The Rundown - CPI Comes in Stronger Than Expected, Costco Finds a New Moneymaker

Episode Date: April 10, 2024

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Public.com presents the rundown, your daily market update in five minutes. My name is Zadadmani, and today is Wednesday, April 10th. In today's episode, we dive into the CPI report that just dropped. And spoiler alert, today might be a good day not to open your portfolio. Also, Apple is making more iPhones in India and away from China. And China's credit rating just took a hit as well. Also, stick around to the end of the show to find out the hottest selling product at Costco. It's probably not something that you expected.

All right, let's get into it. Well, guys, yesterday was a roller coaster day for the stock market. The S&P started the day off in the green, but then dipped mid-morning before getting a burst of energy late afternoon to squeeze out a small gain. I mean, I'll take it. The NASDAQ also finished higher yesterday, but the Dow did finish flat. But then again, nobody should care about the Dow. Let's talk about the March CPI report because investors have been waiting for this report all week and it dropped this morning. And oh boy, it's a hot one.

The CPI in March came in at 3.5% year over year. That's more than February's 3.2% and also more than the 3.4% that was expected by economists. Higher shelter and energy cost were the main drivers of the increase. And if you look at core inflation, which removes volatile prices like food and energy, that came in at 3.8%, which was also higher than expected. So, you know, with this new data, we could probably kiss any rate cuts goodbye, at least in the short term. Because remember, the Fed's inflation target is 2%. and we're still stuck in the 3% range

and starting to tick higher, which is not great. Investors aren't taking this very well. I'm looking at the pre-market right now and all I see is red. All three major indices are down more than 1%. So yeah, not great. Definitely one of those days

where you just don't want to open up your portfolio at all. I know you want to take a peek. It's tempting, but just don't do it. Trust me. Let's run through some headlines. Looks like Apple's ramping up their iPhone production in India. According to Bloomberg, nearly one and seven iPhones

were assembled in India last physical. school year, with production doubling to about $14 billion worth of iPhones. Apple has aggressively been shifting their production away from China to places like India. This is because of rising geopolitical tensions between U.S. and China recently, and also the Chinese market has been pretty tough for Apple recently. Like, Apple's had a tough start to the year with sales. They've had two straight months of declining iPhone shipments in China. In January, their shipments dropped 39% compared to last year, and in February, it dropped by 33%. So, not great. And this is pretty significant, because Apple gets about 20% of its revenue from China, so it's definitely a trend worth monitoring.

Now, it is important to note, while Chinese smartphone brands are eating into Apple's growth, the overall smartphone market in China is shrinking, according to Bloomberg. So it's not just an Apple problem. Chinese consumers are just less willing to buy new phones right now. So Apple's been trying to find other markets, not just to manufacture their iPhone, but also sell their iPhone, and they set their targets on India. And speaking of China, the rating agency Fitch downgraded China's credit rating outlook to negative due to risk related to the country's finances.

China has been racking up debt and struggling with economic growth. China expects their economy to grow by 5% this year. Well, Fitch thinks that their growth will be around 4.5%. Last year, China's economy grew by 5.2%. So their growth is slowing down. Fitch also expects Chinese debt to GDP levels to reach north of 61% in 2024. Compared that to levels of around 39% in 2019, that's quite a big spike in the last five years.

So the Chinese economy continues to struggle right now, and I think they know that. Last month, China hosted a bunch of American CEOs in Beijing, including leaders from FedEx, Blackstone, Qualcomm, Apple's Tim Cook was there, and others to discuss boosting American and foreign investment in China to help, you know, increase the confidence in the economy. Well, Fitch doesn't seem to be convinced yet, so they still got some work to do. Let's talk about some stocks making moves today. A big winner this morning is Delta Airlines. The stock is up more than 3% this morning after they released.

their Q1 quarterly earnings. Delta's revenue in Q1 was up 6% to 12.5 million, and Delta actually made a profit of $37 million in Q1, which is much better than the $367 million that they lost in Q1 of last year. The CEO of Delta Airlines, Ed Bastion, said bookings for both leisure and business travel are strong, and investors were loving the sound of that. Another winner this morning is TSMC. The stock is at 1% for the biggest chip manufacturer in the world after they reported revenue growths of 16% in Q1, which was better than what Wall Street was expecting. TSM also said they expect their revenues to grow by 20% for 2024. That would be a nice bounce back for them because surprisingly, their revenue dropped 4%

last year. So investors are loving the fact that TSM's returning back to growth. All right, let's wrap the show with a fun fact. Today's fun fact is about Costco and gold. According to Esmits from Wells Fargo, Costco is selling about $200 million worth of gold every month. Now, some of you guys listening to this probably didn't even know that Costco sells gold. Well, Costco actually started selling gold bars last year. And it's become pretty popular. Costco gold bars are pretty much always sold out online. And Costco limits the amount of gold that you can buy from them.

I mean, gold is starting to become pretty popular these days, especially with gold prices continuing to rise and hitting all-time highs this year. I mentioned this in a show earlier this week, but gold has been a better investment this year than the S&P 500. Gold is up 14% this year, while the S&P is up 9%. But just because Costco is selling a ton of gold, it likely won't have that much of an impact on their profits. I mean, yes, it's going to help boost their revenue numbers. But the estimates are that Costco is selling gold at about 2% above the spot price. So not really a huge profit margin for Costco. Especially if you consider the fact that you get 2% back for being a Costco executive member.

So you can pretty much buy gold from Costco at the spot price if you're an executive member. Speaking of being an executive member, I'm not going to lie, having that black and gold Costco executive member card, it just hits different. All right, I know. Weird flex. All right, guys. Well, that's all I got for you guys today. I hope you guys enjoyed that show. If you did and you're not driving and can safely operate your phone,

maybe consider tapping those five stars on Apple and Spotify. And while you're there, vote in today's poll on Spotify. Those poll results are always fascinating. Like on Monday's poll, 68% of you guys said that you would consider adding gold to your portfolio. Well, you can do that at Costco. Thank you guys again for listening, and we'll see you guys back here tomorrow. This is the rundown, your real-time resource for news events and trends in the markets.

All views presented in this show reflect the opinion. of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell or hold that security. Rundown guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult. Respective professionals. Learn more at public.com disclosures. In partnership with Zayid Moni, brokerage services for U.S. listed, registered securities are offered by Open to the Public Investing Incorporated, member FINRA and SIPC.