Raphael Stevens

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    Here are 6 buying categories cheaper today than they were before the pandemic

    It’s natural for prices to rise over time, but the pandemic pushed inflation to levels not seen in decades.
    There are a handful of retail categories, dominated by consumer electronics, however, that are cheaper today than they were pre-pandemic.
    Some of the deflation has to do with nuances with the calculation of the consumer price index.

    Getty Images

    It’s the nature of prices to go up over time, even in low-inflation environments. Historically, the target for the U.S. Federal Reserve has been 2% annual inflation.
    So when worldwide events like the Covid-19 pandemic push inflation well above that 2% target, it can be a real shock to consumers. Since hitting 9% in June 2022, it’s been a slow crawl to get the pace of inflation down to the Fed’s preferred target.

    And while inflation has indeed pulled back from that 2022 peak — now down to 3%, according to the most recent consumer price index from the U.S. Bureau of Labor Statistics — prices are still about 20% higher than they were pre-pandemic.
    There are a handful of retail categories, dominated by consumer electronics, that buck the trend and are actually cheaper now than they were before the pandemic, based on a CNBC review of CPI categories in June 2024 compared with June 2019.
    That includes telephone hardware; televisions; audio equipment; computers; certain cookware; and toys, game and hobby items.

    Same price, better value

    Even when annual inflation was at its peak, prices for consumer electronics consistently showed signs of deflation. Some of that has to do with nuances with the calculation of the CPI itself.
    Prices for smartphones, for example, which are a large component of the telephone hardware category, get special adjustments at the Bureau of Labor Statistics to account for rapid improvements in technology.

    The CPI routinely shows that smartphone prices are falling, but it’s actually reflecting that consumers are getting better, more sophisticated products for the same price.
    Such hedonic adjustments — the term BLS uses to describe it’s adjustments for changes in item quality — span the whole consumer price index and include categories from men’s underwear to home computers to refrigerators. They’re meant to reflect the change in value that the consumer is receiving for what they’re paying.

    Why televisions continue to be cheap

    But hedonic adjustments can’t account for everything when the CPI is registering drops in prices. Televisions are a good example: Prices keep falling, but in some cases, manufacturers have to slash prices to stay competitive and get consumers’ attention.
    “Purely from a manufacturing standpoint, in general with new technology and consumer electronics, there’s a learning curve that naturally evolves, which lowers the cost of a product without compromising the quality,” Andrew Csicsila, head of the Americas for consumer products at AlixPartners, told CNBC ahead of Black Friday last year.
    That’s happened aggressively with smart TVs, to the point that the technology has become pretty universal and making it difficult to compete on product features. But Csicsila has also cited other revenue streams for manufacturers that allow them to sell units barely above cost and flood the ultra-competitive marketplace with low-price products.

    “The reason they’re trying to do this is really to gain data,” Csicsila said. “If you look at their earnings reports, [manufacturers] are citing new revenue streams, which are actually the monitoring and exchanging of data that they’re capturing.”
    In other words, the price of the television box is just an entry point to get into your house. Once you’ve connected it to the internet and use it with all the functionality a smart TV can offer, there’s a lot for manufacturers and app developers to learn about your entertainment habits.
    “The amount of data that is being leveraged and targeted for advertisers to capture is astounding,” Csicsila said.
    In the meantime, keep your eyes peeled for those door-buster prices. More

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    in Finance

    Traders see the odds of a Fed rate cut by September at 100%

    Federal Reserve Bank Chair Jerome Powell speaks during a House Financial Services Committee hearing on the Federal Reserve’s Semi-Annual Monetary Policy Report at the U.S. Capitol on July 10, 2024 in Washington, DC. 
    Bonnie Cash | Getty Images

    Traders are now 100% certain the Federal Reserve will cut interest rates by September.
    There are now 93.3% odds that the Fed’s target range for the federal funds rate, its key rate, will be lowered by a quarter percentage point to 5% to 5.25% in September from the current 5.25% to 5.50%, according to the CME FedWatch tool. And there are 6.7% odds that the rate will be a half percentage point lower in September, accounting for some traders believing the central bank will cut at its meeting at the end of July and again in September, says the tool. Taken together, you get the 100% odds.

    The catalyst for the change in odds was the consumer price index update for June announced last week, which showed a 0.1% decrease from the prior month. That put the annual inflation rate at 3%, the lowest in three years. Odds that rates would be cut in September were about 70% a month ago.
    The CME FedWatch Tool computes the probabilities based on trading in fed funds futures contracts at the exchange, where traders are placing their bets on the level of the effective fed funds rate in 30-day increments. Simply put, this is a reflection of where traders are putting their money. Actual real-life probability of rates remaining where they are today in September are not zero percent, but what this means is that no traders out there are willing to put actual money on the line to bet on that.
    Fed Chairman Jerome Powell’s recent hints have also cemented traders’ belief that the central bank will act by September. On Monday, Powell said the Fed wouldn’t wait for inflation to get all the way to its 2% target rate before it began cutting, because of the lag effects of tightening.
    The Fed is looking for “greater confidence” that inflation will return to the 2% level, he said.
    “What increases that confidence in that is more good inflation data, and lately here we have been getting some of that,” added Powell.
    The Fed next decides on interest rates on July 31 and again on Sept 18. It doesn’t meet on rates in August.

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    Morgan Stanley beats estimates on better-than-expected trading and investment banking

    Here’s what they reported: Earnings of $1.82 a share vs. $1.65 a share LSEG estimate
    Revenue of $15.02 billion vs. $14.3 billion estimate
    Morgan Stanley shares dropped after the bank’s wealth management division missed estimates on a steep decline in interest income.

    Morgan Stanley said second-quarter profit and revenue topped analysts’ estimates on stronger-than-expected trading and investment banking results.
    Here’s what the company reported:

    Earnings: $1.82 a share vs. $1.65 a share LSEG estimate
    Revenue: $15.02 billion vs. $14.3 billion estimate

    The bank said profit surged 41% from the year-earlier period to $3.08 billion, or $1.82 per share, helped by a rebound in Wall Street activity. Revenue rose 12% to $15.02 billion.
    Morgan Stanley benefited from its Wall Street-centric business model in the quarter, as a rebound in trading and investment banking helped the bank’s institutional securities division earn more revenue than its wealth management division, flipping the usual dynamic.
    Equity trading generated an 18% jump in revenue to $3.02 billion, exceeding the StreetAccount estimate by about $330 million. Fixed income trading revenue rose 16% to $1.99 billion, topping the estimate by $130 million.
    Investment banking revenue surged 51% to $1.62 billion, exceeding the estimate by $220 million, on rising fixed income underwriting activity. Morgan Stanley said that was primarily driven by non-investment-grade companies raising debt.
    But results in the bank’s wealth management underwhelmed. Revenue rose 2% to $6.79 billion, missing the $6.88 billion estimate.

    While the division’s revenue rose thanks to higher stock market levels, interest income plunged 17% from a year earlier to $1.79 billion.
    Morgan Stanley said that’s because its rich clients were continuing to shift cash into higher-yielding assets, thanks to the rate environment, which resulted in lower deposit levels.
    Shares of the bank fell 3.4% in premarket trading.
    “The firm delivered another strong quarter in an improving capital markets environment,” CEO Ted Pick said in the release. “We continue to execute on our strategy and remain well positioned to deliver growth and long-term value for our shareholders.”
    Last week, JPMorgan Chase, Wells Fargo and Citigroup each topped expectations for revenue and profit, a streak continued by Goldman Sachs on Monday, helped by a rebound in Wall Street activity.
    This story is developing. Please check back for updates. More

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    Bank of America tops estimates on better-than-expected investment banking

    Here’s what they reported: Earnings of 83 cents a share vs. 80 cents a share estimate.
    Revenue of $25.54 billion vs. $25.22 billion estimate.
    The firm said net interest income would rise to about $14.5 billion later this year, giving investors confidence that a turnaround is in process.

    Bank of America on Tuesday said second-quarter revenue and profit topped expectations on rising investment banking and asset management fees.
    Here’s what the company reported:

    Earnings: 83 cents a share vs. 80 cents a share LSEG estimate
    Revenue: $25.54 billion vs. $25.22 billion estimate

    The bank said profit slipped 6.9% from the year earlier period to $6.9 billion, or 83 cents a share, as the company’s net interest income declined amid higher interest rates. Revenue climbed less than 1% to $25.54 billion.
    The firm was helped by a 29% increase in investment banking fees to $1.56 billion, edging out the $1.51 billion StreetAccount estimate. Asset management fees rose 14% to $3.37 billion, buoyed by higher stock market values, helping the firm’s wealth management division post a 6.3% increase in revenue to $5.57 billion, essentially matching the estimate.
    Net interest income slipped 3% to $13.86 billion, also matching the StreetAccount estimate.
    But new guidance on the measure, known as NII, gave investors confidence that a turnaround is in the making. NII is one of the main ways that banks earn money.
    The measure, which is the difference between what a bank earns on loans and what it pays depositors for their savings, will rise to about $14.5 billion in the fourth quarter of this year, Bank of America said in a slide presentation. That confirms what executives previously told investors, which is that net interest income would probably bottom in the second quarter.

    Wells Fargo shares fell on Friday when it posted disappointing NII figures, showing how much investors are fixated on the metric.
    Shares of Bank of America climbed 2% in premarket trading, aided by the NII guidance.
    Last week, JPMorgan Chase, Wells Fargo and Citigroup each topped expectations for revenue and profit, a streak continued by Goldman Sachs on Monday, helped by a rebound in Wall Street activity.
    This story is developing. Please check back for updates. More

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    Small caps are the hottest trade going in the stock market right now and they’re up again Tuesday

    Traders work on the floor of the New York Stock Exchange (NYSE) on July 11, 2024 in New York City. 
    Spencer Platt | Getty Images

    Small-cap stocks are on a tear right now as they took the baton from megacap technology shares last week to lead the bull market on hopes interest rate cuts will broaden out the economic recovery to their benefit.
    The Russell 2000 index, the benchmark for the group, hit its highest level since January 2022 on Monday. If the index rises another 1% Tuesday, it will be the fifth time since 1979 that it has had a five-day streak of gains north of 1%, according to Bespoke Investment Group.

    The iShares Russell 2000 ETF, which tracks the index, was up about 1% in premarket trading Tuesday. The ETF is up 9% over the last one month, nearly triple the gains in the S&P 500.

    Stock chart icon

    Russell 2000

    Fundstrat’s Tom Lee, who’s been correctly calling the stock market for the past few years, said the rally in small caps could last for more than two months, seeing dramatic gains for this cohort.
    “We think this move could be something like 10 weeks and as much as 40%. I think it is just starting,” Lee said Monday on CNBC’s “Closing Bell: Overtime.”

    Market rotation

    Investors are rotating into previously unloved corners of the market as cooling inflation data last week fueled bets that the Federal Reserve could cut interest rates soon and skirt a recession. Small caps are typically more sensitive to fluctuations in the economy and market sentiment and could see outsized benefit from falling rates.
    Moreover, the group is gaining traction as the “Trump trade” among investors, seen as potential beneficiary of a win by former President Donald Trump in November.

    While Trump does not have detailed policy proposals for a second term, but hiking tariffs while lowering taxes and regulation could be a boost for domestic stocks, including small caps, according to Goldman Sachs chief U.S. equity strategist David Kostin.
    Trump’s betting market odds of winning the election have steadily climbed in recent weeks since the debate against President Joe Biden in June and his survival of an assassination attempt over the weekend. More

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    Many Americans think they’re insulated from climate change. Their finances indicate otherwise

    Just 55% of Americans believe global warming will “hurt them a moderate amount,” according to a new study by Stanford University and Resources for the Future.
    Climate change is already having a financial impact on most Americans, economists said.
    Higher insurance rates for homeowners, inflation for groceries, and lost earnings due to heat are a few examples of broad economic impacts.

    A delivery driver takes a break in the shade during high temperatures in Philadelphia on June 21, 2024.
    Joseph Lamberti/Bloomberg via Getty Images

    Many Americans think they’re insulated from the effects of global warming. But climate change is already having negative and broad impacts on household finances, according to experts.
    Just to give a few examples: Insurers are raising premiums for homeowners in many states across the country, pointing to mounting losses from natural disasters as a factor. Extreme weather and flooding raise prices for everyone at the grocery store. Wildfire smoke and heat waves like the one currently blanketing large swaths of the U.S. lower job earnings for many workers.

    That’s not to mention the perhaps more obvious costs like rebuilding or relocating after a hurricane, flood or wildfire — disasters that are growing in frequency and intensity.

    An American born in 2024 can expect to pay about $500,000 during their lifetime as a result of climate change’s financial impacts, according to a recent study by ICF, a consulting firm.
    “Climate change is already hitting home, and of course will do so much more in the future,” said Gernot Wagner, a climate economist at Columbia Business School.
    “There are a bazillion pathways” to adverse financial impact, he added.
    More from Personal Finance:People are moving to Miami and building there despite climate riskHow to buy renewable energy from your electric utilityYou may soon get new federal rebates for energy efficiency

    Yet, in 2024, just 55% of Americans believe global warming will “hurt them at least a moderate amount,” according to a joint report published Monday by Stanford University and Resources for the Future.
    That’s down 8 percentage points from an all-time-high 63% observed in 2010, the study found.
    It’s likely that survey respondents were thinking more about physical than financial impact when answering the survey question, said Jon Krosnick, a report co-author and director of Stanford’s Political Psychology Research Group.
    However, when it comes to financial impact, “I think you could argue the correct answer for [people] is, ‘It’s already hurting me,'” Krosnick said.

    Economic effects ‘increasingly adverse’

    People stand outside a bodega during a summer heat wave in the Bronx borough of New York on July 11, 2024. 
    Angela Weiss | Afp | Getty Images

    Weather-related disasters cause the U.S. at least $150 billion a year in “direct” damage, according to the Fifth National Climate Assessment, a report the federal government issues every four to five years that summarizes the latest knowledge on climate science. (The latest edition was published in 2023.)
    The economic fallout will be “increasingly adverse” with each additional degree of warming, the report said. For example, 2°F of additional warming is expected to cause more than twice the economic harm than an increase of 1°F.
    And that financial accounting is just for “direct” rather than indirect effects.

    Climate change is already hitting home, and of course will do so much more in the future.

    Gernot Wagner
    climate economist at Columbia Business School

    Extreme heat reduces worker productivity

    Many of the impacts can be somewhat unpredictable, Wagner added.
    For example, in addition to negative effects on human health, wildfire smoke also reduces earnings for workers in sectors like manufacturing, crop production, utilities, health care, real estate, administration and transportation, according to a 2022 study by economists at the University of Illinois at Urbana-Champaign and the University of Oregon. Some of that impact may be due to missed days of work, for example.
    On average, workers’ foregone earnings amounted to a total of $125 billion a year between 2007 and 2019, the economists found.
    That became relevant for workers in perhaps unexpected places like New York City last year, when Canada wildfire smoke drifted into the U.S., creating an orange haze over the city. On at least one day during that period, the city ranked as having the world’s worst air pollution.
    “Nobody’s climate-effect bingo card included that particular entry five years ago,” Wagner said.

    Workers in the afternoon heat in Baker, California, on July 10, 2024. A long-duration heat wave led many California cities to break all-time heat records while numerous wildfires have been sparked around the state.
    Mario Tama | Getty Images News | Getty Images

    Wagner’s own research shows that extreme heat causes labor productivity to plummet, triggering reduced earnings.
    Workers lose about 2% of their weekly paychecks for each day over 90 degrees Fahrenheit, he found. For the average person, that’d amount to a roughly $30 pay cut for each day over 90 degrees — which can be extremely consequential for people who live in certain places like Phoenix, he said.
    June 2024 was the 13th consecutive month of record-breaking global temperatures.

    How global warming and inflation intersect

    Climate change also exacerbates inflation, research shows — a dynamic dubbed “climate-flation.”
    Warming is expected to raise global inflation by 0.3 to 1.2 percentage points per year, on average, by 2035, according to a recent study by researchers at the European Central Bank and Potsdam Institute for Climate Impact.

    “That’s big,” Wagner said, noting that over half the U.S. annual inflation target (about 2% a year) may potentially be attributable just to climate impact, he said.
    So-called climate-flation is due partially to effects on grocery prices: say, if extreme weather were to knock out a harvest for crops like avocados, corn, rice, maize or wheat, triggering global prices to spike, he added.

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    New Balance partners with the WNBA as the brand looks to grow in women’s sports

    New Balance has signed a multiyear deal with the WNBA.
    The agreement will make New Balance an official partner of the WNBA and will include broadcast, digital and retail content featuring Los Angeles Sparks rookie forward Cameron Brink.
    New Balance is banking on the women’s category to continue its growth trajectory — at a time when women’s sports have never been hotter.

    Cameron Brink #22 of the Los Angeles Sparks plays defense against Bridget Carleton #6 of the Minnesota Lynx on June 5, 2024 at Crypto.com Arena in Los Angeles, California. 
    Juan Ocampo | National Basketball Association | Getty Images

    New Balance on Tuesday announced a multiyear deal with the WNBA, joining a growing roster of backers for women’s sports.
    The agreement will make New Balance an official partner of the WNBA and will include broadcast, digital and retail content featuring Los Angeles Sparks rookie forward Cameron Brink.

    New Balance joins Adidas, Nike, Puma and Under Armour as a league partner. The WNBA does not have an exclusive footwear partner, but only league sponsors are permitted to display their logos on court. Financial terms of the deal were not disclosed.
    The deal comes as New Balance looks to grow the company’s share across basketball and to become a leader in women’s sports.
    “It’s really exciting that we’re going to play a small part in continuing the growth and progress towards achieving parity in women’s sports,” said Jessica Vassall, global head of partnerships for New Balance.

    In August, Cameron Brink became the first woman’s basketball player to sign with New Balance.
    Courtesy: New Balance

    Nearly a year ago, New Balance signed Brink, then a star at Stanford University. The four-time NCAA All-American became the first female basketball player on the New Balance roster. The brand also represents a handful of NBA stars, including Kawhi Leonard.
    “Even though my parents worked at Nike for a long time, it was such an easy conversion. … I felt like family with [New Balance], and it felt like a great environment,” Brink told CNBC.

    Brink, the Sparks’ No. 2 draft pick, suffered a season-ending ACL tear in June. She will miss the remainder of the 2024 season and the Paris Olympics as she rehabs.
    New Balance said she will be featured in various lifestyle and performance campaigns, in addition to working with their teams to influence future products.

    The sneakers worn by Cameron Brink #22 of the Los Angeles Sparks during the game against the Chicago Sky on May 30, 2024 at the Wintrust Arena in Chicago, IL. 
    Jeff Haynes | NBA | Getty Images

    Nike, Jordan Brand, Adidas, Puma, and Under Armour currently dominate the women’s basketball market. But it is still only a fraction of the total pro market at just 6%, according to market research firm Circana. Still, men’s basketball sneakers are seeing sales declines of late, with the women’s business up double digits.
    “[New Balance is] known for running and walking and training … but they have shown they can be a player in a number of new sports they’ve moved into — like tennis and baseball,” said Beth Goldstein, a footwear industry analyst at Circana.
    New Balance also represents top ranked tennis player Coco Gauff and in 2023 signed Los Angeles Dodgers phenom Shohei Ohtani.
    The 118-year-old Boston-based company did $6.5 billion in sales last year, up 23% from 2022, according to New Balance. For the last three years, the brand has seen double-digit growth globally across footwear and apparel, according to the company.
    Foot Locker CEO Mary Dillon on a May 30 earnings call noted the strength of the brand once known for its “dad shoes.”
    “New Balance continues to drive consumer excitement at scale as they are trending positively with consumers globally, importantly including our women’s men’s and kids’ consumers,” Dillon said.
    The privately held entity is also growing its footprint, with 90 new stores planned in 2024.
    Now, the company is turning to the women’s sports category to continue that growth trajectory — at a time when it has never been hotter.
    “We are outperforming every single metric,” said Colie Edison, chief growth officer for the WNBA.
    Helped in part by the popularity of rising stars like Indiana Fever rookie Caitlin Clark, the WNBA is now averaging 1.2 million viewers per game with attendance up 16% from last season.
    “We’re seeing an influx of fans and partners, which allows us to create a new economic model that is going to set the league up for long-term business sustainability,” Edison said.

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    Microsoft’s hiring of staff from AI startup Inflection referred for UK merger probe

    Microsoft’s hiring of employees from artificial intelligence startup Inflection has been referred for an initial merger investigation in the U.K.
    If it finds reason to investigate further, the Competition and Markets Authority can refer the case for an in-depth investigation, known as a “Phase 2” probe.

    Mustafa Suleyman, co-founder and chief executive officer of Inflection AI UK Ltd., speaks at the World Economic Forum in Davos, Switzerland, on Jan. 18, 2024.
    Stefan Wermuth | Bloomberg | Getty Images

    Microsoft’s hiring of certain former employees from artificial intelligence startup Inflection has been referred for an initial merger investigation in the U.K.
    Britain’s Competition and Markets Authority (CMA) said Tuesday that the hiring of Mustafa Suleyman, Inflection’s co-founder, along with most of the startup’s staff, should be assessed to decide whether it constitutes a merger under U.K. rules and therefore could result in less competition within the AI sector.

    If it finds reason to investigate further, the CMA can refer the case for an in-depth investigation, known as a “Phase 2” probe. The CMA said it would announce a decision on whether to refer the case for a Phase 2 investigation by Sept. 11.
    Microsoft announced in March it had hired Suleyman from Inflection, along with a number of other key employees at the firm.
    Suleyman was appointed Microsoft’s executive vice president and CEO of Microsoft AI, a newly formed unit of the company focused on its AI products, including Copilot, the company’s AI assistant which it integrated into its Windows and Microsoft 365 software.
    In addition to Suleyman’s senior executive appointment, the Washington-based tech giant selected Karen Simonyan to join the firm as its chief scientist, reporting to Suleyman.
    Both Suleyman and Simonyan were former employees of DeepMind, the Google-owned AI lab.
    This is a breaking news story. Please refresh for updates. More