Pfizer sheds weight-shedding pill

Stocks had a mixed close after a day of choppy trade in response to a Fed friendly inflation number. Inflation numbers support the muted coos of doves, waiting to take flight, but the hawks still circle above.

Welcome to the… bundle. Today marks the official start of meteorological winter in the northern hemisphere. If you, like me, reside in that hemisphere, you probably didn’t need me to tell you that. If you, like me, stood, bundled up to the ears, on a train platform this past week, you certainly didn’t need me to remind you of winter’s arrival. But there is some good news. Yesterday, your computer was the equivalent to a warm, crackling fire awaiting you as you came in from the cold. According to yesterday’s economic releases, prices continue to dis-inflate, as in, they increased slower. Remember, yesterday I reminded you that inflation is a rate. If inflation was at 0%, prices would stay exactly the same. If inflation turned negative, prices would actually decline. That would be deflation. Can you imagine showing up to your hairdresser and he or she informing you that your visit would cost you less than last month? How about a phone call from your landlord telling you that your rent is going down? Neither of those is likely, so we can rule out deflation for the moment. Let’s talk a bit about what is happening. I want to start with one of my favorite Bloomberg charts. This one shows the year-over-year Personal Consumption Expenditures (PCE) Deflator and the split between goods and services. Take a look and then keep reading.

The first takeaway you should have from this chart is just how far we have come since late summer of 2022, when inflation was raging. The second takeaway from this chart should be just how much more we have to go in order to get back to where we were before the pandemic. Would you believe that there is a third takeaway? Of course, you would. Annual inflation for “goods” is near 0% (those are the red bars in the chart). Goods are things that you can hold like food, tennis balls, refrigerators, cars, clothing, etc. You know, the things whose inflated prices really upset us in the early days of this spate of inflation. Now turn your attention to the blue bars, those represent Services. You will note that Services inflation peaked earlier this year and has since declined… really slowly, but it has declined, nonetheless. However, Services inflation is still far higher than where it once was.

Here are some notable Service inflation holdouts from yesterday’s release. Motor Vehicle Insurance is +10.6% higher than a year ago, Food Services (eating out) costs +5.3% more this year than last, and Rent is +7.2% higher than last year. I am sure that none of that surprises you, but I want to point out that auto insurance is not optional, nor is rent, therefore consumers have very little power to get prices to moderate.

Because it is Friday, I am going to share a bonus chart with you. The following shows you inflation of rent and hairdressing services, since 2014. I selected those so you can see how we got here. Both are noticeably higher than in the past. One appears, to be thankfully, moderating, though still higher than normal, while the other one appears to be stubbornly higher and remaining high. Going back to my opening paragraph where I asked you to imagine a phone call from your landlord lowering your rent. That is not likely to happen but remember this chart when you renegotiate your lease when it ends. Regarding that conversation with your hairdresser, that does not appear to be likely any time soon, and while it is important, I would like to remind you that it is not required by law (auto insurance) nor is it part of the basic human needs (food, shelter, water). Of course, that is easy for me to say… for those of you who have not met me in person .

WHAT IS HAPPENING BEFORE THE OPENING BELL TOLLS

Ulta Beauty Inc (ULTA) shares are higher by +11.51% in the premarket after the company announced that it beat EPS and Sales estimates last quarter driven by QoQ comparable sales growth. The company also lowered its lower bound on full-year earnings guidance. In the past month 11 analysts have raised their target prices while only 3 lowered targets. Potential average analyst target upside: +24.2%.

Pfizer Inc (PFE) shares are lower by -3.45% on high volume in the premarket after the company announced that it was discontinuing its experimental oral weight loss drug designed to be taken twice, daily. The company cited intolerable side effects as the driver. The company will continue to trial the once-daily version of the therapy. Dividend yield: 5.38%. Potential average analyst target upside: +30.3%.

YESTERDAY’S MARKETS

NEXT UP

• S&P Global Manufacturing PMI (Nov) is expected to come in at 49.5, slightly higher than earlier flash estimates.
• ISM Manufacturing (Nov) may have ticked higher to 47.9 from 46.7.
• Fed talk: Goolsbee and Barr will speak, but Chairman Powell’s 11:00 Wall Street Time speech will be a showstopper.
• Next week: Factory Orders, Durable Goods Orders, JOLTS Job Openings, University of Michigan Sentiment, and monthly employment numbers. Check back in on Monday for calendars and details.