US FINANCIAL MARKET

Stocks Rise as Data, Tech Earnings Boost Optimism: Markets Wrap – Bloomberg, 1/24/2024

• US stocks continued to gain in Wednesday trading, with traders positive about the economy after a fresh batch of data topped estimates and technology companies reported robust earnings.
• The S&P 500 pushed higher, and the Nasdaq 100 rose more than 1%.
• Netflix’s shares soared after subscriber numbers surpassed expectations.
• Meta Platforms touched a fresh record high, propelling its market value to $1 trillion for the first time since 2021.
• The US 10-year yield hovered around 4.12%.
• The Bloomberg Dollar Spot Index fell 0.5%.
• With earnings due later in the day from Tesla and IBM, the spotlight remains on the tech sector.
• Even more broadly, the US earnings season so far indicates companies are coping well with higher interest rates.
• Elsewhere, industrial metals prices received a boost after China signaled plans to stimulate its economy by cutting the reserve requirement ratio for banks.
• The move should allow Chinese banks to step up lending and their purchases of government bonds.
• The news also supported Brent crude around $80 a barrel.
• The Stoxx Europe 600 rose 1.1%.

Netflix Posts Best Customer Gain Since Surge During Pandemic – Bloomberg, 1/24/2024

• Netflix signed up 13.1 million customers in the final three months of 2023, the streaming giant’s best quarter of growth since viewers were stuck at home in the early days of the pandemic.
• Sales rose to $8.83 billion, the company said Tuesday, also topping forecasts.
• The strong tally exceeded Wall Street’s estimate of 8.91 million and beat projections in every region of the world, with Netflix adding more than 5 million customers in Europe, the Middle East and Africa alone.
• The ad-supported tier got off to a slow start but has begun to gather momentum.
• The company said earlier this month it now has more than 23 million people using the tier.
• Fourth-quarter earnings rose to $2.11 a share, though that was short of Wall Street forecasts.
• Netflix generated net income of $5.41 billion for all of last year and closed 2023 with $7.1 billion in cash and short-term investments.
• Netflix said it won’t add as many customers in the first quarter of 2024 as it did in the final months of 2023, though the tally will exceed the year-ago period’s 1.75 million.
• Wall Street expects Netflix to add 4.31 million customers in the quarter.
• Netflix said it will continue to boost revenue at a double-digit rate, in part by raising prices, as it has done for many years now.

AT&T Stock Falls After Telecom Giant’s Soft Earnings Outlook – Wall Street Journal, 1/24/2024

• AT&T continued gaining subscribers for its core cellphone business in the last three months of 2023, lifting revenue and spurring the company to guide for another year of free cash flow growth.
• Quarterly revenue rose more than 2% to $32 billion, above the $31.46 billion that analysts had expected, according to FactSet.
• Last quarter, the cell carrier added 526,000 postpaid phone connections, its main profit engine.
• Analysts surveyed by FactSet had expected the company to add about 488,000.
• Stripping out one-time items, adjusted earnings were 54 cents a share, versus the 56 cents expected.
• AT&T posted free cash flow of $6.4 billion, up from $6.1 billion a year ago.
• AT&T forecast adjusted earnings of $2.15 to $2.25 a share, below the $2.46 that analyst expected.
• AT&T is targeting free cash flow of $17 billion to $18 billion, up from $16.8 billion in 2023.
• The company said its recent $14 billion deal with Ericsson would accelerate the depreciation of AT&T’s Nokia equipment, stinging earnings.

Elevance Health Issues Upbeat 2024 Adj. Earnings Outlook After 4Q Revenue Gains – Market Watch, 1/24/2024

• Elevance Health issued upbeat adjusted earnings guidance for the current year after it reported revenue growth for the fourth quarter, powered higher by contributions from its Carelon unit.
• Revenue rose about 7% to $42.45 billion, topping the $42.19 billion that analysts surveyed by FactSet were expecting.
• Sales were boosted by higher premium revenue from the health-benefits business and higher pharmacy-product revenue from CarelonRx, lifted in part by the company’s acquisition of the BioPlus specialty pharmacy in 2023.
• Revenue from the company’s health-benefits unit rose more than 4% while its Carelon unit posted revenue gains of 14%.
• Stripping out one-time items, including losses on financial instruments and amortization, adjusted earnings were $5.62 a share.
• Analysts surveyed by FactSet had expected $5.60 a share.
• For 2024, Elevance is targeting adjusted earnings of more than $37.10 a share, above the $37.03 a share that analysts expect.
• The company is forecasting flat to low-single digit percentage growth in operating revenue.

Textron 4Q Revenue Higher on Bell Segment Growth – Market Watch, 1/24/2024

• Textron logged higher revenue in its latest quarter, aided by growth in its Bell segment.
• Revenue rose to $3.89 billion from $3.64 billion.
• Analysts polled by FactSet expected $3.97 billion.
• Leading its revenue growth were results from its Bell segment, which grew $255 million to $1.1 billion.
• Texton said the increase reflected higher commercial revenues driven by increased deliveries and higher military revenues related to the FLRAA program.
• Adjusted earnings were $1.60 a share, above analysts’ estimates of $1.53 a share.
• For 2024, the Providence, R.I.-based company forecast revenue around $14.6 billion and adjusted earnings in the range of $6.20 a share and $6.40 a share.
• Analysts polled by FactSet expected $14.69 billion in revenue and earnings of $5.97 a share on an adjusted basis.

Texas Instruments Signals Slump in Industrial Chips Drags On – Bloomberg, 1/24/2024

• Texas Instruments shares slid after the chipmaker delivered a disappointing quarterly forecast, indicating that a slump in demand for industrial and automotive electronic components is dragging on.
• Texas Instruments’ revenue in the fourth quarter declined 13% to $4.08 billion, compared with an average estimate of $4.13 billion.
• Profit was $1.49 a share, down from $2.13 a year earlier.
• The Dallas-based company has built back up its inventory to near target levels — around $4 billion — and slowed down production lines to guard against an excessive accumulation, Lizardi said.
• Sales in the first quarter will be $3.45 billion to $3.75 billion, the company said in a statement Tuesday.
• That compares with an average analyst estimate of $4.09 billion, according to data compiled by Bloomberg.
• Profit will be 96 cents to $1.16 a share, versus a prediction of $1.42.

Abbott Laboratories Stock Is Down. Earnings and Sales Aren’t the Problem. – Barron’s, 1/24/2024

• Shares of Abbott Laboratories were falling after the maker of healthcare products turned in a solid fourth-quarter report but issued light guidance.
• Sales of $10.24 billion topped analysts’ forecast for $10.19 billion and rose from the $10.09 billion recorded the year prior.
• Abbott posted adjusted earnings per share of $1.19, in line with Wall Street’s call for $1.19, according to FactSet.
• The company expects full-year 2024 adjusted earnings per share of $4.50 to $4.70, while analysts see it in the midrange, $4.60, which would mark an increase from $4.44 in 2023.

Kimberly-Clark’s stock dented by weaker-than-expected fourth-quarter earnings – Market Watch, 1/24/2024

• Kimberly-Clark’s stock fell early Wednesday, after the parent to consumer brands including Huggies diapers and Scott and Kleenex tissues posted fourth-quarter earnings that fell short of expectations.
• Sales rose to $4.970 billion from $4.964 billion a year ago, also below the $4.989 billion FactSet consensus.
• In North America, organic sales rose 5% in the personal care segment, while consumer tissue was up 3%, partially offset by a 3% decline in K-C Professional.
• Net sales at the overall personal care segment rose 2% to $2.6 billion, while consumer tissue sales fell 1% to $1.5 billion.
• Gross margin improved by 210 basis points to 34.9%, as higher net revenue realization, cost sales and favorable input costs partially offset unfavorable currency impacts and higher other manufacturing costs.
• Adjusted per-share earnings came to $1.51, below the $1.54 FactSet consensus.
• For 2024, Kimberly-Clark is expecting organic sales to grow at a low-to-mid single digit percentage rate and EPS to grow at a high single-digit rate on a constant-currency basis versus the prior year period.
• The company raised its quarterly dividend by 3.4% to $1.22 a share.
• The new dividend is payable April 2 to shareholders of record as of March 8.

Intuitive Surgical 4Q Revenue Rises on Procedure Growth – Market Watch, 1/24/2024

• Intuitive Surgical’s revenue rose in the fourth quarter as it completed more procedures with its robotic-assisted surgery systems.
• Revenue rose 17% to $1.93 billion, beating the $1.89 billion expected by analysts polled by FactSet.
• Stripping out certain one-time items, adjusted per-share earnings came to $1.60, ahead of the $1.48 forecast by analysts, according to FactSet.
• Intuitive Surgical’s instruments and accessories revenue increased 22% in the period on the back of 21% growth in procedure volume from its da Vinci systems and a pricing benefit.
• The company’s installed base increased 14% from a year earlier.

Freeport McMoRan 4Q Revenue Up on Rising Copper Demand – Market Watch, 1/24/2024

• Freeport-McMoRan logged increased revenue as rising copper demand and higher gold prices compensated for lower-than-anticipated precious-metals sales volumes.
• Fourth-quarter revenue rose 2.6% to $5.91 billion, pipping the average Wall Street target of $5.85 billion, as tallied by FactSet.
• Copper sales for the three-month period rose 7% to 1.1 billion pounds, at an average price per pound of $3.81.
• Trends towards electrification and sustainable energy worldwide have created ravenous demand for the conductive metal.
• Gold sales rose 20% to 549,000 ounces at an average price of $2,034 an ounce.
• Gold sales by volume were 5% shy of an October estimate, the company said.
• Excluding certain one-time charges, Freeport posted adjusted earnings of $393 million, or 27 cents a share, surpassing the average analyst target of 23 cents a share, based on a FactSet survey of Wall Street analysts.

Apple Plans New Fees and Restrictions for Downloads Outside App Store – Wall Street Journal, 1/24/2024

• Apple is planning to add new fees and restrictions when it begins allowing people to download apps outside of the iPhone’s closed ecosystem.
• The plan, a response to a new European law intended to crack Apple’s current grip on apps, will allow users to download software onto the iPhone for the first time without using the App Store.
• The new policies, which will apply only in Europe, set up a major test of the legislation and how it will be enforced as Apple faces challenges from courts, regulators and software-makers globally about its tight control of third-party software.
• Meta Platforms, Spotify and other companies are preparing new download options for customers in anticipation of the new rules.
• Meta is considering a system that would allow people to download apps directly from Facebook ads.
• Spotify plans to offer users the ability to download some of its iPhone apps directly from its website, according to the company.
• Apple has defended its policy of controlling downloads via the App Store, saying it is necessary for keeping the iPhone safe and relatively free from viruses.

Chipotle Plans to Offer New Benefits to Draw Younger Workers for Burrito Season – Wall Street Journal, 1/24/2024

• Chipotle Mexican Grill said it plans to hire 19,000 workers to keep up with what it calls burrito season and offer benefits to attract younger people.
• The chain, which is dealing with rising labor costs, said Wednesday it already has more than 110,000 employees but needed to attract more workers for its busy season from March to May.
• The company said it was offering new benefits to attract Gen Z workers who already make up more than 73% of its restaurant workforce.
• Chipotle plans to cover six free mental-health counseling sessions, match up to 4% of an employee’s salary through 401(k) contributions and offer workers access to a special credit card.

Ebay to Lay Off 9% of Full-Time Workforce – Wall Street Journal, 1/24/2024

• EBay will lay off about 9% of its full-time workforce, part of efforts to boost performance at a time of rising competition and softer consumer spending.
• The San Jose, Calif.-based online marketplace will cut about 1,000 full-time employees, Chief Executive Jamie Iannone said in an internal memo posted on the company’s website late Tuesday.
• He said it would also scale back its contracts with other employees.

Spirit Aero Jumps on Report Boeing Misinstalled Jet Panel – Bloomberg, 1/24/2024

• Spirit AeroSystems Holdings rose after a report in the Seattle Times said the company wasn’t responsible for a fuselage panel that blew off midair on an Alaska Airlines flight earlier this month.
• The Seattle Times reported that Boeing mechanics had removed the panel and reinstalled it improperly before the Jan. 5 accident, citing a person familiar with the details of the work as well as the account of a whistleblower who wasn’t identified.
• The Seattle Times, citing the person familiar with the work, said Boeing mechanics at the assembly line of the 737 removed the fuselage panel for a repair task and then reinstalled it improperly.
• Investigators probing the accident have said that they are looking into the possibility that the bolts holding down the panel were not installed properly, or even missing altogether.

US ECONOMY & POLITICS

U.S. Output Growth Accelerates; Inflation Pressures Cooled – Wall Street Journal, 1/24/2024

• U.S. business activity in the first half of January picked up at the sharpest pace since June 2023, according to the S&P Global flash purchasing managers’ index.
• Inflationary pressures also moderated.
• Input prices increased at the second-weakest pace since October 2020, while firms raised prices at the slowest rate since May 2020.
• The output index for services providers reached a seven-month high of 52.9 this month.
• Meanwhile, the manufacturing slump continued as firms reported a modest drop in production at the start of the year, though operating conditions for goods producers improved for the first time in nine months.
• Firms across both sectors indicated that hiring expanded in January, though slightly slower than in December.

Homebuyer demand pushes mortgage applications higher, even as interest rates inch up again – CNBC, 1/24/2024

• Mortgage rates rose slightly last week, but that did not seem to deter homebuyers who have come back after the holidays.
• Mortgage applications to purchase a home rose 8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
• Demand, however, was still 18% lower than the same week one year ago, when rates were lower.
• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.78% from 6.75%, and points rose to 0.63 from 0.62 (including the origination fee) for loans with a 20% down payment.
• Applications to refinance a home loan fell 7% for the week and were 8% lower than a year ago.
• Mortgage rates moved higher at the start of this week, although there appears to be no particular reason for the increase.
• The average rate on the 30-year fixed, according to Mortgage News Daily, is now 6.92%.

Takeaways From the New Hampshire Primary – New York Times, 1/24/2024

• The much-fabled power of New Hampshire’s fiercely independent voters wasn’t enough to break the spell Donald J. Trump has cast over the Republican Party.
• Brushing aside Nikki Haley a little over a week after he steamrolled her and Ron DeSantis in Iowa, Mr. Trump became the first Republican presidential candidate who was not a White House incumbent to carry the nation’s first two contests.
• His winning margin of 11 percentage points in moderate New Hampshire demonstrated his ironclad control of the party’s hard-right base and set him on what could very well be a short march to the nomination.
• He performed well across nearly every demographic group, according to exit polls.
• He won every age group, among men and women.
• The contest now moves to South Carolina, the next competitive primary and one where Ms. Haley faces a steep uphill battle.
• There’s little question that a defeat there for Ms. Haley would be devastating, making it difficult for her to justify carrying on in the race.

EUROPE & WORLD

ASML Orders Triple in Sign of Demand for Cutting-Edge Chips – Bloomberg, 1/24/2024

• ASML Holding orders more than tripled last quarter from the previous three months, in a sign that parts of the semiconductor industry are resurgent.
• Net sales rose to €27.6 billion last year, an increase of 30% from 2022, the company said.
• China accounted for 39% of ASML’s sales in the fourth quarter and became the Veldhoven-based company’s largest market in 2023.
• ASML’s bookings last quarter were far more than an average estimate of €3.6 billion by analysts surveyed by Bloomberg.
• Orders of its most advanced EUV lithography machines in the period were €5.6 billion.
• Order bookings rose to a record €9.19 billion ($9.98 billion) in the fourth quarter from €2.6 billion in July to September, driven by demand for its most sophisticated machines, Europe’s most valuable technology company said in a statement on Wednesday.
• ASML, which is already restricted from selling its most advanced extreme ultraviolet machines to China, expects as much as 15% of China sales this year will be affected by the new export control measures.

SAP to Launch Restructuring Program Affecting 8,000 Jobs in AI Push – Wall Street Journal, 1/24/2024

• SAP plans to undertake a restructuring program this year that will affect some 8,000 jobs, ratcheting up its focus on artificial intelligence.
• Reporting on a non-IFRS basis, the Walldorf, Germany-based company said total revenue climbed to EUR8.47 billion from EUR8.06 billion in the fourth quarter of 2022.
• Revenue from SAP’s cloud business jumped to EUR3.70 billion from EUR3.08 billion, while software-licenses revenue slipped to EUR841 million from EUR907 million.
• Analysts had forecast total revenue of EUR8.32 billion and cloud revenue of EUR3.72 billion on operating profit of EUR2.47 billion and a 29.9% operating margin, according to a company-provided consensus on a non-IFRS basis.
• Operating profit for the fourth quarter fell to EUR2.51 billion from EUR2.56 billion, with SAP’s operating margin falling to 29.6% from 31.7%.
• For 2024, SAP expects non-IFRS operating profit at constant currencies between EUR7.6 billion and EUR7.9 billion, cloud revenue at constant currencies between EUR17 billion and EUR17.3 billion and free cash flow of roughly EUR3.5 billion.
• By 2025, SAP expects non-IFRS operating profit of approximately EUR10 billion, including share-based compensation expenses of roughly EUR2 billion, and free cash flow of about EUR8 billion.
• The German business-software company said late Tuesday that most of the roughly 8,000 positions affected should be covered by voluntary leave programs and internal re-skilling, when workers are trained to fill other roles within the group.
• Most of the costs related to the restructuring, currently estimated at about 2 billion euros ($2.17 billion), should be recognized in the first half of the year.

China Boosts Stimulus by Allowing Banks to Keep Smaller Reserves – Bloomberg, 1/24/2024

• China said it will cut the reserve requirement ratio for banks within two weeks and hinted at more support measures to come, an unusually early disclosure that shows mounting urgency across President Xi Jinping’s government to shore up the economy and halt a $6 trillion stock-market rout.
• The RRR — which determines the amount of cash banks have to keep in reserve — will be lowered by 0.5 percentage points on Feb. 5 to provide 1 trillion yuan ($139 billion) in long-term liquidity to the market, the People’s Bank of China’s Governor Pan Gongsheng told reporters at a briefing.
• Hours after the announcement, regulators added more measures to bolster the slumping property and stock markets.
• They broadened the use of commercial property loans for developers to help them repay other debt and gave a boost to China and Hong Kong equities by unveiling steps to deepen financial ties with Hong Kong.
• Along with the reserve ratio, Pan also said the central bank would from Thursday lower interest rates on relending funds provided to banks that incentivize loans to the agricultural sector and small firms.

Italy’s Meloni Picks Fight With Stellantis Over Car Production – Bloomberg, 1/24/2024

• Italian Prime Minister Giorgia Meloni blasted Stellantis NV for its efforts to move car production to lower-cost countries at a time when the auto industry is struggling to shift to electrification.
• “We want to defend the national interest, establish a balanced relationship with Stellantis to defend production in Italy,” Meloni told lawmakers in Rome on Wednesday.
• “If you want to sell a car on the international market by advertising it as an Italian jewel, then that car must be produced in Italy.”
• Meloni’s government wants Stellantis to produce one million vehicles in Italy a year, with the company increasingly under scrutiny for its cost-cutting exercises.
• Chief Executive Officer Carlos Tavares, who never shies away from criticizing politicians, told reporters Tuesday that Italy’s hard line on EV incentives has meant lost production in the company’s Mirafiori plant in the past year.

Hamas Open to Releasing Some Israeli Hostages for Pause in Fighting, Mediators Say – Wall Street Journal, 1/24/2024

• Officials of Palestinian militant group Hamas have told international mediators that they are open to discussing a deal to release some of the kidnapped Israelis they are holding hostage in exchange for a significant pause in fighting, Egyptian officials said Tuesday.
• The overture marks a significant shift by Hamas, which for weeks has insisted it would only negotiate on hostages as part of a comprehensive agreement that would lead to a permanent end to the war that has engulfed Gaza since Hamas militants attacked southern Israel on Oct. 7.
• Hamas’s latest proposal comes as fierce fighting rages in the group’s last major stronghold, the southern Gaza city of Khan Younis.
• Israel says that senior Hamas figures are hiding in tunnels under Khan Younis with at least some of the hostages.
• Egyptian officials said Hamas expressed openness to a deal to release all remaining civilian women and children being held.
• Around 130 hostages remain captive in Gaza, including 19 women and two children, according to the Israeli prime minister’s office.
• Some of the women are Israeli soldiers.
• Five of the women hostages may be dead, Israeli authorities have said.

Russian Military Plane Crashes Close to Ukraine – Wall Street Journal, 1/24/2024

• A Russian military transport plane crashed near the border with Ukraine on Wednesday, killing all 74 aboard, according to Russian officials and state media.
• Russian officials said 65 Ukrainian prisoners of war were among those aboard the Ilyushin Il-76 when the plane fell from the sky, while a senior official in Kyiv said the incident was under investigation.
• Unverified footage on Russian state media early on Wednesday showed a plane falling to the ground and exploding in a ball of flames.
• The aircraft came down at around 11 a.m. Moscow time in Russia’s western Belgorod region, Russian news agency TASS said, citing the Russian Ministry of Defense.
• Andrei Kartapolov, head of the Russian parliament’s defense committee, told lawmakers Wednesday that the prisoners of war aboard the plane were part of an imminent swap, and Ukraine’s leadership was “aware of the impending exchange and was informed of how the prisoners would be delivered.”

Iranian Military Technology and Advisers Aid Houthi Attacks in Red Sea, Officials Say – Wall Street Journal, 1/24/2024

• Iran is sending increasingly sophisticated weapons to its Houthi allies in Yemen, Western officials and advisers say, enhancing their ability to attack merchant vessels and disrupt international commerce despite weeks of U.S-led airstrikes.
• Among other high-end gear, Iran has provided the Houthis with drone jammers and parts for long-range rockets and missiles.
• The Iranians and their Lebanese Hezbollah allies have sent advisers to Yemen to help the Houthis plan and launch their attacks.
• The Houthis’ missile and drone attacks on merchantmen and U.S. warships, which they say come in retaliation for Israel’s war on Hamas, have prompted two weeks of American and British counterattacks.
• Those in turn risk drawing Washington into a long-running tit-for-tat military campaign and escalating the U.S.-Iran proxy war.

Factmonster – TODAY in HISTORY

• Gold was first discovered in California, in Sutter’s mill. When President Polk announced the news in December, the gold rush began. – 1848
• Robert Baden-Powell organized the first Boy Scout troop in England. – 1908
• The Casablanca Conference with Franklin D. Roosevelt and Winston Churchill concluded. – 1943
• Japanese soldier Shoichi Yokoi was discovered in Guam, having spent 28 years hiding in the jungle thinking World War II was still going on. – 1972
• Voyager Two space probe passes within 51,000 miles of Uranus. – 1986
• The Department of Homeland Security, under Tom Ridge, became a cabinet department. – 2003

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