Reads
- Waiting for the Next Move - OptionMil
- Apple (AAPL) expands testing of Buy Now Pay Later service (SQ, PYPL, AFRM). Bloomberg
- Meta (META) wants some managers to transition to individual contributor jobs. Bloomberg
- Google (GOOG) aims to introduce AI search features. WSJ
Todays Open Interest Change
PREMIUM
PREPPER
With a mixed bag of economic data only getting more muddled, investors are looking to more specific indicators to assess the health and direction of the global economy. A.P. Moller-Maersk (OTCPK:AMKBY), one of the world's biggest shipping companies, is out with its quarterly earnings, which are widely seen as a barometer for global trade and the supply chain. The Danish firm controls about one-sixth of the world's container trade, with offices across 130 countries and more than 100K employees worldwide.
By the numbers: Earnings before interest, tax, depreciation and amortization (EBITDA) fell 18% Y/Y to $6.54B, coming in below consensus estimates of $6.95B, and lower than the $10.9B seen last quarter. Freight rates also fell by nearly a quarter, compared to the previous three months, which is important to highlight when assessing the economic outlook. While things appear to be cooling fast - triggering fears about a recession - when looking deeper into the details, the economy appears to be readjusting from an "overconsumption of goods" to a "sharp correction in demand" after major pandemic-fueled bubbles.
For example, Maersk expects the global container market to grow between -2.5% and +0.5% in 2023, which signifies a slowdown, but is a far cry from the "dark clouds on the horizon" it predicted just a quarter ago. In fact, the shipping giant based its guidance for 2023 "on the expectation that inventory correction will be complete by the end of the first half leading to a more balanced demand environment." Another common theme to many other industries, is that Maersk, which brought aboard a new CEO in December, is determined to "speed up our business transformation" and "increase our operational excellence" as it faces down macroeconomic headwinds.
Strategies will include streamlining and consolidating the increasingly sensitive supply chain, looking to score new business by becoming an integrated logistics provider, and diversifying revenue sources by expanding air freight services. "It wasn't hard over the last 12 months to make money," said Ditlev Ingemann Blicher, Maersk President of Asia Pacific. "If you had something that could float and could carry your container - that was not hard. Now, skills matter." The shipping behemoth has also made some high-profile deal decisions, like recently ending a partnership with Mediterranean Shipping that could perhaps trigger a price war.
Outlook: Note that Maersk (OTCPK:AMKBY) is coming off the "best financial result in the history of the company," with 2022 witnessing an "exceptional” rise in ocean freight rates before dropping off in the back half of the year. With Maersk now showing more of a decline, Marketplace author Wolf Report says this will only improve the valuation of the company (do you agree?). Maersk is also on the list of 10 large-cap stocks with the lowest P/E (with a ratio of 1.42). Check out the rest here.
Breaking a two-session losing streak, roller-coaster trading on Tuesday ended with stocks firmly in positive territory, as traders parsed the latest remarks from Fed Chair Jerome Powell. He repeated sentiments that were delivered as part of the FOMC's last policy announcement, noting that the economy had entered a "disinflationary process." While the central bank chief added that the effort will take "a good amount of time," markets took heart from the fact that he didn't take an aggressively hawkish turn following Friday's hotter-than-expected jobs. Powell also declined to say whether the FOMC would have raised rates by more than a 25 basis-point hike if it had known about the blowout numbers during last week's meeting. (114 comments)
Another day, another AI update
Competing with Google (GOOG, GOOGL) in the lucrative market, Microsoft (MSFT) topped $2T in market value yesterday as it said it would integrate artificial intelligence into its Bing search engine and Edge browser. "I think this technology is going to reshape pretty much every software category," CEO Satya Nadella declared. "I have not seen something like this since I would say 2007-2008 when the cloud was just first coming out." The new version of Bing is now available for desktop in limited preview, with a wider rollout and mobile version expected to come soon. Analyst Dan Ives, who has an Outperform rating and a price target of $280 on MSFT, said the integration of ChatGPT into Microsoft's products would set off an "AI arms race," while chipmakers rallied on the developments. (60 comments)
Meme favorite Bed Bath & Beyond (BBBY) is looking for multiple avenues to shore up its flailing business model as the retailer looks to create value beyond its 20% off coupons. Shares tumbled over 50% on Tuesday - following a 92% gain the previous session - after Bed Bath announced the issuance of convertible preferred stock and associated warrants. The transactions could buy the company a few more quarters to turn around its operation, but it still faces a weak macro backdrop and high execution risk with inventory, assortment, customer re-engagement and cost savings initiatives under an interim new management team. In the meantime, Bed Bath expects to close some stores under its namesake banner, and anticipates to ultimately operate about 360 stores, as well as 120 buybuy BABY locations. (19 comments)
Today's Markets
In Asia, Japan -0.3%. Hong Kong -0.1%. China -0.5%. India +0.6%.
In Europe, at midday, London +0.7%. Paris +0.4%. Frankfurt +0.7%.
Futures at 6:30, Dow -0.3%. S&P -0.3%. Nasdaq -0.2%. Crude +1% to $77.89. Gold +0.6% to $1895.10. Bitcoin +0.8% to $23,160.
Ten-year Treasury Yield -3 bps to 3.64%
Today's Economic Calendar
7:00 MBA Mortgage Applications
9:20 Fed's Williams Speech
10:00 Fed's Bostic Speech
10:00 Wholesale Inventories (Preliminary)
10:30 EIA Petroleum Inventories
12:30 PM Fed's Kashkari Speech
1:00 PM Results of $35B, 10-Year Note Auction
1:45 PM Fed's Waller Speech
Companies reporting earnings today »
What else is happening...
Takeaways from President Biden's State of the Union speech.
Manchester United (MANU) surges on reports of a Qatari bid.
Apple (AAPL) 'Pay Later' is coming soon amid push into financial services.
Zoom (ZM) lays off 15% of workforce, eBay (EBAY) also announces cuts.
Deeper dive on where the layoffs are: white collar over blue collar.
Chipotle's (CMG) comparable sales tally misses estimates.
Delta Air Lines (DAL) to implement second pay hike in 12 months.
Disney (DIS) and CEO Iger facing multiple questions with earnings on tap.
Meta (META) settles suit over infinity-symbol logo; teens heading to metaverse.
Democratic & GOP politicians' stock picks are now tradable through these ETFs.