Investors are on edge as fears of a severe economic downturn return. Data yesterday revealed a sharp slowdown in both US retail sales and manufacturing activity, while producer prices remained above +6%.

Slowing growth and high inflation are two of the three key components of "stagflation." The third is high unemployment. While payroll data so far does not reflect massive job losses, layoff headlines from the tech and financial sectors are maybe creating the illusion that the job market is cratering.

Bulls want to believe that things may not be as bad as they appear on the surface, however. The decline in retail sales was only -1.1% for the month. Compared to last year, sales in December were up +6%. Bulls are also pointing out that while the Producer Price Index at a year-over-year rate of +6.2% is still far above the Fed's target inflation rate of +2%, it is also a substantial move down from November's rate of +7.3%.

As for layoffs, keep in mind that the tech sector actually only accounts for a small share of the US job market. Overall, layoff announcements remain below pre-pandemic levels.

Today, investors are anxious to hear from Federal Reserve Vice Chair Lael Brainard with bulls hoping she takes a more positive tone about the progress made so far in bringing down inflation. Comments from other Fed officials this week have mostly stuck to the script of "higher rates for longer," and really no cheers about how much it has moved down. In fact, most officials seem more concerned that inflation could spike again if the Fed ends its tightening program too soon.

China's reopening adds to that possibility with some anticipating a surge in commodity prices, particularly energy, which could put upward pressure on global inflation. Economic data today includes Housing Starts and the Philadelphia Fed Index.

On the earnings front, Netflix is one of the biggest highlights with the streaming giants results seen as a preview for what's to come in the weeks ahead when Silicon Valley behemoths start weighing in. Other earnings due today include American Airlines, Concentrix, Fastenal, Netflix, and Procter & Gamble.

Retail Execs Are Questioning How Long They Can Raise Prices: Recent data from retail executives, most of who work at companies with $10 billion or more in annual sales, found that “nearly all” expected less consumption from shoppers this year. Many are even questioning how long they can keep passing their own higher costs to customers. Most said navigating the labor market, where workers have felt more confident seeking better jobs and asking for higher pay would be their biggest difficulty this year. Change can be good, but constant change can be daunting, Deloitte analysts said in the report, adding that retailers today are feeling the hangover of such volatility occurring in the most condensed time frame of any recent business cycle. But as Wall Street presses retailers to prop up margins, only one-third of those executives interviewed in the report were “very confident” about boosting margins or holding on to the margins they have. Seventy percent of those executives said the labor market was the “number one challenge heading into 2023.” Source Market Watch

Is Amazon Prime Finally Slowing? Amazon ended last year with 168 million Prime members in the US, down from 170 million at the end of 2021, according to new estimates from Consumer Intelligence Research Partners. That's the first time ever that the company generated no annual Prime growth in its largest market, according to CIRP. The research firm tracks the number of individuals using Amazon Prime, rather than total paying households. When it began tracking Prime in 2013 there were 17 million members, according to the firm's data. Source Business Insider

Chips Are the New Oil and America Is Spending Billions to Safeguard Its Supply: Only in the past two years has the U.S. fully grasped that semiconductors are now as central to modern economies as oil. In the digitizing world, power tools commonly come with Bluetooth chips that track their locations, appliances have added chips to manage electricity use, and in 2021, the average car contained about 1,200 chips worth $600, twice as many as in 2010. Don't forget, the supply-chain crunch that created a chip shortage brought the lesson home with automakers losing $210 billion of sales last year because of missing chips, according to consulting firm AlixPartners. On top of that, competition with China has stoked concerns that it could dominate key chip sectors, for either civilian or military uses, or even block U.S. access to components. All this has led to the government and companies spending billions on a frenetic effort to build up domestic manufacturing and safeguard the supply of chips. Since 2020, semiconductor companies have proposed more than 40 projects across the country worth nearly $200 billion that would create 40,000 jobs, according to the Semiconductor Industry Association Source WSJ

Boston Dynamics’ Latest "Atlas" Video: Boston Dynamics just released the latest demo of its humanoid robot, Atlas. The robot could already run and jump over complex terrain thanks to its feet. Now, the robot has hands, per se. These rudimentary grippers give the robot new life. Suddenly, instead of being an agile pack mule, the Atlas becomes something closer to a human, with the ability to pick up and drop off anything it can grab independently. The claw-like gripper consists of one fixed finger and one moving finger. CLICK HERE

Source TechCrunch

1 19 2023
What Tech Job Cuts Say About Silicon Valley—and the Rest of the Economy: After a scramble for labor coming out of the Covid-19 pandemic, the US economy has shown signs of reversing course. US employers announced +13% more job cuts in 2022 than they did the year before, according to consulting firm Challenger, Gray & Christmas Inc. The reductions were small; setting aside 2021, last year saw the fewest annual job cuts since CGC began tracking in 1993. There is one sector where the trickle has already become a flood. According to Challenger’s numbers, the tech industry in 2022 increased its announced job cuts by +649%, with the total of 97,171 amounting to the highest since the dot-com crash more than 20 years ago. This year doesn’t look any better with lay offs announced by Amazon, Microsoft, Salesforce, and more than two dozen other US-based tech companies. In some cases, executives have said they misread the post-Covid economy. Andy Challenger, senior vice president at CGC, says the tech layoffs could spread to other industries but adds that a particular “mania” had overtaken the tech industry: “They were hiring at such a breakneck pace, pedal to the metal for two years, that they might have gotten ahead of themselves.” Source Bloomberg

China Reopening Could Push 2023 Oil Demand to New High: The lifting of COVID-19 restrictions in China is set to boost global oil demand this year to a new record high, the International Energy Agency (IEA) said on Wednesday, while price cap sanctions on Russia could dent supply. “Two wild cards dominate the 2023 oil market outlook: Russia and China,” the Paris-based energy watchdog said in its monthly oil report. “Russian supply slows under the full impact of sanctions (while) China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain.” IEA says China’s reopening is set to fuel rebounds in nearby Asian economies and see it take the lead from India as the world’s leader in oil demand growth. Meanwhile the main growth in oil supply is set to come from the US as output from the OPEC+ producer group will decline by -870,000 barrels per day (bpd), led by Russia. Russian oil output was dented by only 200,000 barrels per day (bpd) in December after the European Union banned imports of its seaborne crude and a coalition of countries imposed a price cap on its crude, the IEA said. Overall, Russia's oil exports increased by just under +5% last year, though prices were far lower. Source Reuters

Microsoft, Amazon Set to Erase 28,000 Jobs: Microsoft Corp. and Inc., two of the world’s biggest companies, began cutting a total of 28,000 jobs on Wednesday in a post-pandemic reckoning that has left almost no tech name unscathed. Microsoft began notifying some of the 10,000 workers that will lose their jobs this quarter, while Amazon started sending out emails to people in the US, Canada, and Costa Rica who are among 18,000 people whose positions will be eliminated. Both companies said the painful measures were necessary to offset slowing sales and a possible recession that has made customers more cautious. Microsoft said it still plans to hire people in strategic, competitive areas, such as artificial intelligence. But many other divisions were losing staff, including its HoloLens goggles business which is scaling back work on a headset for the US Army that Congress declined to fund this year. Source Bloomberg

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