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A dovish consumer price index could cement a June Fed cut. (0:17) Adobe set to report earnings. (2:12) DOJ still wants to break up Google. (3:41)
The following is an abridged transcript:
Investors turn their attention to inflation once again this week, but now with a backdrop of uncertainty over government policy and real concern about growth.
In their weekly equities rundown, Goldman Sachs lists a host of things traders are fretting about, including said growth worries, tariff fatigue, weak technicals, challenging liquidity, consumer woes and poor seasonality.
If Wednesday’s consumer price index again indicates sticky inflation it could trigger a further leg down for stocks.
Economists expect that the headline CPI and the core CPI rose by 0.3% in February. That would bring the annual rate down to 2.9%, with the core rate edging down to 3.2%.
Wells Fargo economists say: “While February’s CPI report is likely to deliver an initial taste of tariffs, it is likely to be just the start. The implementation of a further 10% tariffs on Chinese goods and the follow-through on 25% tariffs on goods from Canada and Mexico, even with some carve outs, is poised to stoke inflation in the near term.”
“Although we expect both headline and core inflation to tick down on a year-over-year basis in February, we anticipate it will start moving back up this spring and remain stuck near 3% for the duration of this year despite further easing in shelter inflation and growing signs of consumer fatigue.”
If the CPI delivers a dovish surprise that could cement market expectations for a Fed rate cut in June. The odds of the Fed cutting by a quarter point that month jumped to 80% after the weaker-than-expected rise in February payrolls and fed fund futures are pricing in a one-in-four chance that the rates could be down by 50 basis points from the current range.
Glen Smith, CIO at GDS Wealth Management, says Friday’s jobs report “is concerning because this report doesn’t account for the recent government job cuts from DOGE, so it suggests that businesses are taking a pause on hiring until there is more certainty about tariff policy and the economic outlook.”
“Investors are starting to worry about a noticeable deceleration in first quarter GDP, which is set to be released at the end of April, and that is contributing to the past few weeks of stock market volatility.”
On the earnings front, Adobe (ADBE) will report on Wednesday. The software company is expected to post EPS of $4.97 on revenue of $5.66 billion.
Piper Sandler said in a note earlier this week that 10% to 11% of annual growth in subscription may be “partially masked” by a Y/Y decline of 15% in Adobe’s legacy product and service revenue. It expects margin expansion and stock repurchases to “insulate EPS growth that should continue to grow double-digits.” Adobe has a number of new AI products that could bolster growth into next year, including Express, Acrobat AI Assistant, Firefly, DX premium tiers and GenStudio.
SA analyst DM Insights called ADBE a “compelling Buy” on Friday.
“Adobe has a very reliable and predictable subscription-based business model,” they said. “The company faces increased competition from other large businesses and AI productivity tools. However, I believe Adobe’s business model will remain unchallenged, at least in the near future.”
“Their software offering and seamless integration is a huge asset, making transitioning to a different software suite very inconvenient. Adobe’s valuation is very reasonable at this point.”
Also on the earnings calendar:
BioNTech (BNTX), Vail Resorts (MTN) and NET Power (NPWR) report Monday.
On Tuesday, Ferguson Enterprises (FERG), Viking Holding (VIK), DICK’s Sporting Goods (DKS), Ciena (CIEN) and Kohl’s (KSS) weigh in.
Joining Adobe on Wednesday are Crown Castle (CCI), UiPath (PATH), SentinalOne (S) and ABM Industries (ABM).
Ulta Beauty (ULTA), DocuSign (DOCU), Dollar General (DG), Futu Holdings (FUTU) and Rubrik (RBRK) are due Thursday.
Li Auto (LI) report Friday.
In the news this weekend, the Department of Justice reaffirmed its demand that a federal court break up Google.
The DOJ’s request came after Judge Amit P. Mehta of the U.S. District Court for the District of Columbia ruled last year that Alphabet (GOOG) (GOOGL) illegally operated a monopoly in online search through payments to web browsers and smartphone makers to feature Google’s search engine.
“Google’s illegal conduct has created an economic goliath, one that wreaks havoc over the marketplace to ensure that — no matter what occurs — Google always wins,” the government said in its filing. “The American people thus are forced to accept the unbridled demands and shifting, ideological preferences of an economic leviathan in return for a search engine the public may enjoy.”
However, the DOJ dropped its request that Google be forced to sell off its stakes in AI companies, including Anthropic to promote online search competition.
“DOJ’s sweeping proposals continue to go miles beyond the Court’s decision, and would harm America’s consumers, economy and national security,” Google told Seeking Alpha.
And Meta Platforms (META) is working to advance the voice-controlled capabilities of its new, open-source, large language model Llama 4, as it expects conversational AI agents will supplant text-driven agents.
The Financial Times says Llama 4 is expected to be released in the next few weeks. The Ray-Ban Metas are already utilizing this type of technology.
Chief Product Officer Chris Cox said: “So (what) we have now, we believe, is the best AI device on the market, which is the Ray-Ban Meta. They allow you to talk to them. You can ask questions about the world in front of you.”
For income investors, Allstate (ALL) goes ex-dividend on Monday, with a payout date of April 1.
HP (HPQ) and Nvidia (NVDA) go ex-dividend on Wednesday. HP pays out on March 12 and Nvidia pays out on April 2.
Home Depot (HD) goes ex-dividend on Thursday and pays out on March 13.
And in the Wall Street Research corner, Piper Sandler is out with actionable stock recommendations amid a bearish tilt to the market over concerns of economic growth, tariffs and other policies.
Craig Johnson, chief market technician, noted that his proprietary breadth indicators are in Sell positions.
“Our M.A.C.E. trend work (moving average cycle evaluation) reveals that more stocks are in downtrends than uptrends,” he said.
But added he suspects “markets will find some footing as the S&P 500 (SP500) tests its 200-day moving average and the Russell 2000 (IWM) tests its 50% retracement from its October 2022 low. A period of stabilization, reassessment, and rotation is likely at current levels.”
Among the actionable picks are:
JD.com (JD) approaching the top of a bullish “cup and handle” formation. “Add to positions on a breakout above resistance near $48.”
And Warner Bros Discovery (WBD), approaching the neck of an “inverted head and shoulders” formation. “Add to positions on a breakout above the neckline near $12.70.”
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