Bottom line, many on Wall Street remain worried that inflation will remain stubbornly elevated, and the Fed will need to lift rates higher and or keep them higher for longer than most have been expecting.
Investors will also be tuning into several Fed officials scheduled to speak today as they seek additional clues as to how the latest data may be influencing policymakers.
On the earnings front, Airbnb, Coca-Cola, Marriott International, Suncor, and Zoetis are set to release results today.
Coca-Cola will also be of particular interest with investors closely watching how the company's stream of price increases are impacting the beverage maker's sales.
Turning to geopolitics, there are some worries that the "UFOs" - aka alleged Chinese spy balloons - the US has shot down in recent days could further increase tensions between the world's two largest economies.
Some analysts are encouraged by signs that diplomats from the two countries are considering in-person talks at a conference later this week. Investors at the moment don't seem overly concerned.
On the Ukraine-Russia front, the tiny former-Soviet country of Moldova is warning of a Russian plot to overthrow its pro-Western government. “The plan included sabotage and militarily trained people disguised as civilians to carry out violent actions, attacks on government buildings and taking hostages,” according to the country’s President Maia Sandu. Moldova was granted candidate status to the European Union last June, together with Ukraine. Ukraine warned last week that it had intercepted Russian plans to overthrow Moldova's democratically elected government. Moldova shares a border with Ukraine and has repeatedly expressed concerns about the presence of Russian troops in the breakaway Transdniestria region, which also borders Ukraine and is run by a pro-Russian leaders. Russia’s foreign minister recently warned Moldova is risking the same fate as Ukraine by allowing the West to draw it closer to Europe. Moldova and Romania have also accused Russia of firing cruise missiles through Moldovan airspace at Ukraine targets, raising concerns about the war spreading deeper into Europe.
NY Fed’s Recession Probabilities Model is up to 57% for predicting a recession during the next 12 months, which is higher even than going into the 2008 Great Recession. In fact, it's the highest probability since the late-1970s or early-1980s recessions. Keep in mind, to this date the model is perfect in forecasting recessions once it moves past 50 Source NY FED
Ford Is Taking a Tesla-Like Approach to EV Batteries: Ford announced yesterday that it is spending $3.5 billion for a battery plant in Marshall, Mich., a city about 100 miles west of Detroit. That’s significant, but it isn’t the biggest part of the announcement. The new plant will produce lithium-iron-phosphate, or LFP, batteries, the kind Tesla adopted around the end of 2020. Battery chemistries don’t always make investor-level news, but chemistries are an important issue for the entire auto industry. The choice of chemistry goes a long way to determining EV cost and EV range. Today, Ford EVs use lithium ion batteries with a nickel-manganese-cobalt, or NMC, cathode. Those batteries are more expensive than LFP batteries mainly because the metals in the cathode are pricey. Cobalt costs about $40,000 a metric ton. Iron costs less than $1,000 a metric ton. The trade off for lower cost is less energy density. It takes more LFP batteries to make an EV go the same distance as a NMC battery. That’s a reason Ford intends to use LFP batteries in standard range models. A longer range EV, which is a option car buyers can select, will have higher-end batteries. Source Barrons
Americans With a College Degree Saw Wages Decline the Most in Two Decades: When it comes to wages, fortunes flipped last year for college and high-school graduates. In 2022, median annual pay was $52,000 for Americans with a bachelor’s degree, according to data released by the New York Federal Reserve. That’s a -7.4% decline in inflation-adjusted terms — the steepest plunge since 2004, erasing nearly all of the pandemic-era gains. It was sharpest for those earning the most. Meanwhile, wages accelerated +6% in real terms to $34,320 for those with only a high-school diploma — the biggest gain in more than two decades. While secondary-degree holders are still paid more, those who didn’t attend college are catching up. Americans with only a high school diploma made 93% of what recent graduates with a bachelor’s degree in the bottom quarter of wages made. The ratio is up from 79% in 2021, and it’s back at the levels seen in 2019 when tight labor markets were boosting pay at the the lower end of the spectrum. The data underscore the demand for service-sector workers and those in segments of the economy where technical skills are more important, such as plumbing and electrical work. It also shows the eroding value of an expensive bachelor’s degree as more Americans get one, increasing competition in that part of the labor market. Source Bloomberg
3 More Chemicals Discovered in Ohio Train Derailment: Three more chemicals have been found on the Norfolk Southern train that derailed in Ohio just over a week ago, and they are being described as dangerous. The U.S. Environmental Protection Agency sent a letter to Norfolk Southern stating that ethylene glycol monobutyl ether, ethylhexyl acrylate and isobutylene were also in the rail cars that were derailed, breached and/or on fire. Sil Caggiano, a hazardous materials specialist, said ethylhexyl acrylate is especially concerning since it’s a carcinogen and contact with it can cause burning and irritation of the skin and eyes. Breathing it in can irritate the nose and throat and cause coughing and shortness of breath. Isobutylene is also known to cause dizziness and drowsiness when inhaled. Caggiano says it’s possible some of these chemicals could still be present in homes and on objects until you clean them thoroughly. Source The Hill
Amazon's "Zoox" Robotaxi Now Giving Rides to Employees: Amazon-owned autonomous vehicle venture Zoox said on Monday that it is now testing its self-driving robotaxis on public roads in California with passengers on board. The vehicles have no steering wheel or pedals, and they have bidirectional driving capabilities and four-wheel steering, enabling them to change directions without the need to reverse. Zoox executives said the company began the tests after it received approval from the California Department of Motor Vehicles last week. The tests are currently limited to shuttling Zoox employees on a one-mile public route between two office buildings at the company’s headquarters in Foster City, California, at speeds up to 35 miles an hour. The company hasn’t said how big its test fleet is, but executives have said they have built “dozens” of vehicles, although fewer than 100. Zoox executives declined to say when the company will launch a commercial robotaxi service or open up testing beyond the limited route and employee participants. Source CNBC
Twilio Laying Off About 17% of Workforce: Twilio on Monday announced plans to cut about 1,500 employees, or around 17% of its workforce, according to a blog post shared on the company’s website. The announcement came after the cloud communications software maker already laid off around 11% of its workforce as part of a restructuring plan in September. CEO Jeff Lawson said Twilio is forming two business units - Twilio Data & Applications and Twilio Communications - to help the company spend less and become more efficient. Lawson said that when executives were looking at these two business units, it was clear the company had gotten “too big,” particularly in communications. Twilio is one of more than a dozen tech companies to announce layoffs in recent months. Last week, Dell, Zoom and eBay disclosed significant cuts to their workforce. Source CNBC
What the Super Bowl Tells Us About the Economy: Advertising might be the art of fibbing responsibly, but marketing budgets can’t help but be honest: You either spend $7 million on a 30-second spot or you don’t. That’s why the Super Bowl - the biggest day in American sports, which is also the biggest day in American ads - is a useful measure of which firms and sectors believe themselves to be the future of the economy. That's also why it’s an excellent barometer for bubbles. In 2000, 14 young “dot-com” companies bought ad time in the Super Bowl, including Pets.com, OnMoney.com, E-Stamps.com, Epidemic.com, HotJobs.com, and e1040.com. The next year, the dot-com bubble had popped, and the software industry slashed its advertising budget below the threshold of Super Bowl spots. Last year, a cluster of crypto companies—including FTX, Coinbase, Crypto.com, and eToro—ran ads during the big game. The surge of blockchain-related spots inspired some people to call it the Crypto Bowl. But since then, crypto-asset values have crashed, several crypto firms have gone bankrupt, and the industry has “zero representation” at this year’s Super Bowl. In general, the ad roster seems to be snapping back to the pre-COVID status quo. Anheuser-Busch leads all firms with three minutes of airtime. Other alcohol brands such as Heineken and Diageo are in. So are M&M’s and Doritos and movie studios and automakers. Source MSN
The World’s 10 Highest Paid Entertainers: After releasing her 10th studio album Midnights in October 2022, Taylor Swift became the first artist in history to claim the top ten spots on the Billboard Hot 100 song list. A month later, 14 million loyal fans overwhelmed Ticketmaster when they tried to buy tickets to the 12- time Grammy winner’s 2023 Eras Tour. Despite the success of Midnights and the anticipation for Eras (which hints at an even better 2023), the pop icon scored most of her $92 million in earnings from music she’d released in years past. The 33-year-old’s back catalog made up an estimated 70% of her pay, including profits from streaming and album sales. It was enough to place the musician at No. 9 among the top 10 earning entertainers. As good as Swift’s year was, it was even better for several aging rock stars. The Rolling Stones banked $98 million from belting out their hits and celebrating 60 years together on their European Sixty tour last year. Genesis and Sting did even better, both sold their life’s work for $300 million apiece, showing that investors still see popular music with deep libraries as a safe bet. Source Forbes
Key Facts as India's Population Surpasses China: India is poised to become the world’s most populous country this year – surpassing China, which has held the distinction since at least 1950, when the United Nations population records begin. The UN expects that India will overtake China in April, though it may have already reached this milestone since the UN estimates are projections. Pew Research Center has compiled some key facts about India’s population and its projected changes in the coming decades, based on analyses of data from the UN and other sources. India’s population has grown by more than 1 billion people since 1950, the year the UN population data begins. The exact size of the country’s population is not easily known, given that India has not conducted a census since 2011, but it is estimated to have more than 1.4 billion people – greater than the entire population of Europe (744 million) or the Americas (1.04 billion). People under the age of 25 account for more than 40% of India’s population. In fact, there are so many Indians in this age group that roughly one-in-five people globally who are under the age of 25 live in India. The other two most populous countries in the world, China and the U.S., have rapidly aging populations – unlike India. Source Pew Research
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