Wall Street Lunch: Stubborn Retail Inflation Jeopardizes Big Fed Rate Cut (undefined:AAPL)

Listen below or on the go on Apple Podcasts and Spotify

Core CPI sticky, but arrives as expected. (0:15) Jobless claims hit four-year high. (1:25) The humanoid robot that can cook. (4:24)

This is an abridged transcript of the podcast:

Our top story so far, retail inflation remains stubborn, potentially taking a big Fed rate cut next week off the table.

The August Consumer Price Index rose +0.4% M/M in August, topping the +0.3% consensus and accelerating from +0.2% in July. Annually, CPI growth was +2.9%, matching the consensus and advancing from +2.7% in the prior month.

August core CPI, ex food and energy, rose +0.3% for the second month in a row, meeting expectations. Core CPI remained up +3.1% annually, also matching forecasts.

The index for shelter was the largest factor in the all-items monthly increase, rising 0.4% last month, the fastest pace recorded since the start of the year. The food index increased 0.5% over the month, with the food at home index rising 0.6% and the food away from home index gaining 0.3%.

Economist Ernie Tedeschi notes core goods in CPI rose 0.3% on the month, the “strongest monthly price growth for core goods this year. Driven by pops in apparel price growth (0.5%) and used vehicles (1.0%). Recent months making clear that tariffs are materially weighing on consumer prices.”

And Pantheon Macro says that the pass through of tariffs to core goods is only 1/3 complete.

On the more dovish side of data, weekly initial jobless claims spiked to a four-year-high, raising even more labor market concerns.

Claims rose to 263,000 from 236,000, well above the 235,000 consensus. But there could be some Labor Day noise in the figures.

Kathy Jones, strategist at Schwab, said: “Jobless claims jump while inflation stays elevated. Tough combination for setting monetary policy.”

A quarter-point rate cut is fully priced in, and the odds of a big 50 bps cut have dropped back below 10%.

Skyler Weinand of Regan Capital says: “We expect the Fed to cut 25 by basis points next week and to follow through with another two 25 basis point cuts this year. At this point, all the data has been released, and the Fed has mostly telegraphed a 25-basis point cut starting in September. Anything larger than that may signal that they are either really worried about full employment or are admitting to being behind the curve.”

Fed speakers remain in a blackout period until after next week’s meeting. But that doesn’t mean that their AI avatars can’t tell us something.

A study by George Washington University created AI versions of FOMC members, using the members’ historical data and profiles reflecting their public stances. The simulation then used real economic data and financial news to come to simulate a policy meeting.

“Political pressure scenarios increase dissent and dispersion,” the study concluded, noting that pressure tends to lead to slightly more dovishness.

The study tested different stress cases. It simulated the political pressure on Fed Chairman Jerome Powell, and the meetings concluded with the dissent of one member in 88% of runs, while the average outcome was within the target band.

Another test using weaker labor data saw that rates were pushed down to about 4.30%, and dissent increased.

My personal prediction for next week is three dissenting votes: Christopher Waller, who wants to be the next Fed chief, Stephen Miran, who is President Trump’s new appointee and Michelle Bowman, who is just really worried about the labor market.

Among active stocks, D.A. Davidson downgraded Apple (AAPL) to Neutral from Buy but maintained its $250 price target on the stock.

Analyst Gil Luria said: “While we were initially excited about the prospects of Apple’s role in the AI ecosystem and potential major upgrade cycle, it has become clear to us that neither of those are likely to come to fruition in the near term.” He added that after recent product announcements that have left them “uninspired,” Apple may not significantly leverage AI anytime soon.

Kroger (KR) reported results, with identical-store sales excluding fuel up 3.4% for the quarter, ahead of 2.8% consensus. Sales growth during the quarter was led by the pharmacy, e-commerce and fresh food.

Looking ahead, Kroger sees full-year identical-store sales ex-fuel growth of +2.7% to +3.4%. Full-year EPS is seen at $4.70 to $4.80 (midpoint $4.75) vs. $4.82 consensus.

And apparel brands company Oxford Industries (OXM) soared after the company beat estimates for quarterly profit and outlined a $1.475 billion–$1.515 billion full-year sales targets.

CFO Scott Grassmyer said sales will dip at Tommy Bahama and Johnny Was, offset by growth at Lilly Pulitzer and Emerging Brands, with flat to slightly positive comps expected for the year.

And in other news of note, time to brush up on Asimov’s Three Laws of Robotics.

Jack Ma’s Ant Group, the Alibaba-linked (BABA) fintech giant, unveiled its first humanoid robot, marking its entry into China’s growing push to rival the U.S. in developing next-generation robotics.

The company’s unit Shanghai Ant Lingbo Technology Co., also known as Robbyant, demonstrated its R1 humanoid model at the 2025 Inclusion Conference on The Bund waterfront in Shanghai.

Ant’s large model enables its R1 robot to deal with end-to-end planning of complex tasks. The robot can serve as a tour guide, sort medicine at pharmacies, provide medical consultation or perform basic kitchen tasks.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.