US FINANCIAL MARKET

Stocks Stuck in Range as Earnings Take Spotlight: Markets Wrap – Bloomberg, 1/23/2024

• US equities kept to small ranges ahead of a slew of company results that should offer insights on the state of the global economy.
• The S&P 500 and the Nasdaq 100 were little changed after positive earnings reports from United Airlines Holdings, Verizon Communications and Johnson & Johnson.
• Netflix, which made its first big move into live events by announcing a deal with World Wrestling Entertainment, is scheduled to release results after the close.
• Investors will also be watching for results from the Republican presidential primary as voters in New Hampshire head to the polls.
• Equities have broadly shrugged off the Federal Reserve’s warnings that interest-rate cuts are some way off.
• Instead, they have cheered the economy’s resilience even after the most aggressive policy-tightening cycle in decades.
• But some corners of Wall Street are starting to question if the rally will endure as swaps traders in the US continue to rein in bets of a March rate cut.
• Bond traders are also veering away from making big bets in Treasuries.
• Yields edged higher with the policy-sensitive two-year at 4.41% and the benchmark 10-year at 4.14%.
• Central banks are in focus this week.
• While the Bank of Japan held rates steady, Governor Kazuo Ueda said the certainty of achieving its projections has continued to gradually increase.
• That language supports the prevailing view among economists that the BOJ will raise rates at some point in the first part of this year.
• On Thursday, investor attention will shift to the European Central Bank’s meeting and whether officials there may indicate a start to policy easing.
• Alibaba Group Holding shares jumped after the New York Times reported that founder Jack Ma has been buying up shares in the company.
• Johnson & Johnson’s fourth-quarter earnings beat most analysts’ estimates as a rally in medical device sales continued and pharma revenue exceeded expectations.
• Verizon gave guidance for 2024 adjusted earnings per share that topped the average analyst estimates.
• Homebuilder D.R. Horton sank after reporting weaker-than-expected quarterly orders.
• The Stoxx Europe 600 fell 0.2%.
• The Bloomberg Dollar Spot Index rose 0.3%.
• West Texas Intermediate crude fell 0.2% to $74.62 a barrel.

Aerospace company RTX’s stock rises as Q4 earnings and revenue beat estimates – Market Watch, 1/23/2024

• RTX’s stock was rallying Tuesday toward its largest one-day gain in more than three years after the owner of Collins Aerospace Systems and Pratt & Whitney reported a record backlog and stronger-than-expected results.
• RTX’s revenue rose 10% to $19.93 billion, ahead of the estimate of $19.74 billion.
• The company’s Pratt & Whitney jet engine unit’s profit rose by 25% to $382 million, while sales increased by 14% to $6.44 billion, as it recovered from the geared turbo fan engine issue earlier in the year.
• RTX’s adjusted profit of $1.29 a share beat the FactSet consensus estimate by a nickel per share.
• Chief Executive Greg Hayes said RTX supported a continued recovery in the commercial aerospace business, with $95 billion in new awards for the year and a record backlog of $196 billion.
• Looking ahead, RTX said it expects 2024 adjusted earnings of $5.25 a share to $5.40 a share, compared with the FactSet consensus estimate of $5.28 a share.
• RTX also continues to expect to return $36 billion to $37 billion to shareholders by 2025.

Verizon’s stock rockets as earnings bring a big wireless surprise – Market Watch, 1/23/2024

• Verizon Communications showed signs of a business turnaround Tuesday, posting growth on a key subscriber metric for the first time in a year and surprising some analysts with the magnitude of that growth.
• Revenue came in at $35.1 billion, slightly below the $35.3 billion that the company reported a year prior.
• The FactSet consensus was for $34.6 billion.
• The company’s earnings report showed 318,000 consumer wireless retail postpaid phone net additions during the fourth quarter, which compared with 41,000 such net additions for the same period a year before.
• Meanwhile, quarterly gross consumer postpaid phone additions rose 16.9% from a year before, marking the best performance in four years, according to the company.
• On an adjusted basis, Verizon earned $1.08 a share, matching what analysts tracked by FactSet had been modeling.
• Looking to the full year, Verizon models 2% to 2.5% total wireless service revenue growth for 2024.
• The FactSet consensus implied 2.4% growth.
• The company also expects adjusted earnings per share of $4.50 to $4.70, while analysts had been modeling $4.60.

Lockheed Martin forecasts sales boost on global weapons demand – Financial Times, 1/23/2024

• US aerospace and defense group Lockheed Martin has forecast a larger than expected increase in annual sales in 2024 thanks to strong global demand for weapons.
• Fourth-quarter sales declined in all of Lockheed’s divisions except space, falling the most in its missile business due to supplier timing on PAC-3 air defense missiles.
• The group earned $7.58 a share on revenue of $18.9bn in the three months of 2023, beating analyst estimates of $7.28 a share on sales of $18bn.
• The company said it expected net sales of between $68.5bn and $70bn this year, up from $67.6bn in 2023.
• Analysts expected $68.7bn.
• “Looking ahead to 2024 and beyond, our opportunities to support global security for the US government and its allies remain robust with traditional and breakthrough technologies” chief executive Jim Taiclet said.

Johnson & Johnson narrowly tops quarterly estimates as pharmaceutical, medtech sales jump – CNBC, 1/23/2024

• Johnson & Johnson on Tuesday reported fourth-quarter earnings and revenue that narrowly edged out Wall Street’s expectations as sales in the company’s pharmaceutical and medical devices businesses surged.
• Revenue: $21.40 billion vs. $21.01 billion expected.
• J&J’s medical devices business generated sales of $7.67 billion, up 13.3% from the fourth quarter of 2022.
• Meanwhile, J&J reported $13.72 billion in pharmaceutical sales, marking 4.2% year-over-year growth.
• Excluding sales of its unpopular Covid vaccine, the pharmaceutical division raked in $13.68 billion.
• Wall Street was expecting sales of $13.44 billion for the business segment, according to StreetAccount.
• Wall Street was expecting revenue of $7.50 billion, according to StreetAccount.
• Earnings per share: $2.29 adjusted vs. $2.28 expected.
• J&J also provided full-year guidance for 2024, forecasting sales of $87.8 billion to $88.6 billion and adjusted earnings of $10.55 to $10.75 per share.
• During an earnings call Tuesday, J&J executives said earnings growth in the first half of the year will benefit from a 191 million share reduction in Kenvue. The third quarter will see a “partial benefit,” they added.

P&G Earnings Show Some Consumers Are Getting Used to Higher Prices – Wall Street Journal, 1/23/2024

• Higher prices for household items are not the turnoff that they used to be.
• Procter & Gamble said Tuesday that while pricing is largely fueling sales growth, shoppers stepped up the volume of items purchased across several categories such as hair and family care.
• In the second quarter ended Dec. 31, the Cincinnati-based company said its sales rose 3% to $21.44 billion.
• Analysts polled by FactSet had expected $21.48 billion.
• P&G’s organic sales rose 4% in its second quarter from the prior-year period.
• Excluding the impact of the charge, P&G earned $1.84 a share, which came in stronger than analysts had forecast.
• The company on Tuesday also maintained its outlook for organic sales to increase 4% to 5% in the year ending June 30.

United Airlines’ 2024 Outlook Tops Estimates Despite Early-Year Hurdles – Bloomberg, 1/23/2024

• United Airlines Holdings’s profit is poised to beat Wall Street’s expectations this year as the carrier works to overcome the costs from a grounding of certain Boeing 737 Max planes.
• Revenue was $13.63 billion, while estimates were for $13.54 billion.
• Fourth quarter adjusted profit was $2 a share, United said.
• That topped the $1.69 average of analyst estimates compiled by Bloomberg.
• The airline’s full-year forecast suggests a sharp turnaround after this quarter, when United expects an adjusted loss of 35 to 85 cents a share.
• That would fall well short of the average 21-cent loss estimated by analysts.
• Non-fuel unit expenses in the current quarter will rise by mid-single digits, with a three-percentage-point negative impact if its Max 9 jets remain grounded through Jan. 31.
• Adjusted earnings will be $9 to $11 a share in 2024, United said Monday in a regulatory filing.
• The midpoint topped the $9.45 average of analyst estimates compiled by Bloomberg.

3M forecasts weak 2024 profit as demand slows – Reuters, 1/23/2024

• Industrial conglomerate 3M, forecast full-year earnings below Wall Street estimates on Tuesday as the company grapples with weak demand, sending the diversified manufacturer’s shares down in premarket trading.
• Higher interest rates and inflation have dampened demand for non-essential big-ticket purchases, hurting 3M’s electronics business that makes displays for smartphones and tablets.
• The company reported adjusted revenue of $7.69 billion, compared with estimates of $7.70 billion.
• On an adjusted basis, 3M earned $2.42 per share in the fourth quarter, beating analysts’ estimates of $2.31.
• The company expects 2024 profit between $9.35 and $9.75 per share, compared with analysts’ estimates of $9.81, according to LSEG data.

GE’s first-quarter outlook disappoints, shares fall – Reuters, 1/23/2024

• General Electric, opens new tab flagged lower-than-expected profit in the current quarter, citing the sluggish pace of improvements at its renewable business, after fourth-quarter earnings topped forecasts on demand for parts and services at its jet engine business.
• Total revenue rose 15% to $19.42 billion.
• GE’s adjusted profit for the December quarter came in at $1.03 per share, higher than 91 cents a share expected by analysts.
• The Boston, Massachusetts-based company said while the pace of profit improvement at its renewable business is expected to gather steam in the second half of the year, the performance in the first quarter “will look a lot like the fourth quarter.”
• Overall, the company expects an adjusted profit of 60-65 cents a share in the quarter through March compared with 72 cents a share expected by analysts in a LSEG survey.
• The company said the aerospace business, which makes engines for jets of Boeing, and Airbus, is expected to report $6.0 billion to $6.5 billion in adjusted operating profit in 2024 and more than $5 billion in free cash flow.
• GE said its portfolio of energy businesses, known as GE Vernova, is estimated to generate revenue of $34 billion to $35 billion and free cash flow of $700 million-$1.1 billion in 2024.

Logitech Shares Fall Despite Guidance Uptick – Market Watch, 1/23/2024

• Shares in Logitech International declined after the Swiss manufacturer of computer peripherals and software raised its outlook, though it still expects sales to fall in the current year amid a downturn in spending.
• The company reported early Tuesday morning that third-quarter sales came in at $1.26 billion, down 1% in U.S. dollars and 3% in constant currency, compared with the same period the prior year.
• Operating income increased by 26% to $222.1 million and net income rose to $244.7 million, up from $140.2 million.
• The company now expects an annual sales decline of 6% to 7% to $4.2 billion to $4.25 billion.
• It previously forecasted a full-year sales decline of 9% to 12%, it said.
• It expects operating income of between $610 million and $660 million, up from previous expectations of between $525 million and $575 million, it said.

Halliburton 4Q Operating Earnings Strong as International Services Demand Rises – Market Watch, 1/23/2024

• Halliburton said fourth-quarter net income inched higher as strong demand for oil-drilling equipment worldwide offset a blow from the devaluation of the Argentinian peso.
• Revenue rose 2.7% to $5.74 billion, compared with the average analyst peg of $5.78 billion, as provided by FactSet.
• North American revenue slipped 7.2% to $2.42 billion.
• International revenue rose to $3.3 billion, reflecting increased oilfield activity in Africa and elsewhere.
• Excluding certain one-off items such as the impact of currency devaluation in Argentina, Halliburton logged earnings of 86 cents a share, topping the average Wall Street target of 80 cents a share, as tallied by FactSet.
• Halliburton boosted its quarterly dividend to 17 cents a share from a previous level of 16 cents a share.

D.R. Horton Posts Higher 1Q Revenue, Profit – Market Watch, 1/23/2024

• D.R. Horton reported higher revenue and earnings for its fiscal first quarter as mortgage rates have started to cool off.
• Revenue rose about 6% to $7.73 billion.
• Analysts had expected $7.56 billion.
• Homebuilding revenue rose 8% to $7.3 billion.
• Homes closed rose 12% to 19,340 homes, while the cancellation rate fell to 19% from 27% in the prior-year quarter.
• The homebuilder, based in Arlington, Texas, posted a profit of $947.4 million, or $2.82 a share, for the three months ended Dec. 31, compared with $958.7 million, or $2.76 a share, in the same period a year earlier.
• Analysts surveyed by FactSet had expected $2.87 a share.
• The company also widened its guidance for fiscal 2024, forecasting revenue of $36 billion to $37.3 billion, raising the top end of the range by $300 million.

Paccar’s stock touches record high as it sets revenue and net income records – Market Watch, 1/23/2024

• Paccar’s stock rose to record territory after the truck manufacturer said its fourth-quarter revenue and profits set new records as it hit high-water marks for its vehicles.
• Fourth-quarter revenue climbed to $9.08 billion from $8.13 billion, well ahead of the analyst estimate of $8.48 billion.
• Paccar, which owns Kenworth, Peterbilt and its European unit, DAF, said its fourth-quarter net income rose to $1.42 billion, or $2.70 a share, from $921.3 million, or $1.76 a share, in the year-ago quarter.
• Paccar beat the FactSet consensus estimate of $2.25 a share.

Netflix Pays $5 Billion for ‘Raw’ in Bet on Live Events – Bloomberg, 1/23/2024

• Netflix has acquired the exclusive rights to Raw as well as other programming from World Wrestling Entertainment, marking the streaming service’s first big move into live events.
• The streaming giant has agreed to pay $5 billion over the course of the 10-year deal, according to people familiar with the terms who asked to not be identified because the numbers aren’t public.
• Raw will air on Netflix in the US, Canada, Latin America and other international markets beginning in January 2025, after the expiration of the WWE’s domestic deal with Comcast.
• The company will also become the exclusive home outside the US for all WWE shows and specials, including Smackdown and NXT, as well as pay-per-view live events like Wrestlemania, SummerSlam and Royal Rumble.
• The pay-per-view events will be included at no additional cost for Netflix customers.

Johnson & Johnson to Pay $700 Million to Settle Baby Powder Probe – Wall Street Journal, 1/23/2024

• Johnson & Johnson has tentatively agreed to pay about $700 million to settle an investigation brought by more than 40 states into the marketing of its talcum-based baby powder, a J&J executive said.
• The agreement in principle with attorney general offices in most U.S. states is an “important step” for the company, based in New Brunswick, N.J., as it tries to “reasonably put the matter behind us,” J&J Chief Financial Officer Joseph Wolk said in an interview Tuesday.
• The proposed settlement with states would only address a small portion of the litigation over the safety and marketing of J&J’s talcum powders.
• It doesn’t resolve the personal-injury lawsuits filed by more than 52,000 plaintiffs in various U.S. courts against J&J, alleging that use of the powders, primarily Johnson’s Baby Powder, caused cancer.
• J&J likely will have to spend billions more dollars to resolve the broader litigation.

US ECONOMY & POLITICS

What to Watch in the New Hampshire Primary – New York Times, 1/23/2024

• New Hampshire voters head to the polls on Tuesday for the first presidential primary of the 2024 nomination cycle, in a state that has been known to throw curveballs at overwhelming favorites.
• The withdrawal of Gov. Ron DeSantis from the Republican race on Sunday effectively left what had recently been a crowded field of candidates down to two: former President Donald J. Trump, and former Gov. Nikki Haley of South Carolina.
• After an early-January surge in the polls, Ms. Haley seemed be moving toward striking distance of Mr. Trump in New Hampshire, and when former Gov. Chris Christie of New Jersey dropped out on Jan. 10, it appeared that she briefly had a shot at consolidating the anti-Trump vote among Republicans, independents and about 4,000 Democrats who had re-registered as independent behind her.
• If anything, Mr. Trump’s totals have inched upward.
• Mr. Trump’s hold on his party’s base may be more dominant than any of those previous two-state winners, and no presidential candidate in American history has had quite the same incentives to wrap up a nomination as quickly as possible.
• A convincing Trump win in New Hampshire, where independents had access to the Republican ballot, would leave Ms. Haley hobbled, with few states offering prospects as attractive those in the Granite State.

Fed Review Clears Central Bank Officials of Violating Rules – Wall Street Journal, 1/23/2024

• A two-year-long investigation into the trading practices of two presidents of Federal Reserve banks who resigned in 2021 cleared them of violating policies or laws.
• But the report, released Monday by the Fed’s inspector general, found that the presidents hadn’t properly filed their financial disclosures, and that if they had, the appearances of conflicts of interest posed by their personal investments in 2020 would likely have been worse than they initially appeared.
• The inspector general said it had closed its investigation of former Dallas Fed President Robert Kaplan and former Boston Fed President Eric Rosengren.
• Both men resigned from their positions in September 2021, weeks after their 2020 financial disclosures were made public.
• The public disclosures of their investments from 2020—a year in which the Fed intervened heavily in markets to shield the economy from the fallout from the Covid-19 pandemic—prompted Fed Chair Jerome Powell to announce in October 2021 a sweeping overhaul of personal-finance conduct.
• Kaplan traded large quantities of individual stocks such as Apple, Chevron and Delta Air Lines throughout 2020, including during the week of March 17, one of the most turbulent periods ever in financial markets.
• Those trades were allowed under the Fed’s rules and didn’t violate central bank policies, the inspector general said.
• But the report said incomplete information on Kaplan’s financial disclosures weakened public confidence in the Fed.

EUROPE & WORLD

Ericsson warns of 2024 market decline despite fourth-quarter earnings beat – CNBC, 1/23/2024

• Ericsson said it expects further decline in 5G gear demand from mobile operators this year after beating fourth-quarter operating profit expectations on Tuesday helped by software sales.
• Ericsson’s fourth-quarter net sales fell 16% to 71.9 billion Swedish crowns ($6.89 billion), missing estimates of 76.64 billion.
• Operating profit (EBIT) excluding restructuring charges for the October-December quarter fell to 7.37 billion crowns from 8.08 billion a year earlier but topped the 6.92 billion expected by analysts in an LSEG poll.
• Ericsson’s EBIT margin excluding restructuring charges rose to 10.3% from 9.4%.

China’s Bold Stock-Market Rescue Plan Leaves Investors Skeptical – Bloomberg, 1/23/2024

• China’s boldest plan yet to stem the current stock market rout is facing a wall of skepticism as disillusioned investors say any rebound will prove fleeting without a fundamental fix for its ailing economy.
• A rare mix of positive news including a stabilization fund in the works and Premier Li Qiang’s order to calm markets sent equity benchmarks rallying on Tuesday.
• The latest package including about 2 trillion yuan ($278 billion) to buy mainland shares via offshore trading links shows a sense of urgency from authorities.
• It comes after a rout that’s seen Chinese and Hong Kong stocks erase more than $6 trillion in market value since a peak reached in 2021.
• The value of China’s equity market has never been this far behind that of the US.
• The Hang Seng China Enterprises Index rose 2.8% Tuesday to cap its best day this year while a benchmark for mainland Chinese stocks ended up 0.4% after sliding to a five-year low.

Alibaba Gains on Report Ma, Tsai Buy $200 Million in Stock – Bloomberg, 1/23/2024

• Alibaba Group Holding shares jumped after the New York Times reported that founder Jack Ma has been buying up shares in the company.
• Ma and Alibaba Chairman Joe Tsai have both being buying up shares in recent months as the stock plunged, the newspaper reported Tuesday, citing unidentified people familiar with the matter.
• Ma, the once-outspoken billionaire who stayed out of public view after clashing with Beijing, took to an internal message board last year to urge Alibaba to “correct its course” and praised PDD, which has been swiping market share with its hit shopping app Temu.
• Tsai has purchased about $151 million worth of Alibaba’s US traded shares in the fourth quarter through his Blue Pool Management family investment vehicle, the Times reported, citing a security filing on Tuesday.
• Ma who gave up his role as executive chairman in 2019 but is still a major shareholder, bought $50 million worth of stock in the quarter, the Times reported citing a person with knowledge of the matter.

Amazon Fined in France Over Alleged Employee Surveillance – Wall Street Journal, 1/23/2024

• France’s privacy watchdog fined Amazon.com’s local warehouse management business, saying the company had put in place an “excessively intrusive” system to keep track of staff performance.
• The country’s data-protection regulator, the CNIL, announced Tuesday that it had fined Amazon France Logistique 32 million euros ($34.8 million) in late December, saying the business was collecting data from scanners used to process packages to gauge employee productivity and downtime.
• The CNIL said the scanners kept track of periods of inactivity exceeding 10 minutes and when a package is scanned “too rapidly,” or in less than 1.25 seconds from the previous item, calling such a system excessive as it could pressure staff to justify each break or interruption.
• The watchdog added that Amazon hadn’t properly informed employees and visitors of video surveillance, in breach of the European Union’s General Data Protection Regulation, the EU’s strict data-privacy and security law.

Arab Peace Proposal for Gaza Takes Shape as Top Biden Adviser Lands in Region – Wall Street Journal, 1/23/2024

• Arab countries are working on a proposal for postwar Gaza that would create a pathway toward a Palestinian state in exchange for Saudi recognition of Israel, according to Arab officials.
• The proposal, submitted to Israel via the U.S., is the first joint plan by Arab states to end the war in Gaza and set a pathway toward a two-state solution.
• Saudi Arabia, which is one of five Arab countries making the proposal, is offering to normalize ties with Israel in return, a process derailed by the Hamas-led attack on Oct. 7.
• The proposal is still being finalized, according to Saudi and Egyptian officials, but has so far been rejected by Israel’s government, with the creation of a Palestinian state the main sticking point.
• The news emerged amid a renewed flurry of diplomatic activity from U.S. and European officials seeking to stop the fighting.
• President Biden’s top Middle East adviser, Brett McGurk, arrived in the region Monday to discuss the war and the fate of Israeli hostages, meeting Egyptian officials in Cairo before heading to Qatar, said Egyptian officials.

Israeli Military Suffers Deadliest Day Since Gaza War Began – Wall Street Journal, 1/23/2024

• The Israeli military said at least 24 soldiers were killed when two buildings rigged for demolition in Gaza collapsed after militants fired at a nearby tank, by far the deadliest incident for Israel in the enclave since the start of the war.
• The blast from the rocket-propelled grenade on Monday likely caused the explosives to detonate, collapsing the buildings, the military said.
• The Israeli soldiers, all reservists, were operating inside Gaza around 600 yards west of the Israeli town of Kibbutz Kissufim, the Israeli military said, as part of efforts to create a buffer zone, Israel’s Army Radio reported.
• Israel’s rescue efforts went late into the night and were completed.
• The incident raised the death toll of Israeli soldiers in Gaza to more than 220 and represented around 10% of the total number of Israeli troops killed since the war began.

Factmonster – TODAY in HISTORY

• The deadliest earthquake on record killed 830,000 in Shansi, China. – 1556
• Georgetown University established in what is now Washington, DC. – 1789
• Elizabeth Blackwell became the first woman physician in the U.S. – 1849
• The 24th Amendment to the Constitution, barring poll taxes, was ratified. – 1964
• North Korea seized the U.S. Navy ship Pueblo (the crew was released 11 months later.) – 1968.
• President Nixon announced that an accord had been reached to end the Vietnam War. – 1973

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted. 

All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Financial Group or LPL Financial.

Prior to making any investment decision, please consult your financial advisor regarding your specific situation.