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Fed-Favored Inflation Gauge Expected to Ease to Seven-Month Low

The Federal Reserve’s preferred inflation metric is expected to cool to the slowest pace since June, but overall progress on taming price pressures will keep policymakers cautious about lowering interest rates further. The core personal consumption expenditures price index, which excludes often-volatile food and energy costs, is likely to rise 2.6% in the year through January, according to the median estimate in a Bloomberg survey of economists. Overall PCE inflation is also expected to ease on an annual basis, but components that registered strong increases in the consumer price index will keep the PCE running above the Fed’s 2% target.

Michael Barr is due to speak for likely his last time as the central bank’s vice chair for supervision as he prepares to step down at the end of the month, while Richmond Fed President Tom Barkin and Cleveland’s Beth Hammack are among others scheduled to deliver comments. At the same time as the PCE report, the Commerce Department will release the latest goods-trade balance, which widened to a record in December and will be a key focus for President Donald Trump in his second term.

Other data due for release in the coming week include new-home sales, consumer confidence and the government’s second estimate of fourth-quarter growth. Meanwhile, investors will continue to watch Trump’s efforts on tariffs and Elon Musk’s push to slash the size of the federal government.

In Canada, gross domestic product data for the fourth quarter is likely to show an economy picking up steam following aggressive rate cuts — though that momentum may stall as the looming trade war weighs on business investment.

Elsewhere, Germany’s election, inflation in Australia and the biggest euro-zone economies, and a rate cut in South Korea may be among the highlights. The Bank of Korea will be in the spotlight on Tuesday when authorities decide whether to resume the rate-cut cycle. The Bank of Thailand is seen holding its benchmark at 2.25%, though Bloomberg Economics expects pressure to continue for another cut later this year. Fresh off its first rate cut since 2020, the Reserve Bank of Australia will get consumer inflation data that’s forecast to show price gains accelerated marginally for a third month in January.

Japan publishes CPI data for Tokyo that may show inflation in the capital stayed elevated in February, while Singapore’s core CPI gains probably moderated to 1.5% in January. Sri Lanka releases CPI statistics on Friday. China reports preliminary PMI data for February on Saturday, with a key being the extent to which the manufacturing gauge recovers after a lunar-holiday dip in January. Bloomberg Economics expects the data to reinforce the case for policy support.

Taiwan reports preliminary gross domestic product figures for the fourth quarter on Wednesday, and trade data are due during the week from the Philippines, South Korea, Sri Lanka, Thailand and Hong Kong.

The aftermath of Sunday’s election in Germany will be the focus for investors. The pro-business CDU/CSU bloc, led by Friedrich Merz, is expected to take the biggest vote share after a campaign that often dwelled upon the country’s dismal economic record under Chancellor Olaf Scholz. Recent upticks in investor confidence and among purchasing managers likely came to late to help the incumbent. Similarly, the closely-watched Ifo business sentiment report on Monday is expected to show the highest reading since October.

One of the main questions following the snap ballot will be the future of Germany’s so-called debt brake, a topic that’s preoccupied Bundesbank President Joachim Nagel for some time. Reporters may quiz Nagel on that topic when he presents his institution’s annual report on Tuesday. He’s also likely to use the opportunity to comment on the European Central Bank’s next steps. A pre-meeting quiet period will then begin before the March 6 decision.

Data that may draw attention in the euro region in the coming week include inflation on Thursday and Friday from its four biggest economies, with economists anticipating outcomes ranging from slowing in Germany and France to a stable outcome in Spain and an uptick in Italy. In the UK, meanwhile, several speeches by Bank of England policymakers are scheduled, including Deputy Governors Clare Lombardelli and Dave Ramsden.

Elsewhere in Europe, Swedish, Czech and Icelandic gross domestic product numbers for the fourth quarter will be released. In South Africa, data on Wednesday will likely show inflation quickened to 3.2% in January from 3% a month earlier. The reading will be the first since the nation’s consumer price index was overhauled. The release was delayed by a week to allow the statistics agency to conduct additional checks and verifications on the data.

On Wednesday and Thursday, South Africa will host the first Group of 20 finance minister-central bankers summit since Trump returned to office. The meeting comes as the global economy enters a precarious phase, with markets shaky and the easing cycle at risk because of US protectionist

Trump’s 10% Oil Tariff Could Cost Foreign Producers $10 Billion Annually, Goldman Sachs Says

Goldman Sachs has revealed that a proposed 10% U.S. oil tariff could cost foreign producers approximately $10 billion per year. This estimate comes as Canadian and Latin American heavy crudes remain heavily reliant on U.S. refiners due to limited alternative buyers and processing capabilities.

President Donald Trump plans to impose a 25% tariff on Mexican crude and a 10% levy on Canadian crude starting in March, a delay from his initial proposal. Despite this, Goldman Sachs expects the U.S. to remain the primary destination for heavy crude, as advanced refining capabilities and low costs continue to make American refiners the most competitive buyers.

Goldman Sachs estimates that light oil prices would need to rise by 50 cents per barrel to make medium crude from the Middle East more attractive to Asian refiners, as U.S. Gulf Coast refiners prioritize domestic light crude over imported medium grades.

The investment bank estimates U.S. consumers would face an annual tariff cost of $22 billion, while the government would generate $20 billion in revenue. Meanwhile, refiners and traders could see $12 billion in benefits by linking discounted U.S. light crude and foreign heavy crude to premium coastal markets.

Goldman Sachs noted that Canada, the top exporter of oil to the U.S., is likely to see its 3.8 million barrels per day (bpd) of pipeline exports continue flowing, with prices discounting to offset the tariff impact. Similarly, 1.2 million bpd of seaborne heavy crude imports from Canada and Latin American countries including Mexico and Venezuela would see discounts to offset the levy, ensuring continued flows into the United States.

While the tariffs could reshape trade flows, Goldman Sachs highlighted that Canadian producers, as “captured sellers” with limited alternative buyers, would be forced to absorb much of the tariff burden through price discounts to remain competitive in the U.S. market.

Why the Spring Selling Season is Going to be ‘Challenging’ for Homebuilders

The spring home-selling season is shaping up to be challenging for major homebuilders, largely because of the possibility of a trade war and high mortgage rates. Over the past few years, homebuilders have rushed to build new houses to help alleviate the shortage in the resale market, as high borrowing costs discouraged homeowners from selling. But now, with mortgage rates still elevated and economic uncertainty, builders are facing obstacles.

“We expect the challenging environment for homebuilders to persist through [first half of 2025],” Rafe Jadrosich, homebuilders and building products analyst at Bank of America Securities, wrote in a note to clients. The cracks have started to show. For instance, DR Horton (DHI), the nation’s largest homebuilder, reported a 1% decrease in net orders for the first fiscal quarter ended Dec. 31 compared to the same period last year. Buyers signed contracts for 17,837 homes in the quarter, falling short of analysts’ expectations of 18,478.

To bolster sales, builders like Horton actively offered incentives such as mortgage rate buy-downs and smaller homes. The bad news? These efforts impacted margins. DHI’s margin fell 90 basis points in December from the prior quarter due to higher incentive costs, and they expect those costs to increase. That means lower gross margins of 21.5% to 22% in the second quarter compared to 22.7% in the first quarter. Still, executives at DHI remain hopeful that the spring season will be a turning point. “We need the spring to show up for us and to see the sales,” DHI’s CEO Paul Romanowski told investors and analysts on the company’s first fiscal 2025 quarter earnings call in late January.

Wedbush Securities senior vice president of equity research Jay McCanless shares the optimism but believes a robust selling period is contingent on a more consistent mortgage rate environment. “If we get some rate stability, then the spring season probably continues to improve as it progresses,” McCanless told Finance. “But I’m very worried, as are the builders, about mortgage rate volatility and what that does to buyer psyche.”

The uncertainty is further reflected in Toll Brothers (TOL), which lowered its guidance for home deliveries. The builder expects to close 2,500 to 2,700 sales in its fiscal second quarter, below analysts’ estimates of 2,781. “Although demand was solid in our first quarter, we have seen mixed results so far this spring selling season,” Toll Brothers CEO Douglas Yearley told investors and analysts on the company’s fiscal first quarter earnings call this week.

“While demand has remained healthy in many of our markets and particularly at the higher end, affordability constraints and growing inventories in certain markets are pressuring sales, especially at the lower end,” he added. Another sign of weakness in the housing market, sales of existing homes slowed in January as high home prices and elevated mortgage rates dampened housing activity.

Other Wall Street analysts believe the challenges go beyond demand. Jadrosich pointed to rising land prices and a more competitive selling environment due to things like higher inventory. Data from the National Association of Home Builders showed a 46% increase in the number of completed ready-to-occupy new homes, rising to 118,000 from the previous year. New homes now account for 30% of homes on the market for sale, maintaining the same December pace as last year.

Data from Wolfe Research suggests that if builders can pass along those increased construction costs and raise the price of a new home by $10,000, the monthly housing payment will go up by $48 from $2,470 to $2,518, assuming a 6% mortgage rate buydown. (AP Photo/Ross D. Franklin)

Another concern for builders stems from President Trump’s executive order imposing 25% tariffs on all imported steel and aluminum products, effective in March. The National Association of Home Builders warns this could increase residential construction costs, which could be passed down to consumers and drive up home prices and thus impact home sales — and not in a good way.

Smaller builders are becoming more cautious about the housing market as they navigate concerns over tariffs, elevated mortgage rates, and high housing costs. The uncertainty was reflected in a five-point drop in homebuilder confidence, which reached the lowest level in five months. While housing affordability will remain a key issue, Trevor Allinson, director and senior research analyst at Wolfe Research, told Finance “the bigger headwind is land inflation.” He explained, “It depends on the builder but [land prices] could go up

Abrdn, the UK’s second-largest independent asset manager, is in advanced talks with Citic Bank to launch an asset management joint venture in China, aiming to strengthen its presence in the world’s second-largest economy. The venture, expected to see Abrdn holding a majority stake, would be backed by Citic Wealth, a unit of Citic Bank and China’s third-largest bank-owned wealth management entity with assets totaling 2 trillion yuan ($275 billion) as of last year. This move comes amid a warming in British-Sino relations and contrasts with recent decisions by several Western financial institutions to either reduce their China workforce or halt expansion plans due to concerns about the Chinese economy’s health and tensions between Beijing and Washington. The discussions between Abrdn and Citic Bank have been ongoing for a couple of years, exploring options for a mainland China venture or Abrdn acquiring a stake in Citic Wealth. The talks have gained momentum following the resumption of high-level economic and financial dialogues between China and the UK last month, after a nearly six-year hiatus. Both Abrdn and Citic Bank have declined to comment on the matter, underscoring the confidential nature of the discussions.

Walmart Inc.: Walmart Boosts Dividend by 13%

Summary

Walmart, the world’s largest retailer, has announced a significant increase in its dividend by 13% for the fiscal year ended January 31, 2025. The company reported revenues of $681 billion, surpassing Amazon’s total revenue of $637 billion. Walmart’s operations are divided into three segments: Walmart Stores, which contributed about 68% of the revenue; Sam’s Club, a membership warehouse chain, accounting for 14% of the revenue; and the International segment, generating 19% of sales. With approximately 10,770 retail units in 19 countries, Walmart is headquartered in Bentonville, Arkansas. In the U.S. market, groceries constitute the largest product category at around 60% of sales, followed by Health and Wellness at 12%, and General Merchandise at 26%.

Analyst Profile

Chris Graja, CFA, a Senior Analyst specializing in the Retail sector for Argus, authored this report. Graja has a distinguished career, having been the #1 Stock Picker in the Household Durables sector, winning the 2019 StarMine U.S. Analyst award from Refinitiv. He also secured the top spot in Food and Staples Retailing, winning back-to-back U.S. Analyst Awards in 2015 and 2016. Graja received the Volunteer of the Year award from the New York Society of Security Analysts in 2000. Before joining Argus, he spent 16 years at Bloomberg Financial Markets, where he served as the Director of Training and a Senior Researcher for Bloomberg’s research division. He co-authored the book “Investing in Small-Cap Stocks,” published in multiple editions and languages. Graja holds an MBA from Rutgers University and is a CFA charterholder.

AheadComputing, a newly formed chip startup co-founded by several former Intel central processing unit (CPU) engineers and executives, announced on Wednesday that it has raised $21.5 million in seed funding. The company plans to build technology and chips based on the open-source architecture called RISC-V, pronounced “risk five.” AheadComputing intends to use the funds to design and develop CPU technology that aims to address some of the computing performance issues that have arisen around artificial intelligence, such as bandwidth shortages and data processing limitations.

Co-founder and CEO Debbie Marr stated that it is an opportune moment for a startup that relies on RISC-V technology because it avoids the pitfalls of the x86 architecture used by Intel and Advanced Micro Devices and the problems associated with relying on a single supplier – Arm Holdings – for the underlying designs.

“The RISC-V ecosystem is open, it’s not owned, it’s not controlled by one company,” Marr said in an interview with Reuters. “There are hundreds of players. There is plenty of room for innovation.”

Marr and other senior executives left Intel last year and founded AheadComputing, which is headquartered in Portland. Marr and other AheadComputing executives were responsible for developing several key technologies at Intel that significantly improved CPU performance.

The seed funding round was led by Eclipse Ventures and included Maverick Capital, Fundomo, and EPIQ Capital Group. Former Apple and Tesla chip architect Jim Keller invested in the round as well. Keller runs his own RISC-V venture called Tenstorrent.

Founding the company was attractive because of the growing demand for high-performance computing, Eclipse partner Greg Reichow said in an interview. By 2030, it will be roughly $100 billion, he said.

“There’s a big market tailwind in this,” Reichow said.

Vanguard S&P 500 ETF (VOO) Surpasses SPDR S&P 500 ETF Trust (SPY) as World’s Largest ETF

The title of the world’s largest exchange-traded fund (ETF) has shifted from the SPDR S&P 500 ETF Trust (SPY) to the Vanguard S&P 500 ETF (VOO). VOO, with assets totaling $631.8 billion, surpassed SPY by approximately $1.5 billion, marking the end of a months-long race for the top spot in the $10.7 trillion ETF market.

Vanguard’s recent success can be attributed to its $121.1 billion in net inflows last year, nearly five times the $23.6 billion taken in by SPY. Vanguard’s overall performance has been impressive, with $36 billion in January inflows alone, representing 40% of the $90 billion that went into ETFs last month. In contrast, State Street Global Advisors, which launched SPY in 1993, experienced $11.3 billion in net outflows in January.

Despite SPY’s loss of its crown, it remains a popular choice for options traders and sophisticated investors due to its liquidity and 9 basis points charge. VOO, on the other hand, appeals to investors seeking low-cost broad market index exposure, charging just 3 basis points.

Vanguard’s recent fee cuts to more than half of its ETF lineup have contributed to its success, but the company faces challenges as investor appetite shifts toward active strategies. Vanguard’s lack of cryptocurrency ETFs also sets it apart from other issuers.

Rodney Gomegys, Global Head of Equity Investment Group at Vanguard, credits the company’s success to its “unmatched focus on the best interests of our investors.” He notes that the market environment has been favorable to large-cap U.S. equities, contributing to continued enthusiasm for S&P 500 ETFs and other large-cap strategies across the industry.

Super Micro Computer, Inc. (SMCI) has been a standout performer in the tech sector, but its impressive run is facing potential threats. The company, known for its data center solutions, has seen its stock price soar, driven by robust demand for its products and a strong market position. However, recent developments suggest that this stellar performance may be under threat.

Investors and analysts are divided on the future trajectory of SMCI. On one hand, the company’s innovative technology and strategic partnerships have fueled growth. On the other hand, concerns about market saturation, increased competition, and potential supply chain disruptions are casting shadows over its outlook.

The tech industry’s volatile nature means that even the most promising companies can face unexpected challenges. For SMCI, maintaining its growth momentum will require navigating these hurdles effectively. The company’s ability to innovate and adapt to changing market conditions will be crucial in determining its long-term success.

As the market continues to evolve, investors are closely watching SMCI’s next moves. The company’s performance in the coming quarters will provide valuable insights into whether it can sustain its impressive run or if it will face significant headwinds. The future of Super Micro Computer, Inc. remains uncertain, but one thing is clear: the tech giant’s journey is far from over.