Apple’s Services Boost, Live: Chicago Fed President Goolsbee, Pres. Trump to Meet with Nvidia’s Huang 1/31/25
Jan 31, 2025
auto_awesome
Austan Goolsbee, Chicago Fed President, shares keen insights on the latest PCE inflation data and its implications for monetary policy. He discusses the potential economic impact of President Trump's 25% tariffs on Mexican and Canadian goods, highlighting concerns over agricultural imports and trade dependencies. The conversation also touches on market dynamics, particularly Apple’s challenges in iPhone sales and its optimistic AI growth strategy. Goolsbee emphasizes the cautious optimism regarding inflation while navigating the complexities of interest rates.
The potential 25% tariffs on Canadian and Mexican goods raise significant concerns about consumer price increases in the food industry.
Apple's resilience amidst declining iPhone sales can be attributed to record-high profit margins from its services business and AI strategy.
Deep dives
Market Recovery and Sector Performance
Stocks are showing signs of recovery on the last trading day of the week, with the Nasdaq climbing over 1% despite initial losses. While there was a downturn earlier in the week, particularly due to concerns surrounding DeepSeq, the market has bounced back, with the S&P turning positive. Key sectors such as communication services, consumer discretionary, information technology, healthcare, and real estate are driving this recovery, with major players like Broadcom, Meta, Tesla, and Google performing well. Apple's recent results also contributed to investor optimism, despite a decline in iPhone sales, thanks to record-high profit margins stemming from its services business.
Impact of Tariff Threats on Imports
The potential implementation of a 25% tariff on imports from Canada and Mexico prompts concerns about significant consumer price increases, particularly in the food and beverage industry. Over 40% of U.S. food and beverage imports come from these countries, and specific goods like tomatoes, beer, and various vegetables are heavily reliant on imports from Mexico. A staggering statistic reveals that 86% of U.S. tomatoes are sourced from Mexico, raising questions about domestic production capacity should tariffs be enacted. Additionally, Canada's role in the U.S. meat supply is highlighted, with 100% of live swine imports coming from there, emphasizing the depth of dependency on these trade relations.
Inflation Trends and Economic Confidence
Recent PCE inflation data indicates progress towards the goal of a 2% inflation rate, which is leading to a cautious optimism regarding future monetary policy. Chicago Fed President Austin Goolsbee suggests that inflation is on the right track, supported by sustained progress in housing and services pricing. However, he emphasizes the need for caution as uncertainties related to tariffs and potential impacts on prices remain. Goolsbee expresses a belief that rate cuts may be possible as the economy stabilizes, provided inflation trajectory continues to improve consistently.
Apple's Competitive Landscape in China
Apple is facing increased competition in China from local brands like Huawei, Xiaomi, and Vivo, which have been improving their technology and offering high-quality products. Despite an 11% drop in overall sales, Apple maintains a loyal customer base, holding approximately one-sixth of the Chinese smartphone market. The growing presence of AI features provided by local brands may present a challenge as consumers increasingly seek new innovations. Tim Cook's ongoing regulatory negotiations regarding Apple intelligence suggest that integrating AI effectively into their products will be crucial for maintaining competitiveness in this rapidly evolving market.
Carl Quintanilla, Sara Eisen and David Faber started the show by looking ahead to President Trump’s planned 25% tariffs on Mexican and Canadian goods, set to take effect on Feb. 1. The desk then brought in CNBC’s Steve Liesman, along with Chicago Fed President Austan Goolsbee to discuss this morning’s PCE report as well as the economic implications of the tariffs. Later in the show, Wedbush analyst Dan Ives explained why he’s so bullish on Apple AI strategy following the company’s latest quarterly results. Also in the mix; Seema Mody reported on what to expect from President Trump’s meeting with Nvidia CEO Jensen Huang .