Stock bears are pointing to disappointing earnings from Intel with revenue down -28% and Hasbro announcing they are cutting 15% of their workforce.

Earnings highlights today include American Express, Chevron, Colgate Palmolive, and Roper Technologies.

On the data front, all eyes are on the PCE Prices Index with Wall Street expecting a drop in the annual headline rate to +5.0% from +5.5% previously. The so-called core rate (strips out food and energy), which is one of the Fed's preferred inflation gauges, is expected to slide to +4.4% from a previous +4.7%.

It's worth noting that data yesterday showed the US economy grew at an annualized rate of +2.9% in Q4, according to the first estimate of Gross Domestic Product (GDP). Bulls view the headline number as an indication that the economy may not be as close to the edge as some had feared. Bulls are also happy about the slight growth slowdown to +2.9% from +3.2% in Q3, as slower growth is exactly what the US Federal Reserve is trying to accomplish.

Bears, however, warn that the better-than-expected results are a backward-looking gauge and that growth has taken a deeper dive so far in 2023. Most bears expect GDP in the first two quarters will turn negative, pointing to consecutive monthly declines in residential construction, industrial production, manufacturing activity, and retail sales.

Investors may turn a bit more cautious as we head into next week with a slew of potential catalysts, including the Federal Reserve policy meeting and earnings results from the world's biggest companies.

The Fed's interest rate decision will come at the end of the two-day meeting on January 31-February 1. Traders currently give a 25-basis point hike a more than 98% chance versus less than 2% for a 50-basis point hike, according to the CME FedWatch Tool.

Other key data next week includes the Employment Cost Index, the S&P Case-Shiller Home Price Index, and Consumer Confidence on Tuesday; ADP's Employment Change, ISM Manufacturing, Job Openings and Labor Turnover Survey (JOLTS), and Construction Spending on Wednesday; Productivity and Labor Costs and Factory Orders on Thursday; and the January Employment Situation and ISM Non-Manufacturing on Friday.

Earnings next week heat up substantially with the top highlights being Meta on Wednesday, followed by Alphabet, Amazon, and Apple on Thursday.

Other highlights include GE HealthCare, NXP Semiconductors, and Whirlpool on Monday; Advanced Micro Devices, Amgen, Canadian Pacific, Caterpillar, Chubb, Corning, Edwards Lifesciences, Electronic Arts, Exxon, General Motors, Marathon Petroleum, McDonald's, Moody's, Pfizer, Phillips 66, Snap, Spotify, StrykerUPS, and UBS on Tuesday; Allstate, Altria, Boston Scientific, Corteva, Humana, Johnson Controls, MetLife, Novo Nordisk, Novartis, Suncor, and TMobile on Wednesday; Bristol Myers Squibb, CNH, ConocoPhillips, Deckers Outdoor, Eli Lilly, Ferrari, Gilead Sciences, Harley Davidson, The Hartford, Hershey, Honeywell, Merck & Co., Qualcomm, Shell, Skechers, SnapOn, Stanley Black & Decker, Starbucks, and Trane on Thursday; Cigna, Regeneron, and Sanofi on Friday.

The Recent Gold Rally: Gold purchases by everyone from central banks to institutions and ordinary investors have lifted the precious metal in 12 of the past 16 sessions, according to Dow Jones Market Data. The most-actively traded gold futures contract has climbed about 20% from its September low to above $1,940 an ounce, its highest level since April 2022. Prices are poised to gain for the sixth consecutive week, which would mark the longest weekly winning streak since the nine-week run that carried gold to a record of $2,069.40 in August 2020. Gold avoided the steeper, double-digit losses suffered by stocks and bonds, but still disappointed those who had expected it to thrive during a time of elevated inflation. Now, signs of cooling price increases and weakening growth are lifting investors’ hopes of a respite from the Federal Reserve’s aggressive rate increases. SPDR Gold Shares, the world’s largest physically backed gold exchange-traded fund, has climbed 6.8% so far this month, outpacing the S&P 500 index’s 4.6% advance. Shares of gold producers have rallied, with Barrick Gold Corp. adding 15%, Newmont Corp. gaining 17% and Royal Gold Inc. jumping 17%. Source: WSJ

FedEx Will Start Testing a 1,900-Pound Drone for Hauling Packages: While companies like Wing, from Google’s parent Alphabet, are working on perfecting their small flying drones that will deposit an item in a consumer’s driveway or backyard, FedEx announced last week that it’s teaming up with drone company Elroy Air and their 1,900-pound drone, Chaparral, for what they call “middle mile” logistics. Measuring 27 feet across and 19 feet long, the aircraft can schlep about 300 to 500 pounds in a pod below its belly, and has a range of some 300 miles, meaning it could make it from New York to Boston as it travels at speeds faster than 100 mph. Unlike some of Elroy’s peers in this next-chapter-of-aviation space, the Chaparral aircraft is hybrid electric, featuring 8 rotors on its wings to help it take off and land vertically, and four propellers for forward flight, and all of them are driven by electric motors. However, the source of that electricity is what makes this craft unique, it has a gas turbine and generator inside it to make that juice. Source: Popular Science.

Layoffs Are Starting to Spread Beyond Tech and Media: Layoffs in the tech sector are becoming an almost daily occurrence. IBM and SAP are the latest companies to join the industry’s wave of job cuts, with announcements late Wednesday and early Thursday. They join Microsoft, Alphabet, Amazon, Salesforce, and Spotify in announcing headcount reduction so far in January. But it's no longer just tech and media. Hasbro Inc. on Thursday said it would eliminate 15% of its global workforce this year in the latest indication that economic uncertainty may be spreading to other sectors. The toy and entertainment company said the reduction will comprise around 1,000 positions. Layoffs were also announced by chemicals company Dow Inc. yesterday, which said it would let go 2,000 employees globally. Meanwhile online furniture retailer Wayfair unveiled job cuts last week. Source: Barron's

US Rents Rise at Slowest Annual Paces Since Mid-2021: US apartment rents rose 4.7% in December from a year earlier, the slowest pace since July 2021, according to data from real estate firm released Thursday. Rental prices fell 1.4% from the previous month, with the national median price for an apartment dropping to $1,978. Rents may be declining on a year-over-year basis by late summer, said Jon Leckie, a researcher at The end of the pandemic housing boom should help push US inflation lower this year, although the timing is unclear because there’s a lag before market conditions are reflected in the consumer price index. “We see home price valuations for new and existing homes coming off, they’re slowing rapidly,” Dana Peterson, an economist at the Conference Board, told Bloomberg TV. “That’s going to show up in rents.” As the property market cools, divergences between US regions are becoming more noticeable. Ten states saw rent prices fall from a year earlier in December, including a -5.4% drop in Idaho and -2.7% and -2.5% declines in Nevada and Arizona respectively. Several big cities are seeing sizable decreases too, including Los Angeles and Chicago, the second- and third-largest metropolitan areas in the country. Source: Bloomberg

Where Have All America's Workers Gone? For months economists have warned of recession in America, but in one crucial area the economy seems overheated: employers are still struggling to find workers. Companies’ hiring plans suggest that the economy remains robust for now. Total labor supply (people who have or are seeking jobs) is roughly back to pre-pandemic levels. By contrast, labor demand (filled plus open jobs) has increased by 3 million jobs. Slower GDP growth—whether a recession or not—will help restore balance. The supply picture is more complex. During the pandemic, many workers took time off. Immigration, a key source of labor, also fell. Now, however, the labor-force participation (LFP) rate of prime-age workers (aged 25-54) and the foreign-born workforce have almost fully recovered. Meaning neither explains the current squeeze. Instead, the biggest shortfall comes from Americans getting older and leaving work behind. Since 2019 those aged at least 65 have gone from less than 16% of the population to nearly 17%. Moreover, unlike prime-age workers, many people who retired early as covid-19 struck have not come back to work. Overall, the aging of the population accounts for the loss of 1.9 million workers. Source: The Economist.

Dow Plans 2,000 Job Cuts Under Plan to Save $1 Billion in Costs: Dow Inc. plans to cut about 2,000 jobs as the chemical maker seeks $1 billion in savings and confronts a flareup in energy costs that followed Russia’s invasion of Ukraine. The company said it will shut down certain operations, “particularly in Europe,” in response to the challenges. Dow is also reducing purchases of raw materials and seeking to cut logistics and utilities costs, according to a statement Thursday. The maker of plastics, chemicals and agricultural products cited macroeconomic challenges as well as higher energy costs. The company said it will take a charge of $550 million to $725 million in the first quarter related to the measures, after net sales fell -17% in the fourth quarter. Source Bloomberg

ChatGPT Maker Says Future is Both Awesome and Terrifying: Dystopian fears are never far away when the conversation turns to advanced artificial intelligence. And even the CEO of the hottest A.I. company around right now says the tech’s future is a toss-up. A.I. may have finally gone mainstream last November, when the San Francisco–based startup OpenAI followed up on its earlier success with text-to-image generator DALL-E 2 by launching its latest creation for the public to test out: ChatGPT, arguably the most advanced chatbot in existence. OpenAI and its CEO and cofounder, Sam Altman, seem on top of the world right now, so much so that the 37-year-old will grace the cover of the next issue of Fortune magazine. He’s also the focus of a feature by Jeremy Kahn that looks back on OpenAI’s achievements and what is to come. But even Altman himself admits that for all the promise of A.I.’s future, there is just as much uncertainty and risk. Source Fortune

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