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Good morning investors! Stocks fell Thursday, weighed down by a hotter-than-expected U.S. inflation report, as tech shares failed to keep the momentum seen earlier in the week.
Today we cover:
Wholesale inflation numbers
Earnings (Broadcom and Costco)
Tips to save tax money
📊 Economy and News
US wholesale inflation surged higher in November
US wholesale inflation accelerated in November, with the Producer Price Index (PPI) climbing 0.4% month-over-month and 3% annually, up from October’s revised 0.3% and 2.6%. This marks the highest annual rate since February 2023, driven largely by volatile food prices, particularly a 54.6% spike in egg prices due to avian flu and holiday demand.
Core PPI, excluding food and energy, rose 0.2% monthly and 3.4% annually, in line with expectations. Despite the uptick, economists anticipate the Federal Reserve will proceed with a quarter-point rate cut next week, but persistent inflation pressures may lead to a pause in rate cuts by early 2025.
The data underscores the challenge of controlling inflation, as rising wholesale prices could translate to higher consumer costs in the coming months.
Global hits:
India's inflation slows from 14-month high, raising hopes of interest rate cut under new governor.
Swiss National Bank takes leap with 50-basis-point interest rate cut amid franc strength.
Germany to grow between 0.4% and 1.1% in 2025, Ifo Institute says.
Surprising: Australia orders $5.1 million fine on Kraken crypto exchange operator.
Exciting: US watchdog caps bank overdraft fees over industry objection. Also, Elon Musk has become the first person to reach a net worth of $400 billion.
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📈 Stocks
S&P 500 6,051.25 (-0.54%)
DJIA 43,914.12 (-0.53%)
NASDAQ 19,902.84 (-0.66%)
BRENT CRUDE 73.43 (-0.01%)
* Prices as of Dec 13th, 12:20 AM UTC
Broadcom and Costco beat
✋ Broadcom reported better-than-expected fourth-quarter earnings, with AI-related revenue more than tripling for the year. The company’s stock rose 13% in extended trading after CEO Hock Tan revealed the development of custom AI chips with three major cloud providers.
Quarterly Results vs. Estimates (Ending Nov. 3):
Adjusted EPS: $1.42 (vs. $1.38 expected)
Revenue: $14.05 billion (vs. $14.09 billion expected)
Broadcom expects Q1 revenue of approximately $14.6 billion, slightly above the $14.57 billion analyst forecast.
Key Highlights:
Q4 revenue grew 51% year-over-year to $14.05 billion.
Net income rose 23% to $4.32 billion, or 90 cents per share.
AI chip-related revenue within the semiconductor solutions segment increased 12% to $8.23 billion.
For the full year, AI revenue surged 220% to $12.2 billion, driven by strong demand for generative AI infrastructure, including ethernet networking components.
🛑 Costco reported stronger-than-expected earnings and revenue for the fiscal first quarter, boosted by a surge in e-commerce sales and demand for items like jewelry, luggage, and furniture.
Quarterly Results vs. Estimates (Ending Nov. 24):
Adjusted EPS: $4.04 (vs. $3.79 expected)
Revenue: $62.15 billion (vs. $62.08 billion expected)
Net income rose to $1.80 billion, or $4.04 per share, from $1.59 billion, or $3.58 per share, a year earlier. Revenue increased from $57.80 billion in the same period.
Key Insights:
Chief Financial Officer Gary Millerchip noted that shoppers remain selective but are willing to spend when quality and value align. Strong meat and produce sales suggest more households are cooking at home instead of dining out, with spending split between premium cuts and lower-cost options like poultry and basic cuts of beef and pork.
Costco also benefited from its reputation for value amid ongoing inflation pressures and recently implemented its first membership fee hike in seven years, contributing to its robust performance.
Interesting: Shares of major health-care companies fell nearly 5% on Wednesday on concerns related to potential changes to their complex business models. Elsewhere, Adobe shares suffer steepest drop in over two years on disappointing revenue guidance.
Good to know: US appeals court tosses Nasdaq board diversity rules. Also, after raising about $625 million in its initial public offering, ServiceTitan shares jumped 42% in their Nasdaq debut on Thursday.
💵 Personal Finance
5 Year-End Tax Moves to Save Money
As 2024 draws to a close, there’s still time to make strategic financial decisions that can lower your tax bill, boost savings, and avoid penalties. Here are five actions to consider:
1. Maximize Your Retirement Contributions
It may be too late to adjust workplace retirement plan contributions, but you can still contribute to an IRA. You have until tax day 2025 to add up to $7,000 ($8,000 if 50 or older) to a traditional or Roth IRA. Traditional IRA contributions can reduce 2024 taxable income, while Roth IRAs grow tax-free.
2. Offset Gains with Tax-Loss Harvesting
Review your taxable investments to sell losing assets and offset taxable gains. Losses can neutralize gains dollar-for-dollar and reduce up to $3,000 of ordinary income annually. Be mindful of the wash-sale rule, which disallows tax benefits if you repurchase the same or similar investments within 30 days.
3. Take Required Minimum Distributions (RMDs)
If you’re 73 or older, ensure you withdraw your RMDs from traditional IRAs or employer plans by December 31 to avoid steep penalties. Beneficiaries of inherited retirement accounts must also comply with RMD rules. Failing to withdraw may incur penalties up to 25% of the required amount.
4. Use Flexible Spending Accounts (FSAs)
If you have an FSA, spend down your 2024 balance on eligible health-related costs to avoid losing unused funds. Some employers allow carryovers of up to $640 or a grace period into early 2025, so check your plan’s rules.
5. Gift Strategically
Give up to $18,000 per individual ($36,000 if married) without triggering gift taxes. Consider helping children or grandchildren with direct cash, contributing to a 529 plan, or gifting appreciated securities to let them benefit from lower tax rates on capital gains.
A little planning now can result in significant savings and peace of mind as you prepare for the new year.
Here’s an interesting video on this:
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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.