Stocks bulls had a great run in January as stocks rallied into record territory with the S&P 500 and Dow both ending last week at new all-time closing highs. It’s worth noting that Facebook-parent Meta was a big contributor to Friday’s gains with the stock climbing more than +20% in a single-day of trading, adding +$197 billion to its market capitalization, the biggest single-session market value gain for a company in market history.

Meta’s gains were primarily thanks to stellar earnings that soared past estimates. Bears warn that while most of the big tech behemoths managed to meet or slightly top Q4 expectations, most also failed to deliver the blowout that many on Wall Street were secretly hoping for.

That in turn could leave bulls struggling to build excitement from here, especially with expectations for Federal Reserve rate cuts now being pushed out further on the time-horizon, as well as upcoming seasonal headwinds.

Overall, Q4 earnings is near the halfway mark with about 46% of S&P 500 having reported, with about 72% beating expectations. Earnings have so far been a little stronger than expected and S&P 500 companies are on track for growth of +1.6%, compared to an earnings decline of -1.4% last week. That’s substantially lower than the outlook for earnings growth of +11%  at the beginning of Q4.  

Bears note that the S&P 500 has climbed nearly +20% in that time, with the market narrowly led by just a handful of tech stocks that some argue are at or near “bubble” territory.  

The slew of earnings coming up this week cover a broad range of sectors and include many industry bellwethers that will further shape investor sentiment regarding the outlook for stock gains and the US economy in the upcoming quarters.

Key results out today come from Caterpillar, Estee Lauder, McDonald's, Palantir, Simon Property Group, and Tyson Foods.

Another headwind bulls could face this week is a reset of Fed rate cut expectations following a much stronger than expected January jobs report as well as pushback from Fed Chair Jerome Powell about cuts beginning as soon as March.

The January Employment Report, released Friday, showed a whopping +353,000 jobs added, more than double expectations for a gain of +170,000. Even less supportive of imminent rate cuts was a surge in wage gains to +4.5% year-over-year from +4.1% previously. The Fed doesn't seem real comfortable with wage inflation of +4.5%, as it makes them believe consumer demand might remain strong enough to keep inflation elevated. Most inside the trade believe the Fed wants to see wage growth back down under 3.5% as it was before covid. Bulls are pitching the strong employment report as a positive sign that the economy can experience both strong growth and declining inflation, aka a “soft landing.” Bears, however, argue that the rapid gain in wages is likely to raise red flags among Fed officials that are worried already strong consumer spend could be supercharged by a combination of lower prices and higher paychecks, in turn keeping inflation elevated above the Fed’s +2% target rate.

Most on Wall Street are betting that the Fed by the end of the year will lower its benchmark interest rate from its current range of between 5.25%- 5.5% to below 4%. That would translate to five or more -25 basis point rate cuts, whereas the Fed is only penciling three.

There won’t be much NEW data for investors to chew on this week, either, with ISM Non-Manufacturing today and Consumer Credit on Wednesday really the only two economic reports of note.

Stock bulls may also find themselves struggling against seasonal trends soon as February tends to be a pretty blah month for markets with the average return for the S&P 500 at near zero. I suspect we chop around within 5% of the recent all-time highs while the market searches for the next major catalyst... 

Joe Rogan Gets New Spotify Deal Worth Up to $250 Million:  Spotify has reached a new deal with star podcaster Joe Rogan that will allow his hit show to be distributed more broadly. Rogan’s fresh multi-year deal, according to people familiar with the matter, involves an upfront minimum guarantee, plus a revenue-sharing agreement based on ad sales. Under the new licensing agreement, Spotify will sell ads for and distribute “The Joe Rogan Experience” across several podcast platforms, including in a video format on YouTube, the company said Friday. Under his previous deal, the show was exclusive to Spotify. The new deal is emblematic of shifting economics in podcasting, which has matured in both audience reach and advertising spending since Rogan’s last deal. Spotify is working to revise the terms of its deals with top-talent so that shows are distributed on several platforms to maximize their audience and ad sales, rather than requiring exclusivity. Spotify spent heavily on podcasting in the format’s early days to build large audiences from its biggest shows. While that early foray into podcasting proved costly, Spotify has surpassed Apple to become the most popular podcast-listening platform.  Source WSJ

Mentions of "Job Cuts" in Earnings Calls Hit Pandemic Peak:  Mentions of job cuts and synonyms per earnings calls this season have jumped to the highest levels since the second quarter of 2020, according to a Bloomberg transcript analysis of S&P 1500 Composite Index firms. The increase in corporate layoffs comes as investors look for signs of cooling in the jobs market to gauge when the Federal Reserve may ease borrowing costs. U.S. companies in January announced more than +82,300 job cuts, a +136% increase from December. In 2023, 96% of all business organizations took some kind of downsizing action, according to data from Randstad RiseSmart. Some Wall Street insiders argue this is why corporate earnings and profits have been better than many had forecast, the question is, what happens when they are done trimming the fat? Will gross margins and profits suffer...

Corporate Borrowing is Soaring: If January is any indication, borrowers reset their expectations, and aren't sitting on the sidelines waiting for rates to return to their pre-2022 levels. The corporate bond and loan markets — where large companies borrow money — just saw one of their busiest months in recent memory. Meanwhile, lenders aren't so nervous about an impending recession that they withhold credit. I n short, a much-feared debt market dislocation as a result of the Fed's record tightening spree hasn't happened. Placements of new loan and bond deals soared in January, after dropping sharply in 2022, and see-sawing 2023, according to PitchBook LCD. Most notably, riskier deals reappeared — like bonds with "CCC" ratings (the lowest credit rating); and purely opportunistic stuff like loans backing dividends. "In the past when the credit market offered yields like this, it was because everything was really scary and nobody wanted to lend," says David Rosenberg, high-yield portfolio manager at Oaktree Capital. Much of the demand is coming from big institutions like pensions and insurance companies that make major asset allocation decisions for the coming year each December.  Source Axios

Pharma Companies Raise Prices on Over 900 Meds: As the federal government seeks to rein in drug prices, pharmaceutical companies this year have been raising prices on hundreds of name-brand drugs. An analysis by the drug research firm 46brooklyn Research found that companies increased prices on 910 branded drugs in January, although the median increase was 4.7% – the lowest drug inflation rate in more than a decade, the analysis shows. January is a pivotal month for consumers because more than half of annual drug price hikes in the past five years have launched during the first month of the year. But pharmaceutical companies seem to be limiting cost hikes as they navigate price guardrails under two new federal laws. Under the Inflation Reduction Act, drug companies must pay Medicare a rebate if they increase certain prices above the rate of inflation. The law also empowers Medicare to negotiate prices on a select number of drugs. Source USA Today

The Hottest Beer in America Doesn’t Have Alcohol: When he took out the classified ad that changed everything, Bill Shufelt was desperate. He’d quit his job on the trading desk at one of the world’s richest hedge funds to start a business that sounded absolutely nuts: He was going to sell nonalcoholic beer. He didn’t have a product or even a prototype. Or investors. Or any sort of industry experience. And he’d been turned down by hundreds of brewers who basically hung up as soon as he mentioned what kind of beer he wanted to make: a new kind of nonalcoholic beer that people would actually want to drink. After finding a partner and launching Athletic Beer in 2017, the company has since become the country’s king of nonalcoholic beers, recently passing Heineken and Budweiser as the No. 1 brand by sales in U.S. grocery stores. In fact, at Whole Foods Market, Athletic now sells more than any other beer. Including the ones with alcohol. Source WSJ

Cancer Deaths Decline Even as Cases are Rising in the US: Cardiovascular disease remains the leading cause of death worldwide among middle-aged adults. However, deaths from cancer are catching up in some developed countries and even though cancer deaths are declining in the U.S., incidence isn't. According to the American Cancer Society, the estimated number of new cases in 2024 will cross the two-million mark for the first time ever. The main types of cancer affecting men and women, however, will remain largely the same as in previous years. the most frequently diagnosed types of cancer are breast cancer for women and prostate cancer for men. In 2024, almost one third of all new cancer diagnoses in women will be breast cancer. That number is slightly lower at 29 percent for prostate cancer in men. Men in the U.S. will be diagnosed with lung cancer – the second most common cancer for both sexes - slightly less than women. But they are diagnosed with colorectal cancers more often, which has become the number one cause of cancer-related deaths for men below 50. While men more commonly suffer from bladder cancer, eight percent of cancer diagnoses in women are for cancer of the uterus. Overall, the American Cancer Society estimates that more men will be diagnosed with any type of cancer than women

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