CPI comes in relatively good – does it matter? … Q1 earnings have been strong, but Louis Navellier is beating them … Walgreens doubles down on robots … Jeff Clark says it’s time to bet against this rally

The release of the latest Consumer Price Index (CPI) Report this morning showed that prices cooled more than expected in April.

Month-to-month headline prices rose 0.2%, putting the yearly rate at 2.3% – its lowest reading since February 2021. Forecasts had called for 0.2% and 2.4%, respectively.

Core CPI, which strips out volatile food and energy prices, also showed slight cooling relative to expectations. The month-to-month figure was 0.2%, beneath the 0.3% forecast. And the yearly increase came in at 2.8%, in line with expectations.

While these numbers were relatively cool, two big questions remain:

• What do they reveal about the impact of President Trump’s tariffs on the economy?
• Will they materially impact the Fed’s interest rate plans?

The simplistic answers are:

• Not a lot.
• Not likely.

On tariffs/prices, it’s still too early to see the full impact of Trump’s 10% tariffs. And even if we could isolate their effect, tariff rates are changing (the U.K. deal, the lower tariff rate on China, prospective deals in the coming weeks, etc.), so backward-looking data will be of limited value.

For the Fed, the situation is similar. In his post-FOMC press conference, Chair Powell repeatedly stressed that we simply don’t know how the data will come in. So, “wait and see” is their baseline case. Nothing in today’s report likely changed that stance.

Without tariffs, today’s data might have tempted some Fed presidents to flirt with a June cut. But the likelihood of tariff-goosed higher prices in the months ahead is likely to keep Powell & Co. on the sidelines until additional data arrives.

In the meantime, this earnings season has been strong

Let’s go to FactSet, which is the go-to earnings data analytics group used by the pros:

To date, 90% of the companies in the S&P 500 have reported earnings for the first quarter.

Of these companies, 78% have reported actual EPS above the mean EPS estimate, which is above the 5-year average of 77% and above the 10-year average of 75%.

In aggregate, earnings have exceeded estimates by 8.5%, which is below the 5-year average of 8.8% but above the 10-year average of 6.9%.

This focus on earnings recalls the “Iron Law of the Stock Market” from legendary investor Louis Navellier. Here he is explaining:

Stock price trends can diverge from earnings trends for a while, but over the long-term, if a company grows and grows the amount of cash it takes in, its share price is sure to head higher.

This Iron Law serves as the foundation of Louis’ market approach – and it’s working. His Growth Investor subscribers are beating the market this earnings season.

We just saw FactSet reporting that earnings have exceeded estimates by 8.5%. Here’s Louis with the comparative statistic for his portfolio, along with some additional data:

Our average earnings surprise [this earnings season] is an impressive 17%…

Overall, we had 15 Growth Investor companies announce quarterly results this week, with nine companies topping analysts’ earnings estimates.

So far this earnings season, 44 of our Buy List companies have reported results, and 28 achieved a positive earnings surprise, two posted in-line earnings and 11 missed expectations…

Needless to say, it’s been another stunning earnings announcement season.

It’s a good reminder that during times of heightened volatility, one of the best things you can do is shift your gaze from prices to earnings.

If you’re a Growth Investor subscriber, congrats. Click here to log in and read your latest Weekly Issue.

To learn more about joining Louis in Growth Investor so that fundamental strength drives your market action, click here.

The migration toward a robotic workforce continues

Walgreens is pushing further into a robotic workforce.

The company is increasing the number of retail locations supported by its micro-fulfillment centers. These locations rely on robotic systems to process large volumes of prescriptions.

Here’s CNBC with more details:

Walgreens told CNBC it hopes to have its 11 micro-fulfillment centers serve more than 5,000 stores by the end of the year, up from 4,800 in February and 4,300 in October 2023.

As of February, the centers handled 40% of the prescription volume on average at supported pharmacies, according to Walgreens. 

That translates to around 16 million prescriptions filled each month across the different sites, the company said.

Robots are “the backbone”

Let’s jump to Rick Gates, Walgreens’ chief pharmacy officer:

Right now, [these robots are] the backbone to really help us offset some of the workload in our stores, to obviously allow more time for our pharmacists and technicians to spend time with patients.

It gives us a lot more flexibility to bring down costs, to increase the care and increase speed to therapy – all those things.

Meanwhile, Kayla Heffington, Walgreens’ pharmacy operating model vice president, said that micro-fulfillment centers have generated approximately $500 million in savings. This has come through slashing excess inventory and boosting overall efficiency.

Numbers like these are why Corporate America is turning toward a robotic workforce – and will accelerate that shift in the coming years

In last Friday’s Digest, we reported on the acceleration of corporate layoffs (so far, primarily in tech) due to AI.

In discussing why overall unemployment rates haven’t skyrocketed so far, I listed a few reasons, concluding:

For the time being, AI is being used to augment rather than replace workers. So, many companies are restructuring workflows rather than eliminating full positions.

But let’s be clear…

This is a phase. It’s a temporary evolution point – not an end point.

An analogy comes from Ernest Hemingway’s novel “The Sun Also Rises.” When asked how he went bankrupt, a character replies, “Two ways. Gradually, then suddenly.”

Walgreens’ increasingly robotic workforce pushes us deeper into the “gradually” phase, getting us closer to the “suddenly.”

I’ll add that, this morning, Microsoft announced it’s cutting another 6,000 jobs. Though AI wasn’t named explicitly, the vague “corporatese” language hints at it. From a Microsoft spokesperson:

We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace.

Bottom line: The “suddenly” phase of AI is coming, and we hope you’re taking steps to prepare for it in your portfolio. Circling back to Louis, last week, he released a new batch of research on this topic.

As part of it, there are four special reports covering )1 the top stocks for this age of the Singularity (the point when technological growth becomes so rapid and transformative that AI surpasses human comprehension and control), 2) which physical AI stocks (think “humanoids/robots”) to buy today, 3) a “Complete Portfolio Protection” Plan, and 4) how to find pre-IPO, potential Unicorn AI investments before they’ve gone public.

You can learn more about accessing the research right here.

Finally, if you re still feeling bearish about the market…

You’re not alone!

Master trader Jeff Clark remains bearish – and this morning, he wrote that, “it’s time to bet on another decline phase.”

To unpack this, let’s begin with his update last Friday:

[Last week’s] news of a trade deal between the U.S. and the UK seems like good news. Bullish traders used it as a reason to charge into the market – helping the S&P 500 to rally to its highest level since “Liberation Day” in early April.

But there’s a good chance that folks who bought stocks yesterday will regret it in the days ahead.

Jeff believes that “regret” will be even greater for investors who jumped into the China-truce market surge.

Before I detail the rationale, for newer Digest readers, Jeff is a technical trading expert

He uses a suite of indicators and charting techniques to profitably trade the markets regardless of direction – up, down, or sideways.

Now, one of the technical tools informing Jeff’s latest bearishness is the PMOBUYALL indicator. It’s a momentum indicator that fluctuates between zero and 100.

When it gets to zero, most of the fuel for a large decline has been used up. Traders should look to buy stocks into any additional weakness.

Conversely, when the PMOBUYALL hits 100, most of the fuel for a rally has been used up. Traders should look to sell stocks and/or establish short positions into any additional strength.

To be clear, the PMOBUYALL is not an exact timing tool. But it’s a helpful broad indicator that can traders help frame a market move, and from there, refine their exact trade timing with other tools.

Here’s Jeff:

The following chart of the PMOBUYALL can help explain why stocks are nearing a short-term decline phase…

The PMOBUYALL rallied as high as 100 seven previous times over the past year. Each time this happened the S&P 500 was near a short-term high.

The stock market declined each time the MACD turned lower when the PMOBUYALL was in this condition.

The PMOBUYALL hit 100 about two weeks ago. It has been stuck at the 100 level ever since then. Now, the MACD indicator is starting to turn lower.

If the current situation plays out like the seven previous situations did, then we should see a decline phase get started any day now.

But what about the market explosion based on the trade deal with China?

It didn’t change Jeff’s opinion of what’s coming. It just meant there’s farther to fall.

Let’s go to his update from yesterday morning:

Positive headlines regarding a trade deal (temporary) with China has sparked a buying panic in the overnight futures. Stocks are set to open sharply higher. The S&P will likely gap over its 200-day MA and challenge the resistance of the 5800 level.

Folks with too much short exposure, or not enough long exposure will be chasing this move.

DON’T DO IT!

Buying stocks into extremely overbought conditions is almost always a bad decision.

And that brings us to today. Jeff just recommended a bearish trade on the S&P.

Here’s part of his thinking:

All the conditions that set the stage for a bounce off the lows last month are now pointing to the potential for a decline. And it looks like that decline could get started as soon as today…

The index is trading historically far above all of its various moving averages. All of the technical indicators have flipped from extremely oversold to extremely overbought. And the financial TV talking heads who were warning of a crash last month are now calling for new highs.

Jeff notes that the current setup is eerily like how things looked back in April 2022. And if the similarity continues, stocks will be much lower in the months ahead.

How much lower?

He sees a bear market bottoming later this fall around 4,125. That’s 30% lower than where I write Tuesday approaching lunch.

Bottom line: If you’re a battered bear, Jeff urges you to hang in there.

We’ll bring you more of his analysis over the coming days. In the meantime, to learn more about joining him in Jeff Clark Trader, click here.

Have a good evening,

Jeff Remsburg