Markets climb to finish January with a strong gain

Dow rose 368 closing at the highs, advancers over decliners about 5-1 & NAZ went up 190.  The MLP index was even at 229 & the REIT index jumped 8 to the 406s.  Junk bond funds fluctuated & Treasuries continued in demand, lowering yields.  Oil was up 1+ to 79 & gold added 5 to 1944 (more on both below).

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McDonald's (MCD), a Dow stock & Dividend Aristocrat, doesn't expect inflation to cool this year despite beating predictions for Q4 earnings,  CEO Chris Kempczinski said, the fast food chain's accelerating the Arches strategy helped drive over 10% comparable sales growth & 5% in comparable guest count growth globally in 2022.  "While we expect short-term inflationary pressures to continue in 2023, we remain highly confident in Accelerating the Arches, which now includes a greater emphasis on new restaurant openings," Kempczinski added.  The Accelerating the Arches project will work alongside the recently announced Accelerating the Organization initiative, enabling the restaurant to be faster, more innovative & efficient.  MCD recorded Q4 EPS of $2.59 on $5.93B in sales, after a prediction of EPS for $2.46 on revenue of $5.72B.  Meanwhile, global comparable sales ballooned 12.6% & reflected improvements in all areas including a 10.3% pop in US sales & a 5% jump in systemwide sales.  In 2022, global comparable sales went up 10.9%, including a 5.9% increase in the US & a 13.3% jump in intl operated market segments.  Systemwide sales also moved 5% higher on the year, while consolidated revenues were flat.  The stock fell 4.90.
If you would like to learn more about MCD, click on this link:
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Why McDonald's doesn't expect inflation to cool anytime soon

The ongoing Covid-19 pandemic propelled pharmaceutical company Pfizer's (PFE) earnings to a record $100B last year, almost $57B of which was driven by its vaccine & antiviral pill Paxlovid.  The vaccine accounted for $37.8B, up just 3% from 2021, of total sales as demand for the shots slowed.  But sales of its blockbuster antiviral treatment made up for that softening, surging to $18.9B in 2022, the first full year that Paxlovid was on the market.  Combined sales from its Covid vaccine & antiviral treatment generated more revenue last year than it had in total sales in 2019, before the pandemic became a global crisis that killed more than 6.8M people & upended world markets.  Those results won't be repeated this year.  PFE expects revenue to decline in 2023 by as much as 33% to $67-71B as the world emerges from the pandemic & demand for its blockbuster Covid drugs slows.  Covid vaccines sales are projected to plummet by 64% this year to $13.5B from $37.8B in 2022.  Paxlovid sales are expected to drop 58% to $8B in 2023 from $18.9B in 2022.  PFE is also forecasting that its full-year EPS will drop by as much as 50%, to $3.25 - $3.45, from a record EPS of $6.58 in 2022.  CEO Albert Bourla last qtr laid out a 2030 growth plan for the company that looks beyond the pandemic.  He sees future revenue growth from RSV vaccines & medications for migraines & ulcerative colitis, among other drug products.  The stock rose 30¢.
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The Covid pandemic drives Pfizer’s 2022 revenue to a record $100 billion

UPS (UPS) reported Q4 revenue that missed expectations & declined from last year, as the company continues to see volume fall amid cooling demand.  The shipping & delivery company offered full-year guidance that fell below expectations.  It is projecting revenue $97B-$99.4B, versus estimates of $100B.  Still, it expects the 2nd half of the year to be better than the first.  For Q4, the company reported EPS $3.62 compared with $3.59 a year earlier.  “We expect 2023 to be a bumpy year,” CFO Brian Newman said.  Yet Newman also said that UPS expects about 56% of its profit to come in during H2, counting on US & intl challenges easing during the later months of 2023.  Compa’s shares fell over 10% in 2022 as consumer spending adjusted to inflation & came down from Covid pandemic highs.  Since taking the helm in 2020, CEO Carol Tomé has been championing a “Better not Bigger” business strategy, which it adjusted to “Better and Bolder” in last qtr's earnings announcement, focusing on high-margin shipments rather than just boosting volume.  It also aims to use automation to optimize capacity during periods of shifting volumes.  That strategy was put to the test last qtr as volume declines weighed on revenue.  UPS also forecast adjusted operating margin of 12.8% - 13.6% for the year.  The company expects capital expenditures to come in at about $5.3B, after tightening spending to $5B last year.  The stock gained 8.03 (5%).
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UPS revenue falls short of expectations despite growth in U.S. business

Gold futures ended with a gain & tallied a 3rd consecutive monthly gain. Gold rose for the session after another round of economic data showed the labor market is cooling & the outlook for the economy remains weak.  Bad economic news is once again good news for gold as it will continue to cement bets that a Federal Reserve pivot, a change in its monetary policy, could happen by the end of the year.  Gold for Apr rose $6 to settle at $1945 an ounce.  Based on prices for the most-active contract, gold tacked on more than 6% for the month.

Gold settles higher, posts a third-monthly gain ahead of an expected Fed interest rate hike

Oil futures climbed, but US benchmark prices posted a loss for the month ahead Federal Reserve monetary policy decision & a committee meeting of the Organization of the Petroleum Exporting Countries & their allies (OPEC+), which are both scheduled for tomorrow.  The main driver for oil lately has been the potential for a resurgence of oil demand out of China, which may continue into Feb considering how Chinese economic momentum picked up in the overnight PMI reports.  US benchmark West Texas Intermediate crude for Mar rose 97¢ (1.3%) to settle at $78.87 a barrel.  Based on the front-month contract, prices lost 1.7% for the month.

U.S. oil prices gain for the session, fall for the month

Jan was a choppy month after a brutal year in 2022.  But most investors are happy with the gain.  Dow finished up 940 in Jan.  

Dow Jones Industrials 

Markets rise on corporate earnings

Dow gained 73, advancers over decliners better than 4-1 & NAZ climbed 111.  The MLP index stayed in the 229s & the REIT index was up 4+ to 403.  Junk bond funds edged lower & Treasuries had a little buying, reducing yields slightly.  Oil recovered 1+ to the high 79s & gold added 4 to 1943.

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The IMF revised upward its global growth projections for the year, but warned that higher interest rates & Russia’s invasion of Ukraine would likely still weigh on activity.  In its latest economic update, the IMF said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in Oct.  However, that number would still mean a fall from an expansion of 3.4% in 2022.  It also revised its projection for 2024 down to 3.1%.  “Growth will remain weak by historical standards, as the fight against inflation and Russia’s war in Ukraine weigh on activity,” Pierre-Olivier Gourinchas, director of the research dept at the IMF, said.  The outlook turned more positive on the global economy due to better-than-expected domestic factors in several countries, such as the US.  “Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Gourinchas said, also noting that inflationary pressures have come down.  In addition, China announced the reopening of its economy after strict Covid lockdowns, which is expected to contribute to higher global growth.  A weaker $ has also brightened the prospects for emerging market countries that hold debt in foreign currency.  However, the picture isn't totally positive.  IMF Managing Director Kristalina Georgieva warned earlier this month that the economy was not as bad as some feared “but less bad doesn’t quite yet mean good.”  “We have to be cautious,” Georgieva added.  The IMF warned of several factors that could deteriorate the outlook in the coming months.  These included the fact that China's Covid reopening could stall; inflation could remain high;  Russia's protracted invasion of Ukraine could shake energy & food costs even further; & markets could turn sour on worse-than-expected inflation prints.  IMF calculations say that about 84% of nations will face lower headline inflation this year compared to 2022, but they still forecast an annual average rate of 6.6% in 2023 & of 4.3% the following year.

IMF hikes global growth forecast as inflation cools and household spending surprises

General Motors (GM) shares jumped after it reported higher net income for Q4, forecast stronger-than-expected earnings for 2023 & said it would cut $2B in costs.  The automaker, the top in the US by sales, forecast that it could hold its pre-tax margins steady at 8-10% thru 2025, despite a price war that Tesla (TSLA) has triggered in the electric vehicle segmebetweenatnt.  GM plans to build only about 400K electric vehicles in North America between now & H1-2024.  Its financial results will hinge mainly on sales of combustion-engine trucks & SUVs.  For now & for several years to come, GM's profitability will be driven by demand for those vehicles.  GM underscoaired that its Chevrolet & GMC pickup trucks make it #1 in sales volume in the US market, & it leads in sales of highly profitable large SUVs as well.  The company plans to cut costs in automotive operations by $2B this year, including reducing employment thru attrition, CFO Paul Jacobson said, but does not plan layoffs.  GM has 167K employees worldwide, including its financial subsidiary & the Cruise robotaxi unit.  The stock rose 2.95 (8%).
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GM shoves aside recession fears with robust 2023 forecast

Spotify (SPOT) shares popped after the company reported Q4 earnings that beat expectations for revenue & showed strong user growth.  Loss per share of €1.40 ($1.52) vs an estimated loss of €1.27 as expected & revenue €3.17B euros vs €3.16B expected.  Spotify reported 489M monthly active users for the qtr, up 20% year over year.  There were 33M net additions to monthly active users during the qtr, marking a record high for the company.  SPOT also reported 205M paid subscribers, up 14% from a year ago.  In Q3, the company said it expected to add 23M new monthly active users in Q4, bringing its total to 479M.  It had also expected its revenue to increase to €3.2B & to post 202M paid subscribers in the qtr.  SPOT is continuing to invest in advertising & its ad-supported revenue grew 14% year over year & accounted for 14% of total revenue.  Growth was driven by podcasting.  The stock went up 10.44 (10%).
If you would like to learn more about SPOT, click on this link:
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Spotify shares pop after earnings show strong user growth

Investors are feeling good today.  However, tomorrow brings the Fed decision along with results from the OPEC+ meeting.

Dow Jones Industrials

 

Markets declined as earnings and Fed decision looms

Dow dropped 260 near session lows, decliners over advancers 2-1 & NAZ retreated 227.  The MLP index pulled back 4+ to the 229s & the REIT index fell 4+ to the 399s.  Junk bond funds were mixed & Treasuries continued to see selling, raising yields.  Oil was off 1+ to the high 77s & gold pulled back 7 to 1938 (more on both below).

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Russian Pres Vladamir Putin met with Saudi Crown Prince Mohammed bin Salman by phone to discuss a collaboration on stabilizing the global oil market, the Kremlin said.  The 2 leaders talked about a bilateral cooperation in the political, trade, economic & energy sectors.  OPEC+, which Russia is a member, meets this week.  The global members will seek coordination & stability on oil prices & policies.  Oil is under pressure on indications of strong Russian supply despite a EU & G7 price cap imposed over its invasion of Ukraine.  The EU has banned imports of Russian oil products since Feb 5.  Hopes of a rise in Chinese demand have boosted oil in 2023.  The world's biggest crude importer pledged over the weekend to promote a consumption recovery that would support demand.

Saudi Crown Prince and Putin discuss oil prices ahead of OPEC+ meeting

The electric car price wars may be heating up.  Ford announced that it is cutting the price of the Mustang Mach-E by up to $5900.  The adjustment comes just days after Tesla announced steep cuts on several models.  Ford said the change is due to a combination of "streamlined costs" & an upcoming increase in production.  "We have to compete," Marin Gjaja, chief customer officer for Ford's EV unit, told Automotive news.  "It's a competitive marketplace, and it just got a lot more competitive because of what Tesla did. We're not going to cede ground to anyone."  "At @Ford, we want to make EVs more accessible, so we’re increasing #MustangMachE production & reducing prices across the Mach-E lineup," Ford CEO Jim Farley said.  "Scaling will shorten customer wait times. And with higher production, we’re reducing costs, which allows us share these savings with customers."  The reductions across the Mustang Mach-E's 6 trims $600-5900, & the price of upgrading to the extended range battery option offered on some models was cut from $8600 to $7000.  Mustang Mach-Es sold in the US are built in Mexico & models with list prices under $55K currently qualify for the full federal $7500 tax credit, but new rules on battery material sourcing scheduled to go into effect in Mar are expected to reduce that amount.  Ford delivered 39K Mustang Mach-Es in the US in 2022, making it the3rd-best selling EV behind TSLA's Model Y & Model 3.   The stock fell 39¢.
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Electric car price wars may be heating up as Ford cuts cost of new SUV

The World Health Organization said Covid-19 remains an global health emergency as the world enters the 4th year of the pandemic.  But WHO Director-General Tedros Adhanom Ghebreyesus said he was hopeful that the world will transition out of the emergency phase of the pandemic this year.  “We remain hopeful that in the coming year, the world will transition to a new phase in which we reduce hospitalizations and deaths to the lowest possible level, and health systems are able to manage Covid-19 in an integrated and sustainable way,” Tedros said.  The WHO's emergency committee met on Fri & advised Tedros that the virus, which was initially discovered in Wuhan, China in late 2019, remains a public health emergency of intl concern, the UN agency’s highest alert level.  The WHO first declared an emergency in Jan 2020.  Last month, the WHO chief said the end of the emergency phase of the pandemic is closer than ever before.  In the fall, Tedros said the end of the pandemic was in sight.  “We have never been in a better position to end the pandemic. We are not there yet but the end is in sight,” Tedros told reporters in Geneva last Sep.

WHO says Covid remains a global emergency but pandemic could near an end in 2023

Gold futures ended lower after posting weekly gains over the last 6 consecutive weeks.  With so much uncertainty ahead of this week’s Federal Reserve meeting, gold prices have slipped back, although the lows for the last 5 days have been pretty steady at around $1915-1920.  A hawkish surprise from the Fed could see prices slip back towards $1900 in the short term.  The Fed will announce its monetary policy decision on Wed.  Gold for Apr delivery fell $6 to settle at $1939 an ounce.

Gold futures end lower after posting gains for six weeks in a row

Oil futures declined, with US benchmark prices settling at their lowest in about 2½ weeks.  Uncertainty surrounds the outlook for demand & production ahead of an expected interest-rate hike by the Federal Reserve & a committee meeting of the Organization of the Petroleum Exporting Countries & their allies, both due Wed (OPEC+).  US benchmark West Texas Intermediate crude for Mar declined by $1.78 (2.2%) to settle at $77.90 a barrel, the lowest front-month contract finish since Jan 11.

U.S. oil prices settle at their lowest in two and a half weeks

Traders are twiddling their thumbs, waiting for the Fed & OPEC+ to speak on Wed.

Dow Jones Industrials