PCE Inflation Print
The latest inflation data came in firmer than the recent run of reports. Personal income and outlays were released at 8:30 a.m. Eastern.
Personal income rose 0.4%, better than the 0.2% expected. Personal consumption expenditures (PCE) rose 0.2%, a tenth above expectations but a tenth below last month.
The PCE price index rose 0.2% month over month, a tenth above expectations. Last month it was negative 0.1%. Year over year, PCE ran 3.7%, unchanged from last month but a tenth above the 3.6% expected. Core PCE rose 0.2% month over month; year over year core PCE was 3.3%, unchanged from last month and in line with expectations.
For the first time since January, disposable personal income rose faster than outlays, so the savings rate ticked higher for the first time in five months. The savings rate now sits at 3%, slightly above a month ago. The savings rate had been falling, which worried many economists, so the move back up is good news. More money in people's pockets is somewhat inflationary, matching the wage growth in the last jobs report.
A steady flow of inflation data had been coming in better than expected, partly because crude oil had been lower. Even though crude rallied through July, these numbers stayed roughly flat instead of climbing. Both the 3.7% and 3.3% year-over-year figures held steady. This does not change the trend. Data never moves in a smooth line, so how the Federal Reserve reads this is hard to call.
Meta Child-Safety Settlement
Several states and Meta (META) reached a settlement over claims that its platforms harmed children. Per the court filing, Meta agrees to pay a maximum of $16.68 billion to states as part of the deal. The stock rose about 4% pre-market, up roughly $24 to $26, because the settlement is far below what it could have been.
The base case had been around $200 billion, with estimates running as high as $1.2 to $1.4 trillion. The case involved 29 attorneys general in a teen-abuse matter, and it moved quickly. It is not yet clear whether $16.68 billion goes to each state or is the total figure.
Stocks dislike uncertainty and prefer certainty. Even though the number is large, it is much smaller than feared, and now it is a defined level, which the market likes. The surprise is that Meta settled after the trial had already started, though negotiations always continue in the background. This mirrors what happened when Alphabet (GOOGL) settled its disputes earlier last year and earlier this year, and the stock rallied.
Two earlier Meta settlements preceded this: one in New Mexico for about $500-something million, and an earlier one near $300 million. The overhang is now gone.
Nvidia Earnings Preview
Nvidia (NVDA) reports earnings after the bell today. The report has several layers. First, the raise-and-beat: whether the numbers top estimates, though the market sometimes sells off no matter what comes out.
Key figures to watch: earnings per share, revenue, and guidance. The question is whether revenue hits $90 billion or above, and whether guidance points to over $105 billion in revenue for the next quarter.
CEO Jensen Huang's commentary matters too. Whether he names specific stocks on the conference call, whether he discusses Nvidia's investment portfolio now reaching as much as $63 billion, and whether he addresses the view that the stock looks undervalued. Some analysts say the stock is 34% to 50% undervalued. The Vera Rubin chip is now here and starting to ship to customers.
The stock has come down, and the lower price-to-earnings ratio makes the valuation more attractive. Over the last three months it is up about 1%.
