#1 Data to Watch for Today’s Trading

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The S&P 500 hits another all-time high yesterday after an unexpected drop in retail sales calmed down the fears of red-hot consumer spending (which could aggravate inflation). The anxiety was high after a hotter-than-expected inflation report earlier this week. Anticipating a weaker economy, traders now fully price in a rate cut in June according to Fed swaps. Why? The reason is simple. The Federal Reserve might feel inclined to cut interest rates if the economy cools down -- as long as inflation keeps trending downward. Fed officials are aware that real interest rates will rise if the economy slows down, so a rate cut looks like a likely scenario if consumer demand falls. Rate cuts could be the key to avoiding a recession. Lower rates generally stimulate economic activity. But an extremely-strong economy has given the Fed a pause because officials don’t want to simulate and risk reaccelerating inflation. - “The data is complicated — a true dichotomy,” said Gina Bolvin president of Bolvin Wealth Management Group. “The market will be volatile as it digests the data and scrutinizes every data point.” Gina Bolvin president of Bolvin Wealth Management Group (Photo: Bloomberg) #1 data to watch out for today’s trading: Today, we will get the latest inflation reading – the producer price index. It is not as closely watched as the CPI, but the markets want to see more data, especially after the recent hotter-than-expected inflation reading. - “Tomorrow’s PPI will be closely watched by markets and should drive the near-term direction for the equity and bond markets,” said Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report. The biggest question in the stock market is rate cuts. The Federal Reserve will operate in tight spots if the economy cools down while inflation remains sticky. Things are easy lately because inflation is falling while the economy is growing. But things will be complicated if inflation persists at the 3% level while the economy cools down. That’s when the central bank will need to make tough decisions. High-stake decisions are ahead for the Fed and the investors. The Most Unexpected Software Stock? Today’s Stock Pick: Deere & Company ([DE]( The single most important fundamental of smashing the benchmark in investing is being ahead of the herd. As a result, you can purchase shares at a cheap valuation before the crowd jacks it up. Precisely, that is what you have here with John Deere. For many decades, Deere is known as the hardware company that manufactures agricultural machinery. Naturally, the company is pigeonholed into that category. However, Deere has quietly transformed itself into a technology company. In fact, it is heading in the direction of becoming the “Tesla of farming.” It has mastered the hardware side of the business. Now, its new software is turning heads for its ability to leverage artificial intelligence and machine learning to boost crop performance dramatically. (Technology is NOT a new game for Deere – it partnered with NASA to develop the world’s first internet-based GPS tracking system.) Deere’s VP of autonomy and automation, Jorge Heraud, said its AI-powered systems could identify and kill weeds in real-time. And farmers could operate Deere’s self-driving tractors from a mobile app: - “This is super exciting. It’s not just driver assistance … the farmer can go and do something else. They can leave the cab and operate everything from an app,” said Heraud. When a reporter asked Heraud if the “fully-automated farm of the future” would become reality within the next decade or so, Heraud said: “It’ll be here before the end of the decade.” What does this mean? Deere’s cutting-edge technology is slowly delivering a software margin that hasn’t been reflected in its stock valuation. (Source: Deere) Software margins: Back in 2016, Deere enjoyed a measly OROA of about 15%. Over the years, the metric climbed quietly until it reached a new high of about 50% in 2023. (Source: Deere) With an incredible ROI, the stock is trading far too cheap at a P/E of 10. Wall Steet hasn’t fully caught on to Deere’s tech transformation, but that certainly will change when Deere maintains its superior financial performance. Owning to its desire to become the innovator in its sector, it allocates a huge percent of its sales to the R&D investment at around 3.9%: (Source: Deere) Do you love dividends? Then you’ll love this! Even though Deere is an innovative company, it pays out generous dividends to shareholders. Its dividend per share grew by more than ten-fold since 2004. (Source: Deere) Bottom line: John Deere is developing a software business that could be massively profitable. Its A.I. already proved to turbocharge crop production, and it is going to be a no-brainer for farmers to employ its technology. However, its P/E doesn’t reflect its software potential despite the increased margins. Now is the time to get in before Wall Street analysts reset the valuation for the company. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](