Cover:
-Reducing alcohol consumption has become an all-season trend, particularly among the young, raising the possibility of an age waterfall effect where older drinkers are replaced by younger, more moderate ones, draining booze sales. Shares of companies that were once staples are spilling, with some adding to decade-long losses, like Anheuser-Busch InBev and Molson Coors Beverage, which contended with a flood of craft beers and then a shift to cocktails. Diageo, maker of Johnnie Walker Scotch whisky, is down 36% over two years, while Brown-Forman has lost more than 50%. Boston Beer's stock price quadrupled in spring 2021 but now faces a 24% loss due to a hard seltzer craze. Constellation Brands, which sells Corona and Modelo beers in the USA, had been a growth holdout but its latest quarterly report showed flat sales and shares plummeted 17% in a day. Some Wall Street investors see select buying opportunities in alcohol stocks, while others say to stay away.
Interview:
-No update
Tech Trader:
-The US is expected to win the artificial intelligence race against China due to rapid advancements in chip companies and AI models. The Trump administration is looking to relax energy regulations to alleviate energy bottlenecks, which have become the main hurdle in building large AI data centers. Global investors are willing to fund a massive AI infrastructure buildout with projects like Stargate. However, a significant threat looms on the horizon: tariffs. President Trump foreshadowed such tariffs last month, stating that the US would impose tariffs of 25%, 50%, or even 100% on chip imports to increase domestic semiconductor manufacturing. Vice President JD Vance vowed the Trump administration would implement policies to ensure AI systems and AI chips are made domestically. The threat, specifically around chip tariffs, remains and investors should be aware of the risks.
The Trader:
-The stock market has been able to weather inflation data well, with the NASDAQ Composite advancing 2.2%, the Dow Jones Industrial Average gaining 0.7%, and the S&P 500 index rising 1.4%. However, the S&P 500 has been stuck in a trading range for the past four weeks, never trading much lower than 5920 to the downside or much above 6120 to the upside. The initial breakout is tentative, and a follow-through is needed to keep it alive. The election win by President Donald Trump has created chaos in Washington, with investors still trying to figure out tariffs and how DOGE's rampage through the federal bureaucracy will impact the bottom line of companies receiving government spending. The consumer price index rose a hotter-than-expected 3% year over year in January, making more interest rate cuts less likely and raising the specter that inflation could become a bigger problem if the central bank does move again.
-Southwest Airlines stock has not reached the same level as its peers, with the company missing earnings forecasts four times in the past 10 quarters and sales expectations half the time. This has led to a 13% drop in the stock, reaching $29.93. However, Southwest is taking steps to execute more consistently and efficiently. The company announced Tom Doxey as its new chief financial officer, replacing Tammy Romo, who plans to retire. Argus Research analyst John Staszak has upgraded the stock to Buy from Hold, with a $35 price target, implying a 17% gain.
Features:
-President Donald Trump announced that tariffs on car imports to the US would start around April 2, with Mexico, Japan, Canada, and South Korea being the most importers. Ford CEO Jim Farley warned that the tariffs would have a significant impact on the auto industry, causing billions of dollars in profits to be wiped out. Trump also signed an executive order imposing 25% tariffs on imports of steel and aluminum, causing shares of car makers General Motors, Ford, and Tesla to fall. The tariffs, which take effect on March 12, could lead to higher car prices for consumers. Trump has previously announced tariffs that have not taken effect, such as 25% tariffs on goods from Mexico and Canada after stronger border controls were agreed upon.
-President Donald Trump has suggested that US military spending could be cut in half, leading to a drop in shares of defense firms. Trump's comments came during a news conference addressing the potential outcome of talks with Russia and China. He expressed his desire to cut the military budget in half, with one of the first meetings he wants to have with President Xi of China and President Putin of Russia. Lockheed Martin's stock dropped $10 on the news, leaving shares down almost 1.6% on Thursday at $434.72. The S&P 500 and Dow Jones Industrial Average rose 1% and 0.8%, respectively. Shares of General Dynamics, Northrop Grumman, and L3Harris Technologies fell 2.1%, 3.4%, and 0.3%, respectively. Shares of smaller defense firms Huntington Ingalls Industries, Kratos Defense & Security, and AeroVironment were down 1.6%, 7.9%, and 3.8%, respectively. Boeing stock closed down 0.4% on Thursday. The US currently spends roughly $1 trillion annually on national defense, which is about 3.4% of current GDP.
Europe:
-President Donald Trump has launched a global trade war, with some countries responding to new 25% import taxes on steel and aluminum products. The European Union has reacted by promising countermeasures, while the US has signed executive orders for the tariffs, which will take effect on March 12. Canada Prime Minister Justin Trudeau described the tariffs as "entirely unjustifiable" and said the country's response would be clear and firm. The UK may take a softer, more diplomatic approach, citing government sources calling for "cool heads" to avoid escalating trade tensions. Other countries are likely to respond with countermeasures or statements in the coming days. Trump has also announced tariffs on Canada, Mexico, and China, which China retaliated against by placing its own tariffs on certain American goods. Hong Kong is set to file a complaint with the World Trade Organization, claiming the US has ignored its status as a separate customs territory.
Emerging Markets:
-No update
Commodities:
-Oil prices could drop and inflation could ease if President Donald Trump fulfills his campaign promise to end the war in Ukraine. Trump and Russian President Vladimir Putin agreed on a productive phone call to open talks to end the three-year war. Ukrainian President Volodymyr Zelensky also discussed brokering a reliable peace. The violence has killed or wounded over 1 million people. The end of the war would impact markets, with Brent and West Texas Intermediate prices dropping to $70 a barrel. JP Morgan analyst Natasha Kaneva forecasts that Brent and WTI will drop to the mid-$60s level by year's end due to a cease-fire and faltering global demand. Cheaper crude could help the Federal Reserve in its inflation fight, but Gavekal Research analyst Will Denyer said Ukraine cease-fire talks should cheer investors concerned about inflation. Lower oil prices could also impact the earnings of publicly listed energy majors, although shares in Chevron and Exxon Mobil were flat on Thursday.
Streetwise:
-Pacific Gas and Electric (PG&E) stock is currently trading at its biggest discount in years. PG&E, California's largest distributor of necessities, covers roughly the northern two-thirds of the state. The company has pleaded guilty or settled or paid fines for its involvement in blazes so fierce, destructive, and deadly that they have names like the Camp Fire in 2018; Kincade and Easy in 2019; Zogg in 2020; and Dixie in 2021. Patti Poppe took over in January 2021, six months after the company emerged from bankruptcy. She estimates that the company has reduced its fire risk by more than 90%, covering some lines and burying others, while taking down trees and putting up stronger poles. Small fires are still common, but PG&E has installed hundreds of cameras and other monitoring devices to put out them early.