Stock indexes break their losing streak as a very strong outlook from Taiwan Semiconductor boosts investor hopes for upcoming big tech results. The Taiwan chipmaker touted artificial intelligence as fueling its better-than-expected Q4 earnings and said it expects revenue to grow +20% in 2024 due in part to AI demand.

The company is a key supplier to Apple and Nvidia, so its results and outlook are seen as an early indicator of what the big tech megacaps might reveal over the next two weeks.

With the so-called Magnificent Seven (Apple, Google-parent Alphabet, Microsoft, Amazon, Facebook-parent Meta, Tesla, and Nvidia) stocks alone comprising nearly 30% of the S&P 500's market cap, these companies have an outsized impact on the overall market, as well as investor sentiment.

Tesla reports next Wednesday (January 24), followed the next week by Microsoft on January 30, and Apple, Amazon, Alphabet, and Meta on February 1. Nvidia reports on February 21.

Bulls are hoping big tech results and forward guidance can renew last year's strong rally that has been tripped up by uncertainties about Federal Reserve policy and how far it might cut rates this year. Traders have dropped the odds of a rate cut in March by more than 10 percentage points from a week ago, according to the CME FedWatch Tool.

Bears aren't so sure that tech stocks can deliver the same gains in 2024 as they did last year. They point to the typical concerns about "high valuations," as well as big consumer slowdowns in China and Europe, and the strong US dollar that continues to weigh on exporters. Bears also warn that US consumers and businesses are likely to be spending less as inflation and high borrowing costs dent spending power and keep a lid on growth.

Today, the earnings highlights today will be Fifth Third Bancorp, Huntington Bancorp, Schlumberger, State Street, and The Travelers Companies.  

Looking to next week, key economic data will include the first estimate of Q4 2023 GDP (gross domestic product) and New Home Sales on Thursday, and the PCE Prices Index and Pending Home Sales on Friday.

The earnings calendar next week starts to get pretty packed and will also bring results from a broad cross-section of industries. Meaning we'll be moving past the concentration of gloomy results from the banking sector and onto hopefully more rosy results from other industries.

Top highlights include United Airlines on Monday; 3M, Baker Hughes, Canadian National Railway, D.R. Horton, General Electric, Johnson & Johnson, Lockheed Martin, Netflix, PACCAR, Texas Instruments, and Verizon on Tuesday; Abbott Labs, ASML Holding, AT&T, CSX, FreeportMcMoRan, General Dynamics, IBM, KimberlyClark, Las Vegas Sands, and The Progressive on Wednesday; ADM, American Airlines, The Blackstone Group, Capital One Financial, Comcast, Dow, Intel, KLA, McCormick, Mobileye, NextEra Energy, Nokia, Northrop Grumman, Robert Half, SherwinWilliams, Southwest Airlines, Union Pacific, Valero Energy, and Visa on Thursday; and American Express, ColgatePalmolive, and Norfolk Southern on Friday.

I should mention that Congress yesterday managed to pass a short-term spending bill that will avert a government shutdown this weekend. The bill extends deadlines to fund government agencies until March 1 and March 8. 

Tensions Rising in the Middle East:  Pakistan’s military carried out targeted strikes against militant hideouts in Iran on Thursday, responding to an attack by Tehran a day earlier. Even as officials on both sides strove to prevent the situation from spiraling out of control, the tit-for-tat response is the most significant escalation between the two neighbors, which have had their conflicts in the past. The strikes are the latest sign of rising turmoil in the Middle East over the Israel-Hamas war. The US and UK struck Iranian-backed Houthi militants in Yemen for a fifth time in a week after the Houthis attacked another commercial boat Wednesday, and President Joe Biden vowed the strikes would continue. The Houthis have argued their assault on commercial boats in the Red Sea is in response to Israel’s bombing campaign in Gaza. Source Bloomberg

Mortgage Rates Best in Eight Months: Mortgage rates in the US fell to the lowest level in almost eight months. The average for a 30-year, fixed loan was 6.6%, the lowest since May and down from 6.66% last week. 

BlocRock's Spot Bitcoin ETF is First to Cross the $1 Billion Milestone: BlackRock Inc.’s Bitcoin exchange-traded fund passed $1 billion in investor inflows, making it the first in the group of nine new ETFs directly holding the cryptocurrency to surpass the milestone since the funds started trading last week. Investors deposited $371 million in the fund on Wednesday, pushing IBIT past the milestone, data compiled by Bloomberg show. Fidelity Investments is close behind at around $880 million. BlackRock and Fidelity have driven early consolidation in the new asset, with the two firms receiving 68% of all inflows across the nine new ETFs on the market, totaling nearly $2 billion. A significant portion of inflows are coming from investors leaving Grayscale Investment’s GBTC fund after the U.S. Securities and Exchange Commission approved the ETFs. Grayscale’s Bitcoin Trust, which was created in 2013, had over $28 billion in assets under management when it converted to an ETF, but has seen about $1.6 billion in outflows since trading started.  Source Bloomberg

IEA Raises 2024 Oil Demand but Lags OPEC View: The International Energy Agency (IEA) has again raised its 2024 global oil demand growth forecast, though its projection remains lower than OPEC's expectations, and said the market looked well supplied because of strong growth outside the producer group. The IEA and the Organization of the Petroleum Exporting Countries (OPEC) have clashed in recent years over issues such as future oil demand. The IEA expects oil demand to peak by 2030 as the world shifts to cleaner fuels, a view OPEC dismissed in an article on Wednesday. The IEA, which advises industrialised countries, on Thursday predicted global consumption will rise by 1.24 million barrels per day (bpd) in 2024. This was its third consecutive upward revision in as many months but was below OPEC's 2.25 million bpd projection. With conflict in the Middle East raising concern over supply, the IEA said that - barring significant disruptions to flows - the market looked reasonably well supplied in 2024 and a surplus could emerge if OPEC and its allies unwind output cuts as scheduled in the second quarter. The IEA's latest upward demand growth revision, up 180,000 bpd from its previous projection, was linked to improving global economic growth and lower crude prices in the fourth quarter plus China's expanding petrochemicals sector.  Source Reuters

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NYSE Pulls Plans to List Natural Asset Companies: The New York Stock Exchange (NYSE) has withdrawn from the Securities and Exchange Commission a proposal to create a new tradeable asset class called "natural asset companies", or NACs, the commission said. In a press release, Utah State Treasurer Marlo Oaks applauded NYSE's withdrawal of its plan. "Under the proposal, private interests, including foreign-controlled sovereign wealth funds, could use their capital to purchase or manage farmland, national and state parks, and other mineral-rich areas and stop essential economic activities like farming, grazing, and energy extraction," Oaks said. Source Reuters

Retailers are Stuck in a Cycle of Constant Sales: Retail sales numbers were up 0.6% in December — the month that closed out the 2023 holiday season. Last year, holiday promotions started as early as the day after Halloween. Meanwhile, we just came off Martin Luther King weekend, which, despite having nothing to do with gifting, also came with deals. Next up, there will be sales for Valentine’s Day, President’s Day and every “Day” after that. We’ve even gotten to the point where sales inspire sales. When Amazon has Prime Day, Target has Target Circle Week and Walmart has Walmart Plus Week. Sales have become so common that now many consumers refuse to pay full price. It’s a sales spiral. So the question is: If everything’s always on sale, is it actually ever on sale? And how did we get to this 24/7 sales environment?  Source Marketplace

China’s Deflation Is Led by Goods, Adding Trade-Tension Risk: China’s deflation was driven by falling prices in its manufacturing sector last year, fresh data showed on Thursday, adding to the risk of trade tensions with the US and Europe amid a major ramp-up in Chinese industrial capacity. China’s GDP deflator, the widest measure of prices across the economy, was negative 0.6% in 2023, the steepest annual decline since the late 1990s, according to Bloomberg calculations based on data from China’s statistics bureau. Among sectors, manufacturing showed the biggest price drop, at 3.2%, Bloomberg calculations show. The figures add to evidence that domestic supply in some sectors is running ahead of China’s demand. And that’s likely to fuel accusations in Washington and Brussels that China is over-investing in some manufactured goods sectors, undermining US and European Union rivals. It’s manufacturing deflation that’s raising tensions. An index of China’s export prices fell 9.2% year-on-year in November. And China clocked a trade surplus of some $823 billion for all of last year, the second highest on record. While consumers round the world may benefit from China’s cheapening goods prices — and many central banks may appreciate the disinflationary impulse — for overseas producers the impulse threatens their own competitiveness. Source Bloomberg

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