Morning Reads
- Bank of England Raises Rates to 4 Percent, Its 10th Straight Increase
- Adani Crisis Deepens as Stock Rout Hits $108 Billion, Bonds Sink
- How Extreme Bets Fueled an $11.4 Billion Fortune
- Deutsche Bank Leans on Lending Units as Investment Bank Sputters
- Falling Mortgage Rates Bring Some Home Buyers Back to Market
- Forget Pandemic Puppies. Meet the Inflation Chicken
- The Trillion-Dollar Question: Could a Coin Save the Day?
- Adani, Embattled Indian Company, Scraps $2.5 Billion Share Sale
- Judge Is Said to Let Meta’s Virtual Reality Deal Move Forward
- Meta’s Stock Market Rebound to Surpass $200 Billion in Value
- Shell’s Profit Soared to $42 Billion Last Year
- A Billionaire’s Son Battles a Turbulent WWE
Todays Open Interest Change
PREMIUM
PREPPER
Back from the edge of the metaverse, social media giant Meta Platforms (META) soared more than 20% in after-hours trading on Wednesday as investors renewed their confidence in CEO Mark Zuckerberg. Helping the situation was a big revenue beat, as well as a massive $40B share buyback program. Meta also released a forecast for FQ1 revenue that could reach as high as $28.5B, which would top sales seen during Q1 of 2021 (and was right before Apple's (AAPL) privacy measures heavily dented its ad revenues).
SA commentary: "The social media company continues to heal by reining in wild expense growth," wrote Marketplace author Stone Fox Capital, adding that the tech giant trades closer to ~15x updated '23 EPS targets with eventual upside from reductions in Reality Labs spending. "Shares are not as cheap as they were in 2022, following a 75% share price increase from the 52-week low," warned fellow Marketplace author Jonathan Weber, while Livy Investment Research gave another quick take after the earnings report, citing progress and outstanding executions risks.
On a conference call with analysts, Zuckerberg called 2023 the "year of efficiency," with the company "focused on becoming a stronger and more nimble organization." Meta has already laid off a "substantial majority" of the approximately 11,000 employees it said it would let go this past November as the firm continues to right-size itself. The social network also ended the period with 2B daily active users, which was better than estimates, and has made progress on its artificial intelligence discovery engine and strong engagement from Reels.
Into the verse: In a blow to the Federal Trade Commission and its Chairwoman Lina Khan, a federal judge ruled yesterday that Meta can buy virtual reality company Within Unlimited. The decision suggests that Meta can now board the M&A train to build up its grand vision of the metaverse, similar to its strategic purchases of Instagram and WhatsApp that allowed it to dominate the social space. It's a long-term bet, with Meta's Reality Labs unit losing $4.3B during the quarter, bringing its total loss to $13.7B for 2022. (152 comments)
As expected, the Federal Reserve hiked its policy rate by 25 basis points to 4.50%-4.75% on Wednesday, slowing the rapid tightening campaign that had dented stocks and other assets in 2022. "We've [now] raised rates four and a half percentage points, and we're talking about a couple of more rate hikes to get to that level we think is appropriately restrictive," Fed Chair Jay Powell declared. "Why do we think that's probably necessary? We think because inflation is still running very hot." While the central bank reiterated that it would be data-dependent, investors are already seeing the light at the end of the tunnel, with the Nasdaq Composite Index finishing the session up 2% (Bitcoin (BTC-USD) and cryptos also got a boost). "The rate hike cycle is not done just yet, and with the Fed still pulling liquidity out of the markets, investors would be wise to remain vigilant," cautioned Seeking Alpha contributor Ahan Vashi. (216 comments)
Additional optimism was seen over in Washington as House Speaker Kevin McCarthy said he had a "very good discussion” with President Biden about government spending and the debt ceiling. "I would feel better if I was the markets based upon the meeting I had today," McCarthy told reporters. "We have different perspectives, but we both laid out some of our vision of where we'd want to get to. And I believe, after laying them both out, I can see where we can find common ground." Extraordinary measures are already being employed by the Treasury, with Secretary Janet Yellen warning of big consequences for the U.S. economy if the debt limit is not resolved (which has prompted talk about a $1T coin solution). President Biden is also weighing new candidates for his top economic team, with reports suggesting that Fed Vice Chair Lael Brainard and longtime confidant Jared Bernstein could lead the National Economic Council and Council of Economic Advisers. (3 comments)
The FDA-authorized oral COVID-19 therapy developed by Merck (MRK), called Lagevrio (molnupiravir), is leading to new mutations in the virus with the potential for further spread. That's according to a preprint study of millions of viral samples, which was conducted by researchers in the U.S., the U.K.'s Francis Crick Institute, Imperial College and the University of Liverpool. While the drug-linked mutations of the virus haven't been shown to be more immune-evasive or lethal, some worry that it could lead to more contagious or dangerous strains of COVID. Merck (MRK) has declined to accept molnupiravir - which it expects to have added $5.2B–$5.4B in sales for 2022 - can cause variations, noting that the virus has mutated during the pandemic due to its uncontrollable spread. Pfizer (PFE) has separately rejected resistance worries regarding its COVID-19 pill called Paxlovid. (50 comments)
Today's Markets
In Asia, Japan +0.2%. Hong Kong -0.5%. China flat. India +0.4%.
In Europe, at midday, London +0.5%. Paris +0.6%. Frankfurt +1.4%.
Futures at 6:00, Dow -0.2%. S&P +0.5%. Nasdaq +1.4%. Crude +0.2% to $76.59. Gold +1.5% to $1971.50. Bitcoin +3.6% to $23,835.
Ten-year Treasury Yield +1 bps to 3.41%
Today's Economic Calendar
7:30 Challenger Job-Cut Report
8:30 Productivity and Costs
8:30 Initial Jobless Claims
10:00 Factory Orders
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
Companies reporting earnings today »
What else is happening...
Energy boom! Shell (SHEL) posts record Q4 profit of $9.8B.
Biden to signal support for ConocoPhillips' (COP) Alaska oil project.
Job openings unexpectedly climb in December; quits rate stays steady.
The most overbought/oversold S&P 500 stocks to start February.
Samsung (OTCPK:SSNLF) unveils Galaxy S23 phone with 200MP camera.
On the move: Investors buy the comeback story at Peloton (PTON).
Altria (MO) boosted by earnings beat, optimistic outlook.
FTX founder Sam Bankman-Fried's bail conditions amended by judge.
Another round of layoffs at Rivian (RIVN) trims 6% of workforce.
More cuts: FedEx (FDX) rises after axing 10% of management jobs.