CPI is coming this week with great significance! The Federal Reserve's December rate cut bets face the "final test."

Last week, the surge in technology stocks pushed major U.S. stock indices to new highs, as the latest economic data did little to shake investors' confidence that the Federal Reserve will cut interest rates at its final meeting in 2024. In the first week of December, the Dow Jones Industrial Average was the only index to decline, falling about 0.5%. Meanwhile, the Nasdaq Composite Index soared over 3%, and the S&P 500 Index jumped nearly 1%.

In the coming week, the market will have a clearer view of the Fed's policy outlook. This week, important inflation indicators—the Consumer Price Index (CPI) and the Producer Price Index (PPI)—will be released on Wednesday and Thursday, respectively. In terms of earnings reports, Oracle (ORCL.US), Broadcom (AVGO.US), C3.ai (AI.US), Adobe (ADBE.US), Costco (COST.US), and GameStop (GME.US) will announce their results.

CPI Will Determine Year-End U.S. Stock Trends

Data released last Friday by the U.S. Bureau of Labor Statistics showed that 227,000 non-farm jobs were added in November, slightly above economists' expectations of 220,000. The unemployment rate rose to 4.2%. Overall, this data did not change economists' and investors' views that the job market is cooling, but the pace of cooling is not fast enough to alter the Fed's rate-cutting path.

Rick Rieder, Chief Investment Officer of BlackRock's Global Fixed Income division, wrote on Friday: "The Fed should be able to proceed with a rate cut in December, but next week's CPI report will now become another important milestone in the policy adjustment calculation."

Stephen Brown, Deputy Chief North America Economist at Capital Economics, stated that this week's CPI and PPI price data will be the main determinants of the Fed's interest rate decision this month. According to the CME FedWatch Tool, as of last Friday, the market estimated an approximately 85% chance that the Fed would cut rates by 25 basis points on December 18.

As the last major data point before the Fed's December meeting, Wall Street economists expect the overall CPI for November to rise 2.7% year-over-year, up from 2.6% in October. According to economists' forecasts, the CPI is expected to increase by 0.3% month-over-month, higher than the 0.2% month-over-month increase in October.

Excluding food and energy prices, the "core" CPI for November is expected to rise 3.3% year-over-year. This would mark the fourth consecutive month that the core CPI remains at 3.3%. The month-over-month increase in core CPI is expected to be 0.3%, consistent with the increase in October.

Bank of America analysts, including Jonathan Pingle, believe that several Fed officials have recently released cautious signals. Only Fed Governor Christopher Waller explicitly stated that he "leans toward supporting a rate cut in December," while Jerome Powell reiterated his previous stance. Other Fed officials, such as San Francisco Fed President Mary Daly and Fed Governor Michelle Bowman, were similarly non-committal; Daly stated that "a rate cut in December is possible," while Bowman noted that "policy does not operate on a preset path." The economist team at Wells Fargo, led by Jay Bryson, wrote in a weekly report: "The anti-inflation momentum is fading, and new headwinds (such as the possibility of tariffs and tax cuts) have emerged, making the final stretch of bringing inflation back to the Federal Reserve's 2% target increasingly difficult. The stubborn inflation situation that has emerged in recent months is unlikely to be changed by the CPI report in November."

The market rose in the previous week, similar to the situation since President-elect Trump won the election in early November. Citigroup U.S. equity strategist Scott Chronert expects the S&P 500 index to close at 6,100 points this year, stating that market behavior is "essentially the same," and the enthusiasm for a market-friendly Trump administration post-election is still at play.

It is characterized by significantly lower market volatility. The Chicago Board Options Exchange Volatility Index (VIX) has been hovering around 13, the lowest level since the market pullback in early August. So far, Chronert believes that a significant risk event occurring on December 18 may prevent the stock market rally from continuing into the year-end. Chronert stated, "The Federal Reserve's December meeting seems to be the last obstacle to price volatility before the end of the year."

If the inflation data in November is worse than expected, Powell's hawkish concerns at the Federal Reserve's last meeting in 2024 may begin to brew in the coming week. John Koudounis, CEO of Calamos Investments, expressed his concerns about year-end risks in an interview, stating, "Inflation data is certainly important. If the data is really abnormal, that will be something for people to pay attention to."

Several tech software companies report earnings, GameStop becomes a meme stock hotspot

In the past week, seven major tech stocks surged. Apple (AAPL.US), Alphabet (GOOGL.US), Microsoft (MSFT.US), Amazon (AMZN.US), Meta (META.US), Tesla (TSLA.US), and Nvidia (NVDA.US) all significantly outperformed the S&P 500 index. Last Friday, Meta, Amazon, and Apple all closed at record prices. The Roundhill's Magnificent Seven ETF (MAGS), which tracks these seven stocks, also closed at an all-time high As large tech stocks rise, many Wall Street strategists have been calling for an expansion of the U.S. stock market rally in 2025. However, as we pointed out last week, recent fundamentals have been favorable for the "Magnificent Seven," whose earnings expectations are significantly stronger than those of other sectors in the market.

This trend has led some investors to remain optimistic about large tech stocks heading into next year. Keith Lerner, co-chief investment officer at Trust, stated, "If you look at the relative price trends of tech stocks combined with the relative earnings trends, they have been moving in tandem."

Lerner added that over a rolling three-year basis, the tech sector itself has outperformed the S&P 500 by 33%, which is far from the 252% performance during the peak of the internet bubble. This suggests that tech stocks and the overall bull market may have more room to rise. Lerner noted, "Every bull market has a theme. If you believe, as we do, that the bull market is intact, then this theme may continue until the bull market ends. When it peaks, it will likely tell you that we are at the peak of the bull market."

In this context, despite a relatively light earnings report week, several notable tech companies will be releasing their earnings data. This outcome could significantly impact market sentiment in key industries such as AI software companies.

Oracle will release its quarterly earnings after the market closes on Monday, with analysts expecting the company's revenue and profit to grow by more than 9%. Ahead of the earnings report, Guggenheim and Jefferies have raised their target price for the IT giant. Jefferies analyst Brent Thill raised his target price from $190 to $220, citing a recent survey indicating that the company's "product line has slightly improved." Guggenheim analyst John DiFucci reiterated his buy rating and raised Oracle's target price from $200 to $220; the analyst emphasized that a partner indicated that the appeal of Oracle's database has increased through collaborations with hyperscale companies, including several deals with Google Cloud and a new agreement with Amazon Web Services (AWS).

Adobe will report its earnings after the market closes on Wednesday. Analysts expect revenue and profit to grow nearly 10% year-over-year. SA analyst Daniel Schonberger believes that despite Adobe's strong growth rate, the stock remains a "hold" due to currently high valuations and slowing growth expectations. He emphasized that Adobe's economic moat is driven by brand strength and high switching costs, supporting stable revenue growth and pricing power. However, an intrinsic value calculation shows that Adobe's valuation is slightly high, so he is cautiously waiting for a potential drop in the stock price In contrast, analyst Mike Zaccardi maintained a "buy" rating on Adobe. While he acknowledged the variety of valuation metrics, he pointed out that Adobe's PEG ratio suggests it may be undervalued. Zaccardi also highlighted key risks such as competition and potential macroeconomic downturns, but he believes that Adobe's continued earnings growth and potential bullish technical indicators present an attractive opportunity.

GameStop Releases Earnings Report, Will Meme Stocks Have a Breakout?

After Keith Gill, known as the "leader of retail investors" in the U.S., posted a mysterious tweet, GameStop, one of the Meme stocks, saw its shares rise nearly 6% in U.S. trading last Thursday, with an intraday increase of over 14%. Besides GameStop, other Meme stocks speculated to be related also rose in response last Thursday. GameStop's gains further expanded on Friday, closing up 1.5%.

Keith Gill, who previously drove the "retail battle against Wall Street" and the explosive rise in GameStop's stock price, returned to social media in May this year, triggering a rally in several Meme stocks, including GameStop. In recent months, Keith Gill has been posting tweets every few days or months, which often spark various speculations among retail investors and drive up related Meme stocks.

The latest tweet is the first one posted by Keith Gill, known as "Roaring Kitty," since September. Reportedly, in this mysterious tweet, "Roaring Kitty" shared a photo of a Time magazine cover featuring a blank computer screen displaying a video player interface, with the video duration shown as 4 minutes and 20 seconds, and the playback time at 1 minute and 9 seconds.

"Roaring Kitty" did not provide any textual explanation for this image, leading netizens to speculate about its meaning. Some netizens guessed that the 1 minute and 9 seconds in the image represents the number 69, while the 4 minutes and 20 seconds represents the number 420, which may hint at "Roaring Kitty's" targets for AMC Entertainment (AMC.US) and GameStop, the two hottest Meme stocks.

Keith Gill, who previously drove the "retail battle against Wall Street" and the explosive rise in GameStop's stock price, returned to social media in May this year, triggering a rally in several Meme stocks, including GameStop. In recent months, Keith Gill has been posting tweets every few days or months, which often spark various speculations among retail investors and drive up related Meme stocks.

The latest tweet is the first one posted by Keith Gill, known as "Roaring Kitty," since September. Reportedly, in this mysterious tweet, "Roaring Kitty" shared a photo of a Time magazine cover featuring a blank computer screen displaying a video player interface, with the video duration shown as 4 minutes and 20 seconds, and the playback time at 1 minute and 9 seconds The "Roaring Kitty" himself did not provide any textual explanation for this image, and netizens have made various guesses about the meaning of this mysterious picture. Some netizens speculate that the 1 minute and 09 seconds in the image represents the number 69, while the 4 minutes and 20 seconds represent the number 420. These two numbers may hint at "Roaring Kitty's" targets for AMC Entertainment (AMC.US) and GameStop, the two hottest meme stocks.

Against this backdrop, the earnings report that GameStop will announce this week may become an important point of speculation in the market. GameStop has experienced a remarkable rise, increasing nearly 92% over the past 12 months and 63% year-to-date. Wall Street analysts are generally bearish on the stock, unanimously giving it a strong sell rating, while Seeking Alpha's quantitative rating system upgraded its rating from hold to buy ahead of the earnings report.

SA contributor Bernard Zambonin emphasized that despite the decline in sales, GameStop has a strong cash position and no debt, mainly due to the stock sales driven by retail investors during the meme stock surge. The analyst stated that under CEO Ryan Cohen's leadership, the company is focusing on omnichannel retail, cost management, brand equity, and potential investments outside of gaming.

Art Hogan, market strategist at Riley Wealth Management, stated, "The resurgence of meme stocks is often accompanied by a general revival of market enthusiasm and animal spirits. Whenever the market reaches or approaches historical highs, this particular segment of stock speculation tends to reappear."