Inflation Spirals, TikTok Faces Ban, Reddit Preps IPO, and Oracle’s Earnings Surge

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By: Alex Nahigian

In this week's rundown, we analyze major events from this past week, including taking a deeper look into further inflation concerns, TikTok’s battle, Reddit’s anticipated IPO, and Oracle’s impressive quarterly earnings.?

What You Should Know Going Into Your Week

• Wholesale inflation rose 0.6% in February, much more than expected*
• Consumer prices rose 0.4% in February and 3.2% from a year ago*
• House passes bill that could lead to a TikTok ban; fight shifts to the Senate*
• Reddit to raise nearly $750 million in upcoming IPO*
• Oracle shares surged 12% on better-than-expected quarterly earnings*
• S&P 500 closed lower via inflation worries, notched second straight weekly loss
• Bitcoin hit record high above $72,000
• Dollar Tree missed holiday-quarter estimates, to shut nearly 1,000 stores
• Adobe shares dropped 13% on weak quarterly revenue guidance
• Special prosecutor Nathan Wade quit, allowing Trump Georgia election case to proceed
• SpaceX Starship launched successfully, notched new milestones on way around Earth
• Oscars 2024: ‘Oppenheimer’ won best picture, six other awards including best director, best actor in Oscars sweep

*indicates topic will be discussed further

Consumer and Wholesale Prices Rise?

Inflation stayed hot in February with increases in wholesale prices and consumer prices. Further upticks have almost guaranteed that the Federal Reserve won’t even consider rate cuts until the summer. The chance of June seeing rate cut #1 has quickly diminished with the new data not helping its case.

The consumer price index, which is a broad measure of the prices households are paying for goods and services, increased 0.4% for the month and 3.2% from a year ago, per the Labor Department’s Bureau of Labor Statistics. The monthly gain was in line with expectations, but the annual rate was slightly ahead of the 3.1% forecast from the Dow Jones consensus. Excluding volatile food and energy prices, the core CPI rose 0.4% on the month and was up 3.8% on the year. In other categories, airline fares posted a 3.6% increase, apparel prices rose 0.6%, and used vehicles were up 0.5%.?

Furthermore, the producer price index, which measures pipeline costs for raw, intermediate, and finished goods, jumped 0.6% on the month. That was higher than the 0.3% forecast from Dow Jones consensus and came after a 0.3% increase in January. Excluding food and energy again, the core PPI accelerated by 0.3%, compared with the estimate for a 0.2% increase. On a year-over-year basis, the headline index increased 1.6%, its biggest move since September 2023.

The Fed’s 2% target is looking a little unrealistic for now, as long as soaring prices don’t lose steam. Such inflation data leaves the Fed with a bit of a headache ahead of this week's FOMC meeting, where the committee is expected to hold rates once again.

House Passes TikTok Ban Bill, Fight Turns to Senate?

On Wednesday, the House approved a bill declaring that China-based tech giant ByteDance must divest from TikTok, or see the social media platform banned across the entirety of the United States, one of its major markets. The bill passed with a resounding 352-65 vote in favor of banning the platform’s access in the United States due to national security concerns.

House members deemed TikTok’s risk to national security as legitimate, because the company is controlled by a foreign adversary. The debate over TikTok’s security has probed since the company’s growth in popularity over the past few years, with many considering TikTok’s algorithmic data collection as a way of stealing information from U.S. citizens or at least getting reads on habits and behaviors.?

The fight now shifts to the Senate to see what will happen next. 7 million small businesses use TikTok, and its removal could deal a large blow to these companies, which rely heavily on the social media giant for advertisements and marketing initiatives. Last Tuesday, pro-TikTok participants gathered outside of the U.S. Capitol building with signs that read, for example, “TikTok helped me grow my business.” The sting of a TikTok ban would definitely be felt nationwide, as there are close to 170 million Americans who use the app. However, in a geopolitically tense landscape, the threat of an adversary having a strategic advantage is something the U.S. will not risk.

Reddit Raises Millions Ahead of IPO

Reddit’s 2024 IPO has been anticipated for a couple years now as the social media giant sought out extensive capital back in 2022 from banks, but was forced to postpone its debut due to excessive rate hiking and negative market sentiment. However, as macroeconomic conditions have stabilized to some extent, Reddit appears ready to hit the public market.?

Ahead of its IPO, Reddit is targeting a valuation close to $6.5 billion, with shares expected to be sold in the range of $31 to $34, and a total of 22 million set to be sold. Per CNBC, Reddit has also set aside roughly 1.76 million shares for certain users and moderators, known as Redditors, who have had user accounts before Jan. 1 and plan to participate in the IPO. The Redditors will be able to purchase those shares and then sell them on the open market as they won’t be subject to a lock-up period, which typically prevents investors from selling shares for six months after the IPO. A nice touch for its reliable customer base.

The realm of social media hasn’t seen an IPO since Pinterest went public in 2019. Reddit is looking to hit the ground running after a long wait, hoping their decision to hold off in 2022 was the right one. Valuations as a whole are on the high side right now, so we wouldn’t be surprised if Reddit’s shares drop after IPO day (which historically happens often) to correct themselves before climbing to Reddit’s proposed valuation.?

Oracle Beats Earnings in Win for Cloud Infrastructure

Oracle reported quarterly earnings last week that exceeded Wall Street’s estimates on multiple fronts. The earnings beat saw the stock soar 13% in extended trading, proving the demand for cloud-based technology and infrastructure is vast.?

Let's take a look at the report by the numbers. Earnings per share came in at $1.41 adjusted versus $1.38 expected, while revenue also came in around $13.3 billion expected. Last week’s report shows that revenue rose 7% in the quarter from $12.4 billion a year earlier. This included net income climbing 27% to $2.4 billion, or 85 cents per share, from $1.9 billion, or 68 cents per share, a year ago. Oracle's largest segment, which specializes in cloud services and license support, saw sales rise 12% to $9.96 billion, beating the targeted $9.94 billion.

Oracle CEO Safra Catz emphasized that the company added “several large new cloud infrastructure” contracts during the quarter, in addition to signing multiple large deals with more in the pipeline down the road. And despite what some analysts are labeling as ‘mixed earnings,’ Oracle’s integration of AI is a headline catalyst for growth, which Wall Street likes as a major factor in the company’s outlook.

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Weathering Wall Street references CNBC and Bloomberg for research.