Morning Reads

Morning Reads

Open Interest Changes



Economic reports are continuing to pour in with a stellar GDP print on Thursday that energized the markets. The benchmark S&P 500 (SP500) notched its fifth consecutive record following the reading, while the Dow Jones Industrial Average (DJI) reached another all-time high. The Nasdaq (COMP.IND) also tacked on gains, but some tech sentiment was hurt after-hours on weak guidance from Intel (INTC) (see more below).

Quote: "People are getting ahead," Treasury Secretary Janet Yellen said in remarks at the Economic Club of Chicago. "Instead of contracting, the economy has continued to grow. They're seeing their fortunes improve, and I believe that if inflation stays low, they'll begin to regain their confidence in the economy. It's a good thing, reflective of strong, healthy spending and productivity improvements, and most likely not creating an inflationary challenge."

Speaking of inflation, the Fed's favorite inflation gauge, known as the core personal consumption expenditures price index, will be published Friday at 8:30 AM ET. The measure is expected to have risen 0.2% in December from November, representing an increase of 3.0% Y/Y. That would mark another success for the central bank, which continues to get closer to its 2% goal despite fears of last-mile challenges. Any incoming data will also help guide monetary policymaking, with things looking bright for the economy on the horizon.

Know your onions: Ed Yardeni, founder of Yardeni Research, sees a "Roaring 2020s" scenario as a base case, drawing parallels between the Spanish flu pandemic and COVID-19, while projecting the S&P 500 will reach 5,400 in 2024. "Our basic premise is that a chronic shortage of labor is forcing companies to use technological innovations to boost their productivity growth, which started to improve last year, according to the government's quarterly data. As a result, inflation remains subdued, while real GDP growth, real wage growth, and profit margins all get boosted. The Fed is likely to ease, but won't have to cut the federal funds rate by much. Stock investors do very well."

Bleak outlook

Intel's (INTC) significantly weaker-than-expected guidance overshadowed a continued rebound in PCs, dragging its stock down 11% in extended trade on Thursday. The company expects Q1 revenue to be $12.2B-$13.2B, well below the $14.3B analysts were anticipating, and guided for adjusted EPS of $0.13, compared to a consensus of $0.42. "While we expect a slightly sub-seasonal Q1 from our core product businesses, we see material inventory corrections in Mobileye and PSG," CFO David Zinsner said on an earnings call. Investing Group Leader Quad 7 Capital called the guidance "painful," saying it stemmed from pressures in data center and AI. "While this segment is the source of massive future growth, the market may have gotten ahead of itself bidding shares up." (78 comments)

Houthi hostilities

Chinese officials have reportedly called on their Iranian counterparts to help end Houthi attacks on ships in the Red Sea or risk harming business ties between the two countries. Note that China is the biggest trading partner of Iran, which has been the biggest backer of the Houthis and the so-called "Axis of Resistance." U.S. and U.K. retaliatory military strikes on Houthi targets in Yemen have so far failed to deter the group from targeting commercial ships in the Red Sea, which have been ongoing since mid-November. The Houthis had originally said they would target Israeli-linked ships to show solidarity with Hamas, but that extended to all ships en route to Israel, and then widened to other vessels regardless of its destination. (1 comment)

Digital dilemmas

The Florida House of Representatives this week passed bipartisan legislation that bans minors under the age of 16 from creating social media accounts, and requires platforms to terminate minors' existing profiles and verify account holders' ages. "Social media use correlates with increasing mental health challenges among children," declared Florida House Speaker Paul Renner, adding that the bill would "prevent this from happening to another generation." Note that the legislation would not apply to websites used for email, messaging, and online shopping, likely causing confusion over which companies need to comply with the law. Other U.S. states have tried to limit social media access for minors, but their efforts have been blocked by lawsuits. (30 comments)

Today's Markets

In Asia, Japan -1.3%. Hong Kong -1.6%. China +0.1%. India closed.
In Europe, at midday, London +1.2%. Paris +2.1%. Frankfurt +0.2%.
Futures at 7:00, Dow -0.2%. S&P -0.2%. Nasdaq -0.5%. Crude -0.7% to $76.79. Gold +0.3% to $2,023.20. Bitcoin +2.8% to $41,298.
Ten-year Treasury Yield -1 bp to 4.12%.

Today's Economic Calendar

8:30 Personal Income and Outlays
10:00 Pending Home Sales
1:00 PM Baker Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Tesla (TSLA) spins lower after earnings - now down 27% in 2024.

Apple (AAPL) unveils biggest changes to iOS, App Store since launch.

Microsoft (MSFT) to lay off 1,900 Activision Blizzard, Xbox employees.

Payment volume at Visa (V) misses, expense guidance increases.

Jamie Dimon shakes up top JPMorgan (JPMexecutive leadership.

Boeing’s (BA) situation 'not tenable,' Bank of America says in downgrade.

GM's (GM) Cruise takes the blame for response to October accident.

Levi Strauss (LEVI) to cut workforce by up to 15%, posts mixed results.

Paramount (PARA) records strong gain as layoffs, merger talk make news.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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