Dow rose 133, decliners slightly over advancers & NAZ was off 118. The MLP index slid back 1 to the 267s & the REIT index fell 3+ to the 279s. Junk bond funds fluctuated & Treasuries remained higher which reduced yields. Oil went up 1 to the high 77s (2 month high) & gold gained 9 to 2054 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Respondents to a CNBC Fed Survey see fewer interest rate cuts than the market's aggressive outlook, with the central bank starting them later in the year than traders currently hope. Just 9% see the Federal Reserve cutting rates in Mar. 50% see a cut in May & only in Jun is there a majority of 70% predicting that rates go down. Futures markets, meanwhile, place a 37% probability on a Mar cut & around an 84% chance in May. And while futures markets have priced in 5 or 6 rate cuts, survey respondents, on average, see just a bit more than 3. “There is little reason to expect a major slowdown in the economy so the Fed will likely not risk the gains in inflation it has made by easing prematurely,” wrote Joel Naroff, pres of Naroff Economics, in response to the survey. The Fed's interest rate decision is tomorrow & will be followed by a press conference by Fed Chair Jerome Powell, where traders will parse his words for any indication on when the Fed may start to move. It's fairly typical for this group of Fed watchers to be more closely aligned with the Fed's outlook than the market. The question remains of who has it right & how much it matters. By 2025, the market, the survey & the Fed forecast all converge on a Funds rate of 3.3-3.6% & the debate now is over how fast the Fed gets there. While respondents predict a cautious Fed, on balance they think it should be more aggressive: 56% say the bigger risk is that the Fed cuts too late while 44% say the risk is going too early. The 25 respondents, including economists, strategists & fund managers, were less united on the risks around reducing the Fed's $7.6T balance sheet. They expect the reduction of the balance sheet, known as quantitative tightening, to end in Nov. The Fed is seen lowering its total reserves by another $1.0-$6.6T & reducing bank reserves to $3T from the current level of around $3.5T. At that level, bank reserves would be almost double where they were before the Fed started increasing its balance sheet to provide more stimulus to the economy. The Fed has said it wants to stop QT just above the level of what it calls “ample reserves.” 36% of respondents say the bigger risk is that the Fed leaves the balance sheet too big, compared with 16% who say the risk is keeping the balance sheet too small. But 32% say neither is much of a risk & 12% say both risks are equal. The survey shows forecasters still see a slowdown ahead, but one not nearly as severe as they mis-forecast a year ago. Last year, thru at least the first ½ of the year, respondents predicted growth would slow below 1%, along with rising unemployment. Growth came in above 3% & unemployment barely budged. This year, the average GDP forecast is for GDP to slow to 1.3%, unemployment to rise 0.6% to 4.3% while headline CPI ends the year at 2.7%. But those averages hide a spectrum of views on the outlook.
Pfizer (PFE) posted a surprise adjusted 4th-qtr profit, as the company's declining Covid business loss less revenue than expected. The company reversed roughly $3.5B in revenue related to the expected return of 6.5M doses of its Covid drug, Paxlovid, from the US gov. That hit is less than the $4.2B PFE initially expected for the return of nearly 8M doses of Paxlovid. The
company sees the fewer-than-expected returned Paxlovid doses as an
“encouraging sign” because it indicates that use of the drug increased
in the 4th qtr, CFO Dave Denton said. Covid vaccine raked in $5.4B in revenue for the qtr, down
53% from the same period last year. The forecast expected the shot to
bring in $5B in sales. CEO Albert Bourla said around 15% of the US population received
an updated Covid vaccine this fall & winter, slightly lower
than the 17% forecast in Oct a month after the company's new
shot rolled out. The results come as PFE tries to blunt the
rapid decline of its Covid business, which saw demand plummet to new
lows & transitioned to the commercial market in the US last year. As
revenue suffers, the company is trying to improve its bottom line &
boost investor confidence through a broad $4B cost-cutting plan. Q4 EPS was 10¢, adjusted, versus a loss of 22¢ expected & revenue was $14.25B versus $14.42B expected. PFE also reiterated its full-year 2024 guidance, which it first outlined in mid-Dec. It expects revenue of $58.5-61.5B this
year, which includes roughly $8B in revenue from its Covid
products & contributions from its recently closed acquisition of
cancer drug developer Seagen. The company expects to book adjusted EPS of $2.05-2.25. PFE
recorded 4th-qtr revenue of $14.25B, down 41% from the
same period a year ago, due to the plunge in sales of its Covid
products. For the 4th qtr, PFE booked a net loss of 60¢ per share. That compares to EPS of
87¢ during the same period a year ago. Excluding
certain items, the company posted EPS of 10¢ for
the qtr. Still, the Covid business had a dismal 2023. The stock fell 46¢.
Pfizer beats on earnings as Covid business loses less revenue than expected
General Motors (GM) beat top- & bottom-line expectations for the 4th
qtr, while forecasting another strong year despite potential
economic & sales head winds. The automaker's 2024 guidance
calls for net income attributable to stockholders of EPS of $8.50-9.50 & adjusted earnings
before interest and taxes (EBIT) of $12-14B, or $8.50-9.50 adjusted EPS & adjusted automotive free cash flow of $8-10. The earnings guidance is largely better than GM's 2023 results & in line
or higher than many expectations of flat results
compared with 2023. For the 4th qtr, GM reported EPS of $1.39 a year earlier. Adjusting for one-time items, EPS was $1.24, topping expectations. Revenue was largely flat year over year, at $42.98B compared with $43.11B for the final 3 months of 2022. GM's
full-year 2023 revenue was about up 10% compared with the prior year,
at $171.8B, with net income attributable to stockholders of
$10.13B & adjusted earnings before interest and taxes of $12.36B. That compares with 2022 revenue of $156.74 billion, net income attributable to stockholders of $9.93B & adjusted EBIT of $14.47 billion. “As
we begin 2024, I believe GM is well positioned for another year of
strong financial performance,” CFO Paul Jacobson said. GM's 2023 earnings included several special charges, including $1.1B in North American strike costs & $792M for new commercial agreements between GM & LG Electronics & LG Energy Solution. The stock rose 2.76 (3%).
GM beats Wall Street estimates, forecasts continued strong profit in 2024
West Texas Intermediate (WTI) crude oil closed higher after the US reported more job openings than expected last month & Middle East tensions following a deadly attack on a US military base in Jordan. WTI crude for Mar closed up $1.04 to settle at $77.82 per barrel, while Mar Brent crude, the global benchmark, was last seen up 46¢ to $82.86. The gains followed on bullish economic reports from the US Bureau of Labor Statistics Job Openings & Labor Turnover Survey showing 9M job openings in Dec, up from 8.9M a month earlier & above the consensus expectation for 8.8M openings. Consumer confidence in Jan rose to 114.8, under expectations for a reading of 115.0 but well ahead of 108.0 in Dec. Still, concerns remain over demand from China, the #1 importer, after the country's largest property developer, Evergrande, was ordered to liquidate after failing to restructure more than $300M in debt, overshadowing earlier stimulus measures from its gov as its economy slows.
WTI Crude Oil Rises on Bullish US Jobs Report and Mideast Tensions
Gold futures rose as the $ weakened. The most active gold contract for Apr rose 6 (3%) to close at 2050 per ounce. Escalated geopolitical tension in the Middle East also supported gold. The Federal Reserve kicked off its Jan monetary policy
meeting, which will conclude with an announcement tomorrow. US monthly jobs report will be out on Fri. Economic data released today were mixed. The S&P CoreLogic
Case-Shiller US National Home Price NSA Index, covering all 9 US
census divisions, reported a 5.1% annual gain in Nov, up from a 4.7& rise in the previous month. The
Conference Board said that its consumer confidence index rose for the 3rd straight month to 114.8 in Jan from 108 in Dec. The US Labor Dept reported that US job listings rose to 9M in Dec from a revised 8.9M in Nov.
Gold Rises on Weaker U.S. Dollar
The survey above shows there is a variety of thoughts about the future for interest rates. More will be learned when Powell gives his report. With all the uncertainty out there, gold remains popular for uneasy investors & the advance/decliners indicator was weak (above).
Dow Jones Industrials
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