Critically, stock bulls are struggling to adjust to the more hawkish Fed policy than many expected to see in place by this point in the year. Remember, bulls at the beginning of 2023 were expecting the Fed to be in rate-cutting mode by the second half of the year. But inflation has remained stubbornly elevated amid an extremely strong labor market that recently showed signs of heating up again.
While bulls are still motivated by signs of "disinflation" all around, there is a lot of uncertainty about how fast it might fall in the months ahead. Arguments are being made for fairly substantial declines to start showing up in the data as falling shelter costs filter through.
Some bullish insiders are now forecasting inflation could be back below 3% by this summer, though they are in the minority. Consensus sees inflation hanging between +3% to +6% through the remainder of 2023. In fact, Manhattan just reported its highest monthly average rents ever, so I don't think inflation is really cooling.
Next Tuesday, the January Consumer Price Index (CPI) will be released which could be the bull's next best chance to gain some upward momentum. That's assuming the report shows that inflation slowed again as expected.
The year-over-year CPI rate came in at +6.5% in December versus +7.1% in November and a peak of +9.1% last June. The Producer Price Index (PPI) on Wednesday will likewise be scrutinized closely for further signs of declining cost pressures. Investors will also get updates on various economic measures next week, including Retail Sales, Industrial Production, Industrial Production, Empire State Manufacturing, and the NAHB Housing Market Index on Wednesday; Housing Starts & Building Permits and the Philadelphia Fed Index on Thursday; and Import/Export Prices on Friday.
Turning to earnings, the pace of results will slow substantially with most major US companies having now reported. There are some key highlights still to come next week though with Airbnb, Coca-Cola, Marriott International, Suncor, and Zoetis on Tuesday; American Water Works, Analog Devices, Biogen, Cisco, Invitation Homes, Kraft Heinz, Marathon Oil, Roblox, Shopify, Southern Copper, and Zillow on Wednesday; Applied Materials, DoorDash, DraftKings, Hasbro, Hyatt Hotels,
The Southern Company, and Vulcan Materials on Thursday; and Deere & Co. on Friday.
On the geopolitical front, the war in Ukraine could be set to escalate in the days and weeks ahead which could obviously have numerous implications. Western governments believe Russia is planning a major assault on Ukraine, possibly as early as next week before the 24 February anniversary of its full-scale invasion. Its main goal is believed to be to capture the Donbas region, including Luhansk, which Ukraine partly controls. Ukrainian government sources say one scenario would include ballistic missile strikes on large cities including Kyiv, and an attempt to cut off the east of the country by bombing bridges and other key infrastructure. Military experts are skeptical that Russia's military has the manpower to carryout a rapid offensive deeper into Ukraine territory and any success will likely be limited to the eastern edges. Ukraine leader Volodymyr Zelensky is currently campaigning in the west for more support, including long-range missiles and fighter jets.
Russia warned on Thursday that the line between direct and indirect Western involvement in the conflict was disappearing. This raises the risk that the US and its allies get pulled into the war directly if Russia tries to declare the West's support of Ukraine an "act of war" or use it as an excuse to attack a NATO member.
How U.S. Gas Prices Compare to Other Parts of the World: The average U.S. price for a gallon of regular gasoline is up nearly +5% from a month ago, but American drivers still don’t pay anywhere near as much as they do in other countries around the world, according to data from GasBuddy published on Thursday. Drivers in the U.S. are familiar with the ups and downs of U.S. gas prices, ranging from $3 to $5 per gallon and back again just in 2022 alone, says travel and navigation app GasBuddy. In the U.S., the average price for regular unleaded sells for just under $3.40 per gallon, up +14.8 cents a gallon from a month ago, though also down -7.1 cents from a week ago, data shows. Source Market Watch
Germany tops the list with the highest price. Drivers in that country pay an average gas price of 1.740 euros per liter, which equals about $7.07 a gallon.
The U.K. pays an average of 1.48 British pounds per liter, or $6.74 a gallon, while Spain pays 1.63 euros per liter, or $6.62 a gallon. Drivers in China pay 8.19 Chinese renminbi, or $4.56 a gallon.
Canadians pay an average gas price of 1.46 Canadian dollars per liter, or $4.77 per gallon and in Mexico, divers pay 23.97 Mexican pesos per liter, or $4.81 a gallon, according to GasBuddy.
Addidas Facing First Operational Loss in Over +30 Years: The new chief executive of Adidas warned on Thursday that the brand needed time to “put the pieces back together” as the rival to Nike braces for its first operational loss in 31 years. The German sportswear maker issued its fourth profit warning since July after markets closed, warning investors it could end up with an operating loss of up to €700mn if it cannot find ways to sell its remaining stock of Kayne West's Yeezy sneakers. Source Financial Times
SEC Cracks Down on Crypto "Staking" Services: Crypto trading platform Kraken on Thursday agreed to end its “staking” service and pay a $30 million fine to the Securities and Exchange Commission. The long-term implications could be even greater for competitor Coinbase Global. Staking is a method of securing some blockchains and validating transactions on the networks. Investors agree to lock up their coins in a network, in order to help secure it and process transactions. In return, they earn a yield on their tokens. The biggest staking network now is the Ethereum blockchain. Investors staking Ether tokens on it can earn a yield upward of 5%. One catch with staking, however, is that investors sometimes need to stake tens of thousands of dollars worth of tokens to be eligible for the rewards. On Ethereum, the minimum is 32 Ether tokens, worth around $50,300 at recent prices. Firms like Kraken and Coinbase offered investors a way to pool their tokens, in exchange for giving up a cut of the interest. On Thursday, the SEC said Kraken’s “staking as a service” product was a security and charged the firm with selling it to investors, without making the proper registrations and disclosures. The SEC’s move could spell trouble for Coinbase, which for the past year has often cited its staking program as a way to diversify its revenue amid flagging retail trading activity. Source Barrons
Super Bowl LVII Tickets Have Plummeted -30% Since Sunday and Might Get Cheaper Than Last Year: The inventory in Super Bowl LVII tickets has started to pile up this week, and prices have steadily shown it. After coming into this week hot, tickets to watch the Kansas City Chiefs face the Philadelphia Eagles have gradually declined in price in every 24-hour window since Sunday night. The resulting slide has driven “get in” prices for the cheapest possible seats down -30% — from nearly $6,000 late Sunday night to around $4,200 on Thursday afternoon, according to data from multiple secondary ticket platforms. The reason? Daily inventory across the market saw nearly a +31% increase in available tickets from Saturday to Tuesday, going from around 2,600 available seats to nearly 3,400, according to data from online marketplace TicketIQ. “With the price drop, Super Bowl 57 is the fifth-most expensive Super Bowl we’ve tracked, after spending much of the last week and a half in the No. 2 spot,” TicketIQ CEO Jesse Lawrence said. Interestingly, the marketplace’s data now puts this year’s Super Bowl in a virtual dead heat with last year’s game in average ticket price. While some other sites have slightly varying data on that average, the numbers all generally agree: It’s possible this year’s average ticket price could slip below last season. Source Sports Yahoo
Even as Buying Cools, US Housing Supply Remains Tight: On the housing demand front, things remain sluggish with mortgage purchase applications still down 37% on a year-over-year basis. That’ll happen when the U.S. housing market absorbs a historic mortgage rate shock just after the Pandemic Housing Boom pushed national home prices up more than 40%. At the same time, things remain fairly tight nationally on the supply front. While spiked mortgage rates saw housing demand pull back sharply in 2022, it also saw sellers pull back. According to Realtor.com, new home listings in January were down -5.5% on a year-over-year basis. The idea of giving up a fixed 3% mortgage rate for a 6% rate has many move-up sellers/buyers staying on the sidelines. Still, the trajectory of inventory over the past year is clear: Up. Among the 400 largest markets tracked by Realtor.com, 370 markets saw inventory (i.e. active listings) jump between January 2022 and January 2023. Nationally, total inventory levels spiked 65.5% from 378,189 active listings in January 2022 to 625,875 active listings in January 2023. Places where inventory spiked the most include overheated markets like Austin (up +260% over the past year) and Salt Lake City (up +293%). While buyers have seen an increase in power relative to the frenzied spring 2022 market, it doesn't mean we've shifted into a buyers' market. One of the reasons being, after all, this inventory jump hasn't taken us back to a balanced market. In fact, we're far below pre-pandemic inventory levels: Active listings on Realtor.com in January 2023 were -43.6% below the 1.1 million active listings in January 2019. Source Fortune
Narrower Profit Margins Could Mean Lower Inflation: For much of the past two years, corporate America has been able to raise prices, with much of the higher prices juicing profits. Now the opposite looks to be true: margins are compressing, which could help the inflation cooldown that appears to be underway. One takeaway from corporate earnings season is a turnaround from recent years, when strong consumer demand allowed companies to pass along higher costs more easily. This earnings season, however, corporate earnings have been fairly downbeat as companies report slimming profit margins. According to a weekly earnings tracker maintained by Bank of America, quarterly net margins for S&P 500 firms (excluding financials) are running at 11.3%, down from the peak of 12.7% in 2021. Bottom line, corporate America may get squeezed in the months ahead as supply and demand come into balance. That would be bad news for stocks, but good news for people hammered by higher prices. Source Axios
Yahoo Laying of -20% of Staff by Year End: Yahoo will lay off more than 20% of its workforce by the end of 2023, eliminating 1,000 positions this week alone, the company said in a statement Thursday. Private equity firm Apollo Global Management acquired 90% of Yahoo from Verizon in September 2021. The company had about 10,000 employees at that time, according to PitchBook data. Axios reported that more than 1,600 workers would lose their jobs in the latest cuts, suggesting the company’s current head count is closer to 8,000 employees. The layoffs are part of a broader effort by the company to streamline operations in Yahoo’s advertising unit. The Yahoo for Business segment’s strategy had “struggled to live up to our high standards across the entire stack,” according to a Yahoo spokesperson. Source CNBC
Commodity Trader Trafigura Faces $577 Million Loss After Uncovering Nickel Fraud: Commodity trader Trafigura Group is facing more than half a billion dollars in losses after discovering metal cargoes it bought didn’t contain the nickel they were supposed to. Trafigura has spent the past two months uncovering what it believes is a systematic fraud against it. It has started legal action against Indian businessman Prateek Gupta and several companies connected to him including TMT Metals and subsidiaries of UD Trading Group, Trafigura said in a statement. The missing nickel is a blow for the company that has grown rapidly in the past decade to become one of the world’s largest trading houses. It’s also another black mark for the metals-trading industry, which in recent years has been beset by tales of fake warehouse receipts, duplicate shipping documents and containers filled with painted rocks. Trafigura has recorded a $577 million impairment as a result of the fraud, although the final cost could be lower if it’s able to recover some funds. Nickel is a popular metal with fraudsters. Its high value means that a single container full can be worth $500,000, yet it is traded in relatively large volumes and without the strict security that accompanies shipments of precious metals like gold. Source Bloomberg
Super Bowl's Most Valuable Snack: This year’s Super Bowl will be a great night for either the Kansas City Chiefs or the Philadelphia Eagles, but those teams (and their fans) won’t be the only folks with something to celebrate. It’ll also be a banner day for another group of people: snack lovers. But while snacks as a genre might reign supreme for the Big Game, not all snacks are created equal. An analysis of Google searches in the United States (sponsored by online equipment auction house Bid on Equipment) shows that the mighty meatball is king of the hill when it comes to Super Bowl feasts. While more folks might be searching for meatballs than any other food for gameday, there’s another dominant force, and it shouldn’t be surprising: buffalo wings. A survey commissioned by BoE and conducted via the survey platform Prolific revealed that 38 percent of survey respondents plan to eat buffalo wings during the Big Game. Meatballs and wings might get a lot of the glory, but never underestimate the power of a good dip. Four of the top 10 Super Bowl foods (according to BoE’s analysis of Google searches in the U.S.) are dips: Hummus, spinach artichoke dip and salsa all made strong showings, while guacamole ranked #2 overall, second only to the magnificent meatball. Source Fox News
New Innnovation Called "RipeFinder" Scans Avocado's in Grocery Produce Aisles
Apeel Sciences is best known in the food space for its edible coatings used to keep fruits and vegetables fresher for longer. The company just announced a new innovation that can determine the ripeness of an avocado. The scanner, called "RipeFinder," is designed to be placed in grocery stores, allowing shoppers to know the "ripeness window" of the fruit before purchasing. They are also optimizing the technology so it can be utilized along various stages of the supply chain.
Apeel unveiled its RipeFinder at the International Fresh Produce Association’s Global Produce & Floral Show in late October. The RipeFinder features a consumer-friendly user interface that displays ripeness information to consumers via easy-to-understand messages like “your avocado is ready for a salad” or “your avocado will be ready in about four days.” Source The Spoon & Fruitnet
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