Stock bulls are coming off another record closing-high for the S&P 500. The index is now less than 0.1% from closing above the psychologically important 5,000 milestone.

For what it’s worth, the S&P 500 first closed above 4,000 on April 1, 2021, which was just 632 days after it first crossed 3,000. Its climb to 5,000 has so far taken 1,043 days. Already in 2024, the S&P 500 has gained +4.7%, while the Nasdaq is up +5% and the Dow is up +2.6%.

Stock bulls are pointing to solid earnings that, outside of banks and already troubled companies, have shown no major setbacks from the Federal Reserve’s tighter monetary policy. Coupled with signs of continued growth in the US economy, many bulls are starting to argue that double-digit earnings outlooks can still be met this year, even if the Fed keeps rates higher for longer than many were initially penciling.

Meaning that even though Wall Street has dialed back the number of Fed rate cuts expected in 2024, bulls don’t think market expectations need to be dialed back.

Bears continue to warn that strong US growth runs the risk of reigniting inflation, which is already showing signs of reaccelerating due to rising shipping costs. The climbing freight costs are mostly tied to transit problems through the Red Sea due to attacks on ships by Iran-backed Houthi rebels, as well as low water levels at the Panama Canal.

The longer those two situations continue, the greater the risk that those added costs start showing up in consumer prices. Bears also point out that the Israel-Hamas war that has spurred the Houthi attacks is also still on the edge of spilling over into a wider regional conflict, which could send oil prices skyrocketing. Additionally, bears are warning that lawmakers in Congress are still struggling to reach funding agreements that are needed to prevent a partial government shutdown starting March 1.  

The government has been operating on budget extensions since the fiscal year began on October 1. Leaders of both chambers have reported little progress since passing the last extension.  

Today, investors will be digesting earnings results from AstraZeneca, ConocoPhillips, Siemens, T. Rowe Price, and Unilever. There is no economic data of note.

16 Million Employees Expected to Come Down With “Super Bowl Flu”: The day after Super Bowl LVIII, about 16.1 million employees are expected to come down with "Super Bowl Flu," according to the UKG Workforce Institute. So many employees call off on "Super Sick Monday," petitions and even state lawmakers are trying to make it an official holiday. About 10 million people have already requested the day off. Anticipated absences are slightly down from last year, when 18.8 million employees said they would not show up for work after the Super Bowl. Absences could be down this year because the game is a rematch of Super Bowl LIV in 2020, when the Kansas City Chiefs beat the San Francisco 49ers 31-20.  Source Axios

Americans Prefer Liquor Over Beer for Second Year in a Row: The spirits industry held its market share edge over beer and wine for the second straight year in 2023, even as it showed little growth, according to new data released Wednesday. U.S. spirits revenue grew only a modest 0.2% last year to $37.7 billion, according to the Distilled Spirits Council of the U.S.′ annual economic report. Although the industry gained little total revenue, it outpaced beer and wine sales by 0.4% and 26.1%, respectively. Vodka remained the top-selling spirit in 2023, while the second-highest selling category, tequila and mezcal, gained even more of a lead on American whiskey. Tequila and mezcal, blended whiskey and American whiskey are among the fastest-growing spirits categories by revenue. Though some parts of the industry have weakened, the rapid rise of ready-to-drink cocktails has been a bright spot for investors. Premixed cocktails were the fastest-growing spirits category last year, rising +26.7% to $2.8 billion in revenue, DISCUS reported. Source CNBC

U.S. to Tackle Secrecy in All-Cash Home Purchases: The Treasury Department on Wednesday proposed a new rule that would require real-estate professionals involved in closings and settlements to disclose the names of people behind the anonymous limited liability companies and trusts involved in all-cash residential property sales and transfers nationwide, regardless of purchase price. Policymakers say bad actors also often use shell companies to launder money through property purchases and pay for the purchases entirely in cash to avoid scrutiny from financial institutions obligated to detect and report suspected incidents of money laundering. The proposed rules, announced by the Financial Crimes Enforcement Network, the anti-money-laundering bureau at the Treasury, are built upon the agency’s long-running “residential real estate geographical targeting orders.” If adopted, the proposed rules would replace the existing area-specific targeting orders with nationwide reporting requirements. The agency is also looking at additional rule-making options to increase transparency in commercial real estate. Source WSJ

CBO Projects Biden Green Energy Plan to Cost Much More Than Initial Estimate:  The U.S. budget deficit will grow by an estimated $1 trillion over the next 10 years, the nonpartisan Congressional Budget Office projected in a new report Wednesday. Part of that growth will be driven by unexpectedly high costs related to President Joe Biden’s signature policy goal: Reorienting the U.S. economy towards greener energy, the CBO found. Taken together, CBO estimates that the impact of new emissions standards, clean energy tax credits and falling gas tax revenue as people buy less gas, will add $25 billion to the budget deficit this year. Over a decade, CBO projects they will add $428 billion to the cumulative deficit. More than half of that, $224 billion, is from “projections of amounts claimed for clean vehicle tax credits and of [lower] revenues from excise taxes on gasoline. “The costs of energy-related tax provisions are much higher than ... originally projected,” said CBO director Philip Swagel at a press event Wednesday.  Source CNBC

For First Time in Two Decades, U.S. Buys More From Mexico Than China: New data released Wednesday showed that Mexico outpaced China to become the United States’ top source of official imports for the first time in 20 years — a significant shift that highlights how increased tensions between Washington and Beijing are altering trade flows. The United States’ trade deficit with China narrowed significantly last year, with imports from the country dropping 20% to $427.2 billion, the data shows. American consumers and businesses turned to Mexico, Europe, South Korea, India, Canada and Vietnam for auto parts, shoes, toys and raw materials. Mexican exports to the United States were roughly the same as last year, at $475.6 billion. The United States’ total trade deficit in goods and services, which consists of exports minus imports, narrowed 18.7%. Overall U.S. exports to the world increased slightly in 2023 from the previous year, despite a strong dollar and a soft global economy. Source NYT


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