Daily Market Report 01-17-2024

Daily Market Report

As of 11:00 A.M. EST


Stocks Drop as Solid Retail Sales Lift Bond Yields: Markets Wrap – Bloomberg, 1/17/2024

  • Stocks fell, and bond yields rose, with traders trimming Federal Reserve rate cuts bets after stronger-than-estimated retail sales data.
  • Fed swaps show the probability of easing as soon as March drops to 60% — compared with 80% on Friday.
  • The S&P 500 extended its 2024 losses.
  • The S&P 500 fell 0.8%. The Nasdaq 100 fell 1.4%. The Dow Jones Industrial Average fell 0.3%.
  • Treasury two-year yields topped 4.3%.
  • The yield on 10-year Treasuries advanced five basis points to 4.11%.
  • The Bloomberg Dollar Spot Index rose 0.3%.
  • Wall Street’s “fear gauge” — the VIX — hit the highest since November.
  • The MSCI Emerging Markets Index of stocks slid 2%, with the broad risk-off tone sinking oil.
  • US retail sales rose at the most robust pace in three months in December, capping solid holiday spending that faces headwinds in the new year.
  • Separate data showed industrial production edged up, topping economist estimates.
  • Traders will also be closely watching remarks from policymakers on Wednesday and the Fed’s Beige Book for clues on the rate outlook.
  • For days, central bank officials have been striking a more cautious tone about prospects for easing.
  • They’ve pushed back the timing for the first moves, assigning a lower probability to reductions in the first quarter.
  • Operators of Boeing’s 737 Max 9 have completed inspections on an initial batch of 40 planes, a pivotal step to eventually end the plane grounding ordered by US regulators 11 days ago.
  • Verizon Communications is writing down the value of its business services division by $5.8 billion, a sign of the company’s declining enterprise operations.
  • Charles Schwab reported a decline in net new assets in the fourth quarter, as the brokerage navigated a tumultuous year where interest rate hikes dented the firm’s balance sheet.
  • US Bancorp reported earnings that beat analysts’ estimates as the bank benefits from elevated interest rates.
  • The Stoxx Europe 600 fell 1.6%.
  • West Texas Intermediate crude fell 1.5% to $71.29 a barrel.
  • Spot gold fell 0.5% to $2,018.57 an ounce.

Charles Schwab Stock Falls 6% After Brokerage Reports Lower Profit – Wall Street Journal, 1/17/2024

  • Shares of Charles Schwab fell in morning trading after the brokerage giant reported fourth-quarter earnings.
  • Revenue slid 19% to $4.46 billion.
  • That just missed the $4.49 billion expected by analysts polled by FactSet.
  • Results were weighed down by a $172 million Federal Deposit Insurance Corp. special assessment. Schwab and other big banks had to set aside money to pay a particular fee to the FDIC, which dealt with multiple bank failures last year.
  • The bank had $290 billion in deposits at the end of 2023, down 21% from the end of 2022.
  • Clients’ daily average trades fell to 5.2 million, down 4% from a year ago.
  • Net income fell 47% from a year earlier to $1.045 billion in the quarter.

Verizon to Book $5.8 Billion Charge on Business Unit – Wall Street Journal, 1/17/2024

  • Selling landlines and internet connections to businesses isn’t as lucrative as it used to be.
  • Verizon said it would take a $5.8 billion charge to write down the value of the division that offers such services to a range of companies, from small retailers to multinational corporations.
  • Once at the core of Verizon and rival AT&T’s operations, revenue from landline business services has eroded because of stiff competition from smaller rivals and the unbundling of phone and broadband products that once enjoyed hefty profit margins.
  • Verizon still makes most of its profit from cellphone services and is the largest US wireless company in terms of subscribers.
  • That business has also struggled with slowing revenue growth and customer losses to AT&T and T-Mobile.
  • Executives have recovered some of the lost revenue through higher fees.
  • Verizon said it booked the non-cash charge after completing a five-year review of the unit’s financial outlook.
  • Following the charge, the unit has $1.7 billion in year-end goodwill, an estimate of its value beyond its assets.

Profit Drops at Citizens, US Bank – Wall Street Journal, 1/17/2024

  • Regional bank earnings are in full swing, with two significant players reporting big profit declines in the fourth quarter.
  • Key points from Citizens Financial’s earnings:
  • Revenue in the fourth quarter slid nearly 10% to roughly $2 billion, slightly above what analysts forecasted.
  • Net income dropped 71% from a year earlier to $189 million.
  • That amounted to 34 cents a share, well below the 60 cents analysts polled by FactSet expected.
  • Citizens set aside $225 million for special government fees to replenish a Federal Deposit Insurance Corp. fund that covered uninsured deposits after two of its peers failed in early 2023.
  • And for U.S. Bancorp:
  • Revenue rose 6% in the fourth quarter to roughly $6.7 billion, below analyst estimates of $6.9 billion.
  • Net income slid 7% from a year earlier in the fourth quarter to $861 million.
  • That amounted to 49 cents a share, below the 71 cents analysts expected.
  • US Bank’s results were hit by $734 million in special FDIC fees.

JetBlue’s $3.8 Billion Spirit Deal Turns Into a Nightmare – Bloomberg, 1/17/2024

  • It was supposed to be the merger from heaven — or at least, from 30,000 feet.
  • But now, the collapse of the $3.8 billion deal between JetBlue Airways and Spirit Airlines over antitrust concerns leaves the two carriers adrift, upending the low-cost travel sector and tarnishing the legacy of JetBlue’s swashbuckling CEO as he heads for the exits.
  • The deal’s collapse may not be such bad news for JetBlue’s investors.
  • The company won’t have to shell out billions of dollars and won’t be saddled with a discount carrier as demand wanes at the lower end of the travel market.
  • For Spirit, the consequences appear dire.

Prologis Profit Rises as Occupancy Holds Steady – Wall Street Journal, 1/17/2024

  • Prologis’s profit rose in the fourth quarter despite economic uncertainty.
  • Revenue rose 7.8% to $1.89 billion, beating the $1.85 billion expected by analysts polled by FactSet.
  • The San Francisco-based logistics-property landlord posted a profit of $630.9 million, or 68 cents a share, in the quarter ended December 31, compared with $587.2 million, or 63 cents a share, a year earlier.
  • Core funds from operations, an operating metric that strips out certain items, came to $1.26 a share, up from $1.24 in the prior-year period and in line with analysts’
  • Average occupancy was 97.1%, the same as in the previous quarter.
  • Prologis expects a full-year 2024 profit of $3.20 to $3.45 a share, compared with $3.29 in 2023.
  • The company forecasts average occupancy of 96.5% to 97.5% for the entire year.

Boeing Makes Progress On 737 Ungrounding With First Checks – Bloomberg, 1/17/2024

  • Operators of Boeing’s 737 Max 9 have completed inspections on an initial batch of 40 planes, a pivotal step to eventually end the grounding of the aircraft ordered by US regulators in the wake of an accident earlier this month.
  • The US Federal Aviation Administration will now review findings from those 40 checks to determine whether the Boeing-drafted procedures are appropriate to return the fleet of 171 parked Max 9s to service, the agency said in a statement Wednesday.
  • “Once the FAA approves an inspection and maintenance process, it will be required on every grounded 737-9 MAX before future operation,” the agency said.
  • “The safety of the flying public, not speed, will determine the timeline for returning these aircraft to service.”
  • Boeing Chief Executive Officer Dave Calhoun plans to visit the main campus of Spirit AeroSystems Holdings in Wichita, Kansas, later on Wednesday, where the supplier assembles a large part of 737 Max’s main airframe.
  • Calhoun will participate in a town hall gathering with Spirit employees alongside Spirit CEO Pat Shanahan and Chairman Bob Johnson.


US Retail Sales Rise By Most in Three Months to Cap Holidays – Bloomberg, 1/17/2024

  • US retail sales rose at the most robust pace in three months in December, capping a solid holiday season that suggests consumer resilience heading into the new year.
  • The value of retail purchases, unadjusted for inflation, increased 0.6% in a broad-based advance, Commerce Department data showed Wednesday.
  • Excluding autos, sales rose 0.4%.
  • Motor vehicle sales were up 1.1%, matching the most significant increase since May, while those at gas stations fell for a third month as pump prices declined.
  • So-called control group sales —used to calculate gross domestic product — advanced 0.8%, the most since July.

US Industrial Production Edges Up to Close Out Soft Year – Bloomberg, 1/17/2024

  • US industrial production increased in December, consistent with sluggish manufacturing output that closed out a weak 2023.
  • The 0.1% advance in production at factories, mines, and utilities followed no change a month earlier, Federal Reserve data showed Wednesday.
  • Manufacturing output also rose 0.1% in December, helped again by a pickup in motor-vehicle production tied to the end of the United Auto Workers’ strike.
  • Excluding autos, factory production slipped 0.1%, the third-straight monthly decline.
  • Factory output decreased an annualized 2.2% in the fourth quarter, wrapping up the weakest year for manufacturing since 2020.
  • Output of consumer goods edged up 0.2%, while output of materials rose slightly.
  • Capacity utilization at factories, a measure of potential output, held at 77.1%.

Fed’s Bank Capital Plan Needs Substantive Changes, Bowman Says – Bloomberg, 1/17/2024

  • Federal Reserve Governor Michelle Bowman said the central bank’s controversial proposal to boost bank capital needs “substantive changes,” the Fed should seek comment on any revised plan. This move would delay its finalization.
  • Bowman, who voted against issuing the proposal for public comment last year, said she is “cautiously optimistic” that officials can work toward a compromise that would garner broader support for the plan, led by Vice Chair for Supervision Michael Barr.
  • Bowman’s colleague Christopher Waller, who also voted against issuing the proposal last year, said Tuesday it needs a “major overhaul” and may need to be scrapped altogether.
  • Given the significant pushback on the rule from various stakeholders, “agencies are obligated to think carefully about the best path forward,” Bowman said in Wednesday remarks to the US Chamber of Commerce in Washington.
  • In particular, Bowman criticized the plan’s “excessive calibration” of capital levels.
  • The large increase in capital requirements “could result in significant harm to the US economy through the impact on US businesses while failing to achieve the intended goals of improving safety and soundness and promoting financial stability,” she said.

US Homebuilder Sentiment Increases by Most in Nearly a Year – Bloomberg, 1/17/2024

  • US homebuilder sentiment climbed in January by the most in nearly a year as lower mortgage rates boosted customer traffic, sales, and the demand outlook.
  • The National Association of Home Builders/Wells Fargo gauge of housing market conditions increased seven points to 44, according to data out Wednesday.
  • The January figure exceeded all estimates in a Bloomberg survey of economists.
  • The group’s measure of expected sales increased 12 points, the most since June 2020, while the gauges of prospective buyer traffic and current sales rose to four-month highs.
  • Builder sentiment improved in three regions, led by sizable advances in the South and West.
  • With rates below 7%, some builders are stepping back from price cuts.
  • This month, 31% of builders reported lowering prices, the smallest share since August.
  • The average reduction held at 6%, according to the report.
  • Some 62% indicated they provided some form of incentive, in line with the share in recent months.


UK Inflation Rises Unexpectedly, Tempering Talk of Rate Cuts – Bloomberg, 1/17/2024

  • UK inflation picked up unexpectedly for the first time in 10 months, prompting traders to scale back their expectations for rate cuts from the Bank of England this year.
  • The Consumer Prices Index rose 4.0% from a year earlier in December, up from a 3.9% rise the previous month, the Office for National Statistics said Wednesday.
  • Economists had expected a slight fall to 3.8%.
  • Services inflation also increased, and a core measure stripping out food and energy held at 5.1%.
  • Services inflation — which BOE officials are watching for signs of underlying pressures on prices — accelerated to 6.4% in December from 6.3% in November.
  • Clothing price inflation jumped to 6.8%, while computer game consoles, sports equipment, toys, and DVDs also helped drive prices higher in the recreation and culture category.
  • Food inflation continued to slow, dropping 8% from 9.2% in November.
  • That was more than offset by increased alcohol and tobacco prices, which rose 12.8% from a year ago.
  • Tobacco prices rose by 4.1% between November and December compared with a 0.3% rise between the same two months last year.
  • The fuel and raw materials cost was 2.8% lower than a year earlier, reflecting falls in the price of chemicals and crude oil.

China’s Economic Growth Disappoints, Fueling Stimulus Calls – Bloomberg, 1/17/2024

  • China is still facing significant challenges from deflation pressures and the property crisis as the year kicks off, with investors underwhelmed by policies to keep economic momentum going.
  • Data released Wednesday presented a mixed bag for the world’s second-largest economy, which hit an official growth target for the year but has failed to shake off several of the problems most persistently weighing on domestic demand and confidence.
  • A slew of home prices and property-related spending indicators disappointed, while deflation remains stubborn.
  • A measure of broad price changes recorded its longest stretch of quarterly declines since the wake of the Asian Financial Crisis in 1999.
  • Gross domestic product grew 5.2% last year, data released by the National Bureau of Statistics showed Wednesday, matching expectations.
  • Industrial output rose 6.8% in December from a year ago, compared with a 6.6% increase projected by economists.
  • Retail sales grew 7.4%, compared with an 8% gain forecast.
  • Fixed-asset investment climbed 3% for the entire year, better than a predicted 2.9% rise.
  • The urban jobless rate was 5.1% last month, up from 5% in November.
  • The GDP deflator — a broad measure of prices — fell 1.5% in the October-to-December period, according to Bloomberg calculations based on official data released Wednesday.

Lagarde Says It’s Likely ECB Will Cut Rates in Summer – Bloomberg, 1/17/2024

  • The European Central Bank will likely cut interest rates in the summer, according to President Christine Lagarde.
  • “I would say it’s likely, too,” Lagarde said.
  • “But I have to be reserved because we are also saying that we are data dependent and that there is still a level of uncertainty and some indicators that are not anchored at the level where we would like to see them.”
  • “You’ve talked to some of them; they have spoken recently, and each of them has their view, which I respect completely,” Lagarde said.
  • “We generally coalesce towards our decisions based on data. Some of them have their local domestic data and respective inflation rates, which are different from one country to the other.”
  • “We are on the right path; we are directionally towards the 2%, but unless and until we are confident that it is sustainably at 2% — medium term — and we have the data to support it, I’m not going to shout victory,” she said. “Not yet.”
  • Dutch central bank chief Klaas Knot, speaking concurrently on CNBC, chimed in with his view on investor bets.
  • “Markets are getting ahead of themselves, it’s pretty clear, and the problem for us is that in the end, that might become self-defeating,” he said.
  • “We are optimistic that we have a credible prospect of a return of inflation to 2% in 2025, but a lot still needs to go well for that to happen.”

Apple overtakes Samsung as the top seller of smartphones – Reuters, 1/17/2024

  • Apple opens new tab ended Samsung Electronics’, opens recent tab 12-year run as the largest seller of smartphones in the world after commanding a 20% market share in 2023, according to a report from International Data Corp.
  • Samsung ended the year with a 19.4% share, followed by China’s Xiaomi, opening a new tab, Oppo and Transsion, preliminary data from IDC’s Worldwide Quarterly Mobile Phone Tracker showed.
  • The change in ranking comes after a tough year that saw consumers going slow on smartphone upgrades and choosing cheaper handsets due to high inflation and economic uncertainties.
  • Phone shipments from Samsung were down 13.6%, while iPhone shipments were up 3.7% last year, according to IDC data.

Tesla Price Cuts Send European, Chinese Auto Stocks Lower – Wall Street Journal, 1/17/2024

  • Shares of European and Chinese automakers fell after Tesla continued to cut prices amid heightened global competition and uncertain demand in the electric vehicle market.
  • In Germany, the US electric car company slashed prices by 5,000 euros ($5,439) for two versions of its Model Y, according to its website.
  • The Performance model now costs German consumers EUR55,990 while the Long Range model costs EUR49,990.
  • Tesla also cut the base Model Y price by EUR1,900 to EUR42,990.
  • Meanwhile, in China, Tesla cut the price of its entry-level Model 3 by 5.9% to 245,900 yuan ($34,291) and lowered the Model Y’s starting price to CNY258,900 from CNY266,400 on Friday.

Israel’s War in Gaza Enters Its Most Perilous Phase Yet – Wall Street Journal, 1/17/2024

  • In a dark tunnel lined with concrete, 60 feet below ground, the Israeli general held one hand above the other to illustrate his soldiers’ mission: to destroy Hamas in this sprawling city and the intricate warrens beneath it.
  • “Underground, the defender has the edge. We’re working to cut it down,” said Brig. Gen. Dan Goldfus commands the 98th Paratroopers Division of the Israeli military.
  • The tunnel was barely broader than his shoulders or taller than his helmet.
  • “You want to avoid going chest-to-chest here,” he said.
  • But Israel’s progress in the south is facing a logjam.
  • Its forces are closing in on a swollen population of displaced Palestinians who are running out of places to flee.
  • The process could culminate in a cease-fire that spares civilians but also allows Hamas to survive and recover, a strategic defeat for Israel.
  • It also risks ending in an even greater bloodbath than in the north.

Dimon Says China Risk-Reward Equation Has ‘Changed Dramatically’ – Bloomberg, 1/17/2024

  • China has been “very consistent” in opening up to financial services companies, but calculating the potential upside for US firms has become more complicated, according to Jamie Dimon.
  • Investors considering moving into the world’s second-largest economy must be “a little worried” because “the risk-reward has changed dramatically,” the longtime JPMorgan Chase chief executive officer said Wednesday in a CNBC interview from the World Economic Forum in Davos.
  • Still, “they’re trying to make sure that they’re open for business, that they’re being fair to foreign companies,” Dimon said, adding that he met with Chinese Premier Li Qiang at the conference, and “it’s good they’re here.”
  • In the wide-ranging interview, Dimon also addressed the US economy.
  • “It’s a mistake to assume that everything’s hunky dory,” Dimon said.
  • “When stock markets are up, it’s like this little drug we all feel, like it’s just great. But remember, we’ve had so much fiscal and monetary stimulation, so I’m a little more cautious.”

Maersk, Hapag-Lloyd Form Shipping Alliance in Industry Reshuffle – Wall Street Journal, 1/17/2024

  • Danish shipping giant A.P. Moeller-Maersk and Germany’s Hapag-Lloyd are teaming up to form a new vessel-sharing agreement from next year, shaking up the global lineup of shipping alliances.
  • The long-term deal announced Wednesday—dubbed Gemini Cooperation—seeks to boost efficiencies and help accelerate the companies’ decarbonization efforts by delivering a flexible and interconnected ocean network, they said.
  • A fleet pool of around 290 vessels will be used in the collaboration, offering a combined capacity of 3.4 million containers, with Maersk deploying 60% of the ships and Hapag-Lloyd 40%.
  • Maersk has a total fleet of around 740 vessels, while Hapag-Lloyd has 264.
  • The two companies will target schedule reliability of above 90% once the network is fully phased in.

Britain’s King Charles III to undergo hospital treatment for an enlarged prostate – CNBC, 1/17/2024

  • Britain’s King Charles III will undergo a “corrective procedure” in the hospital next week after seeking treatment for an enlarged prostate, Buckingham Palace said Wednesday.
  • “In common with thousands of men each year, The King has sought treatment for an enlarged prostate,” the statement said.
  • “His Majesty’s condition is benign, and he will attend hospital next week for a corrective procedure.”
  • It added that the 75-year-old’s monarch “public engagements will be postponed for a short period of recuperation.”
  • A Buckingham Palace source told NBC News that Charles “was keen to share the details of his diagnosis to encourage other men who may be experiencing symptoms to get checked, in line with public health advice.”
  • The announcement comes on the same day it was announced that Kate, the Princess of Wales, had undergone planned abdominal surgery and will be hospitalized for up to two weeks.
  • The 42-year-old wife of Prince William, Charles’ eldest son and heir to the throne, will take a prolonged break from her usually busy public appearances and private engagements, a statement from Kensington Palace said.

China’s Population Decline Accelerates as Women Resist Pressure to Have Babies – Wall Street Journal, 1/17/2024

  • Births in China dropped by more than 500,000 last year to just over 9 million, accelerating the decline in the country’s population as women shrugged off the government’s appeals to reproduce.
  • The number of newborns has gone into free fall over the past several years.
  • Official figures released Wednesday showed that China had fewer than half the number of births in 2023 than in 2016 after it abolished the one-child policy.
  • The latest number points to a fertility rate—the number of children a woman has over her lifetime—that is close to 1.0, a level demographers consider as “ultralow.”
  • Over the past year, China’s population dropped by 2.08 million, more than twice the drop in 2022.
  • China ended 2023 with 1.410 billion people, the National Bureau of Statistics said Wednesday, down from 1.412 billion in 2022.
  • The latest data shows that the fertility rate is less than half of the replacement rate of 2.1, said He Yafu, an independent demographer based in Guangdong.

Chinese Lab Mapped Deadly Coronavirus Two Weeks Before Beijing Told the World, Documents Show – Wall Street Journal, 1/17/2024

  • Chinese researchers isolated and mapped the virus that causes COVID-19 in late December 2019, at least two weeks before Beijing revealed details of the deadly virus to the world, congressional investigators said, raising questions anew about what China knew in the pandemic’s crucial early days.
  • Documents obtained from the US Department of Health and Human Services by a House committee and reviewed by The Wall Street Journal show that a Chinese researcher in Beijing uploaded a nearly complete sequence of the virus’s structure to a US government-run database on December 28, 2019.
  • Chinese officials at that time were still publicly describing the disease outbreak in Wuhan, China, as viral pneumonia “of unknown cause.” They had yet to close the Huanan Seafood Wholesale Market, the site of one of the initial Covid-19 outbreaks.
  • China only shared the virus’s sequence with the World Health Organization on January 11, 2020, according to US government timelines of the pandemic.
  • The sequence Ren provided in December 2019 was never published and was deleted from the database on January 16, 2020, after NIH asked her for more technical details. She didn’t respond, Egorin wrote.

Fight Over Ukraine, US Border Moves to White House – Wall Street Journal, 1/17/2024

  • President Biden plans to hold a high-stakes meeting with Senate and House leaders on Wednesday to discuss his $110.5 billion national security request, which has stalled due to Republicans’ demands that any further aid for Ukraine come with a major crackdown on illegal immigration.
  • Senate Republicans have said they won’t help Democrats advance the package, which includes assistance for Ukraine, Israel, and Taiwan unless the Biden administration agrees to policy changes to tighten security at the US’s southern border.
  • A small, bipartisan group of senators has struggled for weeks to reach a border deal, just as the Pentagon ran out of money to send more hardware and ammunition for Ukraine and Russia intensified its ground assaults and missile and drone attacks.
  • White House press secretary Karine Jean-Pierre said Tuesday that the president wants to find “ways to secure our border” and “help Ukraine defend itself.”
  • Jean-Pierre said that Senate discussions are “heading in the right direction” but warned that “the consequences of congressional inaction would be severe.”

Factmonster – TODAY in HISTORY

  • James Madison Randolph, the grandson of Thomas Jefferson, became the first child born in the White House. – 1806
  • Hawaii’s Queen Liliuokalani was forced to abdicate by a group of planters and businessmen. – 1893
  • Gary Gilmore became the first person executed in the US since the death penalty was reintroduced. – 1977
  • Operation Desert Storm was launched against Iraq. – 1991
  • President Clinton became the first sitting US president to testify as a defendant in a criminal or civil suit. – 1998
  • Gray Davis declared a state of emergency concerning California’s electricity crisis. – 2001

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