It's the first Fed day of 2024 as investors digest earnings results from Microsoft and Google — and await another round. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
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What we're watching | 🏦 The Fed breaks its silence: The Federal Reserve is expected to hold rates steady, but investors and economists will be on the lookout for any changes from December. Last month, the market became all but convinced a March rate cut was coming. Now, with at least some of that hope sanded away by hot economic data and hawkish commentary from FOMC members, investors are eager to see where they stand.
🤖 Microsoft and Google: The first- and third-most valuable companies in the US reported results Tuesday evening, with Microsoft beating earnings expectations and Alphabet missing them. AI and efforts to monetize this boom remained in strong focus, but investors got a hint at another 2023 theme making its presence felt: efficiency. Microsoft was flat as Alphabet fell 5.5% in after-hours trading Tuesday evening.
📆 Novo Nordisk, Boeing, and Qualcomm headline: Three companies whose narratives have been top of mind of late will report quarterly results Wednesday in the pause between Magnificent Seven members. Novo Nordisk, our Company of the Year, will provide a check-in on the semaglutide boom. The incident-prone Boeing will answer for its doors and dropped safety exception for the Max 7. And Qualcomm, we’d expect, will work AI into its discussion. |
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What we're reading | 📈 33 charts that explain the economy and markets: Yahoo Finance's Chartbook came out Tuesday, a massive project replete with almost three dozen charts from some of Wall Street's top strategists. The data tells a story far more optimistic than our first edition last summer. This is essential reading, folks. We'll be featuring snippets of these all week in our Chart of the Day below.
🍎 iPhone demand is hurting Apple: A report from TF International Securities said Apple would ship 15% fewer iPhones this year compared to last year, sending the stock down almost 2%. Much of this number comes from Huawei's resurgence in China with foldable phones as well as competition from AI phones, which are becoming the high-end phone preference.
📺 'Suits' proves that old TV is a great strategy: The USA legal drama, which aired from 2011 to 2019 and featured Meghan, Duchess of Sussex, was streamed for 58 billion minutes in 2023 on Netflix and Peacock. Neither company made the show, and Netflix took credit for its popularity, citing its algorithm. Either way, it's a clear sign that vertical integration isn't the only way — as long as someone else is making good stuff to watch. |
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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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| This week's data tells 2 conflicting stories about the economy | Today's Takeaway is by Julie Hyman, Anchor.
Investors looking for earnings this week to wave a magic, clarifying wand over the economic and markets picture may end up being disappointed.
Take UPS (UPS) and General Motors (GM) as two examples of earnings that muddy the economic portrait.
UPS CEO Carol Tomé characterized 2023 as a “difficult and disappointing year” as the package delivery giant forecast sales for 2024 that fell short of estimates. UPS also announced it’s cutting 12,000 workers this year.
Those jobs won’t come back, Tomé said on the company’s conference call, as the company permanently streamlines its operations and aims to use technology and other efficiency levers to be able to meet rebounding demand when it arrives. (CFO Brian Newman said volumes should rise 2% to 4% by the end of the year. They fell 7.4% in the US last quarter and dropped 8.3% internationally).
On the flip side, consider GM.
“Consensus is growing that the US economy, the job market, and auto sales will continue to be resilient.” That’s how CEO Mary Barra kicked off the earnings call. It accompanies the automaker’s forecast for earnings per share this year of $8.50 to $9.50, compared with the $7.70 predicted by analysts.
Of course, these companies’ circumstances aren’t entirely centered on the economy. They both have idiosyncratic factors — GM’s expensive bet on electric vehicles and its Cruise self-driving unit, for example, both of which it’s managing differently this year.
Expanding the aperture, though, doesn’t necessarily help bring the economic picture into focus, as my co-anchor Josh Lipton pointed out.
Whirlpool shares tumbled after the appliance maker warned consumer spending was softening. Visa shares traded at a record intraday high after the stock shook off concerns over January weather and investors heeded the commentary from CEO Ryan McInerney: “Consumer spending remained resilient.”
Canaccord Genuity’s Tony Dwyer warned investors against expecting too much from this week’s numbers: “This week is unlikely to do much to clear up the economic or market confusion. It is one of the busiest weeks for earnings reports, the Fed is meeting, and who knows how they will guide at the press conference, and we get key economic data late in the week,” he wrote in a note sent Monday to clients.
Indeed, the above examples don’t even take into consideration the economic data, including an encouraging job openings report, aka JOLTS, or today’s pending Fed interest rate commentary, which could give hints about the pace and timing of rate cuts.
Nor do they factor in large-cap tech, which seems to exist in a parallel, AI-driven economy.
As Dwyer wrote, maybe “now is not the time to make a big call in either direction.” There’s still a lot more data to come. |
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| Stocks on the move | - United Parcel Service (UPS) stock fell 8% on Tuesday after the company reported weak revenue guidance for 2024 amid stiff competition from e-commerce companies like Amazon (AMZN). UPS also revealed it will be slashing 12,000 jobs as part of a new cost-cutting initiative to save $1 billion.
- General Motors (GM) saw shares rise 8% after the company reported a beat on both the top and bottom lines and issued full-year 2024 profit guidance that matched its initial forecast for 2023. As Yahoo Finance's Pras Subramanian reports, the upbeat results come as GM looks to shake off the effects of the UAW strike and recalibrate its electric vehicle rollout.
- Pfizer (PFE) reported fourth quarter adjusted earnings that beat expectations, although the stock fell a little over 1% after the company missed on the top line as revenue tied to its COVID-19 vaccine fell 53% year over year. Still, the company reaffirmed full-year guidance for 2024 with CEO Albert Bourla saying in the earnings release, "We believe our commitment to execution, maximizing the performance of our new products, and delivering the next wave of pipeline innovation will fuel Pfizer’s growth and make a difference in the lives of patients everywhere."
— Alexandra Canal, Senior Reporter |
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| Watch on Yahoo Finance Live | - Rachel Ruggeri, Starbucks CFO, on the company's two big problems at 9:05 a.m.
- George Arison, Grindr CEO, on its AI bet at 10:45 a.m.
- Matt Perault, UNC tech policy professor & former Facebook public policy director, on Big Tech CEOs testifying on Capitol Hill at 11:00 a.m.
- Richard Francis, Teva CEO, at 11:45 a.m.
- John Stoltzfus, managing director, chief investment strategist, Oppenheimer Asset Management, on the Fed decision at 2:15 p.m.
- Vas Narasimhan, Novartis CEO, on Q4 results 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.
"The Federal Reserve has surprised markets over the past month with a dovish pivot that kicked off the discussion around rate cuts. A key reason for the timing of this shift is the surprisingly quick deceleration in inflation. Softer inflation has, in turn, raised the prospect that Fed policy could overtighten in the coming months if the Fed does not begin to reduce rates. Such an outcome could put the soft landing at risk.
"The accompanying chart demonstrates how the real fed funds rate — measured as nominal fed funds minus spot inflation on a year-over-year basis — is likely to lurch higher as inflation falls. If the Fed does not reduce rates over the coming months, the real fed funds rate would begin to tighten to historically elevated levels that have often been followed by economic slowdowns or recessions."
— Matthew Luzzetti, chief US economist, Deutsche Bank |
|  | For more graphics like this, follow Yahoo Finance on Instagram. |
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Earnings and economic calendar | Wednesday
- Economic data: MBA Mortgage Applications, week ended Jan. 26 (3.7%); ADP private payrolls, January (+150,000 expected, +164,000 prior); employment cost index, fourth quarter (1.0% expected, 1.1% prior); Federal Reserve monetary policy decision (no interest rate change expected)
- Earnings: Aflac (AFL), Boeing (BA), Hess (HES), Mastercard (MA), MetLife (MET), Novo Nordisk (NVO), Phillips 66 (PSX), Qualcomm (QCOM)
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 Jan. 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)
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