😆 Good inflation report

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Good morning investors! Yesterday was another good day for the market.

Today we cover:

• Another positive inflation report

• Stocks continue to rise

• How much you need to save

Poll: We asked this yesterday, here’s the result:

📊 Economy and News 

Consumer price jump as expected with inflation coming down

The consumer price index, a broad-based measure of prices for goods and services, increased 0.2% fin July, putting the 12-month inflation rate at 2.9%. Economists surveyed by Dow Jones had been looking for respective readings of 0.2% and 3%.

Excluding food and energy, the core CPI came in at a 0.2% monthly increase and a 3.2% annual rate, meeting expectations.

The annual rate is the lowest since March 2021, while the core is the lowest since April 2021.

What went up: A 0.4% rise in shelter costs was responsible for 90% of the all-items inflation increase. Food prices climbed 0.2% while energy was flat.

Though food inflation was soft on the month, multiple categories saw sizeable increases, most notably eggs, which were up 5.5%.

Auto insurance costs climbed another 1.2% and are up 18.6% on a 12-month basis.

On the shelter component, which makes up more than one-third of the index, an item that asks property owners what they could get in rent increased 0.4% and was up 5.3% annually, again defying Fed expectations for an easing in housing-related costs.

What went down: Multiple categories showed signs of deflation on the month, including medical care services (-0.3%), apparel (-0.4%) and core commodity prices (-0.3%).

Cereals and bakery items declined 0.5% while dairy and related products fell 0.2%.

Automotive prices continued to decline, with new vehicles down 0.2% and used cars and trucks off 2.3% for the month and 10.9% from a year ago.

Recession? Murmur is still there but not everyone agrees. UBS CEO, for example, says it’s too early to talk about a U.S. recession, but a slowdown is possible.

The new inflation report could be a sign that the Fed will cut rates next month, as expected.

Global hits:

• World’s largest sovereign wealth fund posts $138 billion in first-half profit as AI demand boosts tech.

• Big Lots is closing hundreds of stores after warning it could go out of business.

• Mars agrees to buy Pringles maker Kellanova in $36 billion deal.

Another closure: LL Flooring files for bankruptcy and will close 94 stores.

📈 Stocks

S&P 500 5,455.21 (+0.38%)
DJIA 40,008.39 (+0.61%)
NASDAQ 17,192.60 (+0.029%)
BRENT CRUDE 79.95 (-0.03%)
* Prices as of Aug 15th, 12:20 AM UTC

S&P 500 closes higher for fifth straight day

The Dow Jones Industrial Average ticked up Wednesday after the release of more encouraging U.S. inflation data.

The report comes a day after lighter-than-expected wholesale inflation figures gave stocks a boost.

Futures market pricing is roughly split down the middle between expectations for a quarter or half-percentage point reduction at central bank meeting on Sept.17-18.

All three major averages are now above their Aug. 2 closing level, which was the session before the global market sell-off on Aug. 5 that appeared to be related to an unwind of the yen carry trade and concerns about economic growth.

Earning: Also, some big names announced earnings yesterday, including Cisco that topped estimates.

Here are the key numbers:

• Earnings: 87 cents per share, adjusted, vs. 85 cents per share expected, according to LSEG.

• Revenue: $13.64 billion vs. $13.54 billion expected, according to LSEG.

Cisco said in a filing that it’s implementing a restructuring plan that will result in $1 billion in pretax charges to its financial results and will “allow it to invest in key growth opportunities and drive more efficiencies in its business.” 

The company said $700 million to $800 million of charges will be recognized in the current quarter, with the rest hitting over the course of fiscal 2025.

Firing people: Also, the networking company said it’s cutting 7% of its global workforce. It’s the second major round of layoffs this year for Cisco, which said in February that it was eliminating 5% of its workforce, or over 4,000 jobs. Cisco had 84,900 employees at the end of fiscal 2023, before the initial cuts.

The report sent the stock +5.78% higher after the bell.

Interesting: Texas sues General Motors, alleging illegal selling of driver data.

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💵 Personal Finance

How much money you need in your savings account

As investors face economic uncertainty, we have guidelines for how much cash you should have set aside.

Despite second-quarter economic growth, nearly 60% of Americans wrongly think the U.S. is currently in a recession.

While Goldman Sachs and JP Morgan raised recession forecasts in August, other experts still expect an economic “soft landing,” meaning the Federal Reserve’s policy won’t cause a downturn.

Meanwhile, inflation continues to ease, but a weaker-than-expected jobs report for July triggered stock market volatility last week.

Amid the uncertainty, nearly 60% of Americans aren’t comfortable with their level of emergency savings, up from 48% in 2021.

Some 27% have no emergency savings — the highest percentage since 2020.

Regardless of the economic climate, investors need emergency savings to cover expenses in the event of a job loss or other unexpected bills. Here’s how much cash to set aside, according to financial advisors.

Dual earners: Three months is a rule of thumb

Double-income families should aim to save at least three months of living expenses. But, we suggest you aim for at least six months.

Building that level of cash reserves isn’t easy. Only 44% of Americans have three months of expenses saved for emergencies.

Single income: Save six months or more

Generally, single individuals or families with a single income should save eight to nine months of expenses.

But higher levels of cash reserves could offer more flexibility when faced with a job loss or economic downturn.

Some experts, however, recommend 12 to 18 months of living expenses in “safe, liquid investments” for single earners.

Entrepreneurs and freelancers: Keep up to one year of expenses

With unsteady income, entrepreneurs and freelancers could also benefit from higher levels of savings — 12 to 15 months of expenses.

Of course, the exact amount for emergency savings depends on your unique circumstances and your family’s needs. For example, you will need more savings if you expect sudden expenses in the near future.

💰 Be a Better Investor

Resources:

• Retirement Calculator

• Make Money in Retirement

• Side Hustle Ideas

• Stock Deep Dives

• Investing 101 videos

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.

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