CNBC Daily Open: November’s CPI’s both good and bad

Prices mostly in line
The U.S. consumer price index climbed 0.1% in November and rose by 3.1% from a year earlier. The monthly increase is higher than expected, as economists had predicted prices to remain unchanged. The yearly rate, however, is still lower than the 3.2% in October, signaling a steady downward trajectory. A 2.3% drop in energy prices helped keep inflation in check.

Holding pattern
U.S. stocks closed higher Tuesday as investors digested CPI data and awaited the outcome of the Federal Reserve meeting. Asia-Pacific markets mostly fell Wednesday. Mainland China’s Shanghai Composite lost 0.56% despite Chinese leaders vowing to boost domestic demand for the new year. In contrast, Japan’s Nikkei 225 climbed 0.3% as business sentiment improved more than expected.

Glut of pigs
China’s facing the risk of deflation — and a 31.8% year-on-year plunge in pork prices is adding to the country’s woes. Food makes up an estimated one-fifth of China’s consumer price index basket, with pork being a large component within the food category.

OpenAI’s revenue: $44,486
OpenAI may be valued by private investors at $86 billion, but its revenue from its nonprofit operation in 2022 was just $44,485, according to a filing with the U.S. Internal Revenue Service. OpenAI is a nonprofit — but the company launched a “capped-profit” firm, OpenAI Global, which is responsible for ChatGPT and drew billions in investment from Microsoft.

[PRO] ‘Buy the dip’
Investors have been cautious on Asian markets — but Morgan Stanley’s advising its clients that the market is transitioning to a new cycle, which would favor quality assets from those countries. “Our suggested strategy is to buy the dip on Quality Growth stocks in [Asia Pacific region excluding Japan, and EM],” the bank’s strategists wrote.

The U.S. consumer price index report for November came in a smidge higher than expected, compared with the previous month. However, the annual increase, as well as the monthly and yearly core inflation rates came in exactly as expected. That’s both good and bad.

The positives: Investors don’t like surprises. They could swallow the 0.1 percentage point rise in the monthly inflation rate because the CPI, overall, “was very consistent with expectations,” as Adam Crisafulli, founder and president of Vital Knowledge, put it. And November’s annual rate is slightly lower than the previous month’s, showing that disinflation is, indeed, in progress.

On to the negatives. Although the CPI was “somewhat in line,” said Liz Ann Sonders, chief investment strategist at Charles Schwab, the month-over-month figure was “not as good as some might have hoped.” Indeed, that the number was so “consistent with expectations” means it “changes little,” added Crisafulli. Even U.S. President Joe Biden acknowledged that “Despite this progress, Americans still find too many things unaffordable.”

But investors seemed to take the good where they could, pushing stocks higher. The S&P 500 rose 0.46%, the Dow Jones Industrial Average climbed 0.48% and the Nasdaq Composite gained 0.7% Tuesday. All three indexes touched new intraday 52-week highs.

The rally could be spurred by falling oil prices, which means upcoming CPI reports are likely to show faster disinflation. U.S. crude oil dropped more than 3% yesterday, and gasoline prices in the U.S. are experiencing their first year-over-year decline since 2020, according to Citi.

That’s good news for consumers and central bankers worried about inflation, but a blow to oil companies — Exxon Mobil dropped to a 52-week low on flagging oil prices.

Attention now turns to the Federal Reserve’s last rate-setting meeting for the year. While market consensus is for the central bank to leave interest rates untouched, investors will comb through Fed Chair Jerome Powell’s press conference and a new dot plot — a chart that shows each Fed member’s rate expectations — for hints on when the first cut might come.