🔥 Inflation goes higher

and big earning beats

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Good morning investors! The inflation report yesterday kept the market on its toes.

Today we cover:

  • Inflation jumps to 3%

  • CVS and Restaurant Brands International beat

  • Tax deduction for home offices

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📊 Economy and News 

U.S. Inflation Rises More Than Expected in January

U.S. consumer prices rose more than anticipated in January, reinforcing the Federal Reserve’s cautious stance on rate cuts amid economic uncertainty. The Consumer Price Index (CPI) increased 0.5% last month after a 0.4% gain in December, bringing the annual inflation rate to 3.0%. Economists had expected a smaller 0.3% monthly rise.

Core CPI, which excludes food and energy, climbed 0.4% in January, pushing the annual core inflation rate to 3.3%. Some of the increase likely stemmed from businesses raising prices early in the year, possibly in anticipation of tariffs.

Fed Chair Jerome Powell acknowledged inflation progress but noted recent volatility. With inflation still above the 2% target, expectations for rate cuts in 2024 are fading. The central bank maintained its benchmark rate at 4.25%-4.50% in January, having previously cut rates by 100 basis points since September.

Meanwhile, consumer inflation expectations hit a 15-month high, reflecting concerns over trade policies. Bank of America Securities suggests the Fed's rate-cutting cycle may be over, as a strong labor market continues to support the economy.

Global hits:

Shocking: Trump’s Mexico and Canada tariffs could add nearly $6,000 to the average cost of a car, by one estimate. Elsewhere, Apple brings its TV streaming service to rival Android platform. Lastly, prebiotic soda brand Olipop valued at $1.85 billion in latest funding round.

Also check: Chevron to lay off 15% to 20% of global workforce. Moreover, Joann, the bankrupt fabrics retailer, is closing 500 of its 800 stores. Lastly, Spirit Airlines rejects merger with Frontier – again.

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📈 Stocks

S&P 500 6,051.97 (-0.27%)
DJIA 44,368.56 (-0.50%)
NASDAQ 19,649.95 (+0.031%)
BRENT CRUDE 75.11 (-2.36%)
* Prices as of Feb 13th, 12:20 AM UTC

CVS Health Beats Q4 Estimates Amid Insurance Struggles

CVS Health reported stronger-than-expected fourth-quarter revenue and profit, despite ongoing challenges in its insurance unit. The company posted adjusted earnings of $1.19 per share, beating Wall Street’s estimate of $0.93, with revenue reaching $97.71 billion versus the expected $97.19 billion.

For 2025, CVS projected adjusted earnings of $5.75 to $6 per share, in line with forecasts, but did not provide a revenue outlook. This marks the first full quarter under new CEO David Joyner, who took over in October as part of a $2 billion cost-cutting turnaround plan.

The company continues to face higher medical costs in its Aetna insurance unit and pressures in its retail pharmacy business. CVS shares surged 15% on Wednesday. Like UnitedHealth and Humana, it is grappling with rising Medicare Advantage costs as patients resume delayed procedures.

Exciting: Amazon opens beauty and personal care store in Italy as part of brick-and-mortar expansion. Elsewhere, battery giant CATL files for Hong Kong listing in what could be city’s largest IPO since 2021.

Must check: Zelle payments top $1 trillion in 2024 as network’s growth outpaces rivals including PayPal.

Restaurant Brands International Beats Q4 Estimates on Strong Burger King, Popeyes Sales

Restaurant Brands International reported a 2.5% rise in same-store sales, driven by strong performances at Burger King and Popeyes. Adjusted earnings per share came in at $0.81, beating the expected $0.79, while revenue hit $2.3 billion, surpassing forecasts of $2.27 billion.

Net income fell to $361 million ($0.79 per share) from $726 million ($1.60 per share) a year ago, impacted by restructuring costs. However, total sales surged 26%, boosted by acquisitions of its largest U.S. Burger King franchisee and Popeyes China. Shares remained flat in morning trading.

💵 Personal Finance

Home Office Tax Deduction: Who Qualifies in 2024?

If you worked remotely in 2024, you might be considering the home office deduction—but qualifying isn’t easy. Only self-employed individuals and independent contractors can claim it, as W-2 employees lost this benefit under the 2017 tax cuts until at least 2025.

To qualify, your home office must be used “regularly and exclusively” for business. The IRS allows two deduction methods:

  • Simplified Option: $5 per square foot, up to 300 square feet, for a max of $1,500.

  • Regular Method: A percentage of actual expenses like mortgage interest, insurance, utilities, and depreciation. This method can yield higher savings but may trigger depreciation recapture taxes when selling your home.

Good record-keeping is essential, as poor documentation could lead to IRS audits and disallowed deductions.

💰 Be a Better Investor

“Debt is like any other trap, easy enough to get into, but hard enough to get out of.”

Henry Wheeler Shaw

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