Good morning. Happy Friday.
The Asian/Pacific markets were mostly weak. Japan did well, but China, Hong Kong, South Korea, Taiwan and Thailand posted big losses. Europe, Africa and the Middle East are also weak. France, Germany, Russia, South Africa and Sweden are down the most. Futures in the States point towards a big gap down open for the cash market.
————— VIDEO: State of the Market —————
The dollar is up. Oil is up; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
The state of inflation
Some major economic reports turned in surprisingly strong numbers last week – with January retail sales and CPI prints both beating economists’ estimates. Personal consumption expenditures, to be released at 8:30 AM ET, may continue that trend of a consumer continuing to spend even as economists predict a recession in 2023. Note that PCE is the Fed’s preferred inflation gauge, and follows January’s robust labor market data and yesterday’s downward revision of Q4 GDP amid lower consumer spending growth (more mixed signals?).
Snapshot: Personal consumption expenditures are expected to rise about 1.3% M/M vs. -0.2% in December, while personal income is expected to increase 1.0% M/M vs. +0.2% in the prior month. More importantly, the PCE price index is expected to climb 0.4% M/M, or 4.9% Y/Y, according to consensus estimates, with the core PCE price index forecast to advance 0.4% M/M, or 4.3% Y/Y.
A higher-than-expected number wouldn’t be good for equities, because that implies that the central bank has more hiking to do. Market participants currently put a 73% probability of a 25-bp rate hike to 4.75%-5.00% in March and a 70.3% probability of another 25-bp hike in May. Meanwhile, the chances of a fourth rate hike in June – to 5.25%-5.5% – are a little higher than 50%, according to CME’s FedWatch Tool. The S&P 500 Is In A Massive Death Zone, writes SA marketplace author Lawrence Fuller, citing recent figures on the economic and inflation fronts.
Why does the Fed like PCE? Compared to the headline grabbing consumer price index, which is based on a survey of consumers, personal consumption expenditures are based on a poll of businesses. CPI data also tends to be subject to fewer broad-based revisions, while PCE accounts for substitution effects. See additional differences and more in Manning & Napier’s recent article, Inflation 101: Your Guide To Understanding Inflation. (12 comments)
One year on
U.S. Treasury Secretary Janet Yellen has flagged Russia ending the war in Ukraine as “the most important thing” for the global economy amid devastating effects like the “weaponization of food and energy.” The warning at a meeting of G20 finance ministers and central bank governors came as China pushed for a ceasefire by publishing a 12-point proposal to end the fighting with the conflict entering its second year. The list was immediately criticized by top American officials, like National Security Advisor Jake Sullivan, who said it could’ve “stopped at point one, which is to respect the sovereignty of all nations.” It also called for the end of “unilateral sanctions unauthorized by the UN Security Council,” where Russia can make use of its permanent veto power, as Sino-Russian ties appear to be deepening. (32 comments)
Found dead
Famed billionaire Thomas H. Lee has died at 78, with the New York Post reporting that the leveraged-buyout pioneer was found dead of a self-inflicted gunshot wound at his Manhattan office. Lee, whom Forbes magazine listed as having a $2B net worth, started the firm that became Thomas Lee Partners in 1974, but parted ways with the company in 2005. Under his supervision, Thomas Lee Partners spearheaded several famous and highly profitable leveraged buyouts, including the 1985 $28M purchase of Sterling Jewelers, with sold just two years later for $210M – and is now a part of Signet Jewelers (SIG). He also led 1992’s acquisition of beverage giant Snapple for a reported $135M, which was sold to Quaker Oats – now owned by Pepsi (PEP) – for $1.7B in 1994. After leaving Thomas Lee Partners, Lee founded middle-market private-equity firm Lee Equity Partners, where he served as chairman at the time of his death. (20 comments)
Retirement analysis
How bad was 2022 for retirement accounts? Pretty awful. While 401(k)s rose in the fourth quarter, average balances finished the year down 23% to $103,900. That’s according to Fidelity Investments, the nation’s largest provider of retirement services with more than 43M accounts. Average IRA balances plunged by a similar amount, falling 20% Y/Y to $104,000, while 403(b) plans for public sector and non-profit organizations declined 19% to $92,683. Even more disconcerting is that nearly half of all retirees now expect to outlive their current savings, which may cause some regrets among those that chose to retire early because of the pandemic – only to be hammered by inflation. 2022 also ended with the lowest personal savings rate since 2005, while household debt climbed to its highest level in two decades. (5 comments)
Today’s Economic Calendar
8:30 Personal Income and Outlays
10:00 New Home Sales
10:00 Consumer Sentiment
10:15 Fed’s Mester Speech
1:00 PM Baker-Hughes Rig Count
1:30 PM Fed’s Collins Speech
What else is happening…
Office consolidation: Google (GOOGL) employees to start sharing desks.
DOJ reportedly set to sue Adobe (ADBE) over $20B Figma acquisition.
Chip ETFs surge along with Nvidia’s (NVDA) earnings-fueled rally.
Boeing (BA) pauses delivery of 787 Dreamliners over fuselage issue.
Netflix (NFLX) cuts global prices as it wrestles with growth vs. revenues.
‘Year of building’: Warner Bros. Discovery (WBD) hit by slower ad revenue.
Pioneer Natural Resources (PXD) CEO sees $100 oil by the summer.
Vanguard announces a 2-for-1 split on six equity ETFs.
Should Caterpillar (CAT) buy AGCO (AGCO) for farm machinery growth?
Gut reaction: Beyond Meat (BYND) soars, Domino’s (DPZ) tumbles after earnings.
—————
Good morning. Happy Thursday.
The Asian/Pacific markets were mixed. South Korea and Taiwan did well; Singapore was weak. Europe, Africa and the Middle East are doing well. Poland, Germany, Greece, South Africa, Norway, Spain, Italy Portugal 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 unchanged. Oil is up; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Future of online speech
As mentioned previously on Wall Street Breakfast, there is a big battle taking place at the Supreme Court this week that could reshape the future of the Internet. At issue are the legal rules that govern harmful online content, and who is responsible for their publishing and dissemination. Being heard is a case known as Gonzalez v. Google, which centers around extremist clips on YouTube, as well as Twitter v. Taamneh, which also surrounds terrorist posts and algorithm recommendations.
Backdrop: Pivotal to the discussion is Section 230 of the Communications Decency Act, which was established in the early days of the Internet in 1996. It provides a legal shield that protects tech companies from liability for their users’ posts on their websites – by classifying them as “platforms” rather than “publishers.” It also allows social media companies to moderate posts they deem to be obscene, lewd, excessively violent, harassing etc., as long as they are acting in “good faith.”
“Any changes to the current status quo can be detrimental to Google (GOOG, GOOGL) and investors should be aware of the impending potential risk,” writes SA contributor SL Investments. The article also explores possible changes to Section 230, consequences for advertising revenue, and historical party views of Democrats and Republicans on the matter. Even if reforms or reinterpretations do take place, platforms may not be impacted equally, as can be seen in the comments section.
Outlook: While any rulings could take months, Supreme Court Justices have so far voiced hesitation in upending current protections, especially if there would be far-reaching consequences that would be hard to predict. However, they are exploring whether there should be a legal liability distinction between hosting vs. promoting user content, and whether the companies could be held responsible for aiding and abetting under the Anti-Terrorism Act. The online speech dispute could also be kicked over to Congress if they feel that it’s up to lawmakers on Capitol Hill to set the scope of the law enshrined in Section 230.
How slow can you go?
That was the question at last month’s FOMC meeting, with monetary policymakers debating how much tightening would be needed to rein in inflation without shocking the economy. The minutes showed that “almost all” officials agreed it was appropriate to raise rates by 25 basis points, but there were “a few” that could have supported a larger 50 basis-point hike. As investors debated the hawkish/dovish signals, stocks rose and then fell, with equity futures climbing again overnight. Several other topics that were also discussed included financial stability, the labor market and even crypto, while Fed Chair Jerome Powell warned against complacency following the meeting. (42 comments)
Diabetes disruption
Tech giant Apple (AAPL) has achieved major breakthroughs in a secret project to develop a continuous blood glucose monitoring system, according to Bloomberg. The moonshot-style project known as E5 dates back to the Steve Jobs era, and if the company can hit its ultimate goal of incorporating it into the Apple Watch, the device will become a must-have for millions of people. About one in ten Americans are diabetics, who usually rely on a finger-prick test or newer continuous glucose monitoring (CGM) devices to measure their blood glucose level. However, CGM devices marketed by the likes of DexCom (DXCM), Abbott (ABT) and Senseonics Holdings (SENS) require periodic replacements, sometimes even as early as two weeks. (136 comments)
Deepening ties
Chinese-Russian trade has soared since the invasion of Ukraine, with Beijing becoming Moscow’s largest buyer of oil (a key source of Kremlin revenue), and most of Russia’s auto and cellphone imports coming from the East as it replaces Western suppliers. The two even hailed their ties at a high-profile meeting between Vladimir Putin and China’s top diplomat Wang Yi, describing their relationship as “solid as a mountain” and building on a “no-limits” partnership proclaimed at the 2022 Beijing Olympics. “We are concerned,” U.S. State Department spokesman Ned Price responded at a press briefing. “We have not yet seen the PRC provide Russia with lethal aid, but we don’t believe they’ve taken it off the table either.” Over in Ukraine, President Volodymyr Zelenskyy has warned that China allying itself with Russia would mean WWIII. Let’s hope he’s not right. (14 comments)
Today’s Economic Calendar
8:30 GDP Q4
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
10:30 EIA Natural Gas Inventory
10:50 Fed’s Bostic Speech
11:00 EIA Petroleum Inventories
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $35B, 7-Year Note Auction
2:00 PM Fed’s Daly Speech
4:30 PM Fed Balance Sheet
What else is happening…
Who will likely replace Lael Brainard as the Fed Vice Chair?
Intel (INTC) cuts dividend as Nvidia (NVDA) churns out the chips.
Meta (META) is reportedly weighing thousands of more job cuts.
Revenue numbers from pandemic-favorite Etsy (ETSY) come in hot.
Morgan Stanley gives big boost to global oil demand outlook.
Space services provider Intuitive Machines (LUNR) is still blasting off.
EV maker Lucid (LCID) on the move after Q4 deliveries fall short.
Tesla (TSLA) announces global engineering HQ in Palo Alto.
Lending shakeup: Wells Fargo (WFC) said to lay off mortgage bankers.
Moderna’s (MRNA) vaccine future in focus with pandemic at ‘transition point.’
—————
Good morning. Happy Wednesday.
The Asian/Pacific markets were very weak. Japan, China, Hong Kong, South Korea, Taiwan, Malaysia, Indonesia and the Philippines posted big losses. Europe, Africa and the Middle East are mostly down. The Uk, Denmark, Poland, Turkey, the UAE, Greece, Spain, Italy, Portugal and Austria are down the most. Futures in the States point towards a positive open for the cash market.
————— Masterclass Overview –>> here —————
The dollar is unchanged. Oil and copper are down. Gold is up; silver is down. Bonds are down.
Stories/News from Seeking Alpha…
Retail conundrum
Another key to defining the current economic landscape is on display this week, with earnings from retail heavyweights Walmart and Home Depot. But like most economic indicators these days, they came with a mixed bag full of solid trends and worrying stats, as well as vague commentary about consumer resilience. It’s also making it difficult to predict shopping behavior for the remainder of 2023, resulting in some muted and uncertain outlooks.
On the move: Walmart (WMT) fell as much as 4% after setting cautious profit guidance for the year ahead, but shares ended the session in the green, as investors focused on its earnings topper, strong comparable sales and dividend boost in the current macro environment. Home Depot (HD) also slumped initially, but the stock stayed depressed, and eventually closed out Tuesday down 7%. While earnings beat consensus estimates, sales came in short, and disappointing guidance for fiscal 2023 was not enough to counter a bigger dividend raise and bullish analyst commentary.
Uncertainty was also a common theme on the earnings calls – just take a look at the transcripts and follow-up interviews. “We do see a unique environment with many cross currents right now… Customers are still spending money… [but] balance sheets are continuing to get thinner, the savings rate is roughly half of what it was at a pre-pandemic level and we’ve not been in a situation like this where the Fed is raising at the rate that it does,” said executives from Home Depot and Walmart. “So, that makes us cautious on the economic outlook because we simply don’t know what we don’t know.”
Up next: The earnings parade continues today with quarterly results from TJX Cos. (TJX), which SA contributor Justin Purohit currently calls the “best bet in retail.” Keep in mind that while the SPDR S&P Retail ETF (XRT) stumbled 5% on Tuesday, the industry gauge has climbed 13% YTD, which is nearly triple the 4.5% advance of the benchmark S&P 500. (44 comments)
RTO backlash
Sounding off against CEO Andy Jassy’s recent return-to-office mandate, Amazon (NASDAQ:AMZN) employees are getting upset about taking off their pajamas. A Slack channel protesting the measure – which will require corporate staffers to come in at least three days per week – amassed 16,000 members as of Tuesday night, while an internal petition has so far garnered 5,000 signatures. Many are also putting “Remote Advocacy” in their statuses as they express frustration over childcare arrangements and their work-life balance, as well as a prior commitment to flexible work that gave many employees the ability to find more affordable housing. While Amazon’s RTO policy is not finding favor among the workforce, it could be a boost for local business and commercial real estate markets that are “currently in a recession.” (62 comments)
Counting the minutes?
Stock index futures were little changed overnight after the S&P 500 (SP500) tumbled 2% on Tuesday to mark its largest down day since the December FOMC meeting (and erasing all of its gains for February). “All eyes will be on the release of the Fed’s minutes today, as markets look for guidance on policy going forward,” said Deutsche Bank’s Jim Reid. “However it’s likely to feel a bit dated as a lot has happened in the subsequent three weeks.” The slump in equities has followed a selloff on the fixed-income side, with the 10-year Treasury yield (US10Y) returning to the 4.00% level amid hawkish rhetoric from FOMC policymakers. The Fed has emphasized that it would be data dependent, but the question is what data and if it really trusts the numbers. (6 comments)
Meet Oleato
Olive oil and coffee? It’s “alchemy,” noted legendary Starbucks (NASDAQ:SBUX) leader Howard Schultz, before the company unveiled its new game-changing platform. The new drink line, called Oleato, will feature olive oil infused lattes and iced espressos, as well as “golden foam” that sits atop cold brews. It’ll make beverages “richer” and “luxurious,” according to Starbucks, as the product launches in two dozen Italian locations today (with a rollout planned for Southern California later this spring). Oleato will also be a good-bye toast of sorts for Schultz, whose third round as CEO of the coffee giant comes to an end in April. Check out what SA contributor Alex Ponte has to say about Starbucks’ strategic initiatives and valuation. (5 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:00 State Street Investor Confidence Index
11:30 Results of $22B, 2-Year FRN Auction
1:00 PM Results of $43B, 5-Year Note Auction
2:00 PM FOMC Minutes
5:30 PM Fed’s Williams Speech
What else is happening…
Existing U.S. home sales fade for twelfth straight month.
Norfolk Southern (NSC) faces strict EPA order over Ohio derailment.
Earnings preview: Can Nvidia (NVDA) manage a sequential upswing?
Bill Gates: AI is a threat to Google (GOOG) and will ‘reshuffle’ landscape.
Microsoft (MSFT) inks ‘CoD’ pacts with ATVI deal at critical moment.
World’s largest asset manager launches new metaverse-focused ETF.
Dillard’s (DDS) dives nearly 20% as J.P. Morgan cuts to Sell.
Big buybacks from Baidu (BIDU) and Jeep/Dodge maker Stellantis (STLA).
Coinbase (COIN) beats estimates, but monthly transacting users decline.
New START, the last U.S.-Russia arms control treaty, is in jeopardy.
—————
Good morning. Happy Tuesday.
The Asian/Pacific markets were mixed. China, Thailand and the Philippines did well; Hong Kong, New Zealand and Indonesia were weak. Europe, Africa and the Middle East are mostly down. Turkey, Russia and the Czech Republic are up; Poland, South Africa, Norway, Hungary, the Netherlands, Italy, Israel and Saudi Arabia are down. Futures in the States point towards a moderate gap down open for the cash market.
————— Leavitt Brothers Overview –>> here —————
The dollar is up. Oil and copper are up. Gold is up; silver is down. Bonds are down.
Stories/News from Seeking Alpha…
Military aid
As Russia’s war in Ukraine approaches its grim first anniversary, President Biden made a surprise trip to Kyiv on Monday to walk the streets of the capital and keep allies unified in their support for Ukraine. Air raids sirens even howled as he and Volodymyr Zelenskyy wrapped up a visit to the gold-domed St. Michael’s Cathedral, in a show of solidarity that took Biden two plane trips and a 10-hour overnight train ride to reach his final destination. The brutal war has caused widespread destruction, killing tens of thousands of civilians and soldiers, and comes as both sides prepare for bigger offensives in the spring.
Snapshot: With no meaningful changes on the ground for months, President Biden announced the 32nd package of another $450M in American military aid for Ukraine. It will include air defense radars, Javelin anti-armor systems (LMT, RTX) and artillery ammunition (despite concerns that Ukraine may be draining ammo faster than the West can supply it). Long-range weapons were also discussed, though there was no mention of Lockheed Martin (LMT) F-16 fighter jets, which would upgrade Ukraine’s firepower – but could also escalate the situation with the ability to strike deep into Russia.
The U.S. has already made several U-turns on supplying more advanced weapons to Kyiv, including heavy artillery, M1 Abrams tanks and the Patriot missile defense system. Washington has also sought to prevent Beijing from supplying Moscow with arms, though Chinese foreign ministry spokesperson Wang Wenbin recently said the U.S. was “in no position to make demands.” In terms of defense spending, SA contributor Trade Theory still calls dividend aristocrat General Dynamics (NYSE:GD) the “best war coupon for 2023” given the rising threat environment surrounding Ukraine.
“Freedom is priceless. It’s worth fighting for as long as it takes, and that’s how long we’re going to be with Mr. President,” Biden said at a press conference with Zelenskyy. “When Putin launched his invasion nearly one year ago, he thought Ukraine was weak and the West was divided. He thought he could outlast us, but he was dead wrong. The cost that Ukraine has had to pay is extraordinarily high. The sacrifices have been far too great. We know that there’ll be very difficult days and weeks and years ahead. But Putin’s war of conquest is failing.” NATO renews pledge for Ukraine to become member of military alliance
Response: While battlefield losses have piled up for Russia, its economy has so far survived the sweeping sanctions that have led it to become increasingly isolated on the world stage. On the heels of Biden’s visit to Kyiv, Vladimir Putin also gave a speech this morning to the country’s political and military elite, updating them on his “special military operation” in Ukraine. “We were doing everything possible to solve this problem peacefully,” but NATO “covered us with an umbrella.” “I want to repeat: it is them who are culpable for the war, and we are using force to stop it,” he said to great applause, while thanking people in the separatist regions of Donetsk and Luhansk for “being together with your motherland” and that “means we become even stronger.” (41 comments)
Retail on tap
Walmart’s (WMT) earnings this morning could jolt the retail sector. Comparable sales are forecast to rise 4.9% during the quarter – after stripping out fuel revenue – and expect executives to discuss inventory issues, freight costs, vendor relationships and supply chain challenges on the conference call. Overall, analysts see a cautious tone from the company due to the competitive environment and choppy economic backdrop, but see what SA Marketplace author The Value Pendulum views as key items to consider. Keep another eye on Home Depot (HD) earnings in the premarket session, with macro factors in focus as the retailer attempts to maintain sales momentum after a pandemic-driven boom. (20 comments)
Paid verification
Taking a page from Elon Musk’s Twitter playbook, Meta (META) CEO Mark Zuckerberg has confirmed a similar subscription service. “Meta Verified” will allow users to verify their accounts using a government ID, with prices starting at $11.99/month on the web or $14.99/month on iOS and Android. It’s mainly targeted at content creators, enabling them to expand their communities, with a blue verification badge, extra impersonation protection and direct access to customer support. “This new feature is about increasing authenticity and security across our services,” Zuckerberg added in a Facebook post. “We’ll be rolling out in Australia and New Zealand this week and more countries soon.” (93 comments)
Gonzalez v. Google
The future of online speech is up for discussion at the Supreme Court as justices begin to hear oral arguments today in a showdown against Google (GOOG, GOOGL) and the social media world. The case surrounds the death of Nohemi Gonzalez – a 23-year-old American who was killed in the November 2015 Paris attacks – and specifically calls into question Section 230 of the Communications Decency Act, which was passed back in 1996 in the early days of the internet. SCOTUS will also hear a similar case against Twitter later this week. Here is a breakdown of both sides of the recommended content argument. (4 comments)
Today’s Economic Calendar
9:45 PMI Composite Flash
10:00 Existing Home Sales
1:00 PM Results of $42B, 2-Year Note Auction
What else is happening…
China moving out of favor as the world’s production house.
Elliott said to offer financing for Manchester United (MANU) bid.
Does January’s surge in retail sales point to resilience or last hurrah?
Steep fall in Amazon (AMZN) shares hits employee compensation plan.
Greater electrification: Uber (UBER) now pushing EVs in India.
Tesla (TSLA) may be weighing takeover bid for Sigma Lithium (SGML).
Another earthquake shakes the battered Turkey-Syria border.
COVID vaccine sales to see decline through end of decade.
NBA inks new strategic partnership with China’s Ant Group (BABA).
TV usage ticks up, though streaming still tops market share.
—————