Investors continue to debate multiple cross currents that are making it challenging for bulls to keep the recent upward momentum. Bulls continue to focus on signs of disinflationary forces showing up in the data.

However, one area that a slowdown has not yet shown up is the job market. Even though job layoffs are piling up in the tech sector, that has not been reflected in the overall weekly and monthly unemployment data.

Economists say the lag is likely due to a combination of generous severance packages (i.e., most layoffs coming from the tech industry) and the fact that there are still a lot of available jobs. Meaning many people may be getting new jobs before they are eligible or need to file for benefits.

There is however evidence that it is taking longer for people to find new positions, which indicates that the Fed's tightening program is having the desired impact on the labor market. Fed Chair Jerome Powell has previously stated that reducing the number of job openings was one way to soften the labor market and cool wage inflation without significantly raising unemployment.

It's worth noting that the S&P Flash PMI read for January rose to three-month highs for both business output and business activity. While the numbers for both remain below 50 - indicating contracting business - the rate of contraction has slowed so far in January.

Overall, Wall Street is pretty divided as to which way the economy is going to tip from this point with some bracing for recession while others are hopeful the Fed will nail a "soft landing," i.e., lower inflation without a major jump in unemployment.

Most Wall Street insiders are thinking the Fed will hike by +25-basis-points after both the Feb 1st and March 22nd FOMC meetings. This would take Fed Funds to 4.75 to 5.00%.

From my perspective, it feels like the market is now dialed in on the Fed's next several moves. The question now becomes how much longer-term fallout will businesses face in the wake of higher borrowing costs, higher wages, a strong US dollar, and strong inflationary pressures.

Investors today are anxious to see the latest policy decision from Bank of Canada, which some anticipate could be the first major central bank to announce an end to its interest rate hiking campaign.

Bears don't see an end to Fed rate hikes being that beneficial for stocks due to the fact that the Fed has vowed to keep them at elevated levels until they feel confident inflation has been defeated. That means tighter financial conditions that are likely to keep a lid on corporate profit growth in many sectors.

Even Wall Street bulls are concerned about how much higher stocks can climb in the near-term considering the growth headwinds that most businesses are facing with inflation still elevated, borrowing costs climbing, and the US economy slowing down.

Microsoft's earnings after the close seemed to drive that point home with results that showed only minor profit gains and the slowest revenue increase since 2016.

Notably, Microsoft said on its earnings call that the revenue deceleration that began in December is expected to continue into the new year and delivered forward guidance that was below analyst expectations. Earnings highlights today include Abbott Labs, AT&T, Boeing, CSX, IBM, NextEra Energy, The Progressive, Tesla, and US Bancorp. There is no economic data of note today.

Walmart Raises Wages for US Hourly Workers: Walmart is raising its hourly wages across its US stores in a bid to sweeten the deal for front-line workers amid a nationwide labor shortage. Starting pay for Walmart U.S. associates now ranges from $14 to $19 an hour, depending on location, a company spokesperson confirmed over email. Previously, the company’s starting wage was $12. That brings Walmart’s average hourly wages in the U.S. to more than $17.50 an hour. These increases will be reflected in March’s paychecks, the company said. Walmart will also add new college degrees and certificates to its Live Better U education program, and is expanding its initiative that pays for employees to earn a commercial driver’s license and become a truck driver. The move is the retailer’s latest effort to attract and retain workers amid a labor shortage that has challenged retailers, and puts it on more equal footing with competitors. Both Target and Amazon, for example, have have minimum wages of $15 an hour. In markets with more competitive labor pools, starting wages can be higher, the companies have said. While labor markets have started loosening up after a wave of layoffs in the tech and financial sectors, many retailers are still fighting to recruit and retain front-line talent, experts say. Source: Barron's

Housing Costs Drove Relocation For A Record 25% Of Buyers at the End of 2022: A record 25% of users looked to move to a different metro area in the fourth quarter as high housing costs drove relocation, according to a new report from the technology-powered real estate brokerage. That’s up from 22.1% a year earlier and around 18% before the pandemic. People who are buying homes are relocating at an unprecedented rate because elevated mortgage rates, still-high home prices and economic uncertainty are driving many of them–especially remote workers–to more affordable areas. But those same factors also caused the overall pool of buyers to shrink, with pending home sales down more than -30% from a year ago at the end of 2022. Many homeowners are also reluctant to move because they don’t want to give up their relatively low mortgage rate. Eight of the top 10 migration destinations in the fourth quarter all had fewer buyers looking to move in than a year earlier. Source Forbes

Amazon Rolls Out Unlimited Prescriptions for $5 Per Month: Amazon’s long-awaited push to disrupt the health care industry in a manner similar to how it changed retail is underway. The company on Tuesday announced RxPass, a $5 per month add-on for Prime members that will give them access to prescription generic drugs for more than 80 health conditions, ranging from high blood pressure to acid reflux to anxiety. The flat fee covers all meds, so a patient who takes prescription drugs for high cholesterol, high blood pressure, and anxiety would pay just $5 per month, versus the $30 or more they pay currently. Some of the generic drugs, sold through the Amazon Pharmacy program (which will continue separately) sell for up to $15 per month if purchased separately. The service is available beginning January 24 to customers in 42 states, though those in California, Louisiana, Maryland, Minnesota, New Hampshire, Pennsylvania, Texas, and Washington are not currently eligible. RxPass isn’t likely to be the company’s last move in the health care space. Amazon acquired boutique primary-care provider 1Life Healthcare for $3.9 billion last July. And it attempted to purchase home health services firm Signify Health, though CVS ultimately won that battle. Source Fortune

CarMax to Screen Auction Cars with AI Inspection-Tech "UVeye" - CarMax, the largest used car retailer in the U.S, also has a significant wholesale business, moving +706,000 units during the last fiscal year. The used car giant is turning to Israeli tech company UVeye for artificial intelligence-enhanced drive-through inspections of vehicles it buys and sells at auction in order to spot issues ranging from worn tires and sheet metal problems to under body damage in seconds as the vehicle drives through the inspection stations. UVeye originally created its drive-through inspection stations for security purposes including detecting contraband at international border crossings but the growing company has quickly expanded its automotive business. Source Forbes

Auto Insurers’ Rising Rates Are No Accident: Auto insurers are racing to catch up with higher costs to cover claims. Investors should buckle up. Loss trends in auto insurance, propelled by higher costs to cover accidents, continue to be ugly. Travelers reported an underlying combined ratio in its personal auto business of 110.5% for the fourth quarter, meaning payouts and expenses were more than premiums earned, excluding catastrophe-related losses and adjustments in reserves for past years. That was a nearly 7 percentage point jump from a year earlier. Like other auto insurers, Travelers has been pushing through premium increases to try to cover rising loss ratios. This is a slow process that involves getting approval from state authorities in addition to waiting for policies to come up for renewal. Inflation data illustrates the uphill battle being fought by insurers: In December, the consumer-price index for average motor vehicle insurance costs was up 14.2% year-over-year. That rose faster than motor vehicle maintenance and repair costs, which were up 13%. December was the third straight month of faster insurance-premium growth than repair-cost growth, but the margin was narrowing. January’s numbers will be closely watched. Source WSJ

DOJ Lawsuit Could Break Up Google: The Justice Department and states including California, New York, Colorado and Virginia filed a lawsuit against Google alleging the search and advertising behemoth illegally monopolized the market for online ads through a years-long practice of self-dealing, anticompetitive acquisitions, and forcing businesses to use multiple products and services that it offers. The suit could lead to a breakup of Google’s massive advertising business, but any resolution is likely years away. It’s the latest in a barrage of antitrust lawsuits against Google. It’s both the DOJ’s second case, and the second case targeting its ad business. The DOJ and a group of state attorneys general sued in October 2020 over Google’s dominance in web searches, and a Texas-led group of state attorneys general challenged its advertising business later that year. Yet another case was filed by a Utah-led group of states last year over Google Play, its mobile app store Source Political

Earth’s Inner Core May Be Reversing Its Rotation: A team of researchers from China believe the Earth’s inner core has reversed its rotation after they analyzed earthquake-driven seismic waves as they pass through the Earth. In a study published Monday in the journal Nature Geoscience, researchers said the reversal of the inner core rotation would shorten the length of the day by a fraction of a millisecond over the course of a year, and might have a small effect on Earth’s magnetic field, but wouldn’t affect life on the surface. The Earth’s inner core is made of iron and nickel and is separated from the rest of the solid Earth by the liquid outer core, enabling it to rotate differently than the rest of the planet. John Vidale, a professor of earth sciences at the University of Southern California who wasn’t involved with the study, said there may be other interpretations of the seismic data. Other theories from scientists include that the inner core’s rotation actually stopped between 2001 and 2003, or that it isn’t really reversed at all, but just changed the way it rotates, Dr. Vidale said. Source WSJ

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