Investors have a full plate this week that includes the US Federal Reserve's latest policy decision and a slew of big-name corporate earnings. Wall Street widely expects the Fed to deliver a 25-basis point interest rate hike at the end of its two-day policy meeting on January 31-February 1 (Tuesday-Wednesday).

This expectation was further cemented on Friday by another monthly decline in the PCE Prices Index. The headline rate for December slowed to a year-over-year rate of +5.0% from +5.5% in November while the "core" rate (excludes food and energy) came in at +4.4% versus +4.7% previously.

This marked the third straight monthly slowdown in the "core" rate, which is one of the Fed's preferred inflation gauges. The rate is still more than double the Fed's preferred inflation rate of +2% but it has also slowed from +5.2% as recently as September 2022 and is now the slowest pace since October 2021.

Bulls believe the latest PCE slowdown, combined with other data showing slower economic growth and a pullback in both corporate hiring and consumer spending justify a policy adjustment by the Fed.

Many bulls are hoping the Fed on Wednesday will signal one final 25-basis point interest rate hike at the March 21-22 meeting before pausing in order to let the tighter financial conditions filter through the system.

Bears doubt the Fed is ready pause just yet considering how tight the labor market remains and the fact that inflation is still too high. The employment picture has moderated in recent months but demand for workers remains high. We will get an update on the labor market on Wednesday from the Job Openings and Labor Turnover Survey (JOLTS). The survey for November showed US employers had 10.46 million open jobs, down only slightly from October.

The January jobs report isn't due out until Friday, after the Fed's policy meeting. December's data showed the labor market added a healthy +223,000 jobs.

The only data today is the Dallas Fed Manufacturing Survey.

Turning to earnings, big tech is in the spotlight this week with Meta reporting on Wednesday, followed by Google-parent company Alphabet, Amazon, and Apple on Thursday. In total, over 100 S&P 500 companies are scheduled to report Q4 results this week.

Today's highlights are Canon, Franklin Resources, GE HealthCare Technologies, NXP Semiconductors, and Whirlpool.

Traders this week are also braced for potential volatility in oil and other energy markets ahead of two key events.

On Wednesday, February 1, the OPEC+ Joint Ministerial Monitoring Committee (JMMC) is scheduled to meet. The JMMC does not have authority to set production targets or other policy but they do wield a lot of influence over those decision.

JMMC officials have stressed that they will not be making any recommendations at this meeting but OPEC energy ministers often make comments to the press on the sidelines that can provide clues as to how the officials might be leaning.

Many oil insiders believe OPEC needs to lift production in order to meet expected China demand as the world's biggest oil consumer rebounds from Covid.

A little further out on February 5, a ban by the EU on seaborne imports of Russian refined oil products - which includes diesel - will go into effect. It is also working with the G-7 to impose a price cap for countries outside the G-7. Some oil insiders are concerned the EU ban will put further strain on tight global diesel supplies and possibly send prices rocketing higher.

In the US, distillate stockpiles, which include diesel, are -20% below the five-year average, according to the latest US Energy Information Administration inventory report. However, some insiders believe new refining capacity coming online in the Middle East will be able to fill the gaps left by Russia.

I provided more details below.

Middle East Primed to Pounce When EU Bans Russian Diesel: The Middle East is set to deepen its foothold in Europe’s energy market when a ban on Russian diesel and petroleum products kicks in on 5 February, bolstered by new refineries, favorable geography and potentially, additional shipments of Russian product. Gulf states have already traded places with Russia in the crude market, redirecting sales to Europe, while Moscow muscles in on their traditional customers in Asia with cut-rate prices. The diesel ban comes at a fortuitous time for Gulf states, just as they prepare to roll out a slew of new mega-refineries. Kuwait is especially well-placed to capitalize on the ban. The tiny emirate is ramping up production at its new al-Zour refinery - one of the largest oil refineries in the world - which will have the capacity to process 615,000 barrels of crude a day when it is fully operational. In November, Kuwait shipped its first batch of jet fuel from the site. Saudi Arabia is ramping up its Jazan refinery, which is expected to produce more than 200,000 bpd of diesel when it reaches full capacity later this year. Oman's Duqm refinery is also slated to open at the end of 2023, which is expected to have a capacity to refine crude into about 200,000 bpd of diesel and other fuels. Source

Housing Market Could Be in Recovery Mode: Goldman is saying the sharpest declines in the US housing market are now behind us and that falling mortgage rates are likely to stop the dramatic decline in home prices by midyear. At the same time, US pending home sales rose +2.5% in December, reversing a six-month losing streak, according to the monthly index released Friday by the National Association of Realtors. Pending home sales were down for six months in a row, as the U.S. Federal Reserve increased interest rates and mortgage rates took off. Interestingly, pending-home sales beat analyst expectations per a poll by the Wall Street Journal which had forecast the pending home sales index to drop by -1%. Economists view this data as an indicator of the direction of existing-home sales in subsequent months. A dip in rates has boosted demand for mortgages and buyers are coming back to the market in a sign that the housing market is slowly recovering. But inventory remains low, as sellers hold out. Many are looking to the spring to see if sellers are motivated to list their homes. Source Market Watch

Some Big Names Laying Off More Workers... But Some Are Hiring: Layoffs are beginning to spread from the tech sector, with 3M and Newell Brands most recently announcing job cuts. On the flip side, Chipotle and Boeing announced they’re hiring thousands of workers to meet demand. In fact, Boeing expects to hire 10,000 workers in 2023 as it recovers from the pandemic and increases jetliner production but will trim some support jobs, the U.S. plane maker said Friday. Source CNBC

Gas Prices Jump and Could Post Threat to Fed's Inflation fight: U.S. gasoline prices have shot up an unusually strong +9.2% in January to average about $3.50 a gallon as of last week which could throw a wrench in the Federal Reserve’s inflation fight. Prices at the pump fell sharply in the second half of 2022 to a low of $3.096 a gallon on Dec. 22, giving back all six months of earlier gains, plus some. In fact, roughly one month after that December low, national average gas prices have risen +12.9%, providing the sharpest one-month increase since last June. According to Kent Engelke, chief economic strategist at Capitol Securities, markets have talked themselves into a position that they are going to lose, meaning that the energy prices that have come down are heading back up, which could keep inflation elevated. Engelke believes that prices are going to continue to go higher, but the markets have convinced themselves that the Fed is going to lower interest rates in the second half of 2023.Source Market Watch

Big Oil Set To Report Record $200 Billion Profits For 2022: The five biggest oil majors in the world are expected to report record profits for 2022 in the coming days, for around $200 billion in combined yearly earnings thanks to the jump in oil and gas prices last year. This year, earnings at ExxonMobil, Chevron, BP, Shell, and TotalEnergies are set to be around a quarter lower than the combined profits for 2022, but they will still be a whopping $150 billion for 2023, analysts say. According to early estimates compiled by S&P Capital IQ and cited by the Financial Times. Fourth-quarter earnings will still be well above year-ago levels, although lower than the record quarterly profits for Q2 and Q3. For 2022, the U.S. supermajors alone are set to post combined yearly profits of nearly $100 billion, analysts say. The industry, the top performer in the S&P 500 index over the past year, has boosted dividends and share buybacks in recent quarters thanks to the massive cash flows. And its estimated earnings growth of +151.7% is set to lead the 2022 growth of all 11 sectors in the S&P 500. If the sector were excluded, the index would be expected to report a decline in earnings of -1.8% rather than growth in earnings of +5.1% Source

Car Repossessions Grow as Americans Fall Behind on Payments: A growing number of Americans are facing auto repossessions. During the pandemic, a surge in used car prices forced buyers to take out bigger loans for their vehicles. The monthly payments seemed doable in an era of stimulus checks, a tight labor market and surging stocks, but that’s changed for many people as inflation eats into their budgets and the job market cools. Now, more Americans are falling behind on their car payments than during the financial crisis. In December, the percentage of subprime auto borrowers who were at least 60 days late on their bills rose to 5.67%, up from a seven-year low of 2.58% in April 2021, according to Fitch Ratings. That compares to 5.04% in January 2009, the peak during the Great Recession. Higher interest rates are making it even more difficult to make the monthly payments. The average new auto loan rate was 8.02% in December, up from 5.15% a year earlier, according to Cox Automotive. The rate can be much higher for subprime borrowers Source Bloomberg

Takeout is Taking Over: Demand for takeout is still strong even after dropping from peaks reached during the first year of the pandemic. Of all orders placed at U.S. fast-food restaurants in 2022, 85% were taken to go, according to market research firm the NPD Group. That is down from a high of 90% during 2020 but up from roughly 76% in the years leading up to the pandemic. Among full-service restaurants, 33% of orders were to go in 2022—nearly double prepandemic rates. During the pandemic, many restaurant chains oriented their operations around drive-throughs and online ordering. Businesses are also testing restaurants that only serve takeout food. McDonald’s is testing an “order ahead” lane that uses a robotic arm to deposit food in cars, and Chipotle said it plans to open hundreds of restaurants with online-only “Chipotlanes” in 2023. Restaurant executives say to-go-only restaurants could cut costs, but also could alienate some customers. Source Bloomberg

Walmart Rolls Out Sleek New Store: As Walmart’s low-priced groceries attract shoppers, the retailer is rolling out a fresh strategy aimed at wooing them into other aisles: stores with brighter lights, fashion-forward mannequins and colorful displays of makeup, pet supplies and more. The big-box retailer, known for competing with value, has turned five of its SuperCenters into flagship stores with the remodeled look. They are located in Teterboro and North Bergen in New Jersey; Yaphank, New York; Quakertown, Pennsylvania.; and Hodgkins, Illinois. All of the flagships have debuted in the past three months. Walmart’s snazzier look is part of a broader effort to sell more discretionary items — like jeans, lipstick and baby strollers — that usually carry a higher profit margin than groceries. Last summer, it tested the sleeker model at one of its big-box stores in Springdale, Arkansas. Alvis Washington, Walmart’s vice president of marketing, store design, innovation and experience, said it was time to bring the look to other markets after getting positive feedback in Arkansas. In company surveys, he said nearly every shopper said the store’s displays and mannequins encouraged them to browse longer. Source CNBC

George Carlin

1. Throw out nonessential numbers. This includes age, weight and height. Let the doctors worry about them. That is why you pay them.

2. Keep only cheerful friends. The grouches pull you down.

3. Keep learning. ! Learn more about the computer, crafts, gardening, whatever, even ham radio. Never let the brain idle. 'An idle mind is the devil's workshop.

4. Enjoy the simple things.

5. Laugh often, long and loud. Laugh until you gasp for breath.

6. The tears happen. Endure, grieve, and move on. The only person, who is with us our entire life, is ourselves. Be ALIVE while you are alive.

7. Surround yourself with what you love, whether it's family, pets, keepsakes, music, plants, hobbies, whatever. Your home is your refuge.

8. Cherish your health: If it is good, preserve it. If it is unstable, improve it.. If it is beyond what you can improve, get help.

9. Don't take guilt trips.. Take a trip to the mall, even to the next county; to a foreign country but NOT to where the guilt is.

10. Tell the people you love that you love them, at every opportunity.

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