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Mixed Signals Can’t Derail Stocks

The Nasdaq 100 logged its fourth straight week of gains as stocks move “full-steam ahead” into next week’s Fed decision. Let’s see what you missed today. ๐Ÿ‘€

Today’s issue covers American Express’s rosy outlook, the Fed’s preferred inflation indicator, and an under-the-radar market move. ๐Ÿ“ฐ

Check out today’s heat map:

5 of 11 sectors closed green. Consumer discretionary (+2.28%) led, and energy (-2.01%) lagged. ๐Ÿ’š

Electric vehicle stocks soared today as investors continued to digest Tesla’s earnings report. Additionally, Saudi Arabia fund takeover speculation sent Lucid Motors up as much as 100% at its highs before settling at +43%. โšก

Consumer products giant Colgate sunk 5% despite earnings beating expectations. Like its competitors, it appears to be facing significant margin pressure even as it raises prices. ๐Ÿชฅ

Chevron shares fell 4% after the company saw profits double but fall short of wall street estimates. Additionally, the Biden administration is taking aim at the company after it authorized a $75 billion buyback and additional dividends. ๐Ÿ›ข๏ธ

And Buzzfeed continued yesterday’s rally, gaining another 85%, as the media company mulls using ChatGPT to produce some of its content. ๐Ÿค–

In crypto news, Silvergate suspended the dividend on its preferred stock. Custodia Bank was denied federal reverse system membership. And the White House continues to call on Congress to step up its efforts on crypto regulation. โ‚ฟ

Other symbols active on the streams included: $IVDA (+12.07%), $AUVIย (+40.83%), $AI (+17.84%), $MULN (+2.44%), $GNS (+19.34%), $HLBZ (-0.42%), $INTC (-6.41%), and $FOXO (+95.86%). ๐Ÿ”ฅ

Here are the closing prices:ย 

S&P 500 4,071 +0.25%
Nasdaq 11,622 +0.95%
Russell 2000 1,911 +0.44%
Dow Jones 33,978 +0.08%

Amex Sees No Signs Of Recession Featured Image

Despite muted results and outlook from Visa and Mastercard, American Express came into today’s earnings report like the Kool-Aid Man. ๐Ÿคฉ

Needless to say, the results have its investors saying…”Oh yeah!”ย 

On that note…let’s get into the details. ๐Ÿ•ต๏ธ

The company saw adjusted earnings per share of $2.07 vs. the $2.23 expected. Revenues of $14.18 billion also came in light of the $14.23 billion expected.

Driving some of that weakness was a roughly 18x increase in provisions for credit losses. Like other consumer financial services companies, Amex is seeing higher net write-offs and delinquency rates as credit quality deteriorates. With that said, executives say these metrics are still below pre-pandemic levels, and the company does not expect them to return to pre-pandemic levels in 2023. ๐Ÿ“†

Total network volume rose 12% YoY to $413.3 billion as the company’s focus on premium customers continues to pay off. Millennial and Gen Z customers are the largest growth drivers, representing more than 60% of consumer card acquisitions in the quarter and full year.ย 

While other financial services firms have offered cautious guidance, Amex is taking a more optimistic view. It forecasts full-year revenue to grow by 15% to 17% and earnings per share of $11.00 to $11.40. This is above the consensus view for 11% revenue growth and $10.53 in earnings. ๐Ÿ‘

For additional context, here’s what CEO Stephen Squeri had to say: “We’re acquiring spending, and we see future travel bookings [strong] so I don’t see it [a recession] in my numbers at all. It’s really hard for me to get my head around that in quarter three or quarter four we’re going to have a big slowdown…” and “…But if we learned anything during the pandemic, you kind of go day to day, month to month and so, as I sit here today, I do not see it [a recession].”

That’s definitely a rosier outlook than we’ve heard from many executives. Combine that with the company hiking its dividend by 15% to $0.60 per share, and you’ve got the recipe for a sharp rally in the stock. ๐Ÿ“ˆ

$AXP shares were up 11% on the news. ๐Ÿ’ฐ

PCE Tees Up Next Week’s Fed Hike Featured Image

The Federal Reserve’s preferred inflation metric came in better than expected in December, continuing the disinflation trend. ๐Ÿ”ป

The personal consumption expenditures (PCE) price index rose 0.1%, matching November’s gain. The 5% YoY increase fell from November’s 5.5% advance to its smallest YoY gain since September 2021. Core PCE, which excludes food and energy prices, rose 0.3% MoM and 4.4% YoY, registering its smallest gain since October 2021. ๐ŸŒก๏ธ

Disinflation continues, but core inflation remains well above the Fed’s 2% long-term target. As a result, many expect another 25 bp hike at next week’s meeting and potentially another in March before the Fed pauses to allow observe how higher rates impact the economy.

The other economic data that’s been coming out also supports this view. For example, let’s look at consumer incomes and spending.

U.S. consumer spending fell 0.2% in December, its second-straight monthly decline. That’s because November’s number was revised lower to a 0.1% loss. Meanwhile, wage growth was 0.3%, matching November’s number. Real disposable income increased by 0.2%, and the savings rate hit a seven-month high of 3.4%. ๐Ÿ’ธ

Consumer sentiment still remains historically low. However, it has recently begun to tick up on lower gasoline prices and inflation expectations. With that said, concerns over the economy remain, with many consumers stepping up their savings to prepare for a potential recession.ย 

And finally, let’s touch on housing. In December, U.S. pending home sales posted their first gain in seven months. The index rose 2.5% MoM but was still down 33.8% YoY. With mortgage rates pulling back and recession fears moderating, analysts expect the transaction trough is likely behind us. As we saw yesterday, new home sales rose for the third straight month in December. ๐Ÿ˜๏ธ

Labor news typically involves layoffs, but today we heard Boeing is set to hire 10,00 workers in 2023 as it ramps up its production.

CNBC’s Kelly Evans makes similar points as we did yesterday when discussing the seemingly positive GDP data. Definitely worth a read. ๐Ÿ‘

Overall, the market sure seems optimistic about all this. We’ll have to wait and see if the Fed plays ball next week. ๐Ÿคท

Trees Revolt As Lumber Roars Back Featured Image

It’s Friday afternoon, and we’re sure your brains are melting from all the earnings and economic data this week. So let’s send you off into the weekend sunset with an under-the-radar chart. ๐Ÿคซ

That chart is of lumber futures.

Ah, yes, lumber. Remember when lumber futures were the talk of the town for a while there? ๐Ÿ“ฐ

Well, as with anything that sees massive price moves, those moves typically happen in both directions. And after falling 80% over the last two years, prices have been on an absolute tear, rising nearly 50% since early January. ๐Ÿ˜ฎ

Whether or not this “revenge of the trees” will last remains to be seen. Some suggest the recent rally is simply a reversion to the mean (200-day moving average) before prices continue their decline. Others suggest that structural demand remains strong and that prices are likely to stay above their historical average. ๐Ÿคท

Regardless, with the housing market remaining soft, higher lumber prices will become a concern for the economy again if they stabilize at pre-pandemic levels.

We haven’t seen many talking about this so far this January. But if the rally continues, you best bet this will be a household topic again very soon. โŒš๐Ÿ‘ˆ


Bullets From The Day:

๐Ÿ˜๏ธ National rent prices fall back below $2,000. The median monthly rent fell to $1,978 in December, a 1.41% MoM drop and the lowest since April. Year over year, rents grew just 4.77%, their lowest annual change since July 2021. With that said, national averages for real estate can be misleading as some areas fare much better (or worse) than others. And while experts can’t seem to agree on where rents with land in 2023, most agree growth will be substantially slower than in the last few years. Yahoo Finance has more.

๐Ÿ’Š The pharmacist labor crunch continues, impacting pharmacies nationwide. Walmart, Walgreens, CVS, and other national pharmacies continue to struggle to find enough qualified workers. They’ve raised wages and offered additional incentives to entice workers, but now have to cut their operating hours because they cannot keep up. Evidence continues to suggest that some industries are faring better than others. And service industries, particularly at the lower end of the wage scale, are still having trouble meeting their staffing needs. More from CNBC.

๐Ÿ‘ Luxury retailers remain cautiously optimistic. LVMH reported a second straight year of record sales and profits, with 2022 revenues up 23%. While some retailers are struggling, those who cater to the higher-income consumer have remained strong. The luxury giant says China’s wealthy consumers have started returning to stores as the country reopens. With that said, the U.S. market continues to slow, with revenue growing just 7% in Q4. That’s a significant deceleration from its 26% and 22% growth in the first half of 2022. CNBC has more.

โšฝย Investment funds continue to flow into professional sports. For example, JPMorgan has written to Italy’s top soccer league to express interest in supporting the development of Serie A’s media business. It throws its hat into the ring against several other investment funds as the league prepares to hold a tender to sell its domestic and international broadcasting licenses. JPMorgan’s offer is reportedly between 700 million and 1 billion euros in bank financing. More from Reuters.

โš™๏ธ MIT spinout trying to make the steel industry green receives significant backing. The $1.6 billion steel industry creates around 7% and 9% of global carbon dioxide emissions. Now, clean steel technology company Boston Metal is looking to change that. The startup, which spun out of the Massachusetts Institute of Technology, announced $120 million in funding led by steel giant ArcelorMittal and Microsoft. So what makes the company different? Its process to make iron contains no carbon, eliminating a significant portion of the carbon emissions created by traditional steelmakers. CNBC has more.