Stock indexes are little changed as profit taking and perhaps some sector rotation continues to play out.

Stock bulls may also be struggling to find the next catalyst as Q4 2023 earnings season winds down and Wall Street walks back expectations for Federal Reserve rate cuts.

While several big names are still on the earnings calendar this week and next, the next major test for Q4 results comes the week of February 19, when a slew of retailer results start rolling out, including Walmart and Home Depot.

That week also brings highly anticipated results from one of the hottest AI-related tech stocks, Nvidia, on February 21.

Today’s highlights include Alibaba, Arm Holdings, CVS, Disney, Duke Energy, Hershey, Hilton Worldwide, O'Reilly Automotive, PayPal, Roblox, Uber, and Yum Brands.

On the Federal Reserve front, officials out on the speaking circuit this week have mostly stuck to the same script. That includes reiterating Fed Chair Jerome Powell’s warning that March is likely too soon for rate cuts to begin. Officials have also expressed a desire to see inflation pull back closer to the Fed’s +2% target rate before making any rate moves.

The overall concern is that cutting rates too soon might allow inflation to reignite, and possibly worse than before, similar to what happened in the 1970s. It’s hard to make a case that the Fed “needs” to cut rates as recent economic data shows no signs that tighter monetary policy has dented growth. If anything, January data so far shows an economy that is heating up.  

Some bulls are trying to argue that the recent spate of strong January data could be a “fluke” tied to bad weather and/or annual data revisions. If January was indeed a blip, weaker data in the months ahead could again shift expectation for rate cuts at the Fed’s next meeting on March 19-20. However, that theory can’t really be tested until February data starts to roll out. It may also be hard to support that theory if other upcoming January data comes in hot…what are the odds that it is all a fluke? The key reports to watch are the Consumer Price Index (CPI) next Tuesday (2/13), Retail Sales next Thursday (2/15), and the February Employment Report on March 8. .   

More Americans  Moving Where Laws Align With Their Views:  Location used to be everything in real estate, but now it’s local laws that appear to be influencing where people want to buy homes, according to a new survey. One-third of real-estate agents say they have worked with buyers who moved over the last 12 months mainly because of state or local laws or politics, according to a new first-of-its-kind survey. Agents say they’ve worked with clients who have wanted to move either to more liberal parts of the country or to more conservative areas. These moves have been influenced by gun laws, reproductive-rights laws, and tax policies, the agents said. With Democrats and Republicans drifting further apart on issues like climate, immigration, education, abortion, guns, etc... state and local laws and politics have become increasingly more important to individuals as the nation gets more polarized. With the U.S. Supreme Court striking down the constitutional protection for a woman’s right to have an abortion in 2022 and states diverging on gun policies, many house hunters are rethinking where they prefer to live. I think this is very worrisome as it's certainly another step in the direction of a greater divide and perhaps a major social conflict inside the borders of the US. Source Market Watch

Chipotle Wants to Hire +19,000 Workers:  Chipotle easily beat earnings expectations and topped revenue estimates. Chipotle said foot traffic rose in the quarter, bucking an industry-wide trend of declining visits. The company reported net sales grew by over +15% and total revenue topped $2.52 billion for the fourth-quarter. Net income for the quarter was reported at +$282.1 million. The company said profits would have been stronger but higher beef, produce, and queso costs weighed on margins. Chief Financial Officer Jack Hartung said the return of carne asada contributed to the quarter’s strong same-store sales growth. The chain has also been making strides to improve productivity inside its restaurants by increasing training and adding more employees to its make lines. Additionally, Chipotle’s sales received a boost from a +3% menu price increase it implemented in October. The company opened +121 new locations during the quarter and says it plans to open between 285 and 315 new locations in 2024. The chain, which is also dealing with rising labor costs, said it already has more than +110,000 employees but needs to attract more workers for its busy season from March to May.  Source WSJ

Super Bowl Expected to Smash Betting Records:   A record 67.8 million American adults are expected to bet $23.1 billion on Sunday's Super Bowl matchup between the Kansas City Chiefs and San Francisco 49ers, the American Gaming Association said on Tuesday. The number of American adults planning to bet on the NFL's title game is up 35% from a survey conducted last year by the trade group representing the U.S. casino industry, while the estimated value of wagers is up from $16 billion last year. With the expansion of legal sports betting, the AGA said traditional Super Bowl wagers are expected to pass casual wagers for a second consecutive year. According to the AGA, 42.7 million American adults plan to place a traditional sports wager online, at a retail sportsbook or with a bookie, up 41% percent from 2023, while 36.5 million plan to bet casually with friends, up 32% from 2023. The AGA also said bettors are nearly split on the outcome of the game with 47% planning to bet on the defending champion Chiefs and 44% planning to bet on the 49ers. Source Reuters

Rising Delinquency Rates Point to Strained Consumers: An annualized 8.5% of credit card balances and 7.7% of auto loan balances moved into delinquency status in the final months of 2023, according to the New York Federal Reserve’s quarterly report on household debt and credit. "Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels," Wilbert van der Klaauw, an economic research adviser at the New York Fed, said in a press release. "This signals increased financial stress, especially among younger and lower-income households." Other types of debt — like student loans and mortgages — have delinquency rates below pre-pandemic levels. Overall delinquency rates rose a tick to 3.1% in the fourth quarter — that's still 1.6 percentage points below the pre-pandemic level. On a call with reporters, New York Fed researchers noted pockets of overextended consumers and churn in the labor market that has left some people unemployed, which might be contributing to higher delinquency rates. Source Axios

Adam Neumann Tries to Buy Back WeWork: Adam Neumann, the former chief executive and co-founder of WeWork, is trying to regain control of the bankrupt co-working company less than five years after the board forced him out. Neumann’s lawyers sent a letter to WeWork’s advisers saying that he is partnering with Dan Loeb’s Third Point hedge-fund firm and other investors in exploring a bid for the company. That effort is already facing challenges. Some WeWork creditors have signaled they are ready to sell the firm after it exits chapter 11, according to people familiar with the matter. But WeWork executives have been cool to Neumann’s interest. They have shut him out from information he would need to submit a bid for the company since he initially approached WeWork in December, according to Neumann’s letter that was reviewed by The Wall Street Journal. Source WSJ

Eli Lilly’s Obesity Drug Sales Soar Past Estimates: Eli Lilly shares jumped again on Tuesday, as signs continue to point to the drug maker’s new obesity and diabetes medicines growing into earthshaking blockbusters. Lilly reported fourth-quarter financial results Tuesday, including quarterly sales of its diabetes medicine Mounjaro of $2.1 billion, above the $1.7 billion FactSet consensus estimate. Sales of Zepbound, the obesity medicine that only hit U.S. pharmacies in December, were $175.8 million in less than a month, above the $75 million consensus estimate. Lilly’s non-GAAP earnings per share in the fourth quarter were $2.49, well above the consensus estimate for $2.30. Total revenue for the quarter was $9.4 billion, beating the $8.9 billion estimate. Source Barrons

Pizza Hut Introduces “Goodbye Pies” Ahead of Valentine’s Day: Looking for a way to end your relationship before Valentine's Day? Pizza Hut may be able to help. The pizza chain has launched Goodbye Pies, a new Valentine’s Day offering that gives customers in three U.S. cities the chance to “ditch that awkward break-up convo and send a pizza instead.” Starting Tuesday, the free Goodbye Pies will be sent in a custom box that leaves space for the person ending the relationship to sign their name. The pizza inside will be a new menu item, the “sweet yet spicy" Hot Honey pizza. There is of course a catch - The Goodbye Pies will only available at three Pizza Hut locations through Valentine's Day. And the supply will be quite limited.  Source USA

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