Stock investors are anxious to hear from Federal Reserve Chairman Jerome Powell today, who will be interviewed at an event organized by The Economic Club of Washington DC. Investors are particularly nervous to hear the Fed chief's thoughts on the latest employment data, which last week showed US payrolls grew by more than half a million in January as the unemployment rate fell to 53-year low.

That coincided with a gain in job openings back to 1.9 per every unemployed person. While the data might be good news to recession watchers, it is problematic for the Fed's inflation fight as a tight labor market tends to keep wage gains elevated, in turn fueling inflation.

Atlanta Fed President Raphael Bostic yesterday warned that January’s strong jobs report raises the possibility that the central bank will need to increase interest rates higher than officials currently forecast. The Fed's last "dot plot" showed policymakers were projecting a median terminal rate (where rate hikes will end) of 5.1%, which would amount to a target range of 5.0% to 5.25%. To get there, Wall Street is currently penciling two more 25-basis point rate hikes at both the March 21-22 and May 2-3 meetings (there is no Fed meeting in April).

Bostic noted that policy officials will first need to decide if the January job gains were an anomaly but said an additional hike beyond the two currently implied couldn't be ruled out. There is one more round of monthly employment data before the Fed's next meeting so if January's gains were just a one-off, that could be revealed in the February Employment Situation on March 10. Bostic also reminded that even after the Fed pauses hikes, it could again choose to lift rates further if necessary.

Bottom line, the Fed is still in tightening mode and where it will end up remains a moving target. The high degree of Fed uncertainty is butting up against a disappointing Q4 earnings season that is prompting analysts to cut the outlooks for the quarters ahead.

According to FactSet, for Q1 2023 and Q2 2023, analysts are projecting earnings declines of -4.2% and -2.9%, respectively.

For what it's worth, a hawkish Fed and declining earnings growth are not typically the recipe for a bull market. Earnings results are due today from AGCO, BP, Carlyle Group, Centene, Chipotle, DuPont de Nemours, Enphase Energy, Gartner, KKR & Co., Prudential Financial, Royal Caribbean, and Xylem. Economic data today is light with just the Trade Balance and Consumer Credit.

Gold Demand by Central Banks Surge: The World Gold Council was out last week with its annual demand trends analysis. They made a statement in the report that Central bank demand for gold hit a 55-year record in 2022. Annual gold demand (excluding OTC) jumped 18% to 4,741t, almost on a par with 2011 – a time of exceptional investment demand. Read Here if you wish

NEW Competition for ChatGPT: Google on Monday announced an artificial intelligence chatbot technology called Bard that the company will begin rolling out in the coming weeks. The announcement confirms CNBC’s prior reporting. Bard will compete directly with rival ChatGPT, an AI service created by OpenAI. Bard is powered by the company’s large language model LaMDA, or Language Model for Dialogue Applications. Google will open up the conversation technology to “trusted testers” ahead of making it more widely available to the public, the company said in a blog post on Monday. Source: CNBC

Mysterious Donors Are Paying Millions to Run Commercials for Jesus During the Super Bowl: A group of anonymous donors believes Jesus needs an ad campaign and will run two ads in Super Bowl LVII, paying the millions of dollars that Fox is asking for each ad spot. It’s the latest in a series of commercials that have run for the past 10 months under the banner “He Gets Us.” The ad series spotlights Jesus as someone who is patient and loving and understands the human condition, especially as society gets more divided. But as the cost and profile of these ads increase, more questions are coming up as to who is paying for them. The website for the campaign says the campaign is backed by Servant Foundation, a Missouri nonprofit whose donors have largely remained anonymous. While they’re raising eyebrows and questions, don’t expect the ads to stop after the Super Bowl. Organizers say they hope to spend $1 billion over the next three years to continue the pro-Jesus ads. While a commercial with strong religious themes is unusual in the Super Bowl, it’s not unprecedented. A decade ago, the Church of Scientology ran an ad encouraging people who were curious about that religion to “dare to think for yourself…to make up your own mind.” Source: Fortune

Goldman Sachs Reverses Housing Market Call: Just two weeks after Goldman Sachs downgraded its outlook for the U.S. housing market, the investment bank reversed course on Jan. 23 in a paper titled 2023 Housing Outlook: Finding a Trough. Instead of U.S. home prices falling 6.1% in 2023, which was their Jan. 10 prediction, researchers at the investment bank now expect national home prices to end 2023 down just 2.6%. By the time U.S. home prices bottom out this summer, Goldman Sachs says, national home prices will be down around 6% from its June 2022 peak. Previously, Goldman Sachs researchers were expecting that peak-to-trough decline to come in closer to 10%. On a regional basis, Goldman projects larger declines across the Pacific Coast and Southwest regions which have seen the largest increases in inventory on average, and more modest declines across the Mid-Atlantic and Midwest which have maintained greater affordability over the past couple of years, wrote the researchers. In regards to the upward revision, Goldman Sachs points to an uptick in homebuyer demand, saying that home sales appear set to turn higher. Mortgage purchase applications have averaged 9% above their October trough so far in January, and survey-based measures of purchasing intentions have rebounded sharply. Source: Fortune.

Hedge Funds Cut Risky Bets at Fastest Pace in Two Years: Big-money speculators are shunning the new-year equity rally, unconvinced by the buying frenzy that has swept across the retail crowd as well as corporate America. While being forced to unwind bearish bets in droves by last week’s risk-on rotation, hedge funds tracked by Goldman Sachs Group Inc.’s prime brokerage have been reluctant to chase market gains. Their long positions were trimmed during the week through Thursday as the S&P 500 Index posted its fourth weekly advance in five. The reduction in both long and short positions — a phenomenon known on Wall Street as de-grossing — led to the largest overall retreat since January 2021, when day traders infamously banded together on Reddit to take on professional short sellers. Further evidence of professional investor caution was evident in data compiled by JPMorgan Chase & Co., showing Thursday marked the 10th-biggest de-grossing session since the start of 2018. Combined with long activity, the firm’s prime brokerage noted flows were “quite negative” over the past four weeks. Source Bloomberg

Child Care Still Hasn’t Recovered From Covid, Keeping Many Parents at Home: The high cost and limited availability of child care is keeping some parents out of the labor force when unemployment is at its lowest rate in more than half a century. There were about 58,000 fewer daycare workers in the U.S. last month compared with February 2020, just before the pandemic took hold, according to the Labor Department, even though the broader labor market has recovered all lost jobs. That limited supply of labor is also keeping upward pressure on costs. The median price to put an infant in center-based care ranges from $8,000 a year in less-populated counties to more than $17,000 in a major metro area, according to a Labor Department report. The report found care costs can be nearly a fifth of median family income in high-cost, large cities, and as a result mothers in those areas were less likely to work. The Labor Department’s National Database of Childcare Prices, a new data source of county-level daycare costs, estimates that last year in counties with more than one million residents, center-based infant care cost $17,171 for one child, preschools cost $12,307 and school-age center care cost $10,245. Source WSJ

Tech Loses Grip on Largest Office Leases: Tech has been toppled as the leader in leasing large offices. The pullback comes as the roller-coaster tech industry downsizes after a decade-long boom. The finance and insurance industry ousted tech last year for the lion's share of the largest 100 office leases in the U.S., per a new report from commercial real estate firm CBRE. Finance and insurance companies claimed a quarter of the largest 100 leases by square footage, up from 12 in 2021. Tech companies accounted for 17 of the largest 100 leases, down from 36 in 2021. Finance and insurance companies generally have higher office attendance rates than tech, which was quick to embrace remote work, CBRE surveys show. In 2022, as layoffs swept tech companies, many firms abandoned their big office spaces — either by downsizing or moving primarily to a remote-work model. Manhattan, Northern Virginia, and Silicon Valley were the top three markets for total leasing activity, including renewals, accounting for 33% of the square footage total. Source Axios

ULTRA Club | New Members Day - Michelob Ultra pays homage to Caddyshack in its 2023 Super Bowl commercial, which has several teasers, each starring Serena Williams with Succession star Brian Cox, Tony Romo (picking up Bill Murray's iconic role of the groundskeeper Carl Spackler), Alex Morgan and Canelo Alvarez.


Sam Adams: A brighter Boston - Boston-based Sam Adams beer commercials often star "your cousin from Boston." In this Super Bowl ad, Sam Adams' "remastered" Boston Lager inspires the cousin to dream of a "brighter Boston," in which Red Sox and Yankee fans hug it out. CLICK HERE TO WATCH

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