Smalls Fall As Inflation Crawls

It wouldn’t be an inflation data day without some drama, so let’s get into what happened. 👇

First off, the headline consumer price index (CPI) rose 0.4% MoM and 3.7% YoY. That was ten bps above estimates, driven primarily by higher energy prices. As for core consumer prices, they rose 0.3% MoM and 4.1% YoY, as expected.

Services prices rose 0.6% when excluding energy services and were up 5.7% YoY. Within that number, shelter prices remain the main culprit in sticky services inflation, accounting for more than half the rise in September’s CPI reading. 🏘️

Overall, it was not a terrible reading. Core prices continue to decline, albeit at a slower pace each month. Ultimately, the market didn’t react much because it doesn’t think this report will do anything to change the Fed’s recent hawkish guidance. 😴

But the inflation take that got the internet riled up was from famed economist Paul Krugman, who tweeted the chart and caption below. In it, he essentially declares victory in the Fed’s war on inflation. Well, that is if you exclude basically all the items people buy regularly. 🤦

This chart, which excludes food, energy, shelter, and used cars, highlights the difference between how economists/analysts view inflation and how consumers experience it. 🙄

While economists are worried about the slope of price changes, consumers are worried about the absolute price changes. Prices rising a little less each month is undoubtedly a sign of progress, but it means that prices are still growing (just more slowly). That’s the reality consumers are experiencing in their everyday lives.

And that’s likely why recent data suggests that consumers remain concerned about inflation and are turning more pessimistic about the U.S. economic outlook. Energy prices have jumped significantly over the last four months, which has a way of impacting people’s mood about their wallets and the overall economy. 👎

That essentially explains the dunk fest Paul Krugman experienced on X today. But other than that, it was a pretty uneventful inflation report. 🤷

Shares of Delta Air Lines failed to gain any altitude despite third-quarter profits rising 60% YoY. 😮

The airline’s adjusted earnings per share of $2.03 topped estimates of $1.95. However, adjusted revenues of $14.55 billion vs. the $14.56 billion expected.

Like its peers, it cited strength in international travel as revenues grew 34% YoY in that segment. Overall, its fleet of planes flew 88% full during the quarter, up 100 bps YoY, even as it added additional domestic and international capacity. However, passenger unit revenue fell 1.5% YoY as ticket prices pulled back from their peaks. 🔺

Additionally, it’s seeing a sharp increase in demand for premium seats, with revenues rising 17% YoY vs. 12% for its main cabin tickets. Meanwhile, business travel is recovering still, about 80% of the way back to pre-pandemic levels.

As for negatives, higher fuel costs will continue to pressure results in the short term. And while overall demand remains strong, the company is cautious about consumers’ health and ability to keep up their spending levels as the economy slows. ⛽

Nevertheless, Delta expects strong demand in the final three months of 2023, estimating a 9% to 12% YoY revenue increase and $1.05 to $1.30 in earnings per share. That was roughly in line with estimates. 🔮

Despite the generally positive tone from executives, investors were quick to sell the pop in $DAL shares. They’ve fallen 30% from their July peak and are struggling to regain traction in the current environment. With that said, activity on our platform was high today, with sentiment still leaning towards “extreme greed.” 🤑

Two struggling retailers saw their shares pop today on news of leadership shakeups. 🔀

Dollar General announced former CEO Todd Vasos will return to lead the company again. Its stock price has fallen about 60% over the last year, driven by slowing sales growth and stakeholders criticizing the company for having an unsafe environment for employees and customers. 📉

He’ll replace Jeff Owen after less than a year in the role. Alongside this news, the company again reduced its full-year profit and same-store sales guidance. 

$DG shares jumped 7% after the bell, with sentiment on our platform leaning slightly toward “greedy.” However, we’ll have to wait and see how quickly its new CEO can turn the company and its share price around. 💵

Meanwhile, Walgreens Boots Alliance has tapped a healthcare industry veteran, Tim Wentworth, as CEO. He was most recently the CEO of a Cigna division that includes its pharmacy benefit manager. And was also the CEO of Express Scripts until Cigna’s 2018 acquisition of the company. 👨‍⚕️

The pharmacy chain is making a big bet on transforming itself into a broader healthcare company. With a healthcare veteran taking charge here, investors appear to be turning slightly more optimistic about its longer-term plans.

That optimism overshadowed the adjusted profit miss and downbeat full-year outlook the company delivered before the bell. $WBA shares rose 7% on the day, though sentiment on our platform remained firmly in the negative. So, we’ll have to see how things shake out as this leadership transition progresses. 👀