Fed Cuts, New Zealand Recession Loom, and Nike’s New Game Plan

Money Masters' Market Pulse Week 51

December 20, 2024

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Dear Money Master,

This week, the Fed cut interest rates but maintained a hawkish tone 🦅, signaling caution ahead. Meanwhile, Amazon workers staged a historic strike, New Zealand slipped into recession, and Micron shares plunged 📉 after disappointing guidance.

In our Deep Dive, we unravel what a hawkish outlook means for the Fed and how animal terms like bulls and bears shape financial language.

📰 Your Daily Financial Digest - December 20th, 2024

🌍 Economics:

  1. Fed Lowers Interest Rate Again but Signals Fewer Cuts Ahead 🏦
    The Federal Reserve reduced its benchmark rate to 4.25%-4.5%, marking a full percentage-point cut since September. Chair Jerome Powell emphasized cautious optimism for 2025, with only two more reductions expected next year. ReadMore

  2. November Inflation Shows Minimal Movement but Remains Above Fed Target 📊
    The PCE price index, the Fed’s preferred inflation gauge, rose just 0.1% in November, marking a 2.4% annual increase—slightly below estimates but still above the 2% target. Core PCE climbed 2.8% year-over-year as income and spending both missed forecasts. Read More

  3. Bank of Japan Holds Interest Rates Steady at 0.25% Despite Inflation Trends 📉
    The unexpected decision to pause rate hikes surprised many, as board member Naoki Tamura pushed for a 25-basis-point increase. The yen weakened to a four-month low, while the Nikkei 225 index slid by 0.69% amid concerns over Japan’s economic resilience. Read More

  4. New Zealand Enters Recession, Sparking Expectations for Aggressive Rate Cuts 🥝
    The economy contracted 1% in Q3, leading to its steepest decline since 1991 outside of the pandemic. Analysts predict a 75-basis-point rate cut in February, aiming to counteract the ongoing economic downturn. Read More

  5. Novo Nordisk Shares Fall After Obesity Drug Trial Misses Targets 💉
    Shares of Novo Nordisk fell after trial results for its CagriSema weight-loss drug reported lower-than-expected weight reduction. Rival Eli Lilly saw a boost, though Novo remains optimistic about the drug's potential. Read More

💻 Technology:

  1. TuSimple Rebrands as CreateAI, Pivoting to Gaming and Animation 🎮
    After financial struggles and delisting, the autonomous truck company shifted focus to generative AI, announcing its "Ruyi" visual model and a martial arts video game inspired by Jin Yong's novels. CEO Cheng Lu forecasts profitability by 2026. Read More

  2. AI Startup Perplexity Raises $500M at $9B Valuation 🤖
    Perplexity AI closed a $500M funding round led by Institutional Venture Partners, boosting its valuation to $9B. The startup, known for its advanced search tools, also acquired Carbon to enable seamless integration with apps like Notion and Google Docs. Read More

💹Earnings:

  1. Darden Restaurants Beats Expectations with Strong Olive Garden Sales 🥗
    Fiscal Q2 net income grew to $215.1M, driven by better-than-expected same-store sales. Adjusted EPS of $2.03 and a 6% revenue rise boosted shares by 8% in premarket trading. Read More

  2. Micron Shares Sink 16% After Disappointing Guidance 💾
    Despite strong Q1 earnings, Micron’s Q2 guidance fell short, citing slower growth in consumer devices and delayed PC refresh cycles. Analysts lowered their price targets, though the company remains optimistic about AI-driven growth. ReadMore

  3. Nike Reports Stronger-than-Expected Earnings but Signals Challenges Ahead 👟
    While Q2 EPS and revenue beat Wall Street expectations, Nike’s steep discounting and over-reliance on sportswear have hurt profitability. CEO Elliott Hill outlined plans to rebuild wholesale partnerships and refocus on performance innovation. Read More

🔍 Deep Dive: From Bulls to Hawks - Why Is the Fed Acting Hawkish?🌍💰

Animal terms are everywhere in finance, offering metaphors for behaviors in markets and policies:

  • Bullish & Bearish Markets 🐂🐻: Bulls charge upward, symbolizing rising prices, while bears swipe downward, representing declines. These terms date back to 17th-century England, where "bearskin jobbers" sold borrowed stocks, betting on a price drop.

  • Dovish & Hawkish Fed Policies 🕊️🦅: Doves advocate for low interest rates to encourage growth, resembling their gentle nature. Hawks, however, prioritize combating inflation through higher rates, like their sharp and vigilant demeanor.

The Federal Reserve’s December rate cut carried a hawkish tone, despite the reduction. Chair Jerome Powell indicated that fewer rate cuts are likely in the coming years, as inflation remains above the Fed’s 2% target. The revised “dot plot” shows only two cuts planned for 2025, a stark contrast to the four projected earlier. Powell emphasized that while the Fed is less restrictive now, it must remain cautious to avoid reigniting inflation. This signals tighter monetary conditions ahead, contrary to market expectations of a looser policy.

Other animal terms include:

  • Lame Duck 🦆: Describes an ineffective organization or leader, often nearing the end of its term.

  • Dead Cat Bounce 🐱: A temporary market rebound during a larger decline, illustrating fleeting hope amid turmoil.

The Fed's hawkish stance illustrates its focus on controlling inflation while balancing economic growth—a delicate dance that investors will watch closely in the coming months.

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To your financial empowerment, The Money Masters Team

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Disclaimer: This information is for educational purposes only and should not be construed as financial advice. Always conduct your own research or consult with a financial advisor before making investment decisions.