Analysis: LMT COST AAPL

This morning we saw the release of the Producer Price Index (PPI) numbers for November, which came in hotter than expected.

Estimates for PPI were wide but the consensus was for a rise of 0.2% month over month, with the annual number quite hot at 7.2% (but less than October). The actual numbers, however, were more than expected, higher by 0.3%, while the annual number was up 7.4%, slightly higher. But the core PPI number was quite a bit worse, rising 0.4% month/month, double the expectation for 0.2%, and by 6.2% for the year.

These numbers will still keep a 75 basis point hike on the table for the Fed meeting next week.

Breaking the String

Markets were under extreme pressure early in the week as the first five trading days in December got off to a miserable start. As you may recall, November finished on a high note, but the hangover effect ran into the final calendar month of the year. But Thursday was an about face, with the indexes scoring nice wins in front of some important economic data releases Friday morning. After the S&P 500 once again tested the lower 3900 level yesterday, the bulls exerted some power and pushed stocks higher.

Finishing the week strong would certainly be considered a win for the bulls. Overall, economic data has come in a bit better this week, but after PPI this morning, additionally important inflation data will be out soon. CPI comes early next week, just before the conclusion of the final Fed committee meeting of the year.

Defense... Defense

Thursday night we learned the Congress passed the whopping defense spending bill, which grew by 8% over the last one, and was 5% higher than what President Biden was seeking. This bill includes massive funding for aircraft and weapons, which is good for Action Alerts PLUS holding and Two-rated Lockheed Martin (LMT) . In addition, the bill will provide assistance to Taiwan and Ukraine if needed. All in all, a good opportunity for defense names to rise over time.

Costco Reports

We heard from Costco (COST) last night as the company reported results, which were slightly worse than expected. The AAP position did not provide guidance but it offers updates on sales metrics at the end of each month. While disappointing, we speculate the company will have a robust holiday season as shoppers come out to buy in droves before Christmas.

Read our more extensive note on Costco here. which remains a One-rated, Buy Now, position.

Apple Update

Another research firm has lowered their iPhone estimates for Apple (AAPL) . This time it was Credit Suisse, which believes Apple will sell 7 million fewer units during the NEXT quarter due to China production issues. We have yet to hear from Apple itself, but it seems lower numbers are getting baked into the price of the stock. We rate Apple a Three.

We recently made changes to the Action Alerts PLUS ratings system. Read all about it here.