Before the Open (Jan 16-19)

Good morning. Happy Friday.

The Asian/Pacific markets mostly did well. Japan, South Korea, India, Taiwan and Australia led; China and Hong Kong were weak. Europe, Africa and the Middle East currently lean to the upside. Poland, South Africa, Hungary and the Czech Republic are up; Finland is down. Futures in the States point to a moderate gap up open for the cash market.

————— VIDEO: State of the Market —————

The dollar is down. Oil is down; copper is up. Gold and silver are up. Bonds are up.

Stories/News from Seeking Alpha…

Cutting edge

Only three weeks into the new year, tech is showing its staying power, with the market continuing to favor the sector. Chip optimism and AI headlines are helping support the sentiment despite some concerns that Fed rate cuts may take place a little later this year. In fact, the Nasdaq 100 (NDX) just closed at a new all-time high at 16,982, while the best year-to-date performance for any S&P 500 sector is Information Technology (SP500-45TR) with an increase of 2.6%. Will the tech boom continue through 2024? Wall Street Breakfast subscribers think so. Also read Seeking Alpha Readers Predict Tech, Health Care Will Have Best Returns For 2024: Are They Right?

Tech dominance: Many of the usual suspects have seen outsized gains in the new year, including the list of AI favorites. Nvidia (NVDA) +19%, Meta (META) +9% and Microsoft (MSFT) +8% have seen impressive YTD returns, while big tech players like Alphabet (GOOGL) +5%, Amazon (AMZN) +2% and Apple (AAPL) +2% have also tacked on gains. Interestingly, Tesla (TSLA) has seen its shares slide 15% this year, and it wasn’t long ago that Elon Musk threatened to develop AI products outside of the company unless he doubled the amount of his voting control.

Everyone needs a little artificial intelligence these days, and the ones that are ahead in the race stand to benefit. Buying may also be taking place before tech earnings next week, while some of the trillions of dollars parked in money-market funds and other cash-like investments could be coming off the sidelines with yields looking less attractive. A soft landing also appears to be in the cards and that may mean less macro uncertainty, letting tech companies talk more positively about the upside and their bullish product developments.

The AIverse: “This is like, bigger than just a technological revolution,” Sam Altman declared from Davos, adding that there’s no “magic red button” to stop AI. Mark Zuckerberg has also decided to merge two of Meta’s (META) leading AI research groups (FAIR and GenAI) as it “becomes clear that the next generation of services [will] require building full general intelligence.” His new focus will involve 350,000 Nvidia (NVDA) H100 GPUs by the end of the year, or almost 600K H100s equivalents of compute if including other GPUs, which will be another revenue windfall for Nvidia and other computer chip players that are helping power the AI revolution. (4 comments)

Attention borrowers!

The Biden administration will forgive another nearly $5B in student debt for 74K people, though the plan did not disclose when eligible borrowers can expect to see that relief. “Nearly 44K of them are teachers, nurses, firefighters and other individuals who earned forgiveness after 10 years of public service, and close to 30K of them are people who have been in repayment for at least 20 years but never got the relief they earned through income-driven repayment plans,” President Biden said in a statement. His administration has so far forgiven more than $136B in student debt. Recall that last year, the Supreme Court struck down Biden’s student loan forgiveness plan to cancel up to $20K of student loans per borrower. (9 comments)

Peltz and the proxy

Famed activist investor and billionaire Nelson Peltz, who is engaged in a proxy battle with Disney (DIS), feels that oversight of the entertainment giant’s board is awful. “This company is just not being run properly,” announced Peltz, who runs Trian Fund Management. The comments came as Peltz officially launched a campaign to get himself and former Disney CFO Jay Rasulo elected to the board, saying they were “going to be Batman and Robin.” Earlier this month, activist hedge fund Blackwells Capital said it would nominate three directors to Disney’s board in support of Iger, while another activist, Ancora, supports Peltz. Here are the names of Disney’s board nominees. (30 comments)

No shutdown

Congress has officially cleared a temporary spending bill to fund the federal government into early March, buying more time for U.S. lawmakers to hammer out funding bills for the fiscal year that started in October. The latest continuing resolution, which is expected to be signed by President Biden, is the third extension made in recent months. Hardline Republicans pushed back on the measure, with the House Freedom Caucus calling on “all conservatives” to oppose the proposed bill. “It’s Groundhog Day in the House chamber all the time, every day, yet again spending money we don’t have,” said Rep. Chip Roy (R-TX). (3 comments)

Today’s Economic Calendar
10:00 Existing Home Sales
10:00 Consumer Sentiment
1:00 PM Baker Hughes Rig Count
1:00 PM Fed’s Barr Speech
4:00 PM Treasury International Capital
4:15 PM Fed’s Daly Speech

What else is happening…

To the tune of $15B: Amazon (AMZN) bolsters cloud infrastructure.

Macy’s (M) to cut 13% of corporate staff, close another five stores.

Humana (HUM) slides after cutting profit outlook on higher costs.

Wendy’s (WEN) names PepsiCo exec Tanner as its new CEO.

Tech layoffs not done, but jobless claims at lowest level since ’22.

iRobot plunges as EU regulator may block sale to Amazon (AMZN).

Reports suggest Spirit Airlines (SAVE) is exploring financing options.

Norfolk Southern (NSC) gains amid activist investor speculation.

More data requests sent to Apple, Meta (META) and others.


Good morning. Happy Thursday.

The Asian/Pacific markets were mixed. China, Hong Kong, South Korea and Indonesia did well; India, Australia, New Zealand, Malaysia and the Philippines were weak. Europe, Africa and the Middle East are currently doing well. Poland, France, Germany, Turkey, South Africa, Hungary, Italy, Israel and Sweden are up; Saudi Arabia is down. Futures in the States point to a moderate gap up open for the cash market.

————— VIDEO: State of the Market —————

The dollar is down slightly. Oil and copper are down. Gold and silver are up. Bonds are up.

Stories/News from Seeking Alpha…

Down in Davos

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 comes as geopolitics become heavily intertwined with the world economy. The twin triggers of the COVID-19 pandemic and the war in Ukraine had already rattled an already brittle global system, while inflationary forces and the late response by central bank officials didn’t help the situation. More recently, there have been threats to the supply chain and energy from an escalating war in the Middle East, while the AI revolution poses additional societal risks.

Program overview: “Against this backdrop and to instill a measure of collective agency, it is necessary to start restoring trust at three fundamental levels: into the future, within societies and among nations. Therefore, the 54th Annual Meeting of the World Economic Forum will convene under the theme ‘Rebuilding Trust’ to provide the crucial space to step back and focus on the fundamental principles driving trust, including transparency, consistency and accountability.”

“Rebuilding Trust” won’t be easy, and many have already dismissed rich and powerful idealists who gave rise to the terms “Davos Man” and “Davos Woman.” Skepticism surrounding the conference can make the task even more challenging, especially when looking at the track record of the WEF, where stakeholders are supposed to come together to resolve their differences on global security and an integrated world economy. One doesn’t have to look far from the themes in recent years, including “Cooperation in a Fragmented World (2023),” “Working Together, Restoring Trust (2022)” and “A Crucial Year to Rebuild Trust (2021),” compared to prior topics like “Stakeholders for a Cohesive and Sustainable World (2020)” and “Globalization 4.0 (2019).”

Highlights so far: OpenAI CEO Sam Altman announced that coming products are “going to make a lot of people uncomfortable” due to “quite a lot of individual customization” that can result in different answers based on values or user location. On the supply chain, Ngozi Okonjo-Iweala, director general of the World Trade Organization, said the body is “slightly less optimistic” on its goods trade forecast for 2024 due to expanding conflict zones like the one seen in the Red Sea. On the economy, Goldman Sachs (GS) CEO David Solomon related that the “market was clearly running ahead to a position of many [rate] cuts,” while Bank of America’s (BAC) Brian Moynihan said the Federal Reserve has “got to get normalized and get out of the way.”

Integrating AI

Samsung (OTCPK:SSNLF) has launched a new Galaxy S24 lineup to rival Apple’s (AAPL) iPhone 15 models. The new devices contain Galaxy AI with live translation in voice and text, and can summarize incoming messages and suggest replies. The South Korean tech giant also partnered with Google (GOOG, GOOGL) to offer “Circle to Search,” which lets users search from anywhere on their phones. In other news, Apple has been forced to disable the blood oxygen sensor on its popular Watch to avoid a device ban stemming from a patent infringement dispute with Masimo (MASI). Adding to the troubles, Apple is expected to face yet another legal battle as soon as March, this time from the U.S. Department of Justice on antitrust grounds. (5 comments)

Current conditions

U.S. economic activity showed “little or no change” in recent weeks for most of the Federal Reserve’s 12 districts amid signs that the labor market was cooling in most regions. According to the central bank’s Beige Book survey, consumer spending expectations were met in most districts, thanks to seasonal demand, with retail sales heating up more than expected in December. Manufacturing activity was weaker, while a higher interest environment limited auto sales and real estate deals, but respondents were optimistic about the prospect of falling rates. “We suspect consumer spending will increasingly struggle over the next couple of quarters and the Fed will respond with rate cuts, just not as early as the market expects,” said ING Economic and Financial Analysis. (4 comments)

Major writedown

Slashing the value of its wireline business, Verizon (VZ) disclosed that it would take a $5.8B impairment charge in Q4 related to “secular declines” in its Business group. The division accounts for more than a fifth of the company’s revenue and provides legacy voice and data services to clients that include businesses and the government. However, struggles have been seen in recent years due to strong competition and a broader shift to wireless services. Prior to the disclosure, SA analyst Juxtaposed Ideas re-rated Verizon as a Buy, but warned of the risks like the telecom giant’s lead cable-related legal headwinds. (44 comments)

Today’s Economic Calendar
7:30 Fed’s Bostic Speech
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
12:05 PM Fed’s Bostic Speech
4:30 PM Fed Balance Sheet

What else is happening…

Taiwan Semiconductor (TSM) beats on top and bottom line estimates.

Judge in SEC vs. Coinbase (COIN) trial won’t decide from bench.

Charles Schwab (SCHW) converts 90% of TD Ameritrade accounts.

U.S. military strikes Houthi sites; Pakistan retaliates against Iran.

EV stocks slide as traders favor Toyota, Honda and Ferrari.

China issues draft guidelines for standardizing the AI industry.

Fed’s Bowman: Basel III proposal needs ‘substantive’ changes.

Sheryl Sandberg is leaving Meta’s (META) board after 12 years.

JPMorgan (JPM) CEO: Don’t get involved in bitcoin (BTC-USD).

Boeing part in Alaska Airlines (ALK) blowout made in Malaysia.

Squeeze potential? Short sellers feeling heat on these 10 stocks.


Good morning. Happy Wednesday.

The Asian/Pacific markets posted big losses. China, Hong Kong, South Korea, India, Taiwan, Singapore and the Philippines dropped more than 1%. Europe, Africa and the Middle East are currently down big. The UK, Denmark, Poland, France, Germany, South Africa, Finland, Norway, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are down more than 1%. Futures in the States point to a relatively big gap down for the cash market.

————— VIDEO: State of the Market —————

The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down.

Stories/News from Seeking Alpha…

Getting old

A historic shift continues to take place in China that is having impacts on both the domestic and global economy. According to the National Bureau of Statistics, the nation’s total population fell by over 2M in 2023 to 1.41B, marking the second straight year of contraction. The decline also more than doubled that seen in 2022, when the Chinese population shrank for the first time since the Great Famine of the Mao Zedong era in 1961.

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 urbanization in a country that had traditionally been rural.

Somewhat of a bright spot was seen in fresh data overnight as China’s GDP growth expanded by 5.2% in 2023, beating the official target of “around 5.0%.” Others are not convinced as the figure is still way lower than historical growth rates and has consistently failed to meet expectations for a strong post-COVID pandemic bounce. Among the pressures are weak consumer and business confidence, mounting debt problems and a spiraling property crisis. In fact, the mainland Chinese stock market was one of the world outliers last year, with the benchmark CSI 300 Index of major Shanghai and Shenzhen-listed stocks sliding around 20% compared to gains seen across the globe.

Looking for growth: The demographic trend calls into question whether China will get old before it gets rich. As deaths outstrip births, Beijing has rolled out plans for a so-called “silver” economy, which is estimated to be worth 30T yuan ($4.2T) by 2035 and account for about 10% of GDP. Services include meal delivery and entertainment to nursing homes and eldercare, as well as industrial parks that will support products for senior citizens. To encourage development, banks will be enticed to extend credit to the businesses involved in the silver economy, while local governments will be able to issue special bonds to finance the transition.


Artificial intelligence is coming to the U.S. military, with OpenAI confirming a collaboration on cybersecurity tools, as well as software to deal with high rates of veteran suicides. OpenAI announced the partnership with the Pentagon during the World Economic Forum in Davos just days after it removed language from its usage policy that forbade the use of the technology by militaries. The company, which is backed by Microsoft (MSFT), previously had a ban on “activity that has high risk of physical harm,” including, “weapons development” and “military and warfare.” Note that Microsoft is an established contractor with the U.S. military. (10 comments)

Merger mess

Mayday! Mayday! Spirit Airlines (SAVE) is down another 8% in premarket trade after tumbling by a whopping 47% on Tuesday. A federal judge blocked the carrier’s planned $3.8B sale to JetBlue (JBLU) on antitrust grounds, in a move that could result in a Chapter 11 bankruptcy filing. The Department of Justice had previously sued to block the merger in March, after which JetBlue attempted to appease the agency with a divestiture plan involving Allegiant Travel (ALGT) and Frontier (ULCC). The latest news has also triggered fears among M&A traders over Alaska Air’s (ALK) nearly $2B deal to buy Hawaiian Holdings (HA). (106 comments)

Terror list

The U.S. is expected to redesignate Yemen’s Houthis as a foreign terrorist organization as tensions continue to escalate in the Red Sea. The move would reverse President Biden’s decision nearly three years ago to remove the Iran-backed group from the list over concerns it would further weaken Yemen’s economy. It follows the U.S. launching another round of retaliatory strikes on Houthi targets in Yemen on Tuesday, only for the rebels to hit the M/V Zografia, a Maltese-flagged bulk carrier, with an anti-ship ballistic missile. Multiple companies have been forced to halt their vessels from traveling through the Red Sea, disrupting global trade and even forcing Egypt to raise transit fees for the Suez Canal. (3 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Retail Sales
8:30 Import/Export Prices
9:00 Fed’s Barr Speech
9:00 Fed’s Bowman Speech
9:15 Industrial Production
10:00 Business Inventories
10:00 Housing Market Index
10:00 Atlanta Fed’s Business Inflation Expectations
1:00 PM Results of $13B, 20-Year Bond Auction
2:00 PM Fed’s Beige Book
3:00 PM Fed’s Williams Speech

What else is happening…

Waller: Fed should be ‘methodical and careful’ with rate cuts.

Goldman Sachs’ (GS) earnings beat driven by asset, wealth unit.

Morgan Stanley (MS) in charts: Institutional Securities revenue dips.

Boeing (BA) back at $200/share after collision at Chicago O’Hare.

Volkswagen’s Lamborghini sets record with 10K cars sold worldwide.

Biden urged to thwart TC Energy’s (TRP) pipeline expansion.

Apple (AAPL) surpasses Samsung to be 2023’s top phone maker.

… but Supreme Court denies appeal over Epic’s lawsuit.

More layoffs: Google (GOOG) to cut hundreds of ad sales jobs.

Burger King parent (QSR) strikes $1B deal for Carrols (TAST).

Wells Fargo: ESPN’s (DIS) stake talks with NFL can only be good.


Good morning. Happy Tuesday. Hope you had a good weekend.

The Asian/Pacific markets are mostly down. China is up, but Japan, Hong Kong, South Korea, Taiwan, Australia and the Philippines are weak. Europe, Africa and the Middle East are mostly down. Poland, Germany, Greece, Russia, South Africa, Hungary, Spain, Portugal, Israel and Sweden are down the most. Futures in the States point to a moderate gap down for the cash market.

————— VIDEO: State of the Market —————

The dollar is up. Oil and copper are up. Gold and silver are down. Bonds are up.

Stories/News from Seeking Alpha…

End of the peace dividend

There are more warnings that the world is entering a new era of collective defense, and 2024 may mark that inflexion point. One of the world’s most important trade arteries in the Red Sea is becoming too risky to navigate, with fresh attacks hitting American-owned ships despite retaliatory airstrikes by U.S. and U.K. military forces. Overnight, Iran’s Revolutionary Guards also launched ballistic missiles and armed drones at the Erbil airport in northern Iraq, where U.S. and other international forces are stationed.

Quote: “Now is the time for all allied and democratic nations across the world to ensure their defense spending is growing,” U.K. Defense Secretary Grant Shapps declared at the Lancaster House in London. “Because, as discussed, the era of the peace dividend is over. In five years’ time, we could be looking at multiple theaters involving Russia, China, Iran and North Korea.” As a result, Britain will be sending some 20,000 personnel to lead NATO’s latest Exercise Steadfast Defender, marking one of military alliance’s largest deployments since the end of the Cold War.

“We find ourselves at the dawn of a new era,” Shapps continued. “The Berlin Wall a distant memory and we have come full circle, moving from a post-war to a pre-war world. An age of idealism has been replaced by a period of hard-headed realism. Today, our adversaries are busily rebuilding their barriers. Old enemies are reanimated. New foes are taking shape. Battle lines are being redrawn. The tanks are literally on Europe’s Ukrainian lawn. And the foundations of the world order are being shaken to their core.”

“We stand at this crossroads – whether to surrender to a sea of troubles, or do everything we can to deter the danger. I believe that, in reality, it’s no choice at all. To guarantee our freedoms, we must be prepared.”

What to watch: The call for increases in defense spending comes at a time when many Western economies are being pressured by giant debt loads and higher interest rates. Over the past few decades, European countries have cut back even further due to budget deficit rules and a reliance on the U.S. security umbrella, and rechanneling funds away from areas like health, education and infrastructure – or implementing higher taxes and spending cuts – won’t be popular. While Donald Trump just inked a decisive win in Iowa as the 2024 presidential race begins, American military spending is likely to rise at an exponential rate no matter who is in office, with the defense budget increasing every year since 2016. (17 comments)

Out of oxygen

Masimo (MASI) has been locked in a high-profile patent infringement battle against Apple (AAPL), with an appeals court backing two prior decisions by a patent tribunal that had sided with the medical technology firm. Apple has now said it will abandon the blood oxygen feature on its smartwatches to circumvent a U.S. ban on its devices if a court appeal fails. The U.S. Customs and Border Protection agency just approved the company’s workaround as “Apple’s redesign falls outside the scope” of an import embargo. In other news, Microsoft (MSFT) has surpassed Apple as the world’s most valuable publicly traded company in a move previously flagged on Wall Street Breakfast. (23 comments)

Kicking the can

Aiming to avert a partial shutdown, U.S. lawmakers have agreed on yet another temporary spending bill. The stopgap spending measure would extend funds for some government agencies through March 1, while others would be funded through March 8. The Senate will start procedural votes on the bill today, with Senate Majority Leader Chuck Schumer calling for bipartisan cooperation to quickly pass the continuing resolution and send it to President Biden’s desk before Friday’s funding deadline. Some hardline Republicans are pushing back on the latest bill, with the House Freedom Caucus saying, “This is what surrender looks like.” (25 comments)

More control

Tesla (TSLA) CEO Elon Musk is uncomfortable growing the electric vehicle maker into a robotics and artificial intelligence leader unless he owns at least 25% of its voting shares, nearly double his current 13% stake. “If I have 25%, it means I am influential,” he wrote on X. “Unless that is the case, I would prefer to build products outside of Tesla.” Musk’s intent to have more voting power will add to the pressure on the company’s board, which is already concerned over his compensation, as well as his split focus on multiple businesses. In the past, Musk has also suggested that a large portion of Tesla’s value depends on AI and robotics. (17 comments)

Today’s Economic Calendar
8:30 Empire State Mfg Survey
11:00 Fed’s Waller Speech

What else is happening…

Google, Amazon among tech firms starting 2024 with layoffs.

State attorneys general urge DEA to reschedule marijuana.

Boeing (BA) changes quality controls after 737 Max mishap.

Chinese military, universities are still buying Nvidia chips.

IMF: AI will affect almost 40% of jobs around the world.

Why is ether (ETH-USD) now the winning crypto trade?

Disney (DIS) in advanced talks with NFL for ESPN stake.

Uber (UBER) is closing alcohol delivery service Drizly.

Costco, Sam’s Club (WMT) are a big hit in China.

SA Quant’s top industrial picks ahead of Q4 earnings.


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