Weekly Market Update: Markets continue to look past troubling inflation data as central bankers stay cautiously optimistic
Earnings and US inflation data where in focus this week and neither offered overly encouraging signals for investors. Nevertheless, US indices managed to hang around all-time highs mostly on the belief that an early 2024 uptick in inflation is unlikely to change the overall disinflationary trend. Fed officials largely supported that notion when acknowledging their surprise in the recent string of strong numbers, but also underscoring their belief progress is likely to continue and lead to policy normalization later this year. The S&P held 5K despite a backup in interest rates and a swath of companies that either lowered or guided FY24 earnings significantly below market consensus. The US dollar index touched the highest levels since mid-November as US Treasury yields backed up along the curve, led by the short end. For the week, the S&P lost 0.4%, the DJIA dipped 0.1%, and the Nasdaq fell 1.3%.
Jan CPI data clearly suggested that it will take even longer than markets have been hoping for the Fed to become confident that inflation is moving sustainably back toward its 2% objective. Numerous Fed officials reiterated that they want to be sure that core services will eventually return to levels that are consistent with the long-run goal, but the CPI series turned in its largest one-month gain of +0.7% in 16 months. That pop was echoed in Friday’s PPI print when its service-sector components that feed into the PCE were stronger than expected, even if not quite to the same degree as seen in the CPI. The University of Michigan inflation surveys moved up as well, along with prices paid components of the most recent manufacturing surveys. There were several noticeable offsets to the strong inflation data. US January retail sales numbers were very soft relative to expectations while some of the strength seen in that series in December was revised lower. Overseas, both the UK and Japan Q4 GDP data pointed to technical recession, and UK January CPI came in much cooler than expected.
Earnings season marched on with mixed results and a perhaps more overall cautious tone this week. Marriott reported solid Q4 results but provided tepid guidance that suggested preparations for a softer lodging market later this year. In a similar vein, AirBnB projected moderation in the growth rate for its bookings in the current quarter. Cisco Systems cut guidance for the second quarter in a row as it pointed to persistently weak results coming out of Asia. In the ecommerce space, Shopify reported strong numbers and guidance as it saw its GMV rise 23% over year ago. Applied Materials beat estimates and guided higher, and affirmed that the chip equipment sector is still humming along as cloud companies reaccelerate capital investment. On the M&A front this week, Vizio shares were higher on reports that Walmart was eyeing the TV maker for a $2B+ deal.
MON 2/12
(IL) Israel PM Netanyahu: Conquering Rafah in southernmost Gaza is essential to defeating Hamas; Victory is within reach; We're going to do it.
(IL) Axios reporter: Senior Israeli officials have told me that an Israeli delegation will go to Egypt tomorrow for a meeting with the head of the CIA, the head of Egyptian intelligence and the prime minister of Qatar in an attempt to promote negotiations
(IR) Iran Foreign Min Kanaani: Gaza war is moving toward diplomatic solution
(SA) Saudi Energy Min Abdulaziz: OPEC ready to tweak policy at any time; Saudi Aramco is not necessarily abandoning capacity expansion; We are ready to tweak up or downwards at any time, whatever market necessity dictates
(US) Deutsche Bank strategist: Global earnings growth has turned positive for the first time in 5 quarters, while all measures of US earnings beats are well above the upper end of their pre-pandemic ranges
(US) JAN MONTHLY BUDGET STATEMENT: -$21.9B V -$21.0BE
(US) Fed’s Bowman (voter, hawk) Q&A: Doesn't see cuts as appropriate in the immediate future; Many risks remain for Fed's inflation fight
(CH) Swiss weekly Total Sight Deposits (CHF): 482.3B v 481.2B prior
(AU) Australia ANZ Roy Morgan Weekly Consumer Confidence: 82.6 v 83.8 prior
(CN) EU proposes first trade curbs on three Chinese firms and firms in several other countries, including Turkey, India and Serbia, over aid provided to Russia for its war in Ukraine – press
(IN) INDIA JAN CPI Y/Y: 5.1% V 5.0%E (5th straight month within target range)
FANG Diamondback Energy and Endeavor Energy Resources confirm to merge in $26B cash-stock (about 30%-70%) deal; Diamondback raises 7% its annual base dividend to $3.60/shr; Expect merger to close in Q4 and operational synergies to be realized in 2025
CDTX Receives $11.1M milestone payment following European Approval of REZZAYO
ANET Reports Q4 $2.08 v $1.71e, Rev $1.54B v $1.53Be
WAF.DE Guides FY24 H1 flat y/y with significant decline in EBIT, due to the continuing weakness in demand, primarily as a result of elevated customer inventories and the associated further postponements of delivery volumes; Cuts annual dividend 60%
TUES 2/13
(JP) Japan top currency diplomat Kanda: Recent JPY currency (yen) moves are rapid; Will take actions if needed.
(RU) Russia Foreign Ministry: Russia's response to asset seizure will be tough
(EU) Estonia's Foreign Intelligence Service: Russia is preparing for potential military confrontation with the NATO within the next decade; Assessment is based on Russian plans to double the number of forces stationed along its border with NATO members
(DE) GERMANY FEB ZEW CURRENT SITUATION SURVEY: -81.7 V -79.0E (lowest since mid-2020); EXPECTATIONS SURVEY: 19.9 V 17.3E
(UK) DEC AVERAGE WEEKLY EARNINGS 3M/Y: 5.8% V 5.6%E
(US) Weekly API Crude Oil Inventories: +8.5M v +0.7M prior
(US) Jan Real Avg Hourly Earning Y/Y: 1.4% v 1.0% prior; Avg Weekly Earnings Y/Y: -0.1% v +0.7% prior
(US) Atlanta Jan Sticky-CPI annualized 6.7% v 4.2% m/m, Core 6.8% v 4.6% m/m (update)
(US) Weekly Redbook LFL Sales w/e Feb 10th: +2.5% y/y
(US) JAN CPI M/M: 0.3% V 0.2%E; Y/Y: 3.1% V 2.9%E (biggest M/M jump since Sept 2023; Core CPI YoY unchanged from Dec
(US) According to Nielsen and Adobe Analytics, Sunday's Super Bowl game was the most-watched program in television history, averaging 123.4M viewers, +7% y/y
TUI1.DE Reports Q1 -€0.24 v -€0.89 y/y, Underlying EBIT +€6M v -€113M y/y, Rev €4.30B v €4.17Be; Notes bookings for Summer 2024 continue to be promising, ahead y/y across all its markets
ABNB Reports Q4 -$0.55* v $0.67e, Rev $2.22B v $2.16Be
VZIO Walmart reportedly in talks to buy TV maker Vizio; Deal valued at more than $2B – WSJ
002594.CN Considering establishing a plant in Mexico, with eye on US market; BYD already launched a feasibility study; Planning to spend BRL3B for a new plant in Brazil – Nikkei
OPEC Monthly Oil Report (MOMR)
BRKR Reports Q4 $0.70 v $0.65e, Rev $854.5M v $809Me; Guides Rev strong, see it "well above-market"
MAR Reports Q4 $3.57 adj v $2.12e, Rev $6.10B v $6.32Be
SHOP Reports Q4 $0.34 v $0.31e, Rev $2.14B v $2.07Be
TRU Assumes slower/muted growth conditions to persist in 2024, but expects more stable macro environment; In Q1, assumes similar lending and marketing trends q/q - earnings slides
TRU Reports Q4 $0.80 v $0.71e, Rev $954.3M v $927Me; Guides Rev strong, notes US Markets lending and marketing activity remained subdued but consistent with prior Q; Revises previous financials statements, results in no impact to total operating expense or income
WED 2/14
(EU) EURO ZONE Q4 PRELIMINARY GDP Q/Q: 0.0% V 0.0%E; Y/Y: 0.1% V 0.1%E
(EU) ECB allots $214.0M in weekly 7-day USD Liquidity Tender at 5.58% vs $222.0M prior
(UK) JAN CPI M/M: -0.6% V -0.3%E; Y/Y: 4.0% V 4.1%E
(UK) BOE and SNB allotment in weekly 7-day USD liquidity operation
(IR) Iran confirms terror attack hit the main gas transmission network in Borujen [the specific cause of the incident has not been disclosed] - Iran state media
(AU) AUSTRALIA JAN EMPLOYMENT CHANGE: +0.5K V +25.0KE; UNEMPLOYMENT RATE: 4.1% V 4.0%E (1st time above 4% since Jan 2022)
(JP) JAPAN Q4 PRELIMINARY GDP Q/Q: -0.1% V 0.2%E; ANNUALIZED Q/Q: -0.4% V 1.1%E (enters technical recession for 1st time since pandemic; loses title of the world's third-biggest economy to Germany)
- GDP Nominal Q/Q: 0.3% v 0.8%e
(CN) International Institute for Strategic Studies analyst: China starting to prepare for protracted war in the Indo-Pacific, learning from Russia's invasion of Ukraine; Cites China's legal changes that will help integrate military and civilian mobilization – Nikkei
(US) DOE CRUDE: +12M V +2.5ME; GASOLINE: -3.7M V -1ME; DISTILLATE: -1.9M V -1.5ME
(US) Fed's Goolsbee (non-voter for 2024); Lets not get too flipped out about yesterday's inflation data; CPI data yesterday meant the puzzle got bigger and it is something I am watching
(US) Fed's Waller (voter, hawk): Forward guidance should be more flexible
(US) Former congressman Tom Suozzi (Dem) wins against Nassau County legislator Mazi Pilip (R) in New York's 3rd Congressional district special elections over former George Santos (R) seat - press
(US) MBA Mortgage Applications w/e Feb 9th: -2.3% v 3.7% prior
CSCO Reports Q2 $0.87 v $0.84e, Rev $12.8B v $12.7Be; Cuts FY guidance; Confirms to cut ~5% of its global workforce; Raises Quarterly dividend 2.6% to $0.40 from $0.39 (indicated yield 3.18%)
CSCO Orders fell less in Q2 than they did in Q1; Orders down 12% in Q2, with the worst decline in Asia; Now expect to close Splunk acquisition in late calendar Q1 or early in Q2 of 2024 (prior: 'by end of Q3') - earnings call comments
PBB.DE S&P cuts rating one notch to BBB- from BBB; Outlook Negative; Cites challenges from commercial real estate
GMAB.DK Announces initiation of Share Buy-Back Program up to 190K shares (less than 1% of market cap)
TNXP Hosted KOL webinar on positive Phase 3 Fibromyalgia trial for Tonmya; Plans to file NDA for FDA approval in 2H24
MAERSKB.DK *Exec: US businesses are concerned about delivery timing; We don’t see any change in the Red Sea happening anytime soon, last potentially 'through Q3'; Customers will need to make sure they have the longer overall transit time built into their supply chain - CNBC [**Note: prior Maersk mentioned 'few months or longer' to resume Red Sea transits]
CNHI.IT Reports Q4 $0.42 v $0.41e, Rev $6.79B v $6.96Be; Cost reduction programs expected to improve through-cycle margins; Announces additional $500M share buyback program
KHC In regard to consumer health, we continue to see a pressured consumer, with a retained focus on seeking value; The industry was more challenging than we had originally anticipated - prepared remarks
TSEM Reports Q4 $0.55 v $0.73 y/y, Rev $351.7M v $403M y/y; Notes a rebound in several market segments’
TMHC Reports Q4 $2.05 v $1.76e, Rev $2.02B v $1.86Be; ASP's fell faster than street ests
AVNT Reports Q4 $0.52 v $0.48e, Rev $719.0M v $709Me; Expects destocking fully comes to an end in 2024, underlying demand starts to improve
SITE Reports Q4 -$0.08 v -$0.18e, Rev $965M v $941Me; Guides prices to be down 1% to 2% for 2024
OC Reports Q4 $3.21 v $2.83e, Rev $2.30B v $2.24Be
DATABRICKS.IPO CEO: Over next year, prices for AI chips (AI GPUs) will see major drop, throwing a wrench into the business models of numerous major firms and startups (update)
AD.NL Reports Q4 €0.58 v €0.62e, Adj Op €996M v €928Me, Rev €23.0B v €23.0Be
6758.JP Reports 9M Net ¥781.6B v ¥809.0B y/y, Op ¥979B v ¥1.08T y/y, Rev ¥9.54T v ¥8.48T y/y; Raises FY23/24 Net and Op, cuts Rev; Proposes partial spinoff, listing of Sony Financial Group
HEIA.NL Reports FY23 Net €2.30B v €2.50Be, adj Op €4.44B v € 4.50Be, Net Rev €30.3B v €30.3Be; Notes strong pricing to offset costs has affected its volumes
THRS 2/15
(JP) Japan releases weekly flows data [period ended Feb 9th]: Foreign buying of Japan equities: ¥621.3B v ¥308.2B prior; Japan buying of foreign bonds: ¥1.50T v ¥456.7B prior
(RU) RUSSIA GOVT SPOKESPERSON: REFUTE TO COMMENT ON REPORTS RUSSIA HAS PUT NUCLEAR WEAPONS IN SPACE; SUCH RUMORS ARE 'YET ANOTHER WHITE HOUSE PLOY'
(UK) Chancellor of the Exchequer (Fin Min) Hunt reportedly scaling back plans for tax cuts in the Budget next month; Office for Budget Responsibility tell Chancellor that he has less money available than expected for his Budget on Mar 6th - UK press
(UK) Q4 PRELIMINARY GDP Q/Q: -0.3% V -0.1%E; Y/Y: -0.2% V 0.1%E (enters technical recession for 1st time since pandemic)
(EU) ECB's Scicluna (Malta): Risks are everywhere but inflation is easing; open to rate cut in March as inflation fades [**Note: first ECB official to mention March in particular for a potential rate cut]
IEA Monthly Oil Report (OMR): Raises global supply forecast
(BR) Brazil Central Bank Weekly Economists Survey
(US) Fed’s Bostic (dove, voter): Fed likely to soon contemplate cutting rates, but does not face urgency to cut rates given the current economy; Unlikely Jan CPI signals a big change in trend of weakening inflation
(US) FEB EMPIRE MANUFACTURING: -2.4 V -12.5E; Prices Paid: 33.0 v 23.2 prior (input prices pace pick up for second straight month)
(US) JAN ADVANCE RETAIL SALES M/M: -0.8% V -0.2%E; RETAIL SALES (EX-AUTO) M/M: -0.6% V +0.2%E
(US) JAN IMPORT PRICE INDEX M/M: 0.8% V 0.0%E; Y/Y: -1.3% V -1.3%E
(US) Weekly USDA Net Export Sales
(US) WEEKLY EIA NATURAL GAS INVENTORIES: -49 BCF VS. -67 BCF TO -69 BCF INDICATED RANGE
(US) FEB PHILADELPHIA FED BUSINESS OUTLOOK: +5.2 V -8.1E (1st positive print since Aug 2023); Prices Paid: 16.6 v 11.3 prior
(US) FEB NAHB HOUSING MARKET INDEX: 48 V 46E
(US) BOFA INSTITUTE: WEEK-TO-FEB 10TH TOTAL CARD SPENDING -0.7% Y/Y V -0.2% AVG IN JAN; OVERALL SPENDING GROWTH REMAINED RELATIVELY SOFT DESPITE NO BIG WEATHER DISRUPTIONS LIKE IN JAN
(US) NY Fed takes $493.1B (v $575.33B prior) in RRP program at 5.30%; 82 participating and accepted counterparties (lowest dollar amount since June 2021)
(US) Unverified press chatter that Senior House Republican leadership is sending members home for a vacation until Feb 28th [**Note: Mar 1st is the first deadline to avert US govt shutdown]
(US) Atlanta Fed GDPNow: Cuts Q1 GDP forecast from 3.4% to 2.9% (update)
DASH Reports Q4 -$0.39 v -$0.15e, Rev $2.3B v $2.24Be; Announces up to $1.1B share buyback
AMAT Reports Q1 $2.13 v $1.89e, Rev $6.71B v $6.47Be; Guides Q2 strong
OPENAI.IPO Launches a new text to video model called 'Sora' for limited number of testers - press
FNMA Reports Q4 Net $3.94B v $1.43B y/y, Rev $7.80B v $7.14B y/y; Multifamily serious delinquency rate increased to 0.46% v 0.24% y/y; Notes changes in loan activity and declining property values on its overall multifamily guaranty book
SHAK Trends have improved in February as weather headwinds lessened; Jan SSS flat y/y, Average weekly sales $71K v $78K m/m, slightly lower y/y - shareholder letter
IRWD Reports Q4 $0.00 v $0.20e, Rev $117.6M v $117Me (update)
DE Reports Jan (rolling 3-month) US/Canada Combines retail sales 'higher than industry average of -11% y/y; Jan 2WD Tractors dealer inventories 30% v 25% y/y - earnings slides
ENSU.NO Manufactured fully functional solid state microbatteries consisting of stacked cells on 10-micron substrates; Says its 10-micron microbattery expected to transform the battery market for wearables, hearables and connected sensors
STLA Reports FY23 Net €18.6B v €16.8B y/y, Rev €189.5B v €179.6B y/y; Plans €3B share buyback in 2024
AIR.FR Reports Q4 €1.85 v €2.13 y/y, Adj EBIT €2.21B v €2.26Be, Rev €22.9B v €22.5Be; Special dividend of €1.00/shr
FRI 2/15
(RU) RUSSIA PRISON AUTHORITY SAYS JAILED RUSSIAN OPPOSITION LEADER ALEXEI NAVALNY DIED; SAY NAVALNY FELL SICK DURING WALK IN PRISON - RUSSIAN STATE PRESS
(JP) Traders circulating press chatter which cites 'sources familiar with BOJ thinking', saying Bank of Japan is on track to end negative interest rates in coming months despite the economy's fall into recession
(IN) India Weekly Forex Reserve w/e Feb 9th: $617.2B v $622.5B prior
(US) House Majority Whip Tom Emmer (R-Minn.): House will not pass stopgap bill to avoid govt shutdown; Still hopes to pass full year packages before deadline - financial press [**Note: Mar 1st is the first deadline to avert US govt shutdown]
(US) Fed’s Bostic (dove, voter): I was a little surprised by the data but have seen a lot of progress on inflation - CNBC interview
(US) FEB PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 79.6 V 80.0E
(US) JAN HOUSING STARTS: 1.331M V 1.460ME; BUILDING PERMITS 1.470M V 1.512ME
(US) JAN PPI FINAL DEMAND M/M: 0.3% V 0.1%E; Y/Y: 0.9% V 0.6%E; Super core PPI M/M biggest jump since Jan 2023
(US) Weekly Baker Hughes Rig Count: 621 v 623 prior (-0.3% w/w)
(US) Association of American Railroads weekly rail traffic report for week ending Feb 10th; 484.8K total units, +4.5% y/y (update)
OPENAI.IPO CEO Altman reportedly seeks US support to raise billions for AI chips for his Chip Venture idea – press
OpenAI's new instant text-to-video tool Sora, although available for limited testing so far, appears to have shifted the generative AI battle to Hollywood
XPP.UK Trading Update: Likely to be a shortfall in Rev in 2024, outlook significantly below market expectations, based on slowdown in the semiconductor manufacturing equipment industry, recent order intake confirming 'unusual, temporarily soft demand conditions' and destocking
AAPL TF International analyst Ming-Chi Kuo: iPhone shipments in the Chinese market continued to decline Y/Y; The price cuts at the beginning of the year have limited help to shipments