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What we're watching | 💻 Apple, Amazon, and Meta report: Three more "Magnificent Seven" members report quarterly results Thursday. Tesla, Microsoft, and Alphabet all saw shares drop in response to their results posted over the last week. Apple, which faces numerous issues including slumping iPhone demand, has lowered expectations while Amazon shook up its streaming offering. Meta will look to show off a healthy ad business and its efforts to monetize AI after a superb 2023 for the stock.
💨 Twin headwinds push markets off record highs: The S&P 500 dropped 1.6% Wednesday, its worst day of the year, as Microsoft and Alphabet earnings set a downbeat tone and Fed Chair Jerome Powell piled on by saying a rate cut "probably" wouldn't come in March. One key note: If we learned one thing in 2023, it is the market's singular ability to shake off Fed-related fears. And, to paraphrase a 1994 classic, Powell's technically still saying there's a chance.
💸 A slew of earnings and data: Honeywell, Merck, Royal Caribbean, Peloton, and SiriusXM round out the second-tier of reporting companies Thursday. Investors will also get a look at Challenger's job cuts, initial jobless claims, and manufacturing indexes before Friday's jobs report. |
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What we're reading | 💼 Employees have little reason to change jobs: The "Great Resignation" of the past couple of years is a thing of the past, as the freewheeling labor market has tightened up openings and wage growth. Now, the difference between job leavers and job stayers has narrowed considerably — potentially pushing workers to settle for the evil (or joy!) they know.
💰 When you’ll get your 2024 refund: It generally takes 21 days, according to the IRS. But there are a few ways to shorten that wait: filing electronically and really making sure everything is as correct as it can be. Check out some key tips from our personal finance team here.
✈️ A contrite Boeing suspends guidance: The embattled aerospace company notched an expectations-beating quarter but, not surprisingly, threw its 2024 guidance out the window as it deals with the fallout from a door blowout on an Alaska Airlines flight. Boeing is capping its 737 production until the FAA is satisfied. |
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Note: Data is as of the time of opening this email. To view real-time markets data click here. |
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| Powell would like investors to treat good news as good news | Today's Takeaway is by Myles Udland, Head of News.
The Federal Reserve left interest rates unchanged on Wednesday, and Fed Chair Jerome Powell brushed off suggestions the central bank will start cutting rates in March, drawing most of the attention from investors.
But the Fed chair also tried to hammer home the notion that good economic data remains good news for the central bank and disabuse investors of the idea that a period of "bad news is good news" will be required for the central bank to proceed with lower interest rates this year.
"So, I think we look at stronger growth, we don't look at it as a problem," Powell said. "At this point, we want to see strong growth. We want to see a strong labor market. We're not looking for a weaker labor market. We're looking for inflation to continue to come down as it has been coming down for the last six months."
Last week, the first estimate of fourth quarter GDP showed the economy grew at an annualized rate of 3.3% in the final three months of 2023.
Compared to the fourth quarter in 2022, real GDP grew 3.1% in the fourth quarter. As of December, the unemployment rate stood at 3.7%.
On the inflation side, core PCE, the Fed's preferred measure, showed an annual increase of 2.9% in December, the slowest since March 2021. The Fed targets 2% inflation.
On a six-month annualized basis, core PCE reached 1.9% in December, below the Fed's target. Look at this data on a three-month annualized basis, and core PCE fell to 1.6% last month.
In its statement, the Fed said it would need to see "greater progress" on inflation before cutting rates.
Pressed several times during Wednesday's press conference on what, exactly, would constitute greater progress, Powell emphasized time over magnitude. His explicit note that a March cut is "probably not" the most likely outcome next month was his most forceful comment in service of this argument.
Still, Powell emphasized interest rates have "likely" reached their peak for this current cycle.
Back in December 2022, Fed officials had expected GDP to expand just 0.5% in the year ahead; the unemployment rate was forecast to rise to 4.6%. And most Wall Street strategists were penciling in a recession and a further drop in the stock market in 2023 after the brutal bear market of 2022.
That there would be an economic price to pay amid the Fed's efforts to bring down inflation was not just an expectation, but a foregone conclusion. Both for the Fed, investors, and the public.
And, of course, the Fed's actions did not come without costs — inflation peaked at 9.1% in June 2022. For a two-year stretch between April 2021 and April 2023, real wage growth was negative. The aforementioned bear market of 2022 was one of the most challenging years on record for savers investing in a diversified portfolio of stocks and bonds.
But that a continued economic expansion is something to be feared is a view Powell hopes to put to rest in 2024. Whether he'll gain the trust of investors and the public on this count remains to be seen. |
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| Stocks on the move | |
New York Community Bancorp (NYCB) stock tanked more than 37%, which was on track for its worst single-day loss ever, after the bank posted a surprise loss for the quarter and cut its dividend payment. The S&P 500 regional banking ETF (KRE) slipped more than 3% on the news.
— Josh Schafer, Markets Reporter |
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| Watch on Yahoo Finance Live | - Jay Woods, Freedom Capital Markets chief global strategist, on Apple as the "next Tesla" at 9:25 a.m.
- Akash Palkhiwala, Qualcomm CFO and COO, at 10:10 a.m.
- Daniel Morgan, Synovus Trust senior portfolio manager, on Microsoft and Google foreshadowing Apple, Amazon, and Meta earnings at 11 a.m.
- Naftali Holtz, Royal Caribbean Group CFO, on cruise demand at 3 p.m.
- Andy Challenger, Challenger, Gray & Christmas senior vice president, on job cuts and the economy at 4 p.m.
All times ET. |
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Chart of the day | Today's chart of the day features an entry from our latest Chartbook.
"Pay gains have slowed for more than a year. According to ADP Pay Insights, which uses payroll transactions data to provide a view on the wages and salaries of a cohort of almost 10 million matched employees over a 12-month period, the median year-over-year change in pay for workers who have stayed with the same employer over a 12-month period fell to 5.4% in December 2023, the smallest since September 2021. For workers changing jobs, the median annual pay change fell to 8%, the smallest since June 2021.
"Pay increases have stepped down from an unsustainable high level. We've passed the post-pandemic stage when pay gains for job changing or for leisure & hospitality workers hit double-digit percentages. The pay premium for changing jobs has narrowed."
— Liv Wang, lead data scientist, ADP Research Institute |
|  | For more graphics like this, follow Yahoo Finance on Instagram. |
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Earnings and economic calendar | Thursday
- Economic data: Challenger jobs cuts, year-over-year, January, (-20.2% prior); Unit labor costs, fourth quarter (+2.6% expected, -1.2% prior); Nonfarm productivity, fourth quarter (+1.6% expected, +5.2% prior); Initial jobless claims, week ending January 27 (214,000 prior); S&P Global US manufacturing PMI, January final (50.3 prior); Construction spending, month-over-month, December (+0.5% expected, 0.4% prior); ISM manufacturing, January (47.5 expected, 47.2 prior); ISM prices paid, January (45.2 prior)
- Earnings: Apple (AAPL), Amazon (AMZN), Deckers Outdoor (DECK), Honeywell (HON), Meta (META), Merck (MRK), Royal Caribbean Group (RCL), Peloton (PTON), SiriusXM (SIRI), Skechers (SKX), Tractor Supply (TSCO), The Clorox Company (CLX), United States Steel (X)
Friday
- Economic calendar: Nonfarm payrolls, January (+175,000 expected, +216,000 prior); Unemployment rate, January (3.8% expected, 3.7% previously); Average hourly earnings, month-over-month, January (+0.3% expected, +0.4% prior); Average hourly earnings, year-over-year, January (+4.1% expected, +4.1% prior); Average weekly hours worked, January (34.4 expected, 34.3 prior); Labor force participation rate, January (62.5% previously); U. of Mich sentiment, January final (78.8 expected, 78.8 prior); Factory orders, December (+0.5% expected, 2.6% prior); Durable goods orders, December final (0.0% prior)
- Earnings: Chevron (CVX), Exxon Mobil (XOM), Charter Communications (CHTR)
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