Good morning. Happy Friday.
The Asian/Pacific markets were split. Japan and Malaysia did well; China, Hong Kong and Thailand were weak. Europe, Africa and the Middle East are currently down big. The UK, Denmark, Poland, France, Germany, South Africa, Switzerland, Norway, Spain, the Netherlands, Italy, Portugal and Sweden are down big. Futures in the States point towards a moderate gap down open for the cash market.
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The dollar is up. Oil is up; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
The labor force
The U.S. is expected to have added fewer jobs in the last month of 2023 as the transitory effects from the auto and Hollywood strikes that boosted November’s gains are now in the rearview mirror. Nonfarm payrolls, which the U.S. Labor Department is slated to publish at 8:30 AM ET, are seen cooling to 170K in December from the 199K estimate in the prior month. That would spell good news for the Federal Reserve, which is banking on softer conditions to pull off a “soft landing” scenario for the economy.
Watch the 4% levels: The unemployment rate, which has stayed low over the last two years, is expected to tick up to 3.8%, but remain below the 4% mark for the 23rd straight month. Similarly, on a Y/Y basis, average hourly earnings are expected to grow 3.9%, which would be the first time wage gains have come in under 4% since mid-2021. Any deceleration would be welcome news for the U.S. central bank, as it seeks to bring labor demand and supply back into balance in a bid to tame inflation.
Last month, the Fed made a dovish pivot, holding its benchmark lending rate steady for a third straight meeting and signaling its intentions to start cutting rates this year. However, if inflation continues to be stubborn and reaccelerates, then the Fed’s rate projections could be subject to change and thus disappoint markets. Keep an eye on this morning’s numbers, which can impact how investors size up Treasuries, as well as stocks that have cooled in the new year following an impressive nine-week winning streak.
SA commentary: “The labor market data is likely to confirm the disinflationary process, which will allow the Fed to start cutting interest rates, as expected,” wrote SA analyst Damir Tokic. “The reaction of the bond market is likely to guide the reaction of the stock market, which is prone to a profit-taking dip after the end-of-the-year rally.” Chris Lau, Investing Group Leader of DIY Value Investing, also feels that Friday’s jobs report “is unlikely to offer any dramatic changes” to market participants’ rate expectations.
Market cap battle
Concerns surrounding Apple (NASDAQ:AAPL) may soon lead to a new titleholder of the world’s most valuable company. Microsoft (NASDAQ:MSFT) closed out the session on Thursday with a market cap of $2.73T, compared to the $2.83T of its tech rival, which has fallen in every session of the new year. While Apple has held the crown since Nov. 21, it was recently hit with a set of downgrades at Barclays and Piper Sandler over concerns about an iPhone slowdown, hardware trouble and macroeconomic pressures. On the other hand, Microsoft, which just added a Copilot AI button to its Windows keyboard, has been forecast to be one of the AI favorites in 2024 as mentioned in Wall Street Breakfast’s special holiday edition. (11 comments)
Price protest
The grocery retailer may be largely unknown in the U.S., but it is one of the globe’s largest supermarket chains with more than 12K locations across more than 30 countries. Carrefour (OTCPK:CRRFY) is no longer selling PepsiCo (NASDAQ:PEP) products in France, Italy, Spain and Belgium as the retailer says “pas plus” to price hikes. Carrefour’s protest against higher prices might be well placed as PepsiCo has raised prices for seven consecutive quarters by double digits and has even claimed to have shrunk packaging sizes to meet consumer demand for portion control. The maker of Lay’s, Doritos, 7 Up, and Lipton tea saw revenue increase by 6.7% in the latest quarter and it is expected to have increased by 10% in 2023. (37 comments)
Masking returns
Hospitals across several states, including those in New York, California, Illinois, and Massachusetts, have reimposed masking requirements for patients and staff amid a spike in COVID and flu infections. The decision comes as the two respiratory viruses gain momentum in the U.S. According to the latest data from the CDC, COVID-related hospitalizations have risen more than 29K from Dec. 17-23, indicating a ~17% rise over the prior week, while flu cases have reached close to 15K over the same period. In NYC, all 11 public hospitals, 30 health centers, and five long-term care facilities have made masks mandatory, citing potential staffing issues as a reason. (132 comments)
Today’s Economic Calendar
8:30 Non-farm payrolls
10:00 Factory Orders
10:00 ISM Services Index
1:00 PM Baker-Hughes Rig Count
1:30 PM Fed’s Barkin Speech
What else is happening…
iPhone 17 (AAPL) said to get huge camera upgrade amid sales concerns.
Motivation That Moves You: Peloton (PTON) inks TikTok partnership.
Phillips 66 (PSX) in active talks for sale of non-core assets.
Mobileye (MBLY) guidance sends shivers down spine of chip industry.
No longer available: Bye, Kim. A Kardashian venture goes away.
Walgreens Boots Alliance (WBA) nearly halves its dividend payout.
Rejected: Apple (AAPL) and Disney’s (DIS) requests to avoid AI votes.
Costco (COST) benefits from additional shopping day in December.
Impacting business, McDonald’s (MCD) faces backlash in Middle East.
Ford (F) U.S. posts Q4 sales growth on record EV, hybrid volumes.
Shares under $1: Nikola (NKLA) produced 42 hydrogen-cell trucks in 2023.
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Good morning. Happy Thursday.
The Asian/Pacific markets were split. India, Malaysia and the Philippines moved up; China, South Korea and Singapore moved down. Europe, Africa and the Middle East are currently doing well. Poland is down, but Denmark, Turkey, Russia, Finland, Norway, Hungary, Spain, Portugal , Austria, Saudi Arabia and the Czech Republic are up. Futures in the States point towards a flat open for the S&P 500 and a down open for the Nasdaq.
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The dollar is down. Oil is up; copper is down. Gold is up; silver is down. Bonds are down.
Stories/News from Seeking Alpha…
War demand
Many are watching as conflict and war expand across the globe, and what those consequences might mean for various sectors of the economy. Everything from energy and finance to supply chains hangs in the balance, with spillover effects mostly acutely impacting defense production. Countries and companies alike are preparing by restocking their arsenals and inventories, as well as fast-tracking new technologies to give them the upper hand or banning their adversaries from acquiring them.
Bigger picture: The U.S. has already outlawed or effectively lobbied allies against selling cutting-edge semiconductor chips to China out of fear that the silicon could be used for precision-guided kits or other advanced military systems. Traditional arms are also back in fashion, with BAE Systems (OTCPK:BAESY) announcing today that it would restart production of M777 howitzer parts for the U.S. Army. Putting it in perspective, the last order that took place was five years ago, but with output back online, BAE expects to ink new contracts for the artillery cannons given inquiries from more than eight countries.
It’s not the only company going into overdrive. Thales is bringing back the Starstreak portable air-defense missile, while other firms like Raytheon (NYSE:RTX) struggle to ramp up production of the popular NASAMS, which helps protect crucial areas like the airspace over the White House. Demand may not be the only factor when deciding how to invest, with SA’s screening tool helping identify strong buys within the defense sector. Check out the Top Defensive Stocks For Turbulent Times by Steve Cress, Head of Quantitative Strategies at Seeking Alpha.
Conflict zones: It’s not only Russia-Ukraine, China-Taiwan, and an escalating war across the Middle East. Cartel chaos in Mexico has prompted mainstream discussion in the U.S. over whether military personnel should be sent south of the border, while a Venezuela-Guyana conflict could shake things up in Latin America. The U.S. is also preparing military options to secure international shipping in the Red Sea, as well as bases for drones in Africa to counter Russia and stop an Islamist insurgency across the region. Preparing for what might come ahead, President Biden and Congress signed off on a U.S. defense policy bill in December that approved a record $886B in annual military spending. (2 comments)
More in store?
U.S. commercial bankruptcy filings jumped 72% to 6,569 in 2023, primarily due to increased interest rates, tougher lending standards and pushback from the pandemic. “These facts teach investors a timeless lesson,” SA Investing Group Leader Value Digger declared. “Investors need to avoid the leveraged (indebted) companies (i.e. REITs, utilities etc.) and buy companies with fortress balance sheets including ZERO leverage, if they want to sleep well at night.” Among the notable firms that filed for bankruptcy last year were Yellow Corporation (OTC:YELLQ), Rite Aid (OTC:RADCQ) and Bed Bath & Beyond (OTCPK:BBBYQ) as well as SPACs like WeWork (OTC:WEWKQ), Lordstown Motors (OTC:RIDEQ) and Bird Global (OTC:BRDSQ). (2 comments)
Rate uncertainty
The latest FOMC minutes have provided little insight on the timing of potential rate cuts, with Fed officials acknowledging “an unusually elevated degree of uncertainty” about the economic outlook. “The minutes confirm whatever you wanted to think about the direction of U.S. interest rates before the release,” UBS’ Paul Donovan said. “I would suggest they are consistent with three rate cuts, starting later than March – but that was my bias before the minutes.” Some Fed members also noted that keeping the benchmark rate at an elevated level might be necessary should inflation stay above target, meaning the central bank will continue to base its policy decisions on incoming economic data. (18 comments)
Making money
2023 was a bumper year for Meta Platforms (NASDAQ:META), becoming the best-performing Magnificent 7 stock after AI darling Nvidia (NVDA). Shares soared 178% during the “year of efficiency,” in which CEO Mark Zuckerberg refocused the business on digital advertising and social media market share and away from moonshot projects like the Metaverse. As growth returned and the stock neared all-time highs, the captain of the ship also decided to cash in. New filings show that Zuckerberg offloaded nearly half a billion dollars of Meta shares in the final two months of the year, selling stock on every trading day between Nov. 1 and the end of 2023 (his last sales occurred in November 2021). (2 comments)
Today’s Economic Calendar
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
8:30 Initial Jobless Claims
9:45 PMI Composite Final
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
4:30 PM Fed Balance Sheet
What else is happening…
Red Sea ship attacks send ocean freight rates soaring.
Crude oil bounces after shutdown at major Libyan oilfield.
General Motors (GM) remained top-selling U.S. automaker in 2023.
Meet the latest Chinese electric vehicle model – Xiaomi’s SU7.
Goldman Sachs (GS) in talks with Grayscale about bitcoin ETF role.
Cigna (CI) reportedly nearing $3B-$4B deal to sell Medicare business.
Covering biosimilars, CVS (CVS) to drop Humira from certain formularies.
Cannabis stocks in focus report DEA reviewing legal status.
PepsiCo (PEP) looks to leverage both Rockstar and Celsius (CELH).
Disney (DIS) wins Blackwells backing in boardroom fight vs. Trian.
TikTok sets sights on Amazon (AMZN) with goal of growing e-commerce tenfold.
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Good morning. Happy Wednesday.
The Asian/Pacific markets were weak. Malaysia did well, but Hong Kong, South Korea, India, Taiwan, Australia, Indonesia, Singapore, Thailand and the Philippines posted losses. Europe, Africa and the Middle East are currently down big. The UK, Poland, France, Turkey, Germany, South Africa, Finland, Spain, the Netherlands, Italy, Portugal, Israel, Sweden and Saudi Arabia are all posting big losses. Futures in the States point towards a moderate gap down open for the cash market.
————— Audio Course: Guidelines to Successful Trading —————
The dollar is up. Oil is up; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Record debt
The United States is ringing in the new year with a lot of red ink as the national debt surpassed $34T for the first time. The gloomy fiscal milestone, reported by the Treasury Department, comes as Congress braces for another fight over federal spending. Unless lawmakers can agree on another short-term continuing resolution to fund the government, or pass appropriations bills by Jan. 19 (and others by Feb. 2), the U.S. would face its first federal shutdown since 2019.
On the rise: Not only is the overall balance increasing, but the cost of servicing the national debt is rising at a rapid clip. “The interest paid on the federal debt so far this fiscal year is $900B, but this is soon going to reach $1T… and [it] is clear that the situation is unsustainable,” SA analyst WWS Swiss Financial Consulting wrote in The Fed And The Debt. Higher deficits can also make inflation a bigger problem for the central bank, which uses monetary policy to keep prices stable but has little say over what happens on the fiscal side, where outsized spending has been the norm across both parties.
Credit rating agencies are also taking notice, with Moody’s recently cutting its credit outlook on the U.S. to negative from stable, citing heavier downside risks to the country’s fiscal strength. Fitch lowered America’s credit rating following the debt ceiling drama last summer, while S&P was the first to downgrade U.S. government debt in 2011. Kicking the can further down the road also makes the issue harder to resolve and can result in drastic action instead of phasing things in like lower spending or higher taxes.
Tipping point? There’s no magic number or level for when a government’s debt begins to hurt its economy, and the U.S. has easily handled a much heavier debt load than was once thought possible despite doomsday warnings for several decades. However, extreme partisanship has left both parties pointing fingers, with the GOP citing bloated federal spending programs that passed during the Biden administration – like the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the Inflation Reduction Act – and Democrats referencing the “trillions spent on Republican tax cuts skewed to the wealthy and big corporations.” Hard compromises will have to be made over tax increases, while the parties must be willing to tinker with the government’s biggest expenses, such as Medicare, Social Security and the military. (5 comments)
More disruption
Marking another blow to Operation Prosperity Guardian, shipping giant A.P. Moller-Maersk (OTCPK:AMKBY) has halted all transit through the Red Sea and the Suez Canal after a weekend attack on one of its ships. There have been 24 attacks against merchant shipping in the Southern Red Sea since Nov. 19, according to the U.S. Central Command. “If we don’t protect the Red Sea, it risks emboldening those looking to threaten elsewhere, including in the South China Sea and Crimea,” warned U.K. Defense Secretary Grant Shapps. Popular shipping stocks ended in the green on Tuesday, the result of higher booking costs for some tankers amid lengthy diversions, including ZIM (ZIM) +13.4%, Maersk (OTCPK:AMKBY) +7.2%, Hapag-Lloyd (OTCPK:HPGLY) +5.2%. (20 comments)
Energy policy
Chevron (CVX) has warned that it will book $3.5B-$4B in charges for Q4 on some upstream assets, primarily in California, which recently sued Big Oil for allegedly lying about climate change. The company sees “lower anticipated future investment levels” stemming from the state’s harsh regulatory environment, although it will still operate the impacted assets for many years. Chevron will also recognize a loss related to decommissioning obligations linked to assets it previously owned in the Gulf of Mexico, as their buyers are now bankrupt. California, which already has some of the toughest climate policies, is currently weighing capping refining profits and its lawsuit is seen as one of the most significant legal challenges facing the fossil fuel industry. (34 comments)
Build Your Dreams
The EV crown is changing hands as China’s BYD (OTCPK:BYDDF) sped past Tesla (TSLA) to become the world’s biggest electric car maker in the final quarter of 2023. BYD sold 525,409 battery electric vehicles in Q4 compared to Tesla’s 484,507 units, driven by aggressive end-of-year discounting. However, Tesla still outpaced BYD on an annual basis, selling 1.8M electric cars while BYD sold 1.6M BEVs. Investing Group Leader Livy Investment Research noted that Tesla’s market share in China is diminishing rapidly, as its vehicles struggle to keep up with local rivals’ frequently-refreshed product line-ups. (16 comments)
Today’s Economic Calendar
Auto Sales
7:00 MBA Mortgage Applications
8:00 Richmond Federal Reserve Bank President Thomas Barkin Speech
10:00 ISM Manufacturing Index
10:00 Job Openings and Labor Turnover Survey
2:00 PM FOMC Minutes
What else is happening…
Japan earthquake: Plane catches fire after collision with relief aircraft.
Airbus in talks to buy Atos’ (OTCPK:AEXAF) cybersecurity unit.
This shipping giant lands on Wells Fargo’s list of top tactical ideas.
Rivian Automotive (RIVN) drops after slight miss on Q4 deliveries.
Palantir (PLTR) will hold first 2024 board meeting in Israel.
Cruise line stocks begin 2024 by headlining slide in leisure sector.
Tencent, NetEase (NTES) gain after China removes gaming official.
Moderna (MRNA) upgraded at Oppenheimer on commercial prospects.
Google, Meta’s potential fines removed from Russian database.
J.M. Smucker (SJM) completes condiment sale to Treehouse Foods (THS).
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Good morning. Happy Tuesday. Happy New Years.
The Asian/Pacific markets leaned to the upside. South Korea, Australia, Indonesia, Thailand and the Philippines did well; China, Hong Kong and Taiwan were weak. Europe, Africa and the Middle East currently lean down. Turkey, the UAE, Greece, Finland and Saudi Arabia are up; the UK, Denmark, Poland, Finland, South Africa, the Netherlands, Israel and Austria are down. Futures in the States point towards a relatively big gap down open for the cash market.
————— Audio Course: Guidelines to Successful Trading —————
The dollar is up. Oil is up; copper is down. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
Year of the election
2024 is being called the biggest election year in history, with half of the world participating in regional, legislative and presidential elections. Geopolitical tensions were already some of the biggest investing risks going into the new year and many of the coming results will determine how those pressures will be exacerbated or resolved. Complicating the situation is growing mistrust in the integrity of elections themselves, as well as the potential for online misinformation and algorithm manipulation during the campaign trail. In some countries, there is also a widespread risk of doctored results or mass protests in response to them.
Asia: The first big presidential election will take place in Taiwan on Jan. 13. U.S. policymakers will be closely watching the results for the tone on relations with China, which again pledged “reunification” with the self-governing island during Xi Jinping’s year-end address. Elsewhere in Asia, Indians will go to the polls in April and May to decide whether Prime Minister Narendra Modi and his Hindu nationalist Bharatiya Janata Party will secure a third term. The country is rapidly becoming a global manufacturing powerhouse, helping investors turn bullish on the world’s most populous nation.
Europe: European Russia is the most populated part of Russia, which has been in direct conflict with Ukraine over the last two years. Everything from energy to commodities has been impacted by the war with its neighbor, but neither side has shown any signs of achieving victory or motivation to compromise. No surprises are in store, but Russians will go to the polls on March 17, while Ukraine’s planned presidential vote on March 31 is likely to be postponed with the nation currently under martial law. Establishment parties are also bracing for some disruption during the European Parliament election slated for June, while the U.K. economy will be on watch with Rishi Sunak promising to call a general election at some point in 2024.
Americas: The presidential election cycle in the U.S. begins in earnest this month with the first caucuses in Iowa and primaries in New Hampshire. The campaign season will get lots of airtime, with debates and soundbites covering the economy, immigration, infrastructure and foreign policy. The vote on Nov. 5. will not only decide the next president of the United States, but also features Senate and House races, as well as gubernatorial elections. South of the border, Mexico will hold a presidential vote in June that could impact cooperation on trade and border security with its northern neighbor, while Venezuela heads to the polls in December for a predictable election outcome as the country gears up for battle with energy-rich Guyana.
Starting strong
Bitcoin (BTC-USD) rang in the new year by scaling new heights, surpassing $45,000 for the first time since April 2022 amid growing expectations that the SEC could approve a spot bitcoin ETF as early as next week. The imminent approval caused bitcoin to more than double in value over the past year, outperforming gold and global equities, although it is still well below its 2021 peak of $69,000. The upbeat sentiment lifted crypto-related stocks before the bell, including Coinbase (COIN), Riot Platforms (RIOT), and Marathon Digital (MARA). “I suspect approval makes a nice narrative for bitcoin going higher, but the chart shows us this as the more likely outcome without needing to predict the SEC’s actions,” noted Investing Group Leader Jason Appel. (2 comments)
The high seas
Oil prices are advancing after Iran deployed a warship to the Red Sea as tensions in the key trade route continued to escalate over the weekend. Front-month Nymex crude (CL1:COM) for February delivery and front-month Brent Crude (CO1:COM) for March delivery gained more than 2.5% each. While Iran said it deployed the warship under a routine mission, the move was made after the U.S. sank three Houthi boats attacking the Maersk Hangzhou, killing rebel fighters for the first time since the Red Sea attacks began. Maersk (OTCPK:AMKBY) has since temporarily halted shipping, so keep an eye on shipping stocks as investors size up freight rates and additional war risk premiums. (5 comments)
EV credits
The new year means that just 13 electric vehicle models are now eligible for the $7,500 consumer tax credit in the U.S. That’s due to tighter rules surrounding sourcing battery components made by Chinese manufacturers. Vehicles that are still eligible for the full tax credit include variants of Tesla’s (TSLA) Model Y, Rivian’s (RIVN) R1T pickup, Stellantis’ (STLA) Jeep Wrangler 4xe, General Motors’ (GM) Chevrolet Bolt and Ford’s (F) F-150 Lightning pickup truck. Nissan’s Leaf (OTCPK:NSANY) and Tesla’s Cybertruck fell off the list at the stroke of midnight, but still qualify for a $3,750 tax credit. (70 comments)
Today’s Economic Calendar
9:45 PMI Manufacturing Index
10:00 Construction Spending
What else is happening…
Japan dealing with earthquake aftermath, but trading closed for holidays.
Baidu abandons $3.6B deal for JOYY’s (YY) China live-streaming unit.
BuzzFeed (BZFD) asset sale to miss target; president steps down.
California expands health care coverage for undocumented immigrants.
Nokia does not expect to meet FY targets after AT&T (T) contract loss.
Las Vegas casinos look to ride hot streak into 2024, thanks to F1 race.
Exxon (XOM) exits Iraq oilfield, PetroChina (OTCPK:PCCYF) takes over.
Covid-vaccine makers top laggard list; Eli Lilly (LLY) leads gainers.
Morgan Stanley positive on healthcare services despite election year.
U.S. IPO market began recovery in 2023, but global market fell further.
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