🇨🇳 Say bye to Chinese goods

and inflation is crawling up

Good morning investors! U.S. stocks are again going higher with meme stocks attracting a lot of attention.

Today we cover:

  • Inflation data creates worries.

  • The US plans to ‘ban’ Chinese goods.

  • Boeing in more trouble.

📊 Economy and News 

US wholesale inflation data

Wholesale inflation picked up in April to its highest rate in a year, indicating things might get even more expensive.

The Producer Price Index, which measures the change in prices that manufacturers pay to suppliers, was 2.2% for the 12 months ended in April.

That gain is higher than what was seen in March, which was downwardly revised from 2.1% to 1.8%.

On a monthly basis, prices rose 0.5%, a faster pace than March’s 0.1% loss (also downwardly revised) and ran much hotter than the expected figure of 0.3%.

But why? Higher energy costs (up 2% in April) combined with services inflation helped pushed the overall PPI higher.

Services providers saw a 0.6% increase in prices for the month, the fastest pace seen for that category since March 2022, with nearly 2/3rd of the April monthly gain contributed to this sector.

The impact: Stocks fell after the report came out only to rebound after comments from Jerome Powell reassured investors that a hike is not on the table. However, some experts think that such reports could delay a cut.

Global hits:

Debt and delinquency: During the first quarter, household debt in the United States increased to $17.70 trillion, marking a 1.10% rise compared to the previous quarter.

It's worth noting that credit card delinquency rates are showing signs of approaching pre-pandemic levels, with approximately 3.20% of outstanding debt currently in some stage of delinquency.

China v/s US: President Joe Biden plans to impose a 100% tariff on Chinese electric vehicle imports, a 50% tariff on Chinese solar cells and a 25% tariff on certain Chinese steel and aluminum imports.

Administration officials stated that these tariffs are expected to have "no inflationary impact." This statement follows weeks of White House officials cautioning Beijing to revise specific trade practices that Washington believes have negatively affected global supply chains.

China's trade surplus in goods has significantly increased in recent years and is now nearing $1 trillion, leading to heightened tensions with the United States and Europe.

In response, the Commerce Ministry of China vowed to take decisive actions to protect its rights and interests and urged the Biden administration to "rectify its mistakes."

📈 Stocks

S&P 500 5,246.68 (+0.48%)
DJIA 39,558.11 (+0.32%)
NASDAQ 18,322.77 (+0.68%)
BRENT CRUDE 82.88 (+0.61%)
* Prices as of May 15th, 12:20 AM UTC

Boeing in more trouble?

The US Justice Department on Tuesday notified Boeing that it breached terms of its 2021 agreement in which the company avoided criminal charges for two fatal 737 Max crashes.

After a series of safety missteps earlier this year, including a door plug that blew off an Alaska Airlines flight shortly after takeoff in January, the Department of Justice said Boeing is now subject to criminal prosecution.

In its letter, the Biden administration stated that it has not yet finalized its course of action. Boeing will be given a chance to address the breach of the agreement and outline the measures it has taken to resolve the situation by June 13. A decision on how to proceed with the case will be communicated to the court by July 7.

Google AI: Google on Tuesday announced new additions to its AI model series Gemini at its annual developer conference, Google I/O.

The new model can quickly summarize conversations, caption images and videos and extract data from large documents and tables, making it a direct competitor to ChatGPT.

The two that fell: Alibaba posted a beat on revenue in its fiscal fourth quarter ended in March, but the Chinese e-commerce giant’s net profit plunged.

Net income came in at 3.3 billion yuan, down 85% year on year. The stock fell -8% as the result.

On the other hand, Home Depot posted fiscal first-quarter earnings that beat expectations and revenue that missed estimates.

The home improvement retailer is seeing customers defer major home projects due to high interest rates.

Worth checking out: Walmart is laying off, relocating hundreds of corporate workers across the country. Plus, Comcast will introduce a streaming bundle for its cable, broadband and mobile subscribers, tying together Peacock, Netflix and Apple TV+ at a discounted rate.

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💵 Personal Finance

Pros and cons of dividend investing

Interested in dividend investing, i..e: investing to receive income in the form of dividends? Here are some pros of this investing technique:

  • Dividend investing offers a regular flow of income. It can be great for people who want to retire and enjoy a regular flow of cash. 💰

  • You enjoy double benefits because the stock may also appreciate over time, thus making you richer. 🤑 

  • Dividend Reinvestment Plans (DRIPs) can help you make more money by reinvesting dividends and giving you a chance to take advantage of compound returns. 💴 

  • Dividends provide a strong inflation hedge. This happens because top companies offer dividends that are typically higher than the rate of inflation. This is important in today's time when inflation is very high. 💷 

  • Qualified dividends are taxed at a much lower rate; however, the rate depends on a variety of factors, including your location and total income. 🪧 

Cons of dividend investing

  • Dividends are heavily taxed, especially when compared to growth stocks. In fact, they are first taxed when the company paying the dividend earns money. Next, they are taxed again when the investor receives dividends. Because taxes are due on dividend income when it is received. 😔 (Tip: Retirement accounts can help offset this)

  • Dividend stocks carry some risk as dividends aren't guaranteed and the company you have invested in may also falter. 😮 

  • You cannot solely count on dividends since yield typically doesn’t go above 10%. 😭 The average dividend yield on S&P 500 index companies that pay a dividend historically fluctuates somewhere between 2% and 5%, depending on market conditions. However, as seen in the chart above, it may, at times, go high, but that is not promised.

  • Lastly, some economists argue that when a dividend is paid, it reduces the value of the stock by that amount because the company is distributing its cash, so dividend stocks underperform.

💰 Be a Better Investor

"Fortune sides with him who dares."

Virgil

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👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.

Disclosure: This is a paid advertisement for Elf Lab’s Regulation CF offering. Please read the offering circular at elflabs.com

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