Inflation Outlook Raised Sharply in Big-Name Forecasters’ Survey
Inflation this year will run well above the Federal Reserve’s target and remain elevated for the next several years, according to a consensus forecast released Friday from some of Wall Street’s biggest economic names.
Key Highlights
- The Philadelphia Fed’s quarterly Survey of Professional Forecasters puts core inflation as measured by the personal consumption expenditures price index — the central bank’s preferred measure — at 2.9% through 2024, well above the Fed’s target and the previous forecast of 2.1%.
- The consumer price index is expected to average 2.5% over the next five years and 2.33% over the next 10 years, also above previous outlooks.
Top Economists’ Perspectives
The survey includes esteemed economists Jan Hatzius of Goldman Sachs, Ellen Zentner at Morgan Stanley, and Michael Feroli at JPMorgan Chase, amongst other luminous Wall Street forecasters.
Implications for the Economy
The significant upward adjustment in inflation forecasts suggests a potentially more challenging economic landscape in the coming years. High inflation may impact consumer purchasing power and living costs, potentially leading to changes in investment strategies and policy decisions at the Federal Reserve.
Market Reaction
Given the outlook, investors may need to consider the potential impact on investment portfolios and allocate assets accordingly. The forecasted inflation levels could also shape market expectations, influencing future interest rate decisions and bond yields.
Alphabet Falls 1% on Report OpenAI to Unveil Search Competitor
Alphabet shares slipped more than 1% before the bell following a Reuters report that OpenAI could unveil a competitor to Google Search. The report, citing sources familiar with the matter, said the announcement could come Monday.
What It Could Mean for Alphabet
If OpenAI successfully releases a search competitor, it could potentially impact Alphabet’s market share and advertising revenue, as Google Search is currently the leading search engine worldwide. Alphabet may need to assess the competitive landscape and make strategic adjustments to maintain its positioning in the market.
Stocks Open Higher Friday
Stocks opened higher on Friday, continuing the positive momentum from previous sessions. This comes as the U.K. posted better-than-expected first-quarter gross domestic product, indicating a positive economic outlook.
Key Market Indices
The pan-European Stoxx 600 rose 0.52%, the U.K.’s FTSE 100 was up 0.41%, Germany’s DAX rose 0.39%, and France’s CAC 40 was 0.45% higher.
Novavax Shares Double After Signing Deal with Sanofi
Novavax shares surged 125% in premarket trading after announcing a multibillion-dollar deal with Sanofi to co-commercialize its Covid vaccine starting next year.
Key Deal Terms
- The agreement allows Novavax to lift the “going concern” warning it issued in February 2023.
- Sanofi will pay Novavax an upfront payment of $500 million and up to $700 million in additional payments.
Strategic Expansion and Market Impact
With the deal, Novavax gains a significant partner for vaccine distribution and commercialization. This collaboration also demonstrates Sanofi’s commitment to expanding its presence in the Covid vaccine market. The market response reflects the market’s positive reception of the strategic partnership.
Zeekr Prices IPO at Top End of Range
Zeekr, a Chinese EV maker backed by Geely, priced its IPO at $21 per share, aiming to raise more than $400 million in its U.S. public market debut. The offering sits at the top end of Zeekr’s expected range of $18 to $21.
Zeekr’s Growth Strategy
Zeekr seeks to lead the transformation of the automobile industry through the development and offering of next-generation premium Battery Electric Vehicles (BEVs) and technology-driven solutions. The IPO will provide Zeekr with the necessary capital to support its growth and innovation initiatives.
Interest Rates in India Could Stay ‘Higher for Longer,’ State Bank of India Chairman Says
India’s interest rates are likely to stay “higher for longer,” according to State Bank of India Chairman Dinesh Kumar Khara. He believes that the current policy rate status quo could remain “for some time to go,” considering the dip in India’s inflation rate.
Decoupling from Global Trends
Khara suggests that the Reserve Bank of India could deviate from the timeline followed by other central banks in considering interest rate adjustments. By taking into account India’s specific inflation dynamics and other economic factors, the central bank aims to support a more sustainable growth trajectory.
OCBC Posts Record First-Quarter Revenue and Profit; Offers to Take Insurance Subsidiary Private
Singapore’s second-largest bank OCBC posted record first-quarter revenue and profit, with total income rising 8% year-on-year and net profit climbing 5% year-on-year. Separately, OCBC offered to privatize its insurance subsidiary, Great Eastern, at a significant premium.
Strong Performance Across Segments
OCBC highlighted robust performance across all segments, with record highs in banking operations profit, supported by higher wealth management income and assets under management. The decision to privatize Great Eastern showcases OCBC’s strategic focus on optimizing its business portfolio to enhance shareholder value.
HSBC Says Xiaomi Could Break Even on Its EV Sooner Than Expected
HSBC, in a bullish outlook, now expects Xiaomi to break even on its recently launched electric vehicle, the SU7, sooner than previously projected. The bank’s increased optimism is based on Xiaomi’s higher-than-expected order backlog and strong deliveries.
Market Potential and Strong Performance
The positive market response to Xiaomi’s EV and strong performance in terms of order backlog and deliveries contribute to the outlook of a faster break-even point. This reinforces Xiaomi’s potential to successfully expand its presence in the electric vehicle market.
Individual Investors Were Last This ‘Neutral’ on Stocks Eight Months Ago
According to the American Association of Individual Investors, the percentage of individual investors maintaining a neutral outlook on stock prices widened to 35.4%, the highest reading in eight months. This indicates a cautious sentiment among investors.
Contrarian Investing Perspective
Contrarians interpret rising bullishness as an indication of potential decreased buying power, while rising bearish sentiment suggests a potentially increased buying interest. Market participants may need to carefully assess market sentiment and adjust investment strategies accordingly.
Stocks Making the Biggest Moves After Hour
Several companies made significant moves in after-hours trading:
- Yelp: Shares fell 6%, mainly driven by the company’s light second-quarter revenue guidance.
- Sweetgreen: The salad chain experienced a 5% surge in stock price as it reported better-than-expected first-quarter revenue.
- Akamai Technologies: The company’s stock dropped nearly 9% after issuing weak guidance for the second quarter.
Investors should closely monitor the performance of these companies and assess the potential impact on their respective industries and the overall market.
Stock Futures Open Little Changed Thursday Night
Stock futures opened little changed. Dow futures rose 0.08%, S&P 500 futures climbed 0.04%, and Nasdaq 100 futures gained 0.04%, reflecting general market stability.
