Stock indexes remain mostly flat with little in the way of NEW headlines so far this week. Volatility could pick up over the next couple of day, however, depending on two key economic reports.

Investors today are anxious to see the January PCE Prices Index. The year-over-year “core” rate, which strips out food and energy and is one of the Fed’s preferred inflation gauges, came in at +2.9% in December, the first time it’s dropped below +3% since March 2021.

Economists are forecasting a +2.8% core rate for January, with year-over-year headline prices slowing to +2.4%. Keep in mind, the Consumer Price Index (CPI) for January came in a bit hotter than expected, which in turn caused some recalibration of Federal Reserve rate cut expectations. This is also why many on Wall Street are bracing for a hotter than expected read on January PCE Prices. Typically, Wall Street doesn’t have much of a reaction to PCE Prices because CPI comes out a couple weeks before, meaning the data is essentially “old news.” But investors are pretty on edge right now and Wall Street insiders are worried that a hot report could set off a violent knee-jerk reaction and send stocks tumbling.

Again, it’s kind of old data so the report, hot or not, is probably not going to change Wall Street’s outlook for Fed policy. However, ISM Manufacturing tomorrow (Friday) could have a bigger impact on Fed rate expectations as it will be the first look at February data. If ISM Manufacturing and other reports for February show the economy and inflation was still running stronger than expected, it will raise more doubts about when or if the Fed will start cutting rates this year.

Turning to earnings, key results are due today from AnheuserBusch InBev, Autodesk, Bath & Body Works, Best Buy, Dell, Hewlett Packard, and Hormel Foods. I should also mention that Congressional leaders have reached a tentative deal to avert a partial government shutdown starting this weekend.

The measure still needs to pass the full Senate and House so the shutdown threat remains on the table.   

McConnell Stepping Down as Republican Senate Leader: The end of my contributions are closer than I’d prefer, Mr. McConnell said Wednesday on the Senate floor, reviewing his tenure that began in 1984 amidst the Reagan Revolution. He has run the GOP conference since 2007, a political lifetime ago, and his departure from leadership is a concession to the changing political times. He says he’ll finish his term, which expires in 2027, but step down as leader after the election. Mr. McConnell’s most lasting accomplishment was remaking the federal judiciary. The leader’s refusal to allow a confirmation vote to replace the late Antonin Scalia on the Supreme Court ahead of the 2016 election was a political gamble for the ages that took steely nerves and credibility with his GOP colleagues. Source WSJ

Elon Musk Says Tesla Roadster Coming Next Year... 0 to 60 in Less Than 1-Second: Tesla Chief Executive Elon Musk said the company intends to start shipping its long-delayed Roadster sports car next year, the latest sign it is trying to inject new buzz into the brand as competition intensifies in the electric-vehicle space. In a series of posts on his social-media platform X, Musk said Wednesday that Tesla has finished its design for the vehicle as part of a collaboration between Tesla and his rocket company SpaceX, and the vehicle would be unveiled at the end of the year. The car will be capable of accelerating to 60 miles an hour in less than a second, which is the least interesting part, he said. Tonight, we radically increased the design goals for the new Tesla Roadster, Musk wrote. There will never be another car like this, if you could even call it a car. The original Roadster was Tesla’s first production car, released in 2008   Source WSJ


Flawed Valuations Threaten $1.7 Trillion Private Credit Boom: As investors dive headfirst into the booming private credit asset class, an urgent question for regulators is how anybody could even know for sure what it’s really worth. The meteoric rise of private credit funds has been powered by a simple pitch to the insurers and pensions who manage people’s money over decades: Invest in our loans and avoid the price gyrations of rival types of corporate finance. The loans will trade so rarely — in many cases, never — that their value will stay steady, letting backers enjoy bountiful and stress-free returns. This irresistible proposal has transformed a Wall Street backwater into a $1.7 trillion market. Now, though, cracks in that edifice are starting to appear. Data compiled by Bloomberg and fixed-income specialist Solve, as well as conversations with dozens of market participants, highlight how some private-fund managers have barely budged on where they “mark” certain loans even as rivals who own the same debt have slashed its value. This lack of clarity on what an asset’s worth is a regular complaint in private markets, and that’s spooking regulators.  Source Bloomberg

Widespread Wildfires Force Evacuations in High Plains: Massive wildfires continue to spread in the High Plains and one is already the second largest in Texas history. exas Gov. Greg Abbott issued a disaster declaration for 60 counties in his state as widespread wildfires destroyed homes and structures and led to a mix of mandatory and voluntary evacuation orders for several towns on Tuesday. The wildfires also have spread into Oklahoma. The largest of the active fires in the High Plains, the Smokehouse Creek fire in Hutchinson County in the Texas Panhandle, started on Monday and had consumed an estimated 250,000 acres by Tuesday evening. By Wednesday morning it had spread to 500,000 acres, according to the Texas A&M Forest Service with zero contained. The situation was expected to grow worse, with the size of fires rapidly increasing in areas that were at times have been under a red flag warning with high winds, dryness and dewpoints in the teens or single digits already in place or expected overnight in parts of the High Plains.  Source DTN

Growing Number of Colleges Adopt “No-Loan” Policies: Amid a college affordability crisis, a number of schools are eliminating education debt from the outset. Roughly two dozen schools have introduced “no-loan” policies, which means they are eliminating student loans altogether from their financial aid packages. “They are giving them out like candy now,” said Menaka Hampole, an assistant professor of finance at Yale School of Management, of the growing number of no-loan policies. Among the schools on The Princeton Review’s “Best 389 Colleges” list, 23 promise to meet 100% of their undergraduates’ financial need without loans. Of course, even without loans, students may still be on the hook for the expected family contribution, as well as other costs, including books and fees.  Source CNBC

Living at Home Longer Could Cost Younger Generations Later: In the US, the percentage of young adults living at home has climbed 87% over the past two decades, according to the US Census Bureau. Now more than half of 18- to 24-year-olds in America are living with their parents. And in a recent survey by RentCafe, 41% of adult Gen Z respondents who lived with family said they thought they'd be living with other family members for at least another two years. In the wake of the Great Recession, millennials were the first generation to stay home en masse, and now Gen Z is following in their footsteps. But unlike millennials, who were called lazy for living with their parents well into their 20s, it's become cool for Gen Z to live at home. In today's affordable-housing crunch, older generations are starting to understand that it often just makes sense to stay home and save up. But that decision comes with downsides. Living on your own is an important step in becoming an adult, and research indicates that those who put off leaving the nest are going to pay — financially and emotionally.  Source Business Insider

Why the Apartment Building Boom Probably Won’t Bring Down Rents: Across the country, renters with the deepest pockets are more likely than others to score a deal. Across the country, renters with the deepest pockets are more likely than others to score a deal. Demand for more affordable apartments is helping to keep middle-of-the-road rent prices elevated. Rent for middle-tier apartments nationally was up at the end of 2023, according to real estate firm CoStar Group, which rates buildings based on design, amenities, location and certifications. U.S. rents generally are still above pre-pandemic levels, analysts say. Around 89% of the units completed from 2020 through 2022 are high-end, per RentCafe. The pipeline for new projects is also already slowing as developers find it harder to get financing. Source Axios


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