Dow rises, Nasdaq slips after key Fed inflation gauge shows faltering progress

Dell Technologies (DELL) shares dropped more than 13% early Wednesday after the company took a cautious approach to its forecast for investors while warning that AI growth “will not be linear.”

“AI is a robust opportunity…and interest in our portfolio is an all-time high with no signs of slowing down,” Dell COO Jeffrey Clarke said during a call with investors Tuesday night following the company’s earnings report for the October period. “That said, this business will not be linear, especially as customers navigate an underlying silicon road map that is changing.”

Dell’s AI server revenues fell 9% in the third quarter from the prior period.

That nonlinear growth, coupled with a slower-than-expected recovery in the PC market, led the company to drop the midpoint of its guidance range for annual revenue to $96.1 billion from $97 billion since last quarter.

Still, Dell executives and analysts pointed to pent-up demand for Dell’s AI servers using Nvidia’s (NVDA) latest Blackwell AI chips.

Read more about Dell’s most recent earnings results and its role in the AI market here.

The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases were flat in October from the prior month, raising questions over whether progress in getting to the central bank’s 2% goal has stalled.

The core Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 0.3% from the prior month during October, in line with Wall Street’s expectations for 0.3% and the reading from September.

Over the prior year, core prices rose 2.8%, in line with Wall Street’s expectations and above the 2.7% seen in September. On a yearly basis, overall PCE increased 2.3%, a pickup from the 2.1% seen in September.

Read more here.

Another Wall Street strategist sees a solid backdrop for the US economy and a broadening corporate earnings picture driving stocks higher in the year ahead.

JPMorgan’s global equity strategy team led by Dubravko Lakos-Bujas sees the S&P 500 (^GSPC) hitting 6,500 by the end of 2025, joining the likes of Goldman Sachs and Morgan Stanley, who issued the same target. The target represents about an 8% increase from current levels.

Lakos-Bujas wrote that continued “US exceptionalism,” continued earnings growth, and interest rate cuts from the Federal Reserve will be a tailwind for stocks in the year ahead. He argued the US is likely to remain the “global growth engine with the business cycle in expansion, healthy labor market, broadening of AI-related capital spending, and prospect of robust capital market and deal activity.”

He added, “heightened geopolitical uncertainty and the evolving policy agenda are introducing unusual complexity to the outlook, but opportunities are likely to outweigh risks. The benefit of deregulation and a more business-friendly environment are likely underestimated along with potential for unlocking productivity gains and capital deployment.”

US stocks paused near record highs on Wednesday as investors waited for a reading on the Federal Reserve’s favorite inflation gauge to provide clues to the path of interest rates.

After clinching record highs on Tuesday, the S&P 500 (^GSPC) fell about 0.2% at the open while the Dow Jones Industrial Average (^DJI) rose 0.1%. The tech-heavy Nasdaq Composite (^IXIC) was down about 0.3%.

The October print of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, is due for release on Wednesday morning at 10 a.m. ET. The focus is on whether inflation has stalled.

Economists expect annual “core” PCE — which excludes food and energy — to have clocked in at 2.8% in October, up from the 2.7% seen in September.

Weekly jobless claims rose less than expected last week, and hit a seven-month low, as the impact of labor strikes and severe weather continued to abate.

New data from the Department of Labor showed 213,000 initial jobless claims were filed in the week ending Nov. 23, down from the 215,000 the week prior and below the 215,000 economists had expected.

Meanwhile, the number of continuing applications for unemployment benefits hit 1.9 million, up 9,000 from the week prior and the highest level since November 2021.

Elsewhere in economic data, the second estimate of third quarter GDP came in unchanged, once again showing the US economy grew at annualized rate of 2.8%.

Shares of automakers General Motors (GM) and Ford (F) were throttled on Tuesday following Trump’s tariff threats toward China, Mexico, and Canada.

GM lost 9%, while Ford dropped 3% as both companies have a strong presence in Mexico.

But automakers aren’t the only companies that stand to be hurt by tariffs, of course.

Think computers and T-shirts!

Here’s what HP Inc. (HPQ) CEO Enrique Lores and Abercrombie & Fitch (ANF) CEO Fran Horowitz told me on the tariff topic.

Enrique Lores

“Some of that [cost of potential tariffs] will have to go to consumers given what is the overall margin that we have in the categories. But again, we need to wait and see what the final tariffs are for us to define what the exact plan is going to be.”

Fran Horowitz

“When we understand truly what’s happening, we will have to make some adjustments, and we will adjust accordingly,It’s exactly what we did in 2018 when we had the same challenge. In 2024 we will not be receiving more than 5% or 6% of our US receipts from China. We’re taking a look at it country by country, but the agility that we’ve built into our supply chain is really what’s going to help us manage through this.”