Wall Street Brunch: Make Or Break Inflation For The Fed (undefined:US10Y)

Listen on the go! A daily podcast of Wall Street Breakfast will be available by 8:00 a.m. on Seeking Alpha, iTunes, Spotify.

August CPI could decide the Fed’s September rate move. (0:17) Oracle earnings all about AI spending. (1:34) Apple’s new CEO to unveil its biggest iPhone shakeup in years. (2:23)

The following is an abridged transcript:

This holiday shortened-week brings make-of-break consumer price numbers for this months’ Fed rate meeting.

With the market closed Monday for Labor Day, the August CPI arrives Friday.

Economists expect a 0.4% rise in the headline number, keeping the annual rate at 3.4%. The core rate, ex food and energy, is seen rising 0.2%, dipping to 2.4% annually from 2.5%.

Wells Fargo economists say that while headline inflation remains “influenced by the ebbs and flows of the conflict in the Middle East, core inflation remains contained.”

A hot inflation report could cement an FOMC rate hike later this month. Fed Chairman Kevin Warsh’s hawkish Jackson Hole speech spiked odds of a quarter-point rise, but President Donald Trump’s threat to cease trade with a number of nations if rates didn’t come down made it a coin toss. Friday’s better-than-expected rise in payrolls puts hike odds now at 60%.

SA analyst Damir Tokic says the Fed is facing late-cycle dynamics with a strong labor market and high inflation and should “consider inverting the yield curve, or hiking above 5%, starting with a September hike.”

“Otherwise, long-term rates (US10Y) should spike as inflation expectations de-anchor, which would force the Fed to hike even more aggressively due to the 2022-like policy error,” he said.

On the earnings front, Oracle (ORCL) will give the market another glimpse of hyperscaler revenue versus capex when it reports Thursday.

The consensus is for EPS of $1.74 on revenue of $19.13B.

SA analyst JD Research says despite infrastructure buildout risks, Oracle’s software business and multi-cloud AI database are delivering strong growth and mitigating AI execution concerns.

But ORCL bear Paul Franke says escalating AI LLM fees on consumers and businesses are prompting users to cut back on queries, “raising doubts about the sustainability of ORCL’s hyperscaler strategy.”

Here’s how the rest of the earnings calendar shapes up:

GameStop (GME) reports Tuesday.

On Wednesday, Chewy (CHWY) weighs in.

Macy’s (M) and Adobe (ADBE) join Oracle on Thursday.

And Kroger (KR) is due Friday.

Also this week, Apple’s (AAPL) Wednesday product launch event, “Surprise and Shine,” may be its most significant in nearly a decade.

Morgan Stanley analyst Erik Woodring says that along with predictable product launches, “the event will prove to be anything but ordinary.”

“This is because for the first time in 15 years, Tim Cook will not headline the event; instead, new CEO John Ternus will lead the company into its first major iPhone form factor change in nearly 10 years, unveiling the much-anticipated iPhone Fold (Ultra?), alongside what are likely to be the broadest and most significant, like-for-like iPhone price hikes in company history.”

In the news this weekend, should a greenback equal a loonie?

President Donald Trump criticized the value of Canada’s currency, opening a new front in an escalating trade dispute between the two neighboring countries.

“Canada’s Dollar imbalance with the U.S. is unacceptable,” Trump said in a post on Truth Social. “It has been that way for years — but no longer!”

Trump did not specify what he meant by an imbalance or any action his administration might take. The Canadian dollar gives the country’s exporters a pricing advantage in the U.S. market and recently traded around 72 U.S. cents.

And for income investors, Cigna (CI) goes ex-dividend Tuesday, paying out Sept. 23.

HP (HPQ) goes ex-dividend Wednesday, with a Sept. 9 payout date.

Nvidia (NVDA) goes ex-dividend Thursday, paying out on Oct. 1.