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Stock bulls are hoping to push indexes further into record territory this week. The Nasdaq is already up more than +8% and the S&P 500 is up over +7% so far this year, while the Dow is closing in on a +4% gain.
Blowout earnings from Nvidia last week marked the last of the so-called “Magnificent Seven” companies to report. Meaning Q4 earnings from the big names are all in, so results from here are likely to generate a lot fewer headlines. That could be a problem for stock bulls, which face several possible headwinds in the days and weeks ahead, especially as the momentum and “fear of missing out” mentality surrounding Nvidia and other AI plays starts to fade.
The key tech earnings on the calendar include Zoom today, followed by Salesforce and Snowflake on Wednesday, and Dell on Thursday.
The main earnings theme this week and next will be retailers, which should also provide insights into the health of US consumers and where goods prices might be headed.
Keep in mind, any signals that price cuts lie ahead may bode well for inflation but it will likely raise more alarms about “deflation” and falling profitability for retailers.
This week includes results from Lowe’s on Tuesday, TJX Cos. on Wednesday, and Best Buy and Bath & Body Works on Thursday.
On the data front, investors are anxious to see the PCE Prices Index on Thursday following other January data that’s indicated the economy and inflation may be heating back up.
The Fed’s preferred PCE “core” rate, which strips out food and energy, slowed to 2.9% in December, the lowest since March 2021. In other words, that’s the closest inflation has been to the Fed’s target rate of +2% in nearly 3 years. Remember, previous hot January data has caused Wall Street to significantly walk back expectations for Federal Reserve rate cuts, with most now only expecting three 25 basis point cuts versus as many as seven rate trims at the start of the year.
Today’s data highlight is New Home Sales.
Also remember, the US government faces a partial government shutdown starting Friday, March 1, if Congress this week fails to pass a funding deal or a stopgap measure.
Recent Nasdaq Rally Showing More Signs of "Dot-Com Bubble Era" - Last week, the tech-heavy Nasdaq 100 index scored a daily advance of over +3% to close at its all-time high for the first time since March 2000, a scene in some ways reminiscent of the dot-com era over two decades ago which led up to the bursting of the bubble preluded the recession, according to Bespoke Investment Group. March 2000 is certainly a scary period to think about for investors. Even though the Nasdaq 100 hasn’t experienced an over +3% gain to close at all-time highs since March 2000, there were 32 of these instances throughout the 1990s leading up to the ultimate dot-com bubble peak. Similar to the Nasdaq 100 last week, also the S&P 500 had a one-day advance of at least +2% to close at a new all-time high since March 2000, according to data compiled by Bespoke. Source Marketwatch
Why Widespread Tech Layoffs Keep Happening: The tech sector might be having a big 2024 but it’s a different story for tech workers. The number of tech sector layoffs in 2024 has been outpacing the number of terminations in 2023. So far, about 42,324 tech employees were let go in 2024, according to Layoffs.fyi, which tracks layoffs in the tech industry. That averages out to more than 780 layoffs each day in 2024. In 2023, nearly 263,000 tech employees got laid off, averaging to about 720 layoffs each day that year. There are several factors behind the churn. AI is at the forefront. Companies need to free up cash to invest in the chips and servers that power the AI models behind these new technologies. There’s also the stock market effect. Companies that conducted layoffs haven’t been punished, either by investors or on their bottom lines. In fact, they’ve been rewarded with rising stock prices. Source CNBC
Wall Street Considers Controversial “Private IPOs”: Private-equity firms are desperate to cash out of investments. But enthusiasm for initial public offerings is low after several stock-market debuts flopped. Enter so-called private IPOs. The concept is being bandied about on Wall Street as investors and bankers search for ways to keep the money flowing. The contradictory moniker refers to stock sales in which early backers privately sell to longer-term investors such as mutual funds or sovereign-wealth funds, sidestepping the traditional IPO process. Some on Wall Street balk at the name, seeing it as window dressing for private placements, which are sales of shares from one private owner to another and have been used for years. Skeptics say bankers, never a group to sit still, are playing with semantics to drum up business. The private-equity giants KKR and Bain Capital have each held talks with bankers and institutional investors about orchestrating private IPOs for some of their portfolio companies, people familiar with the matter said. Wall Street had hoped IPOs would bounce back in 2024 after two terrible years that saw the majority of IPOs fall below their initial offering price. Source WSJ
Tooth Fairy Payouts Drop for First Time in 5 Years: For the first time since 2019, the tooth fairy is paying less for lost teeth than the year before. It's a sign that the tooth fairy's helpers — aka parents — are worn down from two years of high inflation. The tooth fairy's national average gift value for a single lost tooth dropped -6% to $5.84 from $6.23 last year, according to a Delta Dental survey. It's still the second highest value for a lost tooth and a +349% increase from 1998 when a lost tooth fetched $1.30 on average. Delta Dental, which has tracked tooth fairy trends for 26 years, says in past years its poll has "typically mirrored the economy's overall direction" and tracked with S&P 500 trends. The trends went in a different direction for the second year in a row, Delta Dental noted. Lost teeth in the West had the highest value at $8.54, a +37% increase from last year, according to the survey of 1,000 parents of children ages 6 to 12. The Northeast average was $6.87, up +12%, and surpassing the national average by more than $1. The South dropped from $6.59 to $5.51 this year, which is under the national average. The Midwest has the lowest value of a lost tooth at $3.63, a $2 and -36% drop from 2023. Source Axios
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Food Theft Rises Amid Grocery Inflation: Years of rising prices have made everyday food and drink items a lucrative target for criminals. The problem is bigger than you may think. Thefts of foods and beverages accounted for more than a fifth of all incidents globally last year, the largest share, according to the British Standards Institution, a supply chain intelligence company. That’s up from 17% a year earlier and 14% in 2021. Criminals are using more sophisticated methods once reserved for luxury items, according to Jim Yarbrough, BSI’s global director of supply chain solutions. They include ransomware attacks, false pickups and pretending to be legitimate logistics companies. Looting foodstuffs in transit is relatively easy compared with pricier goods because they tend to be shipped without tracking devices or anti-theft technologies. That’s putting more pressure on a food industry already battered by inflation, climate change and supply chain disruptions — most recently attacks on vessels in the Red Sea. Source Bloomberg
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