Stocks are little changed to start the week as inflation expectations increase: Live

Federal Reserve Vice Chair Philip Jefferson backed the central bank’s current stance of monetary policy, saying Monday that a higher level of interest rates is appropriate until more evidence comes in that inflation is on a sustainable path lower.

“My view is that in light of the attenuation in progress in terms of getting inflation down to our target, it is appropriate that we maintain the policy rate in restrictive territory, which it is right now,” Jefferson said in a question-and-answer session with outgoing Cleveland Fed President Loretta Mester.

The Fed should “continue to look for additional evidence that inflation is going to return to our 2% target, and until we have that, I think it is appropriate to keep the policy rate in restrictive territory,” he added.

As a governor, Jefferson is a permanent voting member of the rate-setting Federal Open Market Committee.

— Jeff Cox

GameStop has already traded more than 36 million shares, as the brick-and-mortar video game retailer soared following a post from “Roaring Kitty.” That volume easily eclipses the stock’s 30-day average of 9.9 million.

— Fred Imbert

In AllianceBernstein’s bull case for Apple, analyst Toni Sacconaghi believes the iPhone maker’s stock could rally 28% to $235.

“The bull case is that replacement cycle and AI tailwinds could drive a strong iPhone 16 cycle, and that Apple’s longer-term valuation is reasonable given its ultra-high quality of earnings/cash flow, strong moat, and sustained growth story,” the analyst wrote in a note from Monday.

Sacconaghi has currently assigned the stock an outperform rating accompanied by a price target of $195, implying that shares could add nearly 7% from their Friday close.

In the same report, the analyst said that he’s less concerned about the China marketplace.

“We see China’s business as cyclically pressured, not structurally altered,
he added.

— Lisa Kailai Han

Check out the companies making headlines before the bell:

GameStop — GameStop shares rallied more than 37% in the premarket after “Roaring Kitty” posted for the first time in roughly three years. The post, a picture on social media site X of a video gamer leaning forward on their chair as to indicate he is taking the game seriously, marked Roaring Kitty’s first post on the platform — or on Reddit — since 2021.

Arm Holdings — Shares popped 3.4% following a Nikkei report that the chip company is looking to launch its first artificial intelligence chips next year. Arm hopes to build the prototype by spring 2024, according to the report.  

Nvidia — Nvidia shares added about 1% after Jefferies hiked its price target on the chipmaker to $1,200 a share, implying about 34% upside. “We believe it’s too early to sift out winners and losers in the AI basket yet, but NVDA is our favorite,” analyst Blayne Curtis wrote.

— Hakyung Kim

Morgan Stanley sees signs that the U.S. economy is cooling, with disinflation set to resume in April’s CPI print and accelerate in the latter half of 2024.

“Weaker monthly prints ahead with faster disinflation starting in 2H24 should provide the Fed the confidence it needs that inflation is on a sustained path toward target,” the bank wrote in a recent note. “We remain bullish the Fed will cut three times this year — but starting in September rather than July — with two more cuts in November and December.”

Against this backdrop, the bank wrote that it currently prefers consumer staples stocks over their discretionary counterparts.

“We see the U.S. Consumer Staples sector as a beneficiary of trade-down from Discretionary categories; further, relative earnings revisions of Staples vs. Discretionary has recently turned higher, pointing to potential upside in relative stock performance by Staples from here,” it said.

— Lisa Kailai Han

GameStop shares rallied more than 37% in the premarket after “Roaring Kitty” posted for the first time in roughly three years.

The post, a picture on X of a video gamer leaning forward on their chair as to indicate he’s taking the game seriously, marked Roaring Kitty’s first post on the platform — or on Reddit— since 2021.

Kitty, whose legal name is Keith Gill, is one of the Reddit traders who drove the meme stock craze of 2021.

— Fred Imbert, Yun Li

This week’s key events include to major U.S. inflation reports, as investors look for clues on whether the Federal Reserve will cut interest rates this year.

The consumer price index report is due Wednesday. Economists polled by Dow Jones expect CPI to have risen in April by 0.4% month over month and 3.4% year on year. Core CPI, which excluded food and energy, is expected to have risen 0.3% from March and 3.6% year over year.

The producer price index is due Tuesday and is expected to have risen 0.3% month over month.

— Fred Imbert

European markets kicked off the new trading week in mixed territory, with pan-European Stoxx 600 gaining slightly to trade up 0.03%.

The U.K.’s FTSE 100 index was 0.07% higher at 8,439, Germany’s DAX was down 0.13% at 18,748, France’s CAC was 0.4% lower at 8,216 and Italy’s FTSE MIB was up 0.4% at 34,808.

China has reportedly begun plans to sell one trillion yuan ($138.24 billion) of ultra-long-term bonds, according to reports by the Financial Times and Reuters.

The Financial Times said that the People’s Bank of China “has asked brokers for advice on pricing the sale of the first batch of the sovereign bonds.”

Meanwhile, Reuters said the bonds will be issued from May 17, citing sources that said there would be 300 billion yuan worth of 20-year bonds, 600 billion yuan worth of 30-year bonds and 100 billion worth of 50-year bonds.

These ultra long term bonds were announced in March, and are designed to fund major projects aligned with national strategies.

These bonds have only been issued thrice before, during the Asian Financial Crisis in 1998, for the capitalization of China Investment Corporation in 2007 and during the Covid-19 pandemic in 2020.

— Lim Hui Jie

China’s Shein is boosting its preparations to go public in London following an attempt to list in New York that was hit by regulatory challenges, Reuters reported, citing sources with knowledge of the matter.

The fast-fashion retailer is planning to file documents with the London Stock Exchange (LSE) as early as this month and will update China’s securities regulator of the IPO venue, according to the report.

Shein filed to go public in the U.S. in late November, valued at $66 billion.

— Shreyashi Sanyal, Reuters

Consumer prices in China rose at a faster pace than expected, with the consumer price index in April recording a 0.3% increase year-on-year, data from the National Bureau of Statistics on Saturday showed.

This was higher than the 0.2% forecast by a Reuters poll of economists, and more than the 0.1% rise seen in March.

Separately, China’s producer price index fell 2.5% compared to April last year, compared to a 2.8% decline in the previous month.

— Lim Hui Jie

Wednesday’s consumer price index report will give much needed insight to where the Federal Reserve will take monetary policy from here.

Inflation has ticked higher in recent months and has spurred worry that price pressures could consistently tick higher once again. Central Bank Chair Jerome Powell said last month the the Fed’s next move would not likely be a rate hike and reiterated a data dependent approach. The sentiment has helped stocks that have found stable footing thanks to a robust first-quarter earnings season.

Still, the CPI print on Wednesday’s will give investors a real test of whether or not rate hikes are really off the table.

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— Brian Evans