Markets tumbled led by selling tech-driven stocks on Nasdaq

Dow sank 404 with buying into the close, decliners over advancers 3-2 & NAZ dropped 267.  The MLP index added 2+ to the 277s & the REIT index was off 4+ to the 386s.  Junk bond funds slid lower & Treasuries were in heavy demand which reduced yields.  Oil remained lower in the 78s & gold gained 12 to 2139 setting another record (more on both below).

AMJ (Alerian MLP Index tracking fund)

Microsoft (MSFT), a Dow stock, is accusing The New York Times (NYT) of “unsubstantiated” claims in the publisher's lawsuit filed in Dec against OpenAI, a case that could have major implications for the future of generative artificial intelligence.  In a motion to dismiss part of the suit, MSF said the Times presented a false narrative of “doomsday futurology” in which OpenAI’s ChatGPT chatbot will decimate the news business.  In the opening line of its argument to the court, MSFT compares the lawsuit to Hollywood’s resistance to the VCR, which was created in the last 1970s & allowed users to record television programs.  “In this case, The New York Times uses its might and its megaphone to challenge the latest profound technological advance: the Large Language Model,” attorneys for Microsoft wrote.  MSFT is OpenAI’s largest investor, having pumped about $13B into the startup.  The filing marks the latest salvo in the battle between OpenAI & the media industry, which is increasingly concerned that AI models are being trained on valuable content that’s been produced over many decades.  In its lawsuit, the Times accused OpenAI & MSFT of copyright infringement & abusing the newspaper's intellectual property in training LLMs.  OpenAI previously asked a judge to dismiss parts of The NYT lawsuit against it, alleging that the publisher “paid someone to hack OpenAI’s products,” such as ChatGPT, to generate 100 examples of copyright infringement for its case.  OpenAI claimed it took the Times “tens of thousands of attempts to generate the highly anomalous results,” & that the company did so using “deceptive prompts that blatantly violate OpenAI’s terms of use.”  In the latest filing, MSFT lawyers argue that, “content used to train LLMs does not supplant the market for the works, it teaches the models language.”  MSFT stock fell 12.27 to 402+.

Microsoft compares New York Times’ claims against OpenAI to Hollywood’s early fight against VCR

The Middle East franchisee of Starbucks (SBUX) said it has begun firing around 2000 workers at its coffee shops across the region after the brand found itself targeted by activists during the ongoing Israel-Hamas war in the Gaza Strip.  The Kuwait-based Alshaya Group, a private family firm holding franchise rights for a variety of Western companies including The Cheesecake Factory, H&M & Shake Shack, issued a statement acknowledging the firings at its Middle Eastern & North African locations.  “As a result of the continually challenging trading conditions over the last six months, we have taken the sad and very difficult decision to reduce the number of colleagues in our Starbucks MENA stores,” the statement read.  Alshaya later confirmed it was firing about 2000 employees.  Many of its employees in the Gulf Arab states are foreign workers hailing from Asian nations.  Alshaya runs about 1900 Starbucks branches in Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Turkey & United Arab Emirates.  It had employed more than 19K staff.  The layoffs represent just over 10% of its staff.  Since the beginning of the war on Oct 7, SBUX has found itself alongside other Western brands targeted by pro-Palestinian activists over the war.  The company prominently has been trying to counter what it describes as “ongoing false and misleading information being shared about Starbucks” being spread online.  “We have no political agenda,” SBUX said.  “We do not use our profits to fund any government or military operations anywhere — and never have.”  SBUX stock dropped 1.24.

Mideast Starbucks franchisee firing 2,000 workers after being targeted in Israel-Hamas war boycott

Shares of Amer Sports (AS), the maker of Wilson tennis rackets & Lousiville Slugger baseball bats, fell after the company reported strong sales in China but a slowdown in wholesale orders.  In the 3 months ended Dec 31, the company reported a net loss of 25¢ per share, compared with $148.3M (39¢ per share a year earlier).  Sales rose to $1.32B, up about 10% from $1.2B a year earlier.  The company started trading on the NYSE last month.  Founded in Helsinki in 1950, Amer was a Finnish public company until it was taken private in 2019 by a consortium of investors led by China's Anta Sports, FountainVest Partners, Anamered Investments & Tencent.  Since the acquisition, sales grew about 45% from $2.45B in 2020 to $3.55B in 2022.  Revenue jumped again in 2023 to $4.37B.  Still, AS failed to turn a profit between 2020 & 2023.  In 2023, the company lost $209M, but its losses narrowed from $231M in 2022.   CEO, James Zheng, said the company is still in the “early stages” of its “profitable growth journey.”   “We are winning in the premium segment of the sports and outdoor market, which remains healthy and growing. Driven by our technical performance products, we believe Amer Sports’ brands resonate strongly with consumers everywhere, but are still relatively small players on the global stage,” said Zheng.  “Looking forward, our confidence is enhanced by the fact that our highest margin brand, region, channel, and category are growing fastest.”  Much of its expansion has come in China.  Between 2020 & 2022, AS grew sales in the region from 8.3% of total revenue to 14.8%.  In the 9 months ended Sep 30, nearly 20% of sales came from the region.  That growth story continued during its fiscal 4th qtr.  Sales in greater China jumped by 45% & all 3 of the company's segments saw “solid growth.”  For its first qtr, AS expects reported revenue to grow 6-8% & it projects its adjusted gross margin to be around 53.5%.  It anticipates earnings to range between a loss per share of 1¢ to EPS of 2¢.  The company expects technical apparel revenue to grow about 30%, sales for its outdoor performance categories to be flat year over year & its ball & racquet segment sales to be down a double-digit percentage.  For the full year, AS expects sales to grow by a mid-teens percentage, & it anticipates an adjusted gross margin of 53.5-54%.  It is forecasting EPS of 30-40¢.  The stock fell 89¢ to 16.45.

Shares of Wilson tennis racket maker Amer Sports drop nearly 10% after first earnings report

Gold rose to a new record for the 3rd-straight session as buying momentum for the precious metals continues.  Gold for Apr closed up $15 to settle at $2141 per ounce, surpassing the record close set a day earlier.  The price of the metal is being supported by expectations interest rates in developed countries will soon be lowered as inflation eases.  Jerome Powell will begin 2 days of congressional testimony tomorrow amid hopes he will offer firmer detail on when rate cuts will begin.  The record also comes amid a steady $ & strong treasury yields, though yields eased early today.  Gold reached a a fresh record closing high despite a run higher in yields, suggesting continued demand from momentum buyers & low short-selling appetite at a time of heightened geopolitical tensions along with market's continued optimism around the rate cut trajectory.  Still, treasury yields weakened, bullish for gold since it offers no interest, with the 2-year note last seen paying 4.56%, down 5.0 basis points, while the yield on the 10-year note was down 7.2 basis points to 4.144%.  The $ also moved, with the ICE dollar index last seen down 0.03 points to 103.8.

Gold Closes at a Fresh Record as Treasury Yields Ease; Buying Momentum Continues

West Texas Intermediate (WTI) crude oil closed lower for a 2nd session, retreating back to the range it has traded for over the past 4 months despite OPEC+'s weekend extension of 2.2M barrels of voluntary production cuts thru Jun.  WTI crude oil for Apr closed down 59¢ to settle at $78.15 per barrel, while May Brent crude, the global benchmark, was last seen down 70¢ to $82.10.  The drop is the 2nd-straight session of weaker prices following the OPEC+ announcement on Sun as prices remain firmly rangebound with the cartel's cuts offset by rising output from the US & other western hemisphere countries & weak demand from China as a real-estate debt crisis weighs on its economy.  Traders are also awaiting further word on when the Federal Reserve will begin lowering interest rates, a move expected to boost demand as the weight of high rates is taken off the economy.  Fed chair Jerome Powell will begin 2 days of congressional testimony tomorrow, which may offer more insight into the timing of rate cuts.

WTI Crude Oil Falls Again as the Extension of OPEC+ Cuts is Offset by Demand Concerns

The overbought stock market, led by tech stocks, met its challenge today.  That brought out more nervous investors who bought safe haven investments such as gold & Treasuries.  Mar could be a tough month for stocks.

Dow Jones Industrials