Morning Reads
- Lagarde Says It’s Likely ECB Will Cut Rates in Summer
- A Fed Governor Reiterates That Rate Cuts Are Coming
- Consumer Bureau Proposes Overdraft Fee Limits for Large Banks
- Traders Heed Central Bank Pushback Against Bold Rate-Cut Bets
- JPMorgan to Hire This Year Amid Wealth, Dealmaking Revival
- A Pandemic-Era Tax Break Is Unraveling, and the Lawsuits Are Flying
- Your Bonus Might Be Smaller This Year in Tighter Job Market
- Billionaire-Backed Developer Asks Voters to Approve New California City
- Tesla Price Cuts Send European, Chinese Auto Stocks Lower
- Electric Car Owners Confront a Harsh Foe: Cold Weather
- Airbus Is Pulling Ahead as Boeing’s Troubles Mount
- JetBlue’s $3.8 Billion Spirit Deal Turns Into a Nightmare
Open Interest Changes
PREMIUM
Prepper
The latest gathering of the world's political and business elite, plus the usual smattering of celebrities, is taking place this week at the Swiss Alpine resort of Davos. The annual meeting comes as geopolitics become heavily intertwined with the world economy. The twin triggers of the COVID-19 pandemic and the war in Ukraine had already rattled an already brittle global system, while inflationary forces and the late response by central bank officials didn't help the situation. More recently, there have been threats to the supply chain and energy from an escalating war in the Middle East, while the AI revolution poses additional societal risks.
Program overview: "Against this backdrop and to instill a measure of collective agency, it is necessary to start restoring trust at three fundamental levels: into the future, within societies and among nations. Therefore, the 54th Annual Meeting of the World Economic Forum will convene under the theme 'Rebuilding Trust' to provide the crucial space to step back and focus on the fundamental principles driving trust, including transparency, consistency and accountability."
"Rebuilding Trust" won't be easy, and many have already dismissed rich and powerful idealists who gave rise to the terms "Davos Man" and "Davos Woman." Skepticism surrounding the conference can make the task even more challenging, especially when looking at the track record of the WEF, where stakeholders are supposed to come together to resolve their differences on global security and an integrated world economy. One doesn't have to look far from the themes in recent years, including "Cooperation in a Fragmented World (2023)," "Working Together, Restoring Trust (2022)" and "A Crucial Year to Rebuild Trust (2021)," compared to prior topics like "Stakeholders for a Cohesive and Sustainable World (2020)" and "Globalization 4.0 (2019)."
Highlights so far: OpenAI CEO Sam Altman announced that coming products are "going to make a lot of people uncomfortable" due to "quite a lot of individual customization" that can result in different answers based on values or user location. On the supply chain, Ngozi Okonjo-Iweala, director general of the World Trade Organization, said the body is "slightly less optimistic" on its goods trade forecast for 2024 due to expanding conflict zones like the one seen in the Red Sea. On the economy, Goldman Sachs (GS) CEO David Solomon related that the "market was clearly running ahead to a position of many [rate] cuts," while Bank of America's (BAC) Brian Moynihan said the Federal Reserve has "got to get normalized and get out of the way."
Integrating AI
Samsung (OTCPK:SSNLF) has launched a new Galaxy S24 lineup to rival Apple’s (AAPL) iPhone 15 models. The new devices contain Galaxy AI with live translation in voice and text, and can summarize incoming messages and suggest replies. The South Korean tech giant also partnered with Google (GOOG, GOOGL) to offer "Circle to Search," which lets users search from anywhere on their phones. In other news, Apple has been forced to disable the blood oxygen sensor on its popular Watch to avoid a device ban stemming from a patent infringement dispute with Masimo (MASI). Adding to the troubles, Apple is expected to face yet another legal battle as soon as March, this time from the U.S. Department of Justice on antitrust grounds. (5 comments)
Current conditions
U.S. economic activity showed "little or no change" in recent weeks for most of the Federal Reserve's 12 districts amid signs that the labor market was cooling in most regions. According to the central bank's Beige Book survey, consumer spending expectations were met in most districts, thanks to seasonal demand, with retail sales heating up more than expected in December. Manufacturing activity was weaker, while a higher interest environment limited auto sales and real estate deals, but respondents were optimistic about the prospect of falling rates. "We suspect consumer spending will increasingly struggle over the next couple of quarters and the Fed will respond with rate cuts, just not as early as the market expects," said ING Economic and Financial Analysis. (4 comments)
Major writedown
Slashing the value of its wireline business, Verizon (VZ) disclosed that it would take a $5.8B impairment charge in Q4 related to "secular declines" in its Business group. The division accounts for more than a fifth of the company's revenue and provides legacy voice and data services to clients that include businesses and the government. However, struggles have been seen in recent years due to strong competition and a broader shift to wireless services. Prior to the disclosure, SA analyst Juxtaposed Ideas re-rated Verizon as a Buy, but warned of the risks like the telecom giant's lead cable-related legal headwinds. (44 comments)
Today's Markets
In Asia, Japan flat. Hong Kong +0.8%. China +0.4%. India -0.4%.
In Europe, at midday, London +0.1%. Paris +0.8%. Frankfurt +0.6%.
Futures at 6:30, Dow +0.1%. S&P +0.3%. Nasdaq +0.6%. Crude +0.9% to $73.11. Gold +0.4% to $2,014.50. Bitcoin -0.7% to $42,384.
Ten-year Treasury Yield -2 bps to 4.09%.
Today's Economic Calendar
7:30 Fed's Bostic Speech
8:30 Housing Starts and Permits
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
12:05 PM Fed's Bostic Speech
4:30 PM Fed Balance Sheet
Companies reporting earnings today »
What else is happening...
Taiwan Semiconductor (TSM) beats on top and bottom line estimates.
Judge in SEC vs. Coinbase (COIN) trial won't decide from bench.
Charles Schwab (SCHW) converts 90% of TD Ameritrade accounts.
U.S. military strikes Houthi sites; Pakistan retaliates against Iran.
EV stocks slide as traders favor Toyota, Honda and Ferrari.
China issues draft guidelines for standardizing the AI industry.
Fed's Bowman: Basel III proposal needs 'substantive' changes.
Sheryl Sandberg is leaving Meta's (META) board after 12 years.
JPMorgan (JPM) CEO: Don’t get involved in bitcoin (BTC-USD).
Boeing part in Alaska Airlines (ALK) blowout made in Malaysia.
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