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On Housing, Technology & mRNA’s Potential
The rising mortgage rate isn’t good news for a housing market that’s already in the dumps. The only positive news is that the market may be slowly adjusting, with builders starting construction on fewer new homes and cutting prices, Jackie reports. ... She also takes a look at one of Australia’s neoclouds, which is being helped by the country’s new regulations and ample funding from Nvidia and others. ... And: The news that Moderna’s mRNA treatment of melanoma was successful in Phase 3 trials gave many patients hope. We look at how Moderna and other companies aim to use mRNA to treat more cancers and diseases.
Dell Results Suggest AI Productivity Boom Is Here
I. Dell Dell Technologies' stock price is soaring (chart). The company delivered a major beat across the board for its fiscal 2027 second quarter (ended July 31), driven by massive, accelerating demand for AI infrastructure and strong legacy hardware performance. Revenues and earnings rose 58% y/y and 203%, respectively. AI server revenue rose 100%, while traditional servers and networking revenues rose 122%. The results confirm that the AI infrastructure buildout remains in full swing. Strong demand for AI compute capacity points to accelerating AI adoption across the economy, which we think will drive a productivity boom. II. Productivity We are already seeing signs of this productivity boom in the economic data. The Atlanta Fed's GDPNow model currently estimates that real GDP is increasing by 4.8% (saar) in Q3, led by a whopping 21.5% increase in AI-supercharged fixed business equipment investment (chart). Output is booming, while labor input is rising at an anemic pace, a clear sign of robust productivity growth (chart). Job growth remains modest relative to the economy's rate of expansion. ADP reported a gain of just 38,000 jobs in August, following a gain of 46,000 in July (chart). Small monthly job gains reflect a declining labor force (chart). That means fewer jobs need to be created to maintain a stable unemployment rate, currently at 4.1% and consistent with full employment. Productivity growth has rebounded since it last bottomed in Q2-2017 at 0.85%, based on the annualized average of its seven-year growth rates (chart). It rose to 2.4% during Q2-2026, slightly exceeding its historical average of 2.3%. We predict that this growth rate will rise to 3.0%-4.0% by the end of the decade. III. The FOMC & Inflation Fed officials are also taking note of the AI-driven investment boom. Today, New York Fed President John Williams said in a CNBC interview that rising Treasury yields are driven by "a strong US economy and a strong economic outlook fueled by big investments in AI and data centers and technology in general." His comments are consistent with our view that bond yields reflect strong nominal GDP growth. On monetary policy, Williams said there are "no clear signs right now" whether current policy is sufficient to return inflation to target. Yesterday, Fed Governor Michael Barr said he would support a hike only if inflation fails to moderate further. In other words, incoming inflation data bears the burden of proof. If progress toward the Fed's 2% inflation target stalls, a majority of the FOMC is likely to vote to raise the federal funds rate in September. (1) CPI vs PCED. Inconveniently, core CPI and core PCED inflation rates are telling different stories. The former was 2.5% in July and has been falling toward 2.0% in recent months, while the latter was 3.3% in July and has been heading higher (chart). The -0.9ppt gap between them is now the most negative since the 1980s (chart). The average spread over time is +0.5ppt! The FOMC meets on September 15-16. August's CPI will be released on Friday, September 11. The Cleveland Fed's reliable Inflation Nowcasting model predicts that the core CPI will be up 0.2% m/m and 2.4% y/y. August's PCED comes out September 30, after the FOMC meets. Core PCED is predicted to rise 0.27% m/m and 3.4% y/y, a full percentage point more than the core CPI and still above 3.0%! We presume that Fed officials are aware of this divergence and won't be lulled into voting against a rate hike by a cool CPI, knowing that the PCED will be hotter. One source of the divergence is that Computer Software & Accessories has a weight of only 0.027% in the CPI, but 1.20% in the PCED. This component rose a whopping 21.2% y/y during July (chart). (2) Food Inflation. We are also starting to monitor food inflation closely. It could become a more meaningful source of inflationary pressure in the months ahead (chart). That's because grain prices are surging (chart). Wheat and corn prices recently reached their highest levels in more than three years amid Black Sea supply disruptions, adverse weather, and higher fuel and fertilizer costs. Because these commodities sit at the heart of the food supply chain, the impact is likely to filter through to consumer food prices with a lag.
On AI At Jackson Hole, Trump’s Bromance With Li’l Kim & Great NERIs
Stablecoins and AI captured central bankers’ attention during this year’s Jackson Hole symposium, Melissa reports. Presenters discussed how stablecoins could help the dollar retain its dominance and how AI agents could trade central bankers’ communications. ... William examines how the “very special bond” between President Trump and North Korea’s Kim Jong Un could unsettle South Korean markets. ... And: analysts’ earnings revisions are decidedly more positive than negative, Joe calculates. That bodes well for future S&P 500 earnings strength.
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DELL TECHNOLOGIES: FORWARD PROFIT MARGIN
S&P 500 HEALTH CARE SECTOR & INDUSTRIES: ANNUAL EARNING GROWTH FORECAST
WELLS FARGO: FORWARD P/E
S&P 500 MATERIALS SECTOR & INDUSTRIES: ANNUAL EARNING GROWTH FORECAST
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