Morning Roundup

By Mark Masterson on February 20, 2024

Good morning,

Below are the news items moving markets today:

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Executive Summary:

Happy Tuesday!

I hope you had a great long weekend – and we kick off a holiday shortened week with markets modestly lower.

All eyes will be on earnings this week.  Some blue chip names early in the week, and the last of the Magnificent 7 to report this week as well.  No doubt, expectations are high.

In terms of economic data – here is what is on tap this week:

• *FED FOMC MINUTES (WED.)
• *JOBLESS CLAIMS (THURS.)
• *SERVICES PMI (THURS.)
• *MANUFACTURING PMI (THURS.)
• *EXISTING HOME SALES (THURS.)

Not be be outdone – we have multiple Fed speakers this week…..

• *FOMC MEMBER BOSTIC (WED. 8:00AM)
• *FOMC MEMBER BOWMAN (WED. 1:00PM)
• *FED FOMC MINUTES (WED. 2:00PM)
• *FED VICE CHAIR JEFFERSON (THURS. 10:00AM)
• *FOMC MEMBER HARKER (THURS. 3:15PM)
• *FOMC MEMBER COOK (THURS. 5:00PM)
• *FOMC MEMBER KASHKARI (THURS. 5:00PM)
• *FOMC MEMBER WALLER (THURS. 7:35PM)

The FOMC minutes will be important as we look at the potential for “higher for longer”, while markets have anticipated many rate cuts.

The recent inflation data of last week paints a murky picture as it appears inflation may be turning higher.

Remember, while inflation has come down, the cumulative impact of inflation is what damages consumers over time.

As per Goldman Sachs, take a look at some important inflation since 2020……

Price growth since 2020 📊

– Food is up 25%

– Rent is up 22%

– Gasoline is up 22%

– Core CPI is up 18%

Chart: Goldman Sachs 2 20 24

Onward into the week….

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Articles of Interest:

• Market:
  • S&P 500 has reclaimed record high, but companies increasingly striking cautious tone on profit outlooks (Bloomberg)
  • Easy financial conditions, bullish options activity and waning hedging prompting ‘peak euphoria’ talk (Bloomberg)
  • Goldman Sachs raises year-end S&P 500 target to 5200, citing increased profit estimates (Bloomberg)
• China:
  • China Lunar New Year holiday spending surpasses pre-pandemic levels (Reuters, Bloomberg)
  • PBOC leaves MLF rate unchanged as expected, makes little change to liquidity (Bloomberg)
  • Foreign direct investment in China fell to 30-year low in 2023 as lockdowns, weak growth and geopolitical tensions deter global businesses (Bloomberg)
• Energy:
  • US natural gas prices fall to lowest in almost three decades with winter tracking to be warmest on record (FT)
• Geopolitics:
  • Russian opposition leader Alexei Nalvany dies in prison, Biden mulling possible further actions against Moscow (NY Times)
  • Brushing off pressure to halt its offensive, Israel gives Ramadan deadline for Hamas to return hostages or its forces will enter Rafah (AP)
  • FBI alert to Chinese attempts to insert malware that could disrupt critical US infrastructure (FT)
• Washington:
  • Biden administration weighs delaying emissions rules aimed at speeding EV transition to give automakers more time to boost EV sales (Washington Post)
  • Trump ordered to pay more than $350M in civil penalties in New York real estate fraud case (FT)

• Economy:
  • Stronger than expected US January economic data challenges soft landing narrative (Yahoo Finance)
  • China’s premier calls for pragmatic and forceful action to boost the nation’s confidence in the economy (Bloomberg)
  • German companies flock to US with record pledges of capital investment (FT)
  • Japan machinery orders rise in December but Q4 negative again (Nikkei, Reuters)
  • Japan mulling further extension of fuel subsidies beyond May amid sluggish economic growth momentum (Reuters)

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Charts of the day:

Sentiment is getting extreme.

Below is the AAII Consensus Bulls at 78.  The last time we were this high was in December 2013

A pause to refresh sentiment is needed.

Helene Meisler 2 17 24

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Quote of the day:

“The more you learn, the more you’ll earn.”

— Warren Buffett