US FINANCIAL MARKET

Bonds Fall as Data Bolster Fed’s Wait-and-See Mode: Markets Wrap – Bloomberg, 1/26/2024

• Wall Street grappling with another mixed economic report sent Treasuries down, with traders betting the Federal Reserve will signal patience before it decides to cut interest rates this year.
• Yields rose across the US curve as data showed personal spending topped estimates — even as the Fed’s preferred gauge of underlying inflation slowed to an almost three-year low.
• With policymakers telegraphing they want to see sustainable signs of cooling before lowering borrowing costs, the figures only reinforced bets that a March pivot is still very much elusive at this stage.
• It’s not that investors have abandoned their bets on a rate cut in the first quarter, but they continued to fully price in a move in May.
• US two-year yields rose six basis points to 4.35%.
• The yield on 10-year Treasuries advanced three basis points to 4.15%.
• After struggling for direction, the S&P 500 edged higher.
• The gauge is up for a seventh straight session, hovering near 4,900.
• The tech-heavy Nasdaq 100 underperformed as disappointing forecasts from Intel and KLA weighed on chipmakers.
• Spirit Airlines tumbled after JetBlue Airways said its planned $3.8 billion acquisition of the low-cost carrier may be terminated in the coming days.
• American Express said it’s sticking to its long-term profit and revenue goals and forecast earnings for 2024 that topped analysts’ estimates.
• Visa posted a profit that beat Wall Street predictions as credit-card spending climbed amid strong US economic growth.
• Salesforce is cutting about 700 workers, adding to a brutal string of tech layoffs at the start of 2024.
• T-Mobile reported earnings that missed analysts’ estimates, overshadowing a surprisingly strong increase in new mobile phone subscribers.
• The Stoxx Europe 600 rose 1.1%.
• The Bloomberg Dollar Spot Index fell 0.1%.
• West Texas Intermediate crude fell 0.1% to $77.25 a barrel.

Visa Profit Climbs Amid Higher Payments Volume – Wall Street Journal, 1/26/2024

• Visa said profit climbed in its fiscal first quarter, citing resilient consumer spending.
• Revenue climbed 8.8% to $8.63 billion, beating analysts expectations of $8.55 billion, according to FactSet.
• Visa said payments volume grew 8%, and that its processed transactions rose 9% in the period.
• Stripping out one-time items, the company’s earnings per share came in at $2.41.
• Analysts surveyed by FactSet had forecast adjusted earnings per share of $2.34.

AmEx forecasts upbeat 2024 profit as credit card spending stays resilient – Reuters, 1/26/2024

• American Express forecast a better-than-expected profit for 2024 on hopes that its affluent customers will be resilient with their spending amid elevated interest rates, sending the company’s shares up on Friday.
• The company’s total revenue for the fourth quarter rose 11% to $15.80 billion.
• For 2023, its revenue rose 15% to $60.52 billion.
• Billed business, which represents the transaction values on AmEx cards and other payment products, rose 6% to $379.8 billion in the fourth quarter.
• However, some caution prevailed, with the credit card giant raising its loan loss provisions in the fourth quarter to $1.44 billion, compared with $1.03 billion a year earlier.
• AmEx posted a profit of $2.62 per share for the three months ended Dec. 31, up from $2.07 per share a year earlier.
• It forecast 2024 earnings per share between $12.65 and $13.15, higher than analysts’ estimates of $12.41, according to LSEG data.

Intel Gives Bleak Forecast in Sign Comeback Is Going Slowly – Bloomberg, 1/26/2024

• Intel, the largest maker of computer processors, gave a disappointing forecast for the current period, signaling that it continues to struggle to defend its once-dominant position in data center chips.
• In the fourth quarter, earnings came in at 54 cents a share on sales of $15.4 billion.
• Analysts had estimated profit of 44 cents and revenue of $15.2 billion.
• Data center sales were $4 billion, falling short of the average projection of $4.08 billion.
• Client computing, Intel’s PC chip business, had sales of $8.84 billion.
• That compared with an estimate of about $8.42 billion.
• Sales in the first quarter will be $12.2 billion to $13.2 billion, the company said in a statement Thursday.
• That compared with an average analyst estimate of $14.25 billion, according to data compiled by Bloomberg.
• Intel’s gross margin — the portion of sales remaining after deducting the cost of production — will be 44.5% in the first quarter.
• That compares with an estimate of 45.5%.
• Profit will be 13 cents a share, minus certain items, versus a projection of 34 cents.
• Total PC shipments should rise to about 300 million units a year, Gelsinger has said, helped by demand for new machines that are better able to handle artificial intelligence software and services.
• The total for 2023 was about 270 million, and growth will be a few percentage points this year, he said.

T-Mobile Gains Subscribers, Joining Peers as Mobile Finds Growth – Bloomberg, 1/26/2024

• T-Mobile US reported gains in mobile subscribers in the fourth quarter, joining rivals in finding new customers in the saturated and competitive wireless market.
• Fourth-quarter revenue was $20.5 billion, beating analysts’ estimates.
• Earnings were $1.67 per share, compared with the average analyst estimate compiled by Bloomberg of $1.91 per share.
• The No. 2 US wireless carrier added a net 934,000 mobile phone customers, it said in a statement Thursday.
• That beat analysts’ estimates of about 886,000 new subscribers.
• It added 541,000 wireless home internet customers, beating estimates and bringing the total to 4.8 million.
• The company has said its target is 7 million to 8 million subscribers by 2025.
• This year, T-Mobile said it expects to 5 million to 5.5 million net customer additions.
• Adjusted earnings before interest, tax, depreciation and amortization are expected to be $31.3 billion to $31.9 billion.

Colgate-Palmolive’s earnings buoyed by higher prices, strength in Latin America – Market Watch, 1/26/2024

• Colgate Palmolive’s stock was flat early Friday, even after the maker of dental, personal care and pet food products posted better-than-expected fourth-quarter earnings and offered guidance that met consensus estimates.
• Sales rose to $4.950 billion from $4.629 billion, also ahead of the $4.893 billion FactSet consensus.
• Sales were boosted by higher prices, which helped boost gross profit margins by 400 basis points to 59.6%.
• By geography, sales rose 18% in Latin America, as prices rose an average of 8% and volumes were up 8%.
• In North America, sales rose 3.5% as prices rose 3% and volumes rose 0.5%.
• European sales were up 10% as prices rose 7.5% and volumes fell 4.0%.
• The Asia Pacific region saw sales rise 0.5% as prices rose 5.5% and volumes fell 4.5%.
• Africa/Eurasia sales fell 4% as prices rose 9.5% and volumes rose 7.5%.
• Adjusted per-share earnings also came to 87 cents, ahead of the 85 cent FactSet consensus.
• The company is now expecting 2024 sales to grow 1% to 4%, including a low-single-digit impact from foreign exchange movements.
• The current FactSet consensus implies growth of 3.3%.
• Adjusted EPS is expected to grow by a mid to high-single-digit percent.
• The current FactSet consensus implies growth of 8%.

Western Digital’s stock dips nearly 4% on revenue decline – Market Watch, 1/26/2024

• Western Digital stock declined in after-hours trading Thursday after the company posted quarterly results.
• Revenue dipped 2% to $3.03 billion from $3.11 billion in the year-ago quarter.
• Adjusted earnings were a loss of 69 cents a share.
• Analysts surveyed by FactSet had expected on average a net loss of $1.12 a share on revenue of $3 billion.
• Western Digital provided third-quarter sales guidance of $3.2 billion to $3.4 billion, while FactSet analysts are forecasting $3.15 billion.

Levi Strauss to Cut Global Corporate Workforce by Up to 15%, 4Q Sales Rise – Wall Street Journal, 1/26/2024

• Levi Strauss put in place a two-year restructuring plan that includes layoffs globally as it reported an increase in sales in the fourth quarter amid a return to growth in the Americas.
• The San-Francisco-based jeans maker on Thursday said it’s looking to increase global productivity by cutting its global corporate workforce by 10% to 15% in the first half of the year.
• Sales rose 3.3% to $1.64 billion, missing analysts’ expectations of $1.66 billion, according to FactSet.
• Levi said a return to revenue growth in the Americas boosted its overall results after cutting wholesale prices by 5% to 6% at the end of the third quarter.
• Stripping out one-time items, the company’s earnings per share came in at 44 cents. Analysts surveyed by FactSet had forecast adjusted earnings per share of 43 cents.
• For the current year, Levi forecasts revenue growth of 1% to 3%, and adjusted earnings per share of $1.15 to $1.25.

KLA shares drop following second-quarter profit miss – Market Watch, 1/26/2024

• Shares of KLA declined in after-hours trading Thursday after the company posted a profit miss in its fiscal second quarter amid weaker demand levels.
• Revenue fell to $2.49 billion from $2.98 billion a year earlier, beating the $2.46 billion expected by analysts polled by FactSet.
• The Milpitas, Calif.-based company, which makes equipment for the semiconductor industry, posted a net profit of $582.5 million, or $4.28 a share, compared with $978.8 million, or $6.89 a share, a year earlier.
• Analysts polled by FactSet expected per-share earnings of $5.66.
• The company is forecasting fiscal third quarter revenue of $2.3 billion, plus or minus $125 million.
• Analysts polled by FactSet expect $2.45 billion in revenue.

Capital One Charge-Offs Jump on Auto, Credit Card Write-Downs – Bloomberg, 1/26/2024

• Capital One Financial reported net charge offs that were higher than analysts expected as borrowers fell behind on their credit-card and auto loans.
• The credit card firm said net charge offs were $2.53 billion, a 77% jump on the prior year and higher than the $2.36 billion predicted by analysts.
• Auto and credit card charge-offs ticked up on the previous year, as did delinquencies in both products, the company said in a statement.
• The firm boosted its provision for credit losses by $573 million to $2.9 billion.
• The company also said deposits were $348.4 billion, in line with estimates, while adjusted profits were $2.24, which topped last year though fell short of analyst predictions.

Norfolk Southern 4Q Earnings Stung Again by Derailment Costs – Market Watch, 1/26/2024

• Norfolk Southern reported a drop in fourth-quarter operating income, weighed down by another $150 million charge from last year’s train derailment in East Palestine, Ohio.
• Railway operating revenue fell 5% to $3.07 billion.
• Analysts expected $3.09 billion.
• Stripping out one-time items, including the charge tied to the high-profile derailment of the train in Eastern Ohio last year, adjusted earnings were $2.83 a share. Analysts surveyed by FactSet expected $2.87 a share.
• For 2024, the company is targeting revenue growth of about 3%.
• Overall for 2023, the train derailment in Ohio cost Norfolk Southern $1.1 billion, pushing the company’s total railway operating costs up 17% to $9.3 billion for the year.

L3Harris Technologies Expects Higher 2024 Revenue, Earnings – Market Watch, 1/26/2024

• L3Harris Technologies expects higher adjusted earnings and revenue in 2024 after logging a smaller profit but higher sales in the final quarter of last year.
• Revenue rose to $5.34 billion from $4.58 billion in the year-earlier quarter, above analyst projections for $5.28 billion.
• The 17% jump in revenue was driven by the acquisitions of Aerojet Rocketdyne and Viasat’s Tactical Data Links.
• Stripping out one-time items, adjusted earnings were $3.35 a share.
• Analysts polled by FactSet had been expecting $3.31 a share.
• For 2024, the Melbourne, Fla.-based company forecast adjusted earnings of between $12.40 and $12.80 a share, up from $12.36 a share last year, on revenue of $20.7 billion to $21.3 billion, up from $19.42 billion in 2023.
• Analysts surveyed by FactSet had been expecting adjusted earnings of $13.05 a share on revenue of $21.43 billion.

Jamie Dimon Shakes Up JPMorgan’s Leadership Once Again – Wall Street Journal, 1/26/2024

• The Jamie Dimon executive shuffle is back on at JPMorgan.
• Daniel Pinto, who is Dimon’s right hand as president and chief operating officer, is giving up day-to-day control of the corporate and investment bank.
• Dimon said he and Pinto would continue to “jointly manage our company.”
• The surprise twist is who is taking over for Pinto: a duo of Jennifer Piepszak, who will move from the consumer-banking side of the house, and Troy Rohrbaugh, who has been running the markets division.
• Piepszak, who was once chief financial officer, is considered a front-runner for Dimon’s job.
• The change separates her from the other widely considered front-runner, Marianne Lake, who will now head the massive consumer bank alone.
• Rohrbaugh is also whispered about as a rising horse for the top job someday.
• Marc Badrichani, the other markets co-head, who had been expected to rise to Pinto’s position at some point, has decided to leave the bank.
• As part of the expanded corporate and investment bank, Doug Petno, who heads the commercial bank, will now run a broader group that includes all lending to corporate and commercial clients.
• Meanwhile, Viswas Raghavan will become the sole head of the dealmakers.

Salesforce to Cut About 700 Workers, Adding to Tech Layoff Flood – Bloomberg, 1/26/2024

• Salesforce is cutting about 700 workers, adding to a brutal string of tech layoffs at the start of 2024.
• Less than 1% of workers will be cut, according to a person familiar with the plans who wasn’t authorized to discuss them publicly and asked not to be identified.

Spirit Air Slumps After JetBlue Warns Deal May Be Terminated – Bloomberg, 1/26/2024

• Spirit Airlines shares tumbled after JetBlue Airways Corp. said its planned $3.8 billion acquisition of the low-cost carrier may be terminated in the coming days.
• JetBlue notified Spirit that terms of the deal “may not be satisfied” by the dates in the agreement, making the deal terminable on or after Jan. 28, according to a regulatory filing Friday.
• JetBlue said it continues to evaluate options.
• Under their agreement, JetBlue is required to pay Spirit $70 million if the deal is blocked for antitrust reasons, and $400 million to Spirit shareholders.

US ECONOMY & POLITICS

Fed’s Preferred Core Price Gauge Cools Amid Robust Spending – Bloomberg, 1/26/2024

• The Federal Reserve’s preferred gauge of underlying inflation cooled to an almost three-year low even with robust holiday spending, keeping the debate alive over whether officials will soon cut borrowing costs.
• The so-called core personal consumption expenditures price index, which strips out the volatile food and energy components, increased 2.9% in December from a year earlier, according to the Bureau of Economic Analysis.
• From a month ago, it advanced 0.2%.

• Inflation-adjusted consumer spending climbed 0.5% in December for a second month, the biggest back-to-back increase in nearly a year.
• Core PCE inflation, on a six-month annualized basis, registered at 1.9% in December, trailing the Fed’s 2% target for a second month.
• Policymakers pay close attention to services inflation excluding housing and energy, which tends to be more sticky.
• That metric slowed to a 3.3% pace from a year earlier, the softest since early 2021.
• On an inflation-adjusted basis, outlays for goods climbed 1.1%, the most in nearly a year, the report showed.
• Real disposable income, the main supporter of consumer spending, advanced 0.1%, the smallest in three months and held back by weak dividend income.

Gauge of US Pending Home Sales Jumps to a Five-Month High – Bloomberg, 1/26/2024

• A gauge of pending US existing-home sales rebounded sharply in December to a five-month high, suggesting the recent drop in mortgage rates is helping to stabilize the resale market.
• The National Association of Realtors’ index of contract signings increased 8.3% to 77.3 after holding at a record low a month earlier, according to data out Friday.
• Last month’s advance — the largest since mid-2020 — exceeded all estimates in a Bloomberg survey of economists.
• The NAR’s report showed the index of contract signings for existing homes jumped nearly 12% in the South, the biggest US housing market.
• Pending sales also surged 14% in the West and climbed 5.6% in the Midwest.
• Those sales are expected to increase 13% this year, according to NAR’s economic outlook.
• They slumped 18.7% in 2023.

Biden Pauses Approvals for LNG Exports – Wall Street Journal, 1/26/2024

• The Biden administration effectively froze the approval process for new plants to export U.S. liquefied natural gas, bowing to demands from environmental groups and angering oil-and-gas companies.
• President Biden said Friday the administration will pause export application reviews as it takes stock of the country’s newfound status as the world’s largest LNG exporter.
• “We will take a hard look at the impacts of LNG exports on energy costs, America’s energy security, and our environment. This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time,” he said.
• In a call with reporters Thursday previewing the announcement, Energy Secretary Jennifer Granholm said the process wouldn’t affect already authorized exports or gas exports to U.S. allies, including Europe, which has relied heavily on American gas since Russia’s invasion of Ukraine.

FTC Launches Probe of Big Tech’s AI Investments – Wall Street Journal, 1/26/2024

• The Federal Trade Commission said it would investigate the growing arms race among the biggest technology companies to produce and commercialize artificial intelligence.
• The agency said Thursday it had issued orders seeking information about AI investments to Microsoft, OpenAI, Amazon.com, Anthropic and Google-owner Alphabet.
• The FTC under Chair Lina Khan has expressed concern about whether dominant technology firms would quickly command the growing field of generative AI, systems that have humanlike abilities to converse, create media, write computer code and more.
• The FTC, which shares antitrust authority with the Justice Department, said it would use its study to probe the companies’ investments and partnerships and how they affect the competitive landscape for AI.
• The FTC has a unique authority that allows it to conduct broad studies of competition in different industries, which sometimes take years to produce outcomes.
• “Our study will shed light on whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition,” Khan said.

EUROPE & WORLD

LVMH grows sales as luxury shoppers show resilience – Reuters, 1/26/2024

• Luxury goods group LVMH posted a 10% rise in fourth-quarter sales on Thursday, as growth edged up from the previous quarter, driven by resilient demand – including from Chinese buyers – for its high-end fashion over the all-important end-of-year period.
• Sales at the world’s biggest luxury group, which owns labels, including Louis Vuitton, Dior and Tiffany, came to nearly 24 billion euros ($26 billion) in the final three months of the year.
• That was just ahead of analysts’ expectations for 9% growth, according to a consensus cited by HSBC.
• Sales at LVMH’s fashion and leather good division, which includes its largest labels Vuitton and Dior, climbed 9% during the quarter, just below expectations for 10% growth.
• Arnault said he was happy with LVMH’s growth rate and was “very confident” about 2024.
• It forecast continued growth next year despite an uncertain macroeconomic and geopolitical context.
• The group proposed a dividend of 13 euros per share, up from 12 euros a year ago.

ECB Rate-Setters Preach Patience Without Ruling Out April Cut – Bloomberg, 1/26/2024

• European Central Bank officials said they’re in no hurry to lower interest rates, but kept alive the possibility of a move in April that’s become the focus of markets.
• Asked about April, Lithuania’s Gediminas Simkus said: “I’m open-minded — I’ll see the data and I’ll decide.”
• As 2024 progresses, “the likelihood of a cut increases,” he told reporters in Vilnius.
• “Confidence because monetary policy is working — we see inflation has come down,” he said.
• “And patience — we’re data dependent, we’re not date-dependent. We’ll see what the data tell us.”
• The only clear objection to April came from Estonia’s official Madis Muller, who said it would be reasonable to expect rates to remain on hold for the next “several” meetings as underlying inflation and wage growth remain elevated.
• Even then, though, he said it’s “still too early to talk about the next interest rate decisions in a definite way.”

UN Court Tells Israel to Protect Gazans, Avoids Cease-Fire Call – Bloomberg, 1/26/2024

• The United Nations’ top court told Israel it must act to immediately prevent the killing and harm to innocent Palestinians in an interim ruling that stopped short of demanding an immediate cease-fire in the Gaza strip.
• The International Court of Justice also said that Israel must provide humanitarian assistance to victims of its assault, in a decision delivered in The Hague on Friday.
• While its judgments are binding without recourse for appeal, the ICJ can’t itself enforce its orders and other countries have chosen to ignore them, notably Russia over its invasion of Ukraine.
• “The catastrophic humanitarian situation in the Gaza Strip is at serious risk of deteriorating further before the court renders its final judgment,” said Joan Donoghue, the ICJ’s presiding judge, as she explained the need for immediate action.
• Israel’s Prime Minister Benjamin Netanyahu welcomed the court’s rejection of calls for a cease-fire, calling that an “outrageous demand to deny us this right.”

Factmonster – TODAY in HISTORY

• The first European settlers landed in Sydney, Australia. – 1788
• Congress passed an act calling for establishment of a library within the US Capitol. – 1802
• Michigan became the 26th state in the United States. – 1837
• India, three years after gaining its independence from the United Kingdom, formally became a republic. – 1950
• Andrew Lloyd Webber’s The Phantom of the Opera opened on Broadway. It would go on to become the longest-running Broadway show. – 1988
• Vaclav Havel was elected president of the new Czech Republic. – 1993
• A magnitude 7.7 earthquake rocked the Indian state of Gujarat, killing more than 20,000 people. – 2001
• President Hamid Karzai signed the new constitution of Afghanistan. – 2004

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