Happy Tuesday afternoon to everyone on The Street. Here's a snapshot of where markets ended the trading session, plus tomorrow's trade idea delivered to you today.

• 🟥 | US stocks fell Tuesday partially over rate concerns. Fed Governor Christopher Waller said the central bank may ease monetary policy slower than anticipated. This caused the 10-year Treasury yield to spike 12 basis points to 4.071%.

• 📈 | One Notable Gainer: AMD's stock rose roughly 8%, fueled by analyst optimism about artificial intelligence driving semiconductor demand.

• 📉 | One Notable Decliner: Spirit Airlines' stock tumbled 47% after a judge blocked its merger with JetBlue, citing antitrust issues.

• 💹 | Tomorrow's Trade: Inflation Expectation Vs. Inflation Reality. Scroll down for more.

Plus, learn more about the company that's using cutting-edge technology to reshape the industrial space.

LAST WEEK’S POLL RESULTS

Are you bullish or bearish on Casey’s General Store (CASY) in 2024

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨⬜️⬜️⬜️⬜️⬜️ 🐻 Bearish

Click here to tell us your thoughts on Casey’s General Store

MARKET MOVERS

Apple, Applied Digital & Morgan Stanley

AAPL: Apple's stock fell 1.2% after the tech giant launched rare discounts on several products in China, including its new iPhone 15 line.

APLD: Applied Digital's stock plunged over 26% following a second-quarter miss and a downward revision in its forecast.

MS: Morgan Stanley's shares fell over 4% despite posting revenue that came in higher than expectations. Executives said two “major downside risks” could weigh on Morgan Stanley this year: intensifying geopolitical conflicts and the state of the U.S. economy.

BA: Boeing's shares fell 7.9% after a downgrade by Wells Fargo, citing ongoing issues with the 737 Max 9.

PYPL: PayPal's stock decreased 4% after Mizuho downgraded it to neutral, pointing to rising competition from Apple Pay and Zelle as key concerns.

TOGETHER WITH LASER PHOTONICS

Driving Growth And Innovation: Laser Photonics Corporation's Path To Industry Leadership

Laser Photonics Corporation (NASDAQ: LASE), a leading global industrial developer of CleanTech laser systems for laser cleaning and other material applications, has recently provided an update on its strategic and operational direction for shareholders.

This comes in the wake of Wayne Tupuola, CEO of Laser Photonics, expressing the company's commitment to long-term expansion, growth, and increasing stockholder value. He acknowledged that LPC has only scratched the surface of the market's potential and technological capabilities.

Learn more here

OVERHEARD ON THE STREET

NYP: Uber is closing its Drizly alcohol delivery app, three years after acquiring it for $1.1 billion.

CNBC: Elon Musk is aiming to increase his voting control in Tesla to 25%. He currently holds around 13% of the company's stock.

Nasdaq: UBS raised its S&P 500 target for 2024 from 4,850 to 5,150. Compared to last Friday's close this is a 7.7% upside.

Bloomberg: Global renewable power capacity increased by 50% last year, with a record-breaking trend expected this decade, driven by more affordable solar panels, especially in China.

Reuters: Amazon is cutting 5% of Audible's workforce, as revealed in a memo from the head of the audiobook and podcast division.

TOMORROW’S TRADE IDEA, TODAY

Inflation Expectation Vs. Inflation Reality

Turning the Corner on Inflation?

Go find some wood and knock on it because the US might (might!) be approaching a turning point when it comes to inflation. We want to emphasize the word “might” again, because honestly who knows, but hear us out.

Yes, the latest inflation reading showed a slight uptick. The CPI increased 0.3% last month and 3.4% from a year ago, compared with respective estimates of 0.2% and 3.2%.

But, but, but, the year-over-year core reading, which excludes volatile food and energy prices, was the lowest since May 2021. More specifically, core food prices were up 3.9% on an annual basis — the first time this specific metric has risen less than 4% since May 2021.

Moreover, much of the December uptick came due to rising shelter costs, but Wall Street expects rent growth to slow this year.

Here’s the kicker: the American public is starting to believe that inflation is falling.

According to the Federal Reserve Bank of New York, a recent consumer survey showed that the median expected increase in prices over the next year is 3%. That same survey was conducted in June of 2022 and the median increase expected was 6.8%.

The five-year average for the survey is 2.7%, so consumer sentiment towards inflation is approaching normal levels.

Expectations Matter

Historically, these consumer expectations have had a sizable impact on actual inflation. 

For example, when restaurants expect high inflation to stick around, they might raise prices to get ahead of future profit margin decreases. This only contributes to more inflation and it becomes a bit of a self-fulfilling prophecy. The same can be true in reverse, however. 

As Americans come to expect less inflation (an expectation they haven’t had in a long time), their behaviors might change. If their behaviors change, it becomes more reasonable to expect the Fed to begin cutting rates.

What Does This Mean for Investors?

If this theory holds — Americans expect less inflation, so inflation does fall, and the Fed cuts rates — you’re trying to find sectors and stocks that could benefit from monetary easing.

And as we were writing this article, we figured it would be worth revisiting some of the ideas we’ve already outlined:

• REITs, which we discussed here, typically do well in a rate-cut environment because their borrowing costs are lower and property valuations move higher. 

• High-quality US bonds, mentioned here, could have a decent year. When the cost of borrowing money falls (aka when interest rates fall), bond prices usually rise.

• Utility companies, featured in this week’s Sunday edition of Street Sheet, could see new investors seeking income and looking to move out of money market funds as rates drop.

Now, the big unknown at the moment is everything happening abroad, specifically in the Red Sea. Geopolitical instability there could impact prices globally and make inflation stickier.

So take the above with a grain of salt, but these are the patterns we hope you enjoy us teasing through and putting on your radar this year.

TOGETHER WITH LASER PHOTONICS

Driving Growth And Innovation: Laser Photonics Corporation's Path To Industry Leadership

Laser Photonics Corporation (NASDAQ: LASE), a leading global industrial developer of CleanTech laser systems for laser cleaning and other material applications, has recently provided an update on its strategic and operational direction for shareholders.

This comes in the wake of Wayne Tupuola, CEO of Laser Photonics, expressing the company's commitment to long-term expansion, growth, and increasing stockholder value. He acknowledged that LPC has only scratched the surface of the market's potential and technological capabilities.

Learn more here.

ON OUR RADAR

Bloomberg: California is on the verge of a potential borrowing boom as Democratic state lawmakers draft more than $100 billion of municipal-bond proposals to fill funding gaps for several key legislative priorities.

BI: According to Mark Newton from Fundstrat, election years tend to feature a tough first quarter before stocks begin pushing up again. "The most promising times for investors for 2024 based on seasonal tendencies alone would seem to be March-August and then November into year-end," he wrote in a note.

NPR: China's young workers are facing economic challenges with a record 21% youth unemployment rate among those aged 16 to 24 as of July 2023. China's statistics bureau said it would stop issuing youth unemployment figures because they "needed to be improved."

MW: Manufacturing activity in the New York region collapsed to its lowest level since the early days of the Covid pandemic, the New York Federal Reserve reported Tuesday.

Reuters: Google is cutting hundreds of jobs in its advertising sales team, part of Alphabet Inc., signaling ongoing job cuts this year as companies increasingly turn to AI and automation.