US investors have a lot on their radar this week, including the first full week of Q4 2023 earnings season, critical Retail Sales results, another government shutdown showdown in Washington, and the ongoing threat of a major escalation in Middle East tensions.
The earnings calendar this week is actually still pretty light with the bulk of results coming from the financial sector. That includes big Wall Street banks Goldman Sachs and Morgan Stanley today, as well as Interactive Brokers and PNC Financial Services. Q4 earnings season kicked off on Friday with largely unimpressive results from Bank of America, Citigroup, JP Morgan, and Wells Fargo.
Many Wall Street insiders believe it may be hard for bulls to mount much of a rally before they get a taste of big tech earnings, which start rolling out next week. The so-called "Magnificent Seven"- Google-parent Alphabet, Apple, Amazon, Facebook-parent Meta, Microsoft, Nvidia, and Tesla - account for around half the weighting of the Nasdaq, and represent some 33% of the S&P 500 by market cap.
The group also delivered monster returns in 2023, rising as a group +107%. Keep in mind, Wall Street analysts' earnings growth estimates for the group in 2024 stands at nearly +21%, versus +6.7% for the S&P 500 without those seven stocks.
Turning to economic data, Empire State Manufacturing is today's highlight. Retail Sales will be the one investors are particularly anxious to see tomorrow after the gauge surprised to the upside in November. While robust consumer spending helps temper worries about a looming economic downturn, it also gives the Fed little reason to cut rates.
In Washington, US Congressional leaders unveiled a temporary spending bill that keeps the government funded through early March. The deal still needs to pass the House and Senate this week to avoid a partial government shutdown beginning on January 20. Passage in the Senate seems likely but the House is more of a wild card with several hardline Republicans seeking lower spending limits. The opposition comes mostly from the same group of Republicans that ousted former Speaker Kevin McCarthy after he reached a temporary funding deal with Democrats to avert another shutdown last October.
Some are now threatening new House Speaker Mike Johnson's job, which could once again throw the House into a standstill and hold up work on the 12 annual spending bills that still need to be passed by March in order to avoid going through yet another shutdown showdown.
On the geopolitical front, the situation in the Red Sea has not improved. Yemen's Houthi rebels hit a US-owned ship on Monday, one day after attacking a US Navy destroyer. The US and UK since last week have bombed multiple sites in Yemen and some maritime agencies are warning ships to stay away from parts of the Gulf of Aden, an important waterway connecting with the Red Sea and an essential oil transport route between Europe and the Far East.
Lots of large traders are keeping a closer eye on the situation brewing along the border of Israel and Lebanon's southern border. The talk is this is much more important than what the media is focusing on in and around Yemen.
There's also a lot of rumors and whispers still surrounding Taiwan and Chinese tensions.
Former President Donald Trump Won the Iowa Caucuses, the first Republican 2024 presidential contest. The front-runner, former President Donald Trump pushed his supporters to turn out, despite the cold, to secure a big win. He bested former U.N. Ambassador Nikki Haley and Florida Gov. Ron DeSantis, who were fighting it out for second place in hopes of a strong second-place showing heading into next Tuesday's New Hampshire primary. Source WSJ
Citigroup Cutting 20,000 from Its Workforce: Citigroup reported that they are letting go of nearly 20,000 employees over the medium term. American banks have been trimming jobs throughout the past year, led by Wells Fargo and Goldman Sachs, to lower costs amid stagnant revenue. Source CNBC
Deflation Worries Deepen in China: China is sinking deeper into its worst deflation in years, spelling possible trouble for the whole world as demand falters in its second-largest economy. With many Chinese worried about the economic outlook and unwilling to spend, consumer prices fell for a third straight month. Prices charged by manufacturers dropped for the 15th month in a row. Economists at Morgan Stanley described the situation as the “longest and deepest” deflation in China since the Asian financial crisis in 1998 when countries across the region overheated and entered recessions that took years to recover from. Until recently, many Western economists had welcomed some deflation in China, because it lowered the cost of imported Chinese goods, helping to ease inflationary pressures elsewhere. One worry is that without more forceful stimulus, China’s economy could fall into a debt-deflation spiral like Japan did in the 1990s, when falling prices prompted companies to cut wages and consumers to hold off on purchases, creating a vicious cycle of even weaker demand and more deflation. Source WSJ
Fed Tiptoes Toward Dialing Back Key Channel of Monetary Tightening: Though the Federal Reserve stopped raising interest rates last summer, it is quietly tightening monetary policy through another channel: shrinking its $7.7 trillion holdings of bonds and other assets by around $80 billion a month. Now that, too, may change. Fed officials are to start deliberations on slowing, though not ending, that so-called quantitative tightening as soon as their policy meeting this month. It could have important implications for financial markets. The Fed can shrink its holdings by selling bonds or, as it has preferred, allowing bonds to mature and “run off” its balance sheet without buying new ones. Runoff increases the supply of bonds that investors must absorb, putting upward pressure on long-term interest rates. Slowing runoff reduces that upward pressure. But whereas the Fed expects to cut short-term interest rates this year because inflation has fallen, its rationale for tapering bond runoff is different: to prevent disruption to an obscure yet critical corner of the financial markets. Five years ago, balance-sheet runoff sparked upheaval in those markets, forcing a messy U-turn. Officials are determined not to do that again. Source WSJ
FedEx Takes on Amazon with New Commerce Platform: Logistics company FedEx announced its own commerce platform called FDX today. The platform will likely compete against Amazon by offering merchants services like demand generation, fulfillment, tracking, and post-purchase experiences including returns. The company said that FDX is currently in private preview with plans for a wider launch in fall 2024. Businesses can register their interest in trying it out through a form. The company didn’t mention any brands that are part of the pilot program. Source TechCrunch
NASA Unveils Revolutionary X-59 Quesst "Quiet" Supersonic Jet: NASA and Lockheed Martin formally debuted the agency’s X-59 quiet supersonic aircraft Friday. Using this one-of-a-kind experimental airplane, NASA aims to gather data that could revolutionize air travel, paving the way for a new generation of commercial aircraft that can travel faster than the speed of sound. The X-59 is at the center of NASA’s Quesst mission, which focuses on providing data to help regulators reconsider rules that prohibit commercial supersonic flight over land. For 50 years, the U.S. and other nations have prohibited such flights because of the disturbance caused by loud, startling sonic booms on the communities below. The X-59’s thin, tapered nose accounts for almost a third of its length and will break up the shock waves that would ordinarily result in a supersonic aircraft causing a sonic boom. Due to this configuration, the cockpit is located almost halfway down the length of the aircraft – and does not have a forward-facing window. Instead, the Quesst team developed the eXternal Vision System, a series of high-resolution cameras feeding a 4K monitor in the cockpit. Source NASA.Gov
US Centenarian Population Projected to Quadruple Over Next 30 Years: The number of Americans ages 100 and older is projected to more than quadruple over the next three decades, from an estimated 101,000 in 2024 to about 422,000 in 2054, according to projections from the U.S. Census Bureau. Centenarians currently make up just 0.03% of the overall U.S. population, and they are expected to reach 0.1% in 2054. The number of centenarians in the United States has steadily ticked up since 1950, when the Census Bureau estimates there were just 2,300 Americans ages 100 and older. In the last three decades alone, the U.S. centenarian population has nearly tripled. The 1990 census counted around 37,000 centenarians in the country. The world is home to an estimated 722,000 centenarians, according to the United Nations’ population projections for 2024. The U.S. centenarian population is the world’s second largest – the UN estimates it at 108,000, slightly larger than the Census Bureau’s estimate. By 2054, the global centenarian population is projected to grow to nearly 4 million. China is expected to have the largest number of centenarians, with 767,000, followed by the U.S., India, Japan and Thailand. Source Pew Research
LG's Transparent TV : Electronics brand LG has unveiled the Signature OLED T, a television with a transparent screen that was on display at this year's Consumer Electronics Show. LG has described the Signature OLED T as "the world's first wireless transparent OLED TV". The television features a 77-inch transparent OLED screen. Thanks to its transparency, the TV does not need to be placed against the wall like a traditional screen. Rather, the Signature OLED T can be used as a subtle room divider while switched off, or positioned against a window without compromising its view. An artificial intelligence (AI) processor powers the screen's picture quality. Users can pivot between two settings – transparent and opaque – depending on how they would like content to appear on the screen. LG says the company plans to sell a version later this year. The company hasn't talked price yet but experts say $10,000 minimum, but probably even more. Source LG
GE Profile Smart Indoor Smoker GE Profile Smart Indoor Smoker: GE touts its newest appliance as the the world’s first and only indoor smoker, available for purchase as of last week for $999.00. The Smart Indoor Smoker boasts Active Smoke Filtration technology, along with tight gaskets and seals, to ensure all the smoke stays inside the appliance, as well as presets and adjustable smoke settings. The smoker is small enough to fit on a countertop and has a capacity large enough to fit a whole chicken, brisket, pork butt, three racks of ribs, and up to 40 wings. Source GE
Weber Summit Smart Grill: The Summit FS38X Smart Grill has Weber's first full touchscreen control panels. It also has interior sensors, which track and adjust internal temperature, and smart technology that keeps all burners functioning at high efficiency. However, the real stand-out feature on Weber's newest grill is a blazing infrared broiler, a first of its kind. The broiler can be raised and lowered to add a quick crust to steak, fish and chops. Source CNET
Motion Pillow: If chronic snoring interferes with you getting proper rest, the Motion Pillow may be able to help. It has AI features that detect snorting, then inflate the pillow to elevate your head and open your airway. Plus, this system will track your sleep, snoring and other data so you can stay informed. List price is $699 but it was on sale for $420 for a limited time.
Four-in-One BeamO Thermometer : Withings announced its next home health innovation: the BeamO, which is a four-in-one thermometer, electrocardiogram, oximeter and stethoscope. Depending on where on your body you "beam it," the device can give you clues about your health. Withings is marketing the BeamO, which it describes in a press release as "portable and smaller than a smartphone," as a device to improve telemedicine visits, where some patient information is naturally lost when you can't get it in-office
Pawport Pet Door: This unique gadget is a motorized pet door cover that’s programmable via an accompanying smartphone app and works in conjunction with a collar tag — allowing it to automatically open when your pet approaches. Using the app, you can control the door remotely, set curfew times, schedule when the port can open or close, and even issue voice commands with Alexa, Siri, or Google. Other cool features include pet tracking and usage data, letting you know exactly when your pet is walking into (and away from) your home.
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