Market 02/14: Fed Goolsbee - Fed's inflation target is PCE, not CPI

Statement by Fed Chicago President Goolsbee

Fed's inflation target depends on PCE, not CPI: says yesterday's CPI data is confusing.
Does not support waiting until inflation hits 2% before cutting rates: asserts inflation is still heading toward the target.
Long-term productivity increases could change policy decisions.
Expectations for housing services inflation to improve.

FYI: There are quite a few concerns about CPI inflation in yesterday's report (02/13). Viet Hustler's weekend article will analyze the inflation growth trend in more depth.

Mortgage rates rise to highest in two months

30-year mortgage rates rise again, to 6.87%, highest since early December.

→ Rising borrowing costs make homeowners enjoying low rates reluctant to list their homes.

MBA mortgage applications decline -2.3% (prior: +3.7%) as both new home purchases and refinance activity declined.

→ Positive sentiment in the housing market temporarily restrained.

26% of price-reduced homes (due to high mortgage rates) were sold in Q4/2023 to investors (those able to buy without mortgage financing) - record high.

→ Affordability for regular homebuyers declines further as cheap homes are also speculatively purchased.

Crude oil inventories increase, production returns to record high

According to API:

Crude: +8.5 million (exp +2.8 million)
Gasoline: -7.2 million (exp -1.0 million) - largest draw since Sep 2021
Distillates: -4.0 million (exp -2.2 million) - largest draw since May 2023

According to DOE:

Crude +12 million (exp +2.8 million)
Gasoline -3.7 million (exp -1.0 million)
Distillates: -1.9 million (exp -2.2 million)

Biden administration added 746,000 barrels to SPR last week.

Crude oil production remains steady at record 13.3 million bpd.

WTI fluctuates around 78.25 USD before official data and begins sharp decline afterward.

Earnings reports: Airbnb, Sony, Robinhood

Airbnb ER: Revenue beats expectations due to strong demand

Loss per share: 55 cents.
- Loss: occupancy tax provision + non-recurring tax deduction (~1B USD).
Revenue: up +17% YoY, reaching 2.22B USD (> exp 2.17B USD).
- Airbnb achieves 98.8M booking nights, up +12% YoY (> 98M expected)
- Average daily rate increases +3% YoY +3% YoY
Expected: investment in new markets + expansion of core business operations.

Expected Q1/2024 revenue: 2.03 - 2.07 billion USD.

Sony ER: Cuts PlayStation 5 sales forecast after revenue beat expectations

Revenue: 3.75 trillion JPY (24.9 billion USD) (> expected 3.58 trillion JPY).
- Game business revenue: up +16% YoY, reaching 1.4 trillion JPY.
Operating profit: 463.3 billion JPY (> expected 428.4 billion JPY).
Cuts sales forecast to 21 million PS5 in fiscal year ending March (< previous forecast: 25 million units).

Sony lowers FY2024 revenue forecast to 12.3 trillion JPY (from 12.4 trillion JPY).

Robinhood ER: Revenue beats expectations, raises growth target

EPS: 0.03 USD (vs. estimated loss of 0.01 USD).
Revenue: 471 million USD (beats estimates of 456.81 million USD).
- Net income: 30 million USD, vs. net loss of 166 million USD last year.
- …higher interest income from customer debt repayment and trading recovery.
Crypto on Robinhood up ~2x in Q4 → Benefits from Bitcoin price increase

Robinhood sets strong profit growth target for 2024.

Q4 performance + positive outlook => Robinhood stock up >10% after earnings report.

Some other news:

Bitcoin officially surpasses 1 trillion USD market cap for the first time since December 2021. Since December 2022, Bitcoin has increased ~700 billion USD in market cap.
Lyft stock drops 60% to “reasonable” level after abnormal surge due to “typo” in earnings report.