is worth buying, Cramer said.

Thursday: Warby Parker, Toast, Rivian

Warby Parker

  • Q2 2022 earnings release at 6:45 am ET; conference call at 8 am ET
  • Projected loss: 2 cents per share
  • Projected revenue: $150 million

“I bet, like other recent IPOs, it’s going to move up on the quarter,” Cramer said.

toast

  • Q2 2022 earnings release at 4:05 pm ET; conference call at 5 pm ET
  • Projected loss: 12 cents per share
  • Projected revenue: $651 million

He said that he’s surprised so many small companies like Toast are seeing their stocks go higher, even on no news — which suggests they never should have gone down so much in the first place.

Rivian

  • Q2 2022 earnings release at 4:10 pm ET; conference call at 5 pm ET
  • Projected loss: $1.63 per share
  • Projected revenue: $335 million

The electric vehicle maker will likely benefit from the Inflation Reduction Act due to the bill’s extension of income tax credits for consumers who purchase electric vehicles, Cramer said. I have added that he still prefers Tesla.

Disclosure: Cramer’s Charitable Trust owns shares of Disney.

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Categories
US

Energy prices have dipped, but oil stocks are still a buy: Investor

Energy prices have dipped, but oil stocks are still a buy: Investor

Oil prices have fallen sharply from their recent peaks, but there’s still a case for buying oil stocks, according to Bill Smead, chief investment officer at Smead Capital Management.

That’s because energy prices are likely to stay high or even increase further, he told CNBC’s “Street Signs Asia” on Thursday.

He described the slide in crude prices as “the first significant correction” in a bull market that started in the spring of 2020 after prices crashed.

“You have this huge move, you go from $20 a barrel to $120 and then you pull back — and now people are going, ‘Oh yeah, that’s all over, that’s going to cure the inflation right there,'” Smead said.

We like the oil stocks here. You can buy ’em here, Warren Buffett is buying it here.

bill smead

Chief investment officer, Smead Capital Management

But several factors suggest that prices are going to increase, he said.

The US has to replace 180 million barrels of strategic reserves that were drawn down to meet demand, and supply remains tight, he pointed out.

“What happens when China’s economy gets open in full … get past their quarantines and just get out,” he asked, suggesting that demand will come back up again.

Covid flare-ups in China have spurred lockdowns this year, and caused consumption of energy to drop in the world’s most populous country.

Read more about energy from CNBC Pro

Demand will likely to spring back when more movement restrictions are eased.

“We like the oil stocks here. You can buy ’em here, Warren Buffett is buying it here,” Smead said.

Brent crude futures and US West Texas Intermediate futures both soared to levels above $120 per barrel this year, but are now at $96.88 and $90.88 per barrel, respectively.

Still, both benchmarks are more than 40% up from a year ago.

— CNBC’s Thomas Franck and Yun Li contributed to this report.

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Categories
US

Taiwan’s trade with China is far bigger than its trade with the US

Taiwan's trade with China is far bigger than its trade with the US

Aerial photograph of shipping containers at the harbor in Keelung, Taiwan. Data show that Taiwan depends more on China for trade than it does on the US

Sam Yeh | Afp | Getty Images

BEIJING — Data show that Taiwan depends more on China for trade than it does on the US, even if US House Speaker Nancy Pelosi threw her weight behind Taiwan this week in a high-profile visit.

Taiwan came under military and economic pressure from Beijing this week, after the democratically self-ruled island allowed the visit of Pelosi — the highest-ranking US official to set foot on Taiwan in 25 years.

The visit came despite warnings from China, which considers Taiwan part of its territory and maintains the island should have no right to conduct foreign relations. The US recognizes Beijing as the sole legal government of China, while maintaining unofficial relations with Taiwan.

Still, Taiwan’s business and economic ties with mainland China and Hong Kong have grown so large that the region is by far the island’s largest trading partner.

Many large Taiwanese companies in high-tech industries such the world’s biggest chipmaker — Taiwan Semiconductor Manufacturing Co., or TSMC. — operate factories in mainland China.

Last year, mainland China and Hong Kong accounted for 42% of Taiwan’s exports, while the US had a 15% share, according to official Taiwan data accessed through Wind Information.

In all, Taiwan exported $188.91 billion in goods to mainland China and Hong Kong in 2021. More than half were electronic parts, followed by optical equipment, according to Taiwan’s Ministry of Finance.

Taiwan’s exports to Southeast Asia were even greater than those to the US — at $70.25 billion to the region, versus $65.7 billion to the US, the data showed.

As a source of Taiwan’s imports, mainland China and Hong Kong again ranked first with a 22% share. The US only had a 10% share, ranking behind Japan, Europe and Southeast Asia.

Growing trade with mainland China

In recent years, Taiwan has bought an increasing amount of products from mainland China, and vice versa.

Over the last five years, Taiwan’s imports from mainland China have arisen by about 87% versus 44% growth in imports from the US

Taiwan’s exports to mainland China grew by 71% between 2016 and 2021. But exports to the US nearly doubled, growing by 97%.

Read more about China from CNBC Pro

Comparable to Shanghai

.

Categories
US

Taiwan’s trade with China is far bigger than its trade with the US

Taiwan's trade with China is far bigger than its trade with the US

Aerial photograph of shipping containers at the harbor in Keelung, Taiwan. Data show that Taiwan depends more on China for trade than it does on the US

Sam Yeh | Afp | Getty Images

BEIJING — Data show that Taiwan depends more on China for trade than it does on the US, even if US House Speaker Nancy Pelosi threw her weight behind Taiwan this week in a high-profile visit.

Taiwan came under military and economic pressure from Beijing this week, after the democratically self-ruled island allowed the visit of Pelosi — the highest-ranking US official to set foot on Taiwan in 25 years.

The visit came despite warnings from China, which considers Taiwan part of its territory and maintains the island should have no right to conduct foreign relations. The US recognizes Beijing as the sole legal government of China, while maintaining unofficial relations with Taiwan.

Still, Taiwan’s business and economic ties with mainland China and Hong Kong have grown so large that the region is by far the island’s largest trading partner.

Many large Taiwanese companies in high-tech industries such the world’s biggest chipmaker — Taiwan Semiconductor Manufacturing Co., or TSMC. — operate factories in mainland China.

Last year, mainland China and Hong Kong accounted for 42% of Taiwan’s exports, while the US had a 15% share, according to official Taiwan data accessed through Wind Information.

In all, Taiwan exported $188.91 billion in goods to mainland China and Hong Kong in 2021. More than half were electronic parts, followed by optical equipment, according to Taiwan’s Ministry of Finance.

Taiwan’s exports to Southeast Asia were even greater than those to the US — at $70.25 billion to the region, versus $65.7 billion to the US, the data showed.

As a source of Taiwan’s imports, mainland China and Hong Kong again ranked first with a 22% share. The US only had a 10% share, ranking behind Japan, Europe and Southeast Asia.

Growing trade with mainland China

In recent years, Taiwan has bought an increasing amount of products from mainland China, and vice versa.

Over the last five years, Taiwan’s imports from mainland China have arisen by about 87% versus 44% growth in imports from the US

Taiwan’s exports to mainland China grew by 71% between 2016 and 2021. But exports to the US nearly doubled, growing by 97%.

Read more about China from CNBC Pro

Comparable to Shanghai

.