Stock bulls hope to remain in control after pushing the S&P 500 to a new record high again last week and above the 5,000 milestone for the first time ever! Bulls continue to focus on positive data that indicates the long-dreaded “lagging effects” of tighter Federal Reserve monetary policy haven’t pushed the economy or earnings into recessions.

The big debate now is whether growth is too strong, running the risk of reigniting inflation. That will put a spotlight on the January Consumer Price Index (CPI) coming up on Tuesday. Bulls will be looking for another decline in the so-called “core” rate, which strips out food and energy and is one of the Fed’s preferred gauges.

December headline CPI was up +3.4% year-over-year, versus +3.1% in November, and core CPI was up +3.9% year-over-year, versus +4.0% in November.

Investors are also anxious to see January Retail Sales on Wednesday. December results came in unexpectedly strong, with sales rising +0.6% but economists forecast a pullback into negative territory of around -0.2% in January. Softer reads on both CPI  and Retail Sales will help strengthen the argument for Fed rate cuts to begin sooner rather than later. Of course stronger than expected reads could again cause Wall Street to reevaluate how low interest rates will be lowered by the end of 2024 and create more headwinds for the bulls.

Traders are currently giving just 16% odds of the first rate cut coming at the March 19-20 Fed meeting and see around 52% odds of a rate cut at the April30-May 1 meeting, according to CME Group's FedWatch tool.

Turning to earnings, at this point in the Q4 2023 season, S&P 500 companies are on track for earnings growth of nearly +3%, up from +1.6% the week before. Bulls note that Q4 is set to be the second quarter in a row of positive earnings. Earnings gains are expected to be even larger in the quarters ahead, with analysts currently forecasting earnings growth of +4.0% in Q1 2024 and +9.1% in Q2 2024. Full-year 2024 growth is pegged at nearly +11%.

Earnings highlights today include Arista Networks and Michelin. Later in the week we will hear earnings reports from Coca-Cola, MGM, Airbnb, Kraft Heinz, Cisco, John Deere, Coinbase, and DraftKings to name a few.

I'm impressed seeing the market digest and dial back the number of rate cuts it is anticipating in 2024, yet able to hold and push the market to even higher-highs. Tough to fade this kind of strength... staying conservatively optimistic!

Bezo's Unloads +$2 Billion in Amazon Shares:  Amazon founder, Jeff Bezos, unloaded 12 million shares of Amazon this week, the first time the billionaire has sold the company’s stock since 2021. The sales took place on Wednesday and Thursday and netted just over $2 billion, according to a filing. Amazon disclosed on Feb. 2 that Bezos plans to sell as many as 50 million shares of Amazon over the next 12 months, potentially cashing in on a stock surge that’s put him within reach of becoming the world’s richest person. His fortune has climbed $22.6 billion this year to $199.5 billion as of Friday, according to the Bloomberg Billionaires Index. The Amazon founder has sold over $30 billion in shares since records going back to 2002, including about $20 billion combined in 2020 and 2021. Wow!  Source Bloomberg

Cost of Interest on U.S. Debt is Soaring:  The U.S. government's debt is on track to rise to $54 trillion over the next decade, according to the Congressional Budget Office. Raw numbers don't tell you much about whether a given level of debt is burdensome or not. The rubber-meets-road test of sustainability is how much of the nation's resources go to service that debt every year, and the news is gloomy. The U.S. government is on track to face debt service costs that, starting in 2026, will be a modern record as a share of the economy and they are forecast to rise from there, pinching other national priorities. The government already spends more money servicing the national debt than it does on Medicaid, and the number is on track to surpass defense spending soon. Debt service costs were 1.2% of GDP as recently as the mid-2010s and 1.8% in 2019 just before the pandemic. But the combination of higher interest rates and the swell of debt for pandemic relief spending has pushed that much higher. Debt service amounted to 2.4% of the economy last year, CBO said, and is poised to rise to 3.1% this year and 3.9% in 2034. Source Axios

What the LNG Export Fight Means for Gas Prices:  Americans’ utility bills are getting wrapped up in the fight over President Biden’s pause on most new natural gas exports. The White House last month effectively froze new approvals for liquefied natural gas shipments, a booming industry that has helped turn the U.S. into an energy export powerhouse. As the Energy Department weighs new criteria for greenlighting future exports, some manufacturing groups and consumer advocates warn that America’s ties to global markets could make price instability more likely. The fear is that additional projects in the next decade could push up Americans’ heat and power bills, as well as costs to make everything from drywall to steel. Thanks to warm weather and roaring production in Texas and Appalachia, benchmark U.S. gas prices last week fell to their lowest levels since the depths of the pandemic. But traders are betting on a rally sparked by projects currently under construction, which will allow more gas to flow to businesses across Europe and fast-growing economies in Asia. To limit that risk, Aubrey Hilliard, president of Texican Natural Gas’s Carolinas division, is advising customers such as glassmakers and cement producers to lock in supplies further toward 2030. The number of outstanding contracts for deliveries 12 months or more into the future has climbed as additional export terminals in Texas and Louisiana prepare to come online.  Source WSJ

Americans are Retiring Faster Than Experts Predicted: Economists long expected the share of retirees in the population to soar as baby boomers aged. Covid-19 then caused the number to spike well beyond expectations, a surge dubbed the “Great Retirement Boom.” But just as they seemed to be coming back down, the numbers surged again in recent months, reaching a post-pandemic record in December. The US now has around 2.7 million more retirees than predicted in a model designed by Miguel Faria-e-Castro, an economist at the Federal Reserve Bank of St. Louis. Financial market performance looks to have played a role. The gap in the model appeared to be closing earlier last year following a 19% drop in the S&P 500 in 2022. But in 2023 the index rebounded, jumping 24%, with most of the gain coming in the fourth quarter. On top of that, housing across the vast majority of US metro areas continued to rise last quarter, bolstering the wealth of older Americans. The labor force participation rate for workers age 65 and older is holding at its post-pandemic average of 19.1%. In the year before the pandemic, it stood at 20.2%  - more than a percentage point higher. Source Bloomberg

Gyms Face Tough Year as Key January Growth Screeches to a Halt: A post-pandemic growth spurt for gyms in the US came to an abrupt halt in January, usually the busiest month of the year. Foot traffic to major gyms was flat from January 2023, according to mobile phone location data for 10 chains tracked by January visits rose more than 40% in each of the past two years at the clubs, which include both closely held ones like Equinox Holdings Inc. and listed ones like Planet Fitness Inc. and Xponential Fitness Inc. The slow start may signal a tough year ahead if traffic doesn’t expand. Xponential is expected to report its slowest revenue growth for the first quarter since going public in 2021, while Planet Fitness is on track for its second-worst quarterly sales growth since 2021. Analysts are largely blaming a harsh winter in much of the US, alongside stiffening competition. Attempts to raise prices may also be hurting signups. Source Bloomberg

Billionaires Are Trying to Bring Casinos and Gambling to Texas: Everything’s bigger in Texas—except for the state’s gambling industry. The Lone Star State has long had a ban on gambling, but billionaires are trying to change that law. Big names like Tilman Fertitta, Miriam Adelson, and Mark Cuban have all expressed a desire for casinos and the like to open in Texas, a move they say would bring jobs and economic opportunity to the state. While some like Golden Nugget casino owner Fertitta, have been fighting to bring gambling to Texas for years, the push has become even more pronounced in recent months. Adelson, whose family is behind the Las Vegas Sands company, bought the Dallas Mavericks last year, and she and her kin have been increasing their political donations and recruiting more lobbyists in the state. Mark Cuban, the billionaire whom they bought the team from, has also started talking up casino-based resorts and the benefits they could bring to Texas. Source The Rob Report

Steelers’ Cam Heyward Named Walter Payton Man of the Year: Heyward’s passion for giving back began publicly in 2014 with the creation of The Heyward House. The program benefits underprivileged children and their families through a variety of programs, with an emphasis on fighting hunger, combating cancer, encouraging childhood literacy and providing support for students and teachers. The organization also launched Craig’s Closet, named in his late father’s honor, which provides free business attire for interviews, formal events, internships and more. The Walter Payton Man of the Year Award, established in 1970, is considered the league’s most prestigious honor. It recognizes NFL players who excel on the field and also demonstrate a meaningful impact in their community. Source The Athletic

America’s Most Expensive Real Estate Listing is in Naples, Florida: A compound in Naples, Florida has hit the market for a whopping $295 million, reportedly the most expensive house on the market in America. If the asking price is realized, the 9-acre gated compound in the Port Royal neighborhood with three houses and a private yacht-basin would shatter home sale records for the state. The property known as Gordon Pointe has been growing under the ownership of the John "Jack" F. Donahue, a well-known Naples philanthropist, and his family since the 1980s. Donahue made his fortune running Pittsburgh-based Federated Investors. The property includes about 708 feet of beachfront and Gulf of Mexico views, 952 feet of bay views, an "exclusive and extremely rare" yacht basin, measuring 231 feet, and a T-shaped dock for up to six boats. Port Royal has long been known as a playground for the rich. Nearly a year ago, a waterfront estate in the neighborhood came to market for more than $174 million. A price that was unheard of then. It's still for sale. The most expensive home sold in the area last year fetched $46.8 million – also in Port Royal. The county record home sale price is $62 million, set in 2022. Source USA Today


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