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Commentary |
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Stock indexes maintain their upward momentum amid mostly solid earnings results. I should mention that Tesla earnings, released after the market close yesterday, widely missed Wall Street expectations, with a per share profit of just $0.45 versus average analyst estimates of $0.49. Revenue also missed, falling -9% versus expectations of a decline around -5%. However, Tesla stock was up in after hours trading after CEO Elon Musk reaffirmed the company’s commitment to introduce “more affordable products.” Concern that Tesla was abandoning plans to make cheaper electric vehicles was partially behind the recent decline in the company’s stock.
Musk also said Tesla was in talks with a “major” carmaker to license its Full Self Driving technology, though he didn’t name the company. At the opposite end of the spectrum is General Motors, which not only beat Wall Street estimates but also raised its full-year guidance. GM also sees room to lift guidance again if the company’s pricing power holds up.
Bulls today are anxious to see earnings from Facebook-parent Meta, which reports after the close. Meta, like Tesla, is among the “Magnificent Seven” group of stocks that, due to their enormous valuations, can have an outsized influence on wider indexes, particularly the S&P 500 and Nasdaq.
Meta’s stock is up some +40% already this year and +130% over the past 12 months. Like many of the other big tech stocks riding the AI-hype wave, investors are looking for earnings to justify the huge gains.
Wall Street expects Meta to post an earnings gain of +95% which compares to a gain of over +200% in Q4 2023.
Other earnings highlights today include AT&T, Biogen, Boeing, Boston Scientific, Canadian Pacific, Chipotle, CME Group, Ford, General Dynamics, Hilton Worldwide, Norfolk Southern, O’Reilly Automotive, Thermo Fisher Scientific, and Waste Management.
There isn’t much on the economic data front with Durable Goods Orders really the only report of note.
Keep in mind, there are two key reports coming at the end of the week that could have a heavy influence on Federal Reserve rate cut expectations - the first estimate of Q1 2024 GDP on Thursday and the PCE Prices Index on Friday.
Investor have significantly walked back those expectations already, from as many seven 25 basis point cuts at the start of the year to now just one or two cuts. If the data comes in much stronger-than-expected it could easily fan inflation fears and raise more doubts about whether the Fed will be able to cut rates at all in 2024.
Wall Street bulls are trying to adjust to the talk of rates staying higher for longer, it's just a matter of if they can continue to find enough fresh new headlines to hold onto the gains... I remain underinvested in the market and overweight cash in the bank earning +5%.
Could Be a Game Changer for Some Businesses... US Taking Steps to Ban "Non-Compete Agreements" for Nearly All Jobs - The Federal Trade Commission narrowly voted Tuesday to ban nearly all non-competes, employment agreements that typically prevent workers from joining competing businesses or launching ones of their own. The FTC received more than 26,000 public comments in the months leading up to the vote. Chair Lina Khan referenced on Tuesday some of the stories she had heard from workers. "We heard from employees who, because of noncompetes, were stuck in abusive workplaces," she said. "One person noted when an employer merged with an organization whose religious principles conflicted with their own, a noncompete kept the worker locked in place and unable to freely switch to a job that didn't conflict with their religious practices." These accounts, she said, "pointed to the basic reality of how robbing people of their economic liberty also robs them of all sorts of other freedoms." The FTC estimates about 30 million people, or one in five American workers, from minimum wage earners to CEOs, are bound by noncompetes. It says the policy change could lead to increased wages totaling nearly $300 billion per year by encouraging people to swap jobs freely. The ban, which goes into effect later this year, carves out an exception for existing noncompetes that companies have given their senior executives, on the grounds that these agreements are more likely to have been negotiated. The FTC says employers should not enforce other existing noncompete agreements. The vote was 3 to 2 along party lines. The dissenting commissioners, Melissa Holyoke and Andrew Ferguson, argued that the FTC was overstepping the boundaries of its power. The FTC’s final rule becomes effective in four months. The U.S. Chamber of Commerce plans to sue the FTC as soon as Wednesday over the rule. The suit would argue that the FTC lacks the legal authority to issue the rule and would ask a federal court to invalidate it. I agree with the U.S. Chamber of Commerce, how can a company or small business owner protect themselves if we completely do away with "non-compete" agreements? How can you hire people, teach them your trade secrets then just let them walk away and start their own company or be lured away by your competition for simply more money? I have several friends who had small family-owned businesses that really took a hit by not having a non-compete on some key employees. Then those employees left and started a competing business right in their backyard. I also understand the employee's argument that if they had been paid more or treated better they might not have left, but I still don't agree with fully doing away with non-competes. Source WSJ
US Accounts for Just 10% of EV Market: Global electric vehicle sales are still heading upward, but headwinds are preventing faster mass-market adoption. The International Energy Agency (IEA) sees full EVs and plug-in hybrids together accounting for one in five light-duty vehicles (think cars, SUVs and pickups) sold in 2024. But the market is top-heavy: 60% of those sales are in China, with 25% in Europe, and 10% in the U.S. Overall, the agency projects sales growing over 21% this year. That's down from 2023 growth, but from a higher base. EVs still haven't reached upfront cost-parity with fossil fuel-powered models, and that's a check on growth. They're 10%-50% more expensive in Europe and the U.S., "depending on the country and car segment," the IEA notes. But in China, the largest market, 60% of EVs sold last year were less costly than their internal combustion equivalent, it added. Source Axios
GM Says Americans Still Paying Top Dollar for Gas Guzzlers: The strong U.S. consumer is the gift that keeps on giving for General Motors. America’s best-selling automaker upgraded its profit guidance for 2024 Tuesday after beating analysts’ forecasts for the first quarter. Last year, like many investors, GM prepared for a tougher U.S. economy that never actually arrived. That is now leading to strong results as higher-than-expected revenue hits a cost base shrunken by layoffs. At $3.9 billion, quarterly operating profit was the best since the third quarter of 2022, when vehicle shortages were still forcing consumers to pay top dollar to get new wheels. Now vehicles are easier to get, but Americans are still paying up. On a call with analysts, GM’s management team called out pricing as the key reason for its guidance upgrade: Prices are falling, but not as fast as they had expected. If the trend continues, they may have to increase their forecasts again, said Chief Financial Officer Paul Jacobson. Source WSJ
Living to 120 is Becoming an Imaginable Prospect: Living to 100 today is not unheard of, but is still rare. In America and Britain centenarians make up around 0.03% of the population. Should the latest efforts to prolong life reach their potential, living to see your 100th birthday could become the norm; making it to 120 could become a perfectly reasonable aspiration. More exciting still, those extra years would be healthy. What progress has been made in expanding lifespans has so far come by countering the causes of death, especially infectious disease. The process of aging itself, with its attendant ills such as dementia, has not yet been slowed. This time, that is the intention. The idea is to manipulate biological processes associated with aging that, when dampened in laboratory animals, seem to extend their lives. Many of those techniques involve drugs that suppress appetite, and newer ones that kill “senescent” cells for which the body has no further use. Researchers are also investigating gene manipulation that could halt or reverse aging. One cause for concern is people’s brains. Slowing bodily aging will not change the fact that the brain has a finite capacity, and is presumably adapted by natural selection to conventional lifespans. This is quite separate from worries about dementia, which is caused by specific diseases. An even greater concern is that none of these ideas has yet been tested formally on people. That is partly because drug-approval agencies do not yet recognize old age as a treatable condition, making trials hard to register. Source The Economist
Lots of New Roller Coasters Debuting This Summer
Amusement parks figured out a long time ago that a surefire way to attract visitors is by claiming the fastest, tallest, most terrifying roller coaster on the planet. Over the years, it’s evolved into a sort of roller coaster arms race with all the parks scrambling to outdo one another. Roller coaster fans have never had it so good with at least a handful of new thrill-rides opening every year. Even with wait times stretching hours long, America’s adrenaline junkies gladly line up every year. While numbers for 2023 attendance have not been released yet, US parks in 2022 were well on their way to regaining their record-setting pre-pandemic levels with coasters among the top draws. Parks this summer will debut almost a dozen new roller coasters, ranging from heart-stopping to family-friendly. I've included a few of each below. Might be a good summer vacation idea! “Top Thrill 2” at Cedar Point in Sandusky, Ohio: The former “Top Thrill Dragster” has been replaced by the world’s tallest and fastest triple-launch strata roller coaster, according to Cedar Point. It also features the world’s first and only dual-tower vertical speedway featuring two 420-foot-tall track towers. The coasters three passenger trains reach maximum speeds of 120 mph over the course of its two-minute ride. Top Thrill 2 is expected to open in May. CLICK HERE to watch Video |
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Georgia Surfer at Six Flags Over Georgia in Austell, Georgia: According to Six Flags Over Georgia’s website, “Riders will launch forward and backward along nearly 590 feet of track, reaching speeds of up to 60 miles per hour, hitting the ride’s 144-foot peak before coasting down into a scenic splash pool. Free-spinning seats ensure no two rides are alike.” In other words, riders get spun around in their seats while getting propelled up and down the equivalent of a 14 story building…whee! CLICK HERE
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“The Iron Menace” at Dorney Park in Allentown, Pennsylvania: The Iron Menace will be the first “dive coaster” in the Northeast. The park’s website says the ride starts in the remains of an old steel mill and then climbs 160 feet in the air. Riders will hang at the top before diving into the first of four loops. With speeds up to 64 miles per hour, Iron Menace will boost the first-ever tilted loop on a dive coaster. The ride also features a zero g-roll, a tilted loop, and a 360-degree corkscrew CLICK HERE |
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