2/3/2023 4:21:59 PM
Investors navigated a jam packed week of catalysts this week including major central bank announcements, an intense slate of quarterly earnings reports, and a plethora of economic readings culminating in a remarkably strong January jobs report on Friday. Crude oil prices rolled over after OPEC+ left its output plans unchanged, as expected. Early in the week, stocks drifted upward as the path of least resistance remained higher. The improving technical picture brought about by the strong start to 2023 continued to aid sentiment overall. Earnings reports offered glimpses of strength where managements proved successful in navigating macro uncertainty and high inflation heading into 2023. Rates crept up ahead of the mid-week FOMC announcement while market expectations remained highly stable. Tech stocks in particular stayed hot as Fed fund futures continued to project the central bank would shift to cutting rates by the end of 2023.
US indices opened lower Wednesday. Monthly JOLTS jobs data pushed back above 11M ahead of the FOMC statement. Treasury yields then moved decidedly lower and stock prices jumped after the Fed hiked by 25 basis points and offered hints that the end of the rate hike cycle is nearing. The statement reiterated that additional rate increases remained necessary, but Chairman Powell defined that as "couple more" during his press conference. More importantly, he spent much of his Q&A emphasizing Fed officials have been “gratified” to see the disinflation process commence. He added if that disinflationary process were to pick up momentum and spread to the services sector faster than officials currently forecast, the FOMC will take that into account during its ‘meeting-by-meeting’ deliberations. Chairman Powell also did very little to go out of his way to push back or even indicate concern that markets still expect Fed rate cuts later this year.
The next day the Bank of England followed suit by offering tea leaves that suggested it too is about done hiking rates. The ECB, notably further behind the curve on hiking, didn’t scare markets by penciling 50 basis point moves for the next two meetings, as previously suggested. EU bond yields subsequently slid lower while the US 10-year yield slipped below 3.4% and the 2-year approached 4% for the first time since last September. Volumes surged on both the NASDAQ and NYSE, and the VIX approached 17, dropping to its lowest level in more than a year. Technicians saw the S&P 500 form a much-anticipated ‘golden cross’ with its 50-day moving average surpassing the 200-day.
Even a surprisingly strong January US jobs report resulted in only a marginal break in the momentum on Friday. Nonfarm payrolls more than doubled market expectations at 517 thousand. The unemployment rate dropped a tenth to 3.4% rather than ticking higher as had been expected, while average weekly hours made a startling jump to 34.7 from 34.3. Some were quick to point out potential seasonal factors for the head scratching strength, but with most of the December data revised higher it is hard view the report as anything less than another sign of an “out of balance” labor market that Fed officials have emphasized they need to see come back into line before ending this rate hike cycle. The robust jobs data was followed up by a very strong print for ISM services data. Nevertheless, there was only modest give back in the equity markets on Friday, suggesting that at least for now, investors continue view the data as support for a ‘soft landing’ narrative, rather than as a signal that the Fed needs to take rates substantially higher from here. Treasury yields did pop led by a 15+ basis point jump in the US 2-year and the US dollar rose. For the week, the S&P gained 1.6%, the NYSE slid 0.2%, and the Nasdaq tacked on 3.3%.
In corporate news this week, the pace of earnings reports picked up, with some constructive commentary from the tech giants despite shaky quarterly result that triggered some recent workforce reductions. Meta missed its bottom line numbers but Wall Street was pleased with CEO Zuckerberg’s pledge to focus on efficiency and cost cutting in the new fiscal year. Both Apple and Alphabet missed quarterly earnings expectations, but calmed investors with rosier discussions about the year ahead as well as highlighting their efforts in AI, a sphere which has drawn renewed investor interest in recent weeks. Along the same lines, a report noted that China’s Bidu will soon launch its own AI chatbot to rival OpenAI’s ChatGPT. GM reported strong quarterly numbers, noting EV demand remains strong enough that it has no plans to mirror Tesla’s price cuts. Caterpillar missed earnings expectations, sending shares lower, though management said 2023 would be better, with good demand and revenue supported by price actions.
SUN 1/29
BIDU Expected to launch AI chatbot service similar to ChatGPT in China during Mar 2023 - US financial press
MON 1/30
PHIA.NL Reports Q4 Adj EBITA €651M v €647M y/y, Rev €5.42B v €4.88Be; Job cuts being implemented as planned; Notes supply chain situation remains challenging; Expects further improvements to be gradual
RNO.FR Confirms to reduce mutual stake with Nissan to 15%; Nissan to invest into Renault's EV unit; Renault to transfer 28.4% of Nissan shares into a French trust
(ES) SPAIN JAN PRELIMINARY CPI M/M: -0.3% V +0.2% PRIOR; Y/Y: 5.8% V 5.0%E (first acceleration of annual pace in 6 months)
(DE) GERMANY Q4 PRELIMINARY GDP Q/Q: -0.2% V 0.0%E; Y/Y: 1.1% V 1.3%E (first Q/Q contraction since Q4 2021)
1211.HK Reports prelim FY22 (CNY) Net 16.0-17.0B +425-458% y/y, Rev at least 420B v 410Be
005930.KR Reportedly considers cutting its chip production - Korean press
(US) JAN DALLAS FED MANUFACTURING ACTIVITY: -8.4 V -15.0E
(US) Treasury quarterly financing estimates: to borrow $932B in Jan-Mar quarter v $860Be (prior estimate $578B)
005930.KR Reports Q4 final (KRW) Net 23.5T* v 10.8T y/y, Op 4.31T v 4.3T prelim, Rev 70.5T v 70.7T prelim; Expects weak chip demand in Q1 with steepening decline; Sees possible demand recovery in H2 2023
(CN) CHINA JAN MANUFACTURING PMI (GOVT OFFICIAL): 50.1 V 50.0E [first expansion in 3 months]
TUES 1/31
UBSG.CH Reports Q4 $0.50 v $0.38 y/y, Rev $8.03B v $8.71B y/y; To buy back >$5.0B in shares in 2023
(FR) FRANCE JAN PRELIMINARY CPI M/M: 0.4% V 0.5%E; Y/Y: 6.0% V 6.1%E
(TW) Taiwan Dec Export Orders Y/Y: -23.2% v -25.0%e; Sees Jan export orders -35.5% to -32.1% y/y
(DE) GERMANY JAN NET UNEMPLOYMENT CHANGE: -22.0K V +5.0KE; UNEMPLOYMENT CLAIMS RATE: 5.5% V 5.5%E
(UK) DEC MORTGAGE APPROVALS: 35.6K V 45.0KE (lowest since May 2020)
GM Reports Q4 $2.12 v $1.65e, Rev $43.1B v $41.3Be; FY23 guidance above estimates
GM Confirms GM and Lithium Americas to develop US-sourced lithium production through $650M equity investment and supply agreement
CAT Reports Q4 $3.86 v $3.95e, Rev $16.6B v $15.9Be
CAT Reports Q4 dealer statistics: Total machines +8% v +7% prior
CAT Guides initial FY23 Rev to increase y/y supported by favorable price; Guides initial FY23 Capex $1.5B v $1.4B y/y - earnings slides
PFE Reports Q4 $1.14 v $1.04e, Rev $24.3B v $24.2Be; Guides FY23 below consensus
MCD Reports Q4 $2.59 v $2.45e, Rev $5.93B v $5.70Be; Expects short-term inflationary pressures to continue in 2023
AMZN Reportedly Whole Foods asking its suppliers to cut prices on packaged groceries as inflation slows down - US financial press
(US) Q4 EMPLOYMENT COST INDEX (ECI): 1.0% V 1.1%E
(US) Nevada reports Dec casino gaming Rev $1.31B, +14.3% y/y, Las Vegas strip Rev $814.2M, +25.1% y/y
(US) JAN CHICAGO PURCHASE MANAGER’S INDEX (PMI): 44.3 V 45.0E
(US) JAN CONSUMER CONFIDENCE: 107.1 V 109.0E
(US) Freeport LNG said to seek US permission to begin introducing gas into liquefaction train at liquefied natural gas plant in Texas
SNAP Reports Q4 $0.14 v $0.10e, Rev $1.30B v $1.30Be; Sees path to adj EBITDA breakeven in Q1
AMD Reports Q4 $0.69 v $0.66e, Rev $5.60B v $5.54Be; Guides Q1 Rev $5.0-5.6B v $5.57Be
(CN) CHINA JAN CAIXIN PMI MANUFACTURING: 49.2 V 49.8E [6th straight contraction]
(HK) Macau Jan Casino Rev (MOP): 11.6B ; Y/Y: +82.5% v -56.3% prior (+36.5%e)
WED 2/1
(UR) US said to be preparing new $2.2B aid package for Ukraine; To include new longer-range rockets for the first time since June 2022, artillery and other munitions - press
NOVN.CH Reports Q4 Core EPS $1.52 v $1.42e, Rev $12.7B v $12.9Be; Sandoz spin-off remains on track for H2 2023
(UK) JAN NATIONWIDE HOUSE PRICE INDEX M/M: -0.6% V -0.4%E; Y/Y: % V 1.9%E (fifth consecutive decline)
VOD.UK Issues Q3 Trading update: Service Organic Rev +1.8% v +1.8%e; Affirms FY23 guidance
(IT) ITALY JAN MANUFACTURING PMI: 50.4 V 49.5E (1st expansion in 7 months)
HLAG.DE CEO: The party is over as we are back to a normal shipping business; Container freight rates will keep declining in the current realignment of shipping demand and supply
(EU) EURO ZONE JAN CPI ESTIMATE Y/Y: 8.5% V 8.9%E (third-straight month of deceleration); CPI CORE Y/Y: 5.2% V 5.1%E V 5.2% PRIOR
(EU) EURO ZONE DEC UNEMPLOYMENT RATE: 6.6% V 6.5%E
TSLA Said to plan increasing Shanghai's average weekly output to 20K vehicles in Feb-Mar 2023 to meet increased demand following price cuts - press
HUM Reports Q4 $1.62 v $1.46e, Rev $22.4B v $22.5Be
TMUS Reports Q4 $1.18 v $1.10e, Rev $20.3B v $20.8Be
(US) JAN ADP EMPLOYMENT CHANGE: +106K V +180KE; Notes pay growth was flat in January
OPEC+ JMMC panel said to recommend no changes to current policy at meeting today (as expected) - press
(US) Treasury Quarterly Refunding Announcement; To sell $40B in 3-year notes, $35B in 10-year notes, $21B in 30-year bonds
(US) JAN FINAL S&P/MARKIT MANUFACTURING PMI: 46.9 V 46.8E (4th straight month of contraction)
(US) JAN ISM MANUFACTURING: 47.4 V 48.0E; PRICES PAID: 44.5 V 40.4E
(US) DEC JOLTS JOB OPENINGS: 11.012M V 10.300ME
(US) DOE CRUDE: +4.1M V 0ME; GASOLINE: +2.6M V +1ME; DISTILLATE: +2.3M V -1ME
(US) FOMC RAISES TARGET RANGE BY 25BPS TO 4.50-4.75%; AS EXPECTED; REITERATES THAT ONGOING RATE INCREASES WILL BE APPROPRIATE; Notes inflation has "eased somewhat"
(US) Fed Chair Powell: We have more work to do: Without price stability economy does not work for all - rate decision press conference
(US) Fed Chair Powell: We are talking about a "couple of more rate hikes" to get to restrictive level - rate decision Q&A
(US) FERC approves Freeport LNG to restart activities (in line with expectations)
META Reports Q4 $1.76 v $2.12e, Rev $32.2B v $31.3Be; Announces $40B increase to share buyback; Cuts FY23 Opex & Capex outlook
COST Reports Jan total SSS +7.4% (ex-gas and FX) v +5.9%e
(JP) Bank of Japan (BOJ) releases text of Dep Gov Wakatabe speech: Wider YCC band could be problematic for easing effect; Should not weaken easing effects with policy tweaks
THRS 2/2
ABBN.CH Reports Q4 $0.61 v $0.39e, Op EBITA $1.12B v $1.16Be, Rev $7.82B v $7.58Be; Do not anticipate a major set-back in demand in 2023
6758.JP Reports 9M Net ¥809.0B v ¥771.1B y/y, Op ¥1.08T v ¥ 1.06T y/y, Rev ¥8.48T v ¥7.66T y/y; Raises outlook
DBK.DE Reports Q4 Net €1.80B v €145M y/y, Pretax €775M v €1.25Be, Rev €6.32B v €5.90B y/y
ROG.CH Reports FY22 (CHF) Core Op 20.30 v 20.61e, Rev 63.3B v 63.3Be; Expects sharp decline in COVID-19 products sales in 2023
8306.JP Reports 9M Net ¥343.2B v ¥1.07T y/y, Pretax ¥848.9B v ¥1.39T y/y, Rev ¥6.79T v ¥4.36T y/y
SONY CFO: Raises FY23 PS5 sales to 19M units (prior 18M); Expects global smartphone market to recover from H2 2023 - post earnings comments
HON Guides Q1 $1.86-1.96 v $2.04e, Rev $8.3-8.6B v $8.67Be; Notes good start to 2023 with sequential improvement to follow; Supply chain improvement continues in Q1 - earnings slides
(UK) BOE FEB MINUTES: VOTE WAS 7-2 ON TODAY'S DECISION; Tenreyro and Dhingra again voted to hold rates unchanged
(UK) BOE Gov Bailey asked if rates might have peaked: We have changed the language we use - Q&A
(EU) ECB RAISES KEY RATES BY 50BPS; AS EXPECTED; Hints another 50bps rate hike in Mar and then to reevaluate the rate path; Notes rates still have to rise "significantly and at a steady pace"
(US) INITIAL JOBLESS CLAIMS: 183K V 195KE; CONTINUING CLAIMS: 1.655M V 1.684ME
(US) Q4 PRELIMINARY NONFARM PRODUCTIVITY: 3.0% V 2.4%E; UNIT LABOR COSTS: 1.1% V 1.5%E
(EU) ECB chief Lagarde: Reiterates stance that expect growth to stay weak; 'Intend' to raise by 50bps in Mar; Intention is not 100% commitment; Would not say that the disinflationary process is already at play; Underlying inflation pressures are alive and kicking - Q&A
(US) DEC FACTORY ORDERS: 1.8% V 2.3%E
(EU) Reportedly ECB policymarkers see at least two more rate hikes; Some policymakers see 3.5% as terminal rate – press
QCOM Reports Q1 $2.37 v $2.35e, Rev $9.46B v $9.56Be
AMZN Reports Q4 $0.03 v $0.15e, Rev $149.2B v $145.4Be
GOOGL Reports Q4 $1.05 v $1.15e, Rev (ex TAC) $63.1B v $63.1Be; To optimize global office space, sees related costs at $0.5B in Q1
SBUX Reports Q1 $0.75 v $0.77e, Rev $8.71B v $8.81Be
F Reports Q4 $0.51 v $0.60e, Rev $44.0B v $39.3Be; Left ~$2.0B in profits on the table last year which was within our control
X Reports Q4 $0.87 v $0.60e, Rev $4.34B v $3.95Be
AAPL Reports Q1 $1.88 v $1.93e, Rev $117.2B v $121.2Be
QCOM CEO: Sees weak handset market persisting through first half; Taking steps to reduce expenses - post earnings comments
(CN) CHINA JAN CAIXIN PMI SERVICES: 52.9 V 51.0E [first expansion in 5 months]
(US) US Pentagon said a spy balloon was seen over 'a number of sensitive sites' in Montana, US; Senior official sees very high confidence that the balloon is Chinese: The ‘Gang of 8’ staff was briefed, Pres Biden asked for 'military options', but decided against because of the risk to civilians
FRI 2/3
SAN.FR Reports Q4 Business EPS €1.71 v €1.72e, Business Net €2.14B v €1.73B y/y, Rev €10.73B v €10.56Be
(EU) ECB's Simkus (Lithuania): Headline inflation has likely peaked but core remain stubborn; 50bps hike in Mar will not be last of half-point magnitude; Rate cut in 2023 is 'not very likely'
CI Reports Q4 $4.96 v $4.84e, Rev $45.8B v $45.6Be; Carrying great momentum into 2023; Raises Quarterly dividend 9.8% to $1.23 from $1.12 (indicated yield 1.63%)
(US) January preliminary NA Class 8 Net Orders 21.6K, -25% m/m; Continue to lock in build slots for 2H23 - FTRintel.com
(US) JAN UNEMPLOYMENT RATE: 3.4% V 3.6%E (lowest since Feb 2020)
(US) JAN CHANGE IN NONFARM PAYROLLS: +517K V +188KE (above any analysts' estimate and highest job creation since July 2022)
(US) JAN AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 4.4% V 4.3%E
(US) JAN FINAL S&P/MARKIT SERVICES PMI: 46.8 V 46.6E
(US) JAN ISM SERVICES INDEX: 55.2 V 50.5E (largest monthly increase since June 2020 and above all analysts' estimates)
(US) Fed's Daly (non-voter): Today's jobs number was a "wow" number but trend not surprising; Still see Dec SEP projections as a good guide post of where rates need to go
