Good morning. Happy Friday.
The Asian/Pacific markets did well. Japan, China, Hong Kong, South Korea, New Zealand and Singapore posted gains while India and Thailand were weak. Europe, Africa and the Middle East currently lean up. France, Turkey, Greece, Spain, the Netherlands, Italy, Portugal and the Czech Republic are up; Hungary is down. Futures in the States point towards a positive open for the cash market.
————— Masterclass Overview –>> here —————
The dollar is up. Oil is up; copper is down. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
Next episode
Shares of Netflix (NFLX) jumped 7.1% AH on Thursday following a Q4 earnings report where the company easily beat Street and management expectations for subscriber growth – and narrowly cleared the bar on its newfound top focus of revenue. Revenues grew 1.9% year-over-year to $7.85B, and the company added a net 7.66M subscribers globally to hit 230.75M total memberships. That’s 70% higher than the 4.5M net adds expected by the company, while Wall Street was even more cautious, forecasting 4.1M net adds.
SA commentary: Subscriber growth is accelerating once again and the stock is even up 30% since Netflix’s last earnings report in October. SA contributor Livy Investment Research was quick to point out that “Netflix deployed its ad-supported streaming tier in the middle of the fourth quarter, coming at an opportune time as the increasingly price sensitive consumer amid tightening financial conditions and a looming economic downturn escalate churn risks.” However, “looming macro headwinds and the wider rollout of paid-sharing beginning 1Q23 will likely weigh on Netflix’s normalizing profits further,” and the company will need to prove itself as streaming rivals like Disney+ (DIS) come after its market share (NFLX is still down 40% over the past year).
New leadership is also set to take the reins as Netflix co-founder Reed Hastings steps down as CEO, but stays on as executive chair. Hastings has been at the helm since 1997, when the company was renting out DVDs by mail, but later transformed the company into the world’s most dominant streaming service. The succession planning has been in the works for several years, with Ted Sarandos (previously chief content officer) becoming co-CEO in July 2020, and COO Greg Peters (who was a key player in the ad-supported tier) now getting promoted to the other top spot.
Quote: “It was a baptism by fire, given COVID and recent challenges within our business. But they’ve both managed incredibly well, ensuring Netflix continues to improve and developing a clear path to reaccelerate our revenue and earnings growth,” Hastings wrote in a blog post. “So the board and I believe it’s the right time to complete my succession. For myself, I’ll be helping Greg and Ted, and, like any good Chairman, be a bridge from the board to our co-CEOs. I’ll also be spending more time on philanthropy, and remain very focused on Netflix stock doing well.” (133 comments)
Learn to Code
Not anymore? Google (GOOG, GOOGL) is laying off 12,000 employees, or 6% of its workforce, adding to the slew of major U.S. tech companies cutting jobs amid fears of an oncoming recession. “These are important moments to sharpen our focus, reengineer our cost base, and direct our talent and capital to our highest priorities,” CEO Sundar Pichai wrote in a memo. “The fact that these changes will impact the lives of Googlers weighs heavily on me, and I take full responsibility for the decisions that led us here.” Besides downsizing their workforces together, Big Tech is standing united on protecting Section 230 at the Supreme Court amid several cases centering around online speech. (17 comments)
Latest domino to fall
Contagion in the crypto sector continues as lender Genesis filed for Chapter 11 bankruptcy protection in Manhattan federal court. The company had suffered crippling losses from the collapses of FTX and hedge fund Three Arrows Capital (to which it had made many of its loans), and had frozen customer withdrawals back in November. Among Genesis’ creditors is Gemini, the crypto exchange founded by the Winklevoss twins, showing just how much of the industry is intertwined. Nearly $1B worth of customer money was tied up in Gemini Earn, a high-yield crypto lending product, which is now being subject to a lawsuit by the SEC.
Surprise, surprise
Credit Suisse’s global strategy team asks, “What if we’re wrong?” Looking at a broad spectrum of base-case scenarios and market calls, analysts led by Andrew Garthwaite analyze risks to those assumptions, while laying out 10 market surprises for 2023. The predictions include movement on oil, the S&P 500, gold and the war in Ukraine. See the full list here.
Today’s Economic Calendar
9:00 Fed’s Harker Speech
10:00 Existing Home Sales
1:00 PM Baker-Hughes Rig Count
1:00 PM Fed’s Waller Speech
What else is happening…
More tech layoffs as Intel (INTC) deepens job cuts in California.
Monetary policy will need to stay restrictive for some time – Brainard.
Inflation in Japan reaches highest level since 1981.
Credit card stocks drop as Discover (DFS) sees deterioration.
Procter & Gamble (PG) volume declines drag on peers.
WhatsApp (META) fined by Ireland for breach of EU law.
Solar shares sink in biggest intraday decline since October.
JPMorgan (JPM) rules out more special pay awards for CEO Jamie Dimon.
ChargePoint (CHPT) tumbles 10% as Wallbox layoffs jolt the sector.
WWE’s McMahon reaches settlement with ex-referee who accused him of rape.
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Good morning. Happy Thursday.
The Asian/Pacific markets leaned up. China, South Korea, Australia and Indonesia led while Japan and the Philippines lagged. Europe, Africa and the Middle East are down big. The UK, Denmark, Poland, France, Germany, Russia, Greece, South Africa, Finland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Israel, Austria, Sweden and the Czech Republic are down 1% or more. Futures in the States point towards a moderate down open for the cash market.
————— Jason Leavitt’s Masterclass in Trading —————
The dollar is down. Oil is flat; copper is down. Gold is up; silver is down. Bonds are down.
Stories/News from Seeking Alpha…
Debt ceiling showdown
The U.S. today will reach its statutory debt limit of $31.4T, prompting a series of extraordinary measures to avoid a default on government debt. Looking to conserve capital at the federal level, the Treasury will start withholding investments from retirement funds for some government employees, while other measures will take weeks or months to kick in. “Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability,” Treasury Secretary Janet Yellen declared. “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
SA commentary: “The Treasury could just ignore Congress and issue notes and bonds with coupons well above current yields,” wrote SA contributor James Baker, referencing a novel solution to the debt crisis. “There is a big mess taking place behind the scenes,” noted Mark Grant, saying there might be drastic impacts on the financial condition of the Fed. “Reducing the deficit is not the same as reducing the debt,” added Ronald Surz, cautioning that “U.S. debt continues to climb into the stratosphere.”
While there will be discussions over the next few months, things are not likely to get serious until after the tax season deadline in mid-April, when the Treasury will know how much receipts and revenue have come in. That will reveal exactly how much time will be left on the clock until the government runs out of cash, though its obligations are likely to be funded until at least June. While raising the debt ceiling has turned into a bitter partisan issue over the years – even prompting a credit rating downgrade of U.S. government debt in 2011 – both parties have always reached a late deal to avoid the country going into default.
Game of chicken: Tensions are definitely on display this time around due to the razor-thin margins in Congress. Republicans are looking for big budget cuts, while Democrats and the Biden administration are threatening to play hardball with a clean vote and no conditions. Only a handful of rejections could derail any deal, and concessions may be a lot harder to come by, especially with extreme flanks enveloping both sides of the debt limit debate. (23 comments)
AI Age
With Microsoft (MSFT) investing billions of dollars into ChatGPT, and set to integrate the technology into its Azure cloud service, the world of artificial intelligence stands on the brink of a widespread breakthrough. That’s the opinion of Oppenheimer analyst Timothy Horan, who said that Microsoft pairing up with ChatGPT developer OpenAI has created an “iPhone Moment” for artificial intelligence, and that “things will now move fast” for AI at a speed that until now wasn’t possible. He calls ChatGPT’s breakthrough “epochal” and that, finally, “the AI Age has arrived.” SA Marketplace authors, Robert & Sam Kovacs, also flag four dividend stocks to profit from the ChatGPT AI revolution. (60 comments)
Losing momentum
Economists are seeing more red flags for the U.S. economy following the latest batch of reports on Wednesday. Retail sales dropped 1.1% in December, a sharper decline than was predicted (see the winners and losers here), while a separate report showed the third consecutive month of contraction in industrial activity. Looking to nail a soft landing, the Fed is likely to respond to the data by easing its foot off the accelerator, with markets fully pricing in a softer quarter-point interest rate hike at the end of the month. According to newly released stats from the National Retail Federation, retail sales during the holiday shopping season also lagged industry expectations. (16 comments)
Cloudy skies
The holiday meltdown at Southwest Airlines (NYSE:LUV) in December was not an anomaly, and many airlines will not be able to handle all the flights they plan to operate this year (let alone the anticipated growth). That was the message from United (NASDAQ:UAL) CEO Scott Kirby, who touted a dire view of the industry’s capacity following the company’s Q4 earnings results. Critical investments in tools, infrastructure and people are necessary amid a shortage of pilots and airline workers, outdated technology and strains on the FAA (remember the system outage a week ago?).
We want your feedback! Send a message to wsbfeedback@seekingalpha.com.
Today’s Economic Calendar
8:30 Housing Starts and Permits
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
1:15 PM Fed’s Brainard Speech
4:30 PM Fed Balance Sheet
6:35 PM Fed’s Williams Speech
What else is happening…
Microsoft (MSFT) confirms 10,000 layoffs, will take $1.2B charge.
Slowest quarterly revenue growth? Netflix (NFLX) set to report earnings.
New Zealand’s Jacinda Ardern to resign as prime minister.
Shiba Inu (SHIB-USD) jumps higher amid upcoming Shibarium launch.
Oral herpes drug developer Squarex Pharmaceutical (SQRX) files for IPO.
Johnson & Johnson (JNJ) scraps HIV vaccine program after Phase 3 setback.
Crypto lender Genesis Global likely to file for bankruptcy this week.
… and crypto news site CoinDesk said to tap Lazard to explore sale.
Apple (AAPL) unveils new $299 HomePod, continuing product launch blitz.
Renault (OTCPK:RNLSY), Nissan (OTCPK:NSANY) near deal for alliance reset.
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Good morning. Happy Wednesday.
The Asian/Pacific markets leaned up. Japan, Hong Kong, India and the Philippines did well; South Korea was weak. Europe, Africa and the Middle East are mostly up. Turkey, South Africa, Finland, Hungary, Spain, the Netherlands, Italy, Austria and the Czech Republic are leading. Futures in the States point towards a positive open for the cash market.
————— VIDEO –>> State of the Market —————
The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
A tale of two banks
Earnings season is getting underway as the biggest U.S. banks parade down Wall Street. While many things have been expected, like the rise in net interest income and a slowdown in dealmaking, investors are sending some of the biggest names in the business in opposite directions. Things were starkly seen on Tuesday as Goldman Sachs (GS) finished the session down 6.4%, whiles shares of Morgan Stanley (MS) ended the day with a gain of 5.9%.
What happened? Shareholders want to make sure that banks are focusing on other types of revenue sources, with a recession (or worries about one) threatening to derail investment banking profits. Goldman Sachs has not been so successful in diversifying into consumer banking and ended up posting its worst earnings miss in a decade. Loan loss provisions also came in higher than expected, while its Platform Solutions unit – which includes its consumer-focused GreenSky, credit card, and Marcus units – incurred $1.8B in expenses for all of 2022. See the full stats here.
On the other side of the Street, Morgan Stanley was quick to show off the performance of its wealth management division, with margins approaching 30% and $6.6B in pretax profits for 2022. That led the bank’s earnings to meet expectations, while its revenue total came in higher than the consensus. “The firm did what it was supposed to do with our more stable Wealth and Investment Management businesses offsetting declines in Institutional Securities,” declared CEO James Gorman. “This is hard evidence of the transformation we’ve made to become increasingly durable.” Missed the earnings call? Check out the full transcript.
Elsewhere: Q4 reports last week from commercial banking giants also saw their stocks waver as they set aside billions of dollars in loan-loss provisions. Shares soon recovered after JPMorgan (JPM) CEO Jamie Dimon projected a “mild recession,” compared to his “economic hurricane” warning from last summer, while Bank of America (BAC) and Citigroup (C) echoed his views. The banks will still have to boost their other revenue sources outside of net interest income amid risks that the “Fed funds could deviate from forwards, balance attrition and migration assumptions could be meaningfully different,” or depositors find better places to put their money.
Tech layoffs
More pink slips might be on the way, with reports that Microsoft (MSFT) is laying off as much as 5% of its workforce, or nearly 11,000 employees. The cuts would take place in the company’s engineering and human resources units, and follow similar layoffs at Salesforce (CRM), Amazon (AMZN) and Meta Platforms (META). Microsoft most recently shrank its workforce in October, including 1,000 employees across several areas of its business – like its Xbox division – as fears grow over slowing demand and the global economic outlook. (47 comments)
Last one sitting?
The Nikkei 225 Index (NKY:IND) soared 2% and the yen tumbled 2% overnight following a surprise announcement from the Bank of Japan. Key interest rates will remain in negative territory, a level where they have been since 2016, and the yield curve tolerance band that shocked markets in December was left unchanged. While the BOJ is the last major global central bank to maintain an ultra-loose monetary policy, many are questioning how long that could last in the wake of inflationary pressures. SA contributor Hunting Alpha still calls the iShares MSCI Japan ETF (EWJ) the sumo wrestler of ETFs in a recent technical analysis. (3 comments)
Another legal battle
Jury selection has wrapped in a trial over Elon Musk’s tweets claiming he had “funding secured” to take Tesla (TSLA) private in 2018. A group of nine jurors are now set to hear opening arguments today in a courtroom showdown that is scheduled to last for around 10 days. Millions – or possibly billions – of dollars in damages are on the line if Musk is found to have knowingly and materially misled shareholders. Despite the additional hot water, Tesla was the biggest gainer in the S&P 500 Index (SP500) on Tuesday with a 7.4% push higher. See why here (and it wasn’t because of testimony that Tesla’s self-driving footage was faked). (15 comments)
We want your feedback! Send a message to wsbfeedback@seekingalpha.com.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
9:00 Fed’s Bostic Speech
9:15 Industrial Production
9:30 Fed’s Bullard Speech
10:00 Business Inventories
10:00 NAHB Housing Market Index
1:00 PM Results of $12B, 20-Year Bond Auction
2:00 PM Fed’s Beige Book
4:00 PM Treasury International Capital
What else is happening…
Fed details climate risk analysis plan for biggest U.S. banks.
Wyoming legislators propose a ban on electric vehicles.
Carvana (CVNA) plays defense with new rights plan.
U.K. inflation dips for second straight month, in line with consensus.
Apple (AAPL) eyes cheaper mixed-reality headset, postpones AR glasses.
United Airlines (UAL) gains on bottom line beat, bullish forecast.
Disney (DIS) slams activist Peltz amid proxy fight, defends Iger record.
Avatar sequel (DIS) passes The Lion King at domestic box office.
Albertsons (ACI) can pay dividend after Washington State drama.
Bitcoin (BTC-USD) recovers all losses since the collapse of FTX.
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Good morning. Happy Tuesday.
The Asian/Pacific markets were mixed. Japan, India and Indonesia did well; Hong Kong and South Korea were weak. Europe, Africa and the Middle East lean down. Turkey is up; Poland, Russia, Finland and Portugal are down. Futures in the States point towards a down down open for the cash market.
————— VIDEO –>> State of the Market —————
The dollar is down. Oil is up; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Demographic crisis
A historic shift is taking place in China that is set to have long-term impacts for both the domestic and global economy. According to the National Bureau of Statistics, the nation’s total population fell by 850K in 2022 to 1.412B, marking the first decline since 1961. In the near term, things may even escalate quicker than expected as deaths outstrip births. COVID-related fatalities are quickly spreading through the population – and could lead to a toll in the millions – as the country gives up on its strict zero-COVID policy.
Snapshot: China has long been a key source of labor and demand, but its birth rate has continued to decline as couples delay or decide against having children. That’s despite the lifting of the government’s one-child policy in 2015, and incentives rolled out in 2021 that encouraged people to have more babies (tax deductions, housing subsidies and longer maternity leave). Sky-high education costs have also led to one of the lowest fertility rates in the world, as well as a trend towards rapid urbanization in a country that had traditionally been rural.
Baby-related Chinese stocks sold off sharply following the latest announcement. Kidswant Children Products and incubator maker Ningbo David Medical Device tumbled around 8%, while baby formula manufacturer China Feihe (OTCPK:CFEIY) fell as much as 3% in Hong Kong. Adding to the fears overnight was the latest economic figures, which slumped to one of their worst levels in nearly half a century. China’s GDP growth expanded by only 3% in 2022, missing the official target of “around 5.5%” and slowing sharply from the 8.4% growth recorded in 2021.
Outlook: The demographic trend calls into question whether China will get old before it gets rich. The United Nations also projects that in 2023, China will lose its status as the world’s most populous country to India, whose estimated 1.4B population is still growing. On that note, SA contributor Macrotips Trading points to the iShares MSCI India ETF (INDA) for boosting exposure to large- and mid-cap Indian equities as the country revs its growth engine. In the short term, India is benefiting from access to discounted Russian oil – which has allowed the economy to grow rapidly with relatively less inflation than others – and in the long term, India is forecast to have the largest working-age population, setting it up to be the world’s manufacturing hub. (7 comments)
New campaign
Activist investor Ryan Cohen has reportedly amassed a stake worth hundreds of millions of dollars in Alibaba (BABA) and wants the company to pursue more share buybacks. Cohen, founder of online pet retailer Chewy (CHWY), has gained fame in recent years among meme-stock traders, especially for his stake in GameStop (GME), where he later became chairman. News of Cohen’s stake in Bed Bath & Beyond (BBBY) originally sent its shares soaring 34% on March 7 and a disclosure that he had exited his stake sent the stock plunging 41% on Aug. 19. Will the same happen at Alibaba? (37 comments)
#WorldEconomicForum
The latest gathering of the world’s political and business elite, plus the usual smattering of celebrities, is taking place this week at the Swiss Alpine resort of Davos. The annual meeting of the WEF comes as economic storm clouds gather for the global economy, and as the ‘r’ word becomes featured on many corporate earnings calls. In fact, recession has become the top concern for CEOs worldwide, according to a recent survey by The Conference Board. Tomorrow, Treasury Secretary Janet Yellen will also meet her Chinese counterpart Liu He as tensions linger between the world’s two largest economies.
ROE control key
Return on equity for the broader market has been lackluster for the past three quarters and this year will likely see a drop in median S&P 500 (SP500) (SPY) ROE, according to Goldman Sachs. “An upwards inflection in S&P 500 ROE will be difficult to achieve in 2023, as headwinds from a higher cost of capital and higher taxes will place further strain on profitability,” equity strategist David Kostin wrote in a note. Goldman rebalanced its ROE growth basket, adding new names to the 50 stocks it expects to beat the broader market (where the median ROE is expected to be -6%). New names include PepsiCo (PEP), Wells Fargo (WFC) and AMD (AMD). See the rest here. (45 comments)
Today’s Economic Calendar
8:30 Empire State Mfg Survey
3:00 PM Fed’s Williams Speech
What else is happening…
Get ready! Goldman Sachs (GS) is the latest bank to report earnings.
Bain Capital co-chairman Pagliuca to retire after 34 years at the firm.
Drugmakers welcome new year with 450 drug price hikes so far.
Walgreens (WBA) removes purchase limits on children’s fever meds.
Linked to firearm sales, first cannabis bill introduced in new Congress.
Binance launches an off-exchange crypto trade settlement solution.
Credit Suisse expands ‘Top of the Crop’ list to five stocks.
Following Tesla (TSLA), XPeng (XPEV) cuts prices on most models.
Microsoft (MSFT) likely to receive EU warning over Activision (ATVI) deal.
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