Stock bulls are coming off their first winning day of the New Year and are hoping tech companies and other stocks will continue to benefit from the fresh headlines flowing out of the 2024 Consumer Electronics Show being held in Las Vegas, which just wrapped up two days of media previews that included new product announcements from a slew of big names, including Apple and Nvidia.

Investors, however, may start to tread a bit more cautiously ahead of the Consumer Price Index which is scheduled for release on Thursday. The big worry is that if upcoming data shows that progress on inflation has stalled or worse, reversed, Wall Street will start to reconsider when the Federal Reserve might deliver the first rate cut. That in turn would likely mean a recalibration of earnings prospects in 2024 and put a heavy lid on upward momentum.

"Core" CPI (strips out food and energy) in November was unchanged at +4.0% year-over-year, while the headline rate declined only slightly to +3.1% from +3.2%. Significantly, core inflation is twice the Fed's +2.0% target and many economists are questioning where the still-needed 2.0% slowdown is going to come from, as well as how fast it can realistically happen?

There is outright "deflation" starting to appear in some sectors, such as apparel, education and communication, and energy, which could obviously spell trouble for related earnings. The problem is that the rising prices in every other sector continue to outpace the declines, and some of those have recently accelerated. Investors this week are listening closely to a parade of Fed officials scheduled to deliver remarks, including Fed Vice Chair of Supervision Michael Barr today.

Federal Reserve President Raphael Bostic yesterday reiterated his outlook for just two 25 basis-point cuts this year, versus the four to five that Wall Street is penciling and the three rate cuts that the Fed most recently projected.

The only economic data due out today is the Trade Balance for November.

On the earnings front, Alberstons is the top highlight.

Staying cautiously optimistic but arguably underinvested. I still like the +5% some 

More Young Adults Leaning on Parents for Financial Help:  A recent Harris Poll survey found that nearly half of individuals aged 18 to 29 live with their families. Similarly, a Bankrate report found that almost 70% of parents with adult children have made financial compromises to support them. Almost one in five parents polled say they have sacrificed their retirement savings to help their children financially. Crippling student loan debt along with higher inflation and higher interest rates is intensifying the trend of young adults leaning on parental support. Experts insist parents put their own oxygen mask on before helping others. “It’s nice to help if you can, but don’t deplete your own resources,” says Rossman. “Not to sound insensitive, but there’s no such thing as a retirement loan, [whereas] your kids can get loans to pay for college, cars, homes, etc.”, said Ted Rossman, senior industry analyst. Source Barrons

Offices Around America Hit a New Vacancy Record: America’s offices are emptier than at any point in at least four decades, reflecting years of overbuilding and shifting work habits that were accelerated by the pandemic. A staggering 19.6% of office space in major U.S. cities wasn’t leased as of the fourth quarter, according to Moody’s Analytics, up from 18.8% a year earlier. That is slightly above the previous records of 19.3% set in 1986 and 1991 and the highest number since at least 1979, which is as far back as Moody’s data go. While remote work is partially to blame, much of the market’s current malaise traces its roots to the office-market downturn of the ’80s and ’90s. That surge in office vacancies in the 1980s and early 1990s followed years of overbuilding. The glut weighs on the office market to this day. Many office parks built in the 1980s and earlier struggle to find tenants as companies cut back on space or leave for more modern buildings. And just as in the early ’90s, it is the overbuilt South that is hit hardest. Today, the three major U.S. cities with the country’s highest office-vacancy rates are Houston, Dallas and Austin, Texas, according to Moody’s. In 1991, Palm Beach and Fort Lauderdale in Florida and San Antonio held those positions. Source WSJ

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Biden Administration NEW Contractor Rule Could Upend Gig Economy: The administration of U.S. President Joe Biden will release a final rule as soon as this week that will make it more difficult for companies to treat workers as independent contractors rather than employees that typically cost a company more, an administration official said. The U.S. Department of Labor rule, which was first proposed in 2022 and is likely to face legal challenges, will require that workers be considered employees entitled to more benefits and legal protections than contractors when they are "economically dependent" on a company. A range of industries will likely be affected by the rule, which will take effect later this year, but its potential impact on app-based services that rely heavily on contract workers has garnered the most attention. Shares of Uber Technologies, Lyft, and DoorDash all tumbled at least -10% when the draft rule was proposed in October 2022. The rule replaces a Trump administration regulation that said workers who own their own businesses or have the ability to work for competing companies, such as a driver who works for Uber and Lyft, can be treated as contractors. Business groups sharply criticized the draft rule after it was proposed. Any change in policy is expected to increase labor costs for many sectors including trucking, retail and manufacturing. Source Reuters

Moon Landing Attempt by US Company Appears Doomed: The first U.S. moon landing attempt in more than 50 years appeared to be doomed after a private company's spacecraft developed a “critical” fuel leak just hours after Monday's launch. Pittsburgh-based Astrobotic Technology managed to orient its lander toward the sun so the solar panel could collect sunlight and charge its battery, as a special team assessed the status of what was termed “a failure in the propulsion system.” It soon became apparent, however, that there was “a critical loss of fuel," further dimming hope for what had been a planned moon landing on Feb. 23. A propulsion system problem “threatens the ability of the spacecraft to soft land on the moon," the company said. Astrobotic was aiming to be the first private business to successfully land on the moon, something only four countries have accomplished. A second lander from a Houston company is due to launch next month. NASA gave the two companies millions to build and fly their own lunar landers.  Source ABC

Waymo’s Robotaxis Are Hitting the Highway, First For Self-Driving Cars: Waymo, the first company to operate a public robotaxi service, is preparing for another big step: carrying passengers on highways in autonomous vehicles, not just on lower-speed city and suburban streets. Starting this month, the Alphabet Inc. unit plans to begin running its electric Jaguar I-PACE SUVs on stretches of freeway around Phoenix. They’ll operate in full autonomous mode, initially carrying only Waymo employees. The company, which has been developing robotic driving technology since 2009, isn’t saying how quickly it’ll expand the service to fare-paying customers, but it intends to be the first company to do so.  Source Forbes

EV Sales Fell Short of Predictions in 2023: A year ago, auto industry analysts predicted that U.S. sales of new electric vehicles (EVs) would rise to as many as 1.6 million in 2023. That didn’t happen. While EV sales easily set another record, they likely totaled no more than 1.3 million for the full year. Manufacturers, watching inventories of unsold vehicles ominously grow, are second-guessing themselves. According to Fortune, most Americans are anxious about the vehicles’ range. They also worry about sticker prices, insufficient financial incentives to buy electric, and too few choices. Significantly, these issues have only become more salient since early 2022, the last poll on the topic, despite the accelerated buildout of a national charging network, an influx of new EV makes and models, federal and state tax credits, and deep price cuts. All of this presumably should have only accelerated sales–and yet many consumers seem more hesitant. As the public face of the EV industry, Elon Musk is likely harming the cause. Asked whether they have a lower opinion of electric vehicles because of the actions of people associated with them, almost half of all Americans (45%) said yes. Source Fortune

Buying Home and Auto Insurance Is Becoming Impossible: For many Americans, getting insurance for both their cars and homes has gone from a routine, generally manageable expense to a do-or-die ordeal that can strain household budgets. Homeowners and drivers are facing sharply rising premiums, less coverage and fewer, if any, choices of insurer. In some places, the only options are bare bones coverage or none at all. That can make homes worth less and harder to sell, and cars less affordable. Farmers Insurance Group increased home-insurance rates by more than 23% last year for tens of thousands of policyholders in both Illinois and Texas, according to S&P Global Market Intelligence. Nationwide Mutual said it won’t renew 10,525 home-insurance policies in hurricane-prone areas of North Carolina.  State Farm racked up $13 billion in property-casualty underwriting losses in 2022, its worst ever. Last year, it stopped writing new home-insurance policies in California. The state’s regulators last month approved a 20% home-insurance rate increase.  Source WSJ

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