CNBC Daily Open: Stubborn inflation complicates rate-cut plan

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Wall Street lower
U.S. stocks closed lower Monday taking a breather from a rally sparked last week after the Federal Reserve stuck to its rate-cut forecast. The 30-stock Dow lost more than 150 points to dip 0.4%, while the S&P 500 and Nasdaq Composite fell around 0.3% each. Bitcoin, meanwhile, jumped 7% to retake the $70,000 level.

FTX to sell AI startup stake
Bankrupt crypto exchange FTX is selling its majority stake in AI startup Anthropic for $884 million, according to a court filing. The bulk of the stake is going to ATIC Third International Investment — a group aligned with a UAE sovereign wealth fund Mubadala. Other investors include Jane Street, venture fund HOF Capital, the Ford Foundation and funds managed by Fidelity.

Trump Media to start trading
The company behind former President Donald Trump’s social media platform Truth Social, will start trading on Tuesday. Called Trump Media & Technology Group Corp., it will trade on the NASDAQ under the stock ticker symbol DJT. Trump, the  presumptive Republican presidential nominee, owns at least 58% of the company — that’s worth $3 billion or more at Monday’s share price. 

U.S., Britain blame China-linked hackers
U.S. and Britain blamed China-linked hackers of “malicious” cyber campaigns and imposed sanctions. This could further escalate tensions with Beijing. A spokesperson for the Chinese embassy in the U.K. rejected the allegations. “We strongly oppose such accusations,” according to a response that was posted on the website. 

[PRO] Forget Nvidia?
Investors should look beyond Nvidia since the chipmaker’s stock looks far too expensive. That’s according to David Dietze, managing principal and senior portfolio strategist at Peapack Private Wealth Management. Instead, the veteran wealth manager is betting on four stocks in growth sectors that look “reasonably valued.”

The central bank should take a cautious approach to cutting interest rates to allow more time for inflation to slow down, Fed Governor Lisa Cook said Monday.

“The path of disinflation, as expected, has been bumpy and uneven, but a careful approach to further policy adjustments can ensure that inflation will return sustainably to 2% while striving to maintain the strong labor market,” she said.

Torsten Slok, chief economist at Apollo Global Management, highlighted wage inflation as a problem, citing a gauge developed by the New York Fed.

“The New York Fed has constructed a new measure of trend wage inflation, which currently is running at 5%,” he said in a note.

“Wage inflation at 5% is not consistent with the Fed’s 2% inflation target,” he added. “The Fed will keep interest rates higher for longer.”

Some Fed officials don’t even expect three rate cuts this year as the central bank has forecast at the last meeting.

Atlanta Fed President Raphael Bostic, scaled back his rate-cut projection last week, citing persistent inflation as a concern.

In a post on X, Diane Swonk, Chief Economist at KPMG, said Bostic “has made clear is he NOT convinced inflation will fall rapidly enough to cut rapidly in 2024.”

“He has consistently pushed back against a first half cut for a second half cut, with more progress and said he currently favors one cut in 2024,” versus two previously.

It remains to be seen whether the Fed will stick to its script on rate cuts or be forced to change course.