US FINANCIAL MARKET

Stocks Bounce After Rough CPI Day as Yields Fall: Markets Wrap – Bloomberg, 2/14/2024

• Equities rebounded after a slide in the previous session that was triggered by a reset in Federal Reserve rate-cut expectations — and amplified by moves in derivatives markets.
• The market’s favorite volatility gauge — the VIX — tumbled after closing at the highest since November.
• Treasuries also gained, with the move led by shorter maturities.
• Fed Bank of Chicago President Austan Goolsbee said slightly higher inflation data for a few months would still be consistent with a path back to the central bank’s 2% goal.
• Traders are now only fully pricing in three Fed rate cuts for this year, with around a 70% chance of a fourth reduction.
• That lines up with the US central bank’s own forecast for three easing moves.
• The S&P 500 got close to reclaiming its 5,000 mark, while the tech-heavy Nasdaq 100 added almost 1%.
• Nvidia led a rally in chipmakers, while Uber Technologies jumped 12% on plans to buy back as much as $7 billion in shares.
• Treasury 10-year yields fell three basis points to 4.28%.
• A Bloomberg index of global debt has dropped 3.5% this year, wiping out all of its gains since Dec. 12, the day before the Fed announcement that month.
• Slower-than-forecast UK inflation numbers for January offered some relief to Treasuries on Wednesday, lowering the US 10-year yield after Tuesday’s 14-basis-point surge.
• Lyft issued a massive correction to its outlook for earnings margin in 2024, saying its margin is expected to expand by 50 basis points — not the 500 basis points written into an earnings presentation released earlier on Tuesday.
• Airbnb ended 2023 stronger than analysts’ had expected but suggested that demand in the current quarter wouldn’t be as robust as the last.
• Robinhood Markets reported revenue that topped estimates and executives said deposit growth is outpacing that of last year.
• West Texas Intermediate crude fell 0.4% to $77.57 a barrel.

Nvidia outstrips Alphabet as third largest US company by market value – Reuters, 2/14/2024

• Nvidia overtook Google-parent Alphabet’s stock market capitalization to become the third biggest U.S. company on Wednesday, days before the poster child of AI boom is due to report fourth-quarter results.
• Strong demand for the Silicon Valley company’s chips used in artificial intelligence computing has powered the stock 231% in the past 12 months to record highs, taking its market value to $1.83 trillion.
• In comparison, Alphabet’s market capitalization is $1.82 trillion.

Lyft Soars After Outlook Tops Estimates, Signaling Strong Demand – Bloomberg, 2/14/2024

• Lyft jumped after issuing projections that beat investors’ expectations, signaling that the company’s years-long effort to boost ridership and challenge much-larger rival Uber Technologies is paying off.
• Revenue was $1.22 billion, up 4% from a year earlier and in line with projections.
• In the fourth quarter, gross bookings jumped 17% from a year earlier to $3.72 billion, ahead of estimates for $3.67 billion.
• In the fourth quarter, Lyft said the number of active riders on its platform increased 10% from a year earlier to 22.4 million.
• Lyft said adjusted earnings before interest, tax, depreciation and amortization, were $66.6 million in the fourth quarter, beating the $56 million estimated by analysts.
• Gross bookings, representing the value of transactions for rides excluding tips, will be $3.5 billion to $3.6 billion, above estimates of $3.48 billion.
• Adjusted earnings before interest, taxes, depreciation and amortization will total $50 million to $55 million in the first three months of the year, the company said in a statement Tuesday, topping analysts’ estimates of $49.5 million.

Airbnb reports better-than-expected revenue and beats on guidance – CNBC, 2/14/2024

• Airbnb reported better-than-expected revenue for the fourth quarter and issued an optimistic forecast for the current period.
• Revenue: $2.22 billion vs. $2.17 billion expected by analysts, according to LSEG.
• Gross booking value, which Airbnb uses to track host earnings, service fees, cleaning fees and taxes, came in at $15.5 billion in the fourth quarter.
• The company reported 98.8 million nights and experiences booked, up 12% from a year ago, and above the 98 million expected by analysts, according to StreetAccount.
• Average daily rates increased 3% from a year ago to $157 in the fourth quarter, and the company ended 2023 with 7.7 million active listings, up 18% from a year earlier.
• Loss per share: 55 cents. It’s not immediately clear if that’s comparable to the profit estimate of 62 cents, according to LSEG, formerly known as Refinitiv.
• The company also announced approval to buy back up to $6 billion of its Class A common stock, according to a release.
• In its shareholder letter, Airbnb said the company is at an “inflection point” after spending the past three years upgrading and adding features to its main room-sharing service.
• Airbnb said it’s investing in more under-penetrated markets abroad in 2024, and that it will share plans to expand beyond its core business later this year.
• Airbnb said revenue in the first quarter will be between $2.03 billion and $2.07 billion, while Wall Street was expecting $2.03 billion, according to LSEG.
• The company said the quarter started out strong, with more than six million guests celebrating the new year in an Airbnb.
• Airbnb said guest demand “remains strong,” particularly for first-time users.

Kraft Heinz’s stock sinks as consumers push back more against rising prices – Market Watch, 2/14/2024

• Shares of Kraft Heinz took a hit Wednesday, after the food, condiment and beverage company topped fourth-quarter profit expectations but fell short on sales, as volume fell more than prices increased.
• The company with brands including Heinz ketchup, Kraft macaroni and cheese, Jell-O and Kool-Aid, said sales for the quarter to Dec. 30 declined 7.1% from a year ago to $6.86 billion, below the FactSet consensus of $6.99 billion, as North America sales fell 9.1% while international sales edged up 0.2%.
• Prices increased 3.7 percentage points, as list prices were raised to help mitigate the impact of inflation on input costs.
• But volume and mix declined 4.4 percentage points, due to increased elasticity, or more consumer pushback to higher prices, and to the reduction in Supplemental Nutrition Assistance Program, or SNAP, benefits.
• The cost of goods sold fell 9.4%, or more than sales, to boost gross margin to 33.8% from 32.0%.
• Excluding nonrecurring items, adjusted earnings per share of 78 cents topped the FactSet consensus of 77 cents.
• Price is expected to provide a “positive contribution” to sales growth in 2024, while volume is expected to turn positive in the second half of the year.
• The company expects adjusted EPS of $3.01 to $3.07, which surrounds the current FactSet consensus of $3.04.

Upstart’s stock slides as earnings outlook suggests longer road to recovery – Market Watch, 2/14/2024

• Upstart Holdings whiffed with its outlook for the current quarter, sending shares of the lending company down 18% in Tuesday’s after-hours action.
• Upstart’s revenue dropped to $140.3 million from $146.9 million a year before, whereas the FactSet consensus was for $134.8 million.
• Looking at the first quarter, Upstart is modeling about $125 million in revenue.
• Analysts had been projecting $152.3 million.
• The company, which uses artificial intelligence to inform lending decisions, also models a loss of $25 million on the basis of earnings before interest, taxes, depreciation and amortization.
• The FactSet consensus was calling for roughly $5 million in adjusted EBITDA.
• On an adjusted basis, Upstart lost 11 cents a share, matching the consensus view based on analysts tracked by FactSet.

Robinhood Shares Rise as Fourth-Quarter Revenue Beats Estimates – Bloomberg, 2/14/2024

• Robinhood Markets shares surged as revenue topped estimates and executives said deposits are growing faster than last year.
• Fourth-quarter net revenue jumped 24% from a year earlier to $471 million, beating analysts’ estimates of $457 million, according to a statement Tuesday.
• Net deposits were $4.6 billion for the fourth-quarter.
• Robinhood’s crypto revenue was $43 million for the quarter, topping estimates for $37 million.
• Menlo Park, California-based Robinhood estimates total operating expenses will be between $1.85 billion and $1.95 billion for this year.
• Analysts estimated the outlook would be $1.95 billion for total operating expenses.

Zillow Beats Estimates as Web Traffic Helps in Ice-Cold Market – Bloomberg, 2/14/2024

• Zillow Group reported fourth-quarter earnings that beat expectations, as the company navigated the slowest housing market in more than a decade and an industry in turmoil.
• Zillow, led by Chief Executive Officer Rich Barton, generated $349 million in its core residential business, which depends on connecting real estate agents with potential clients.
• The company’s websites and apps had 2.2 billion visits in the quarter, up slightly from the year before.
• The company reported quarterly revenue of $474 million, topping $452 million, the average of analyst estimates compiled by Bloomberg.

Instacart Lays Off 7% of Staff Amid Rising Competition and Food Costs – Wall Street Journal, 2/14/2024

• Instacart is cutting about 250 employees, or roughly 7% of staff, as it focuses on profitability amid heated competition in the grocery-delivery business and rising food costs.
• The layoffs are aimed at cutting back on money-losing projects while focusing on those that are generating returns.
• “This will allow us to reshape the company and flatten the organization so we can focus on our most promising initiatives,” Chief Executive Fidji Simo said in an investor letter.
• The company’s revenue grew 6% to $803 million, in line with Wall Street’s forecast.
• The value of transactions on its app grew 7% to $7.89 billion, slightly better than the estimates of analysts polled by FactSet.
• The company posted a profit of $135 million in the three months through Dec. 31, down 71% from the same quarter a year earlier when it gained from a tax allowance.
• For the current quarter that ends in March, Instacart projected the value of transactions on its app to be between $8 billion and $8.2 billion.
• That is higher than the $7.91 billion that analysts had expected.

Molson Coors looks to lock in market share gains as consumers shift away from Bud Light – CNBC, 2/14/2024

• Brewer Molson Coors said on Tuesday that it expects to maintain its market share gains in the year ahead.
• The company, which makes Coors Light and Miller Lite, reported strong fourth-quarter earnings Tuesday as net sales for 2023 grew 9.3%.
• Those revenue gains were in large part tied to consumers migrating away from AB InBev’s Bud Light products after boycotts began last April.
• Molson said its underlying earnings were $1.19 per share, which outpaced the $1.12 per share analysts were expecting, according to LSEG, formerly known as Refinitiv.

AIG Earnings Beat Estimates as Firm’s Investment Income Grows – Bloomberg, 2/14/2024

• American International Group reported profit that beat analysts’ estimates for the 15th straight quarter as the company saw strong growth in investment income.
• Net investment income in the unit was up 38%, which the company credited with driving its higher profits.
• AIG’s general insurance unit reported $1.44 billion of adjusted pretax income, up 19% from a year earlier.
• General-insurance underwriting income was up 1.1% overall, though it fell nearly a quarter in North America.
• The company’s life and retirement business, meanwhile, saw adjusted pretax income rise 12% to $957 million.
• Adjusted earnings for the fourth quarter rose to $1.79 a share from $1.39 a year earlier, the New York-based company said in a statement Tuesday.
• The results topped the $1.63 average estimate of analysts in a Bloomberg survey.

Generac’s stock drops as residential-generator sales miss, outlook disappoints – Market Watch, 2/14/2024

• Shares of Generac Holdings took a hit Wednesday, after the home-generator maker reported fourth-quarter results that came up short of expectations and provided a downbeat outlook, citing weakness in its industrial and commercial business.
• Revenue for the latest quarter edged up 1.4% to $1.06 billion, below the FactSet consensus of $1.09 billion.
• Residential-product sales ticked up 1% to $580.4 million, which was well short of the FactSet consensus of $605.7 million.
• Commercial and industrial sales inched up 0.4% to $362.9 million — but missed expectations of $369.4 million.
• Meanwhile, gross profit margin improved to 36.5% from 32.7%, due to lower raw material and transportation costs, favorable product mix and production efficiencies.
• Excluding nonrecurring items, adjusted earnings per share increased to $2.07 from $1.78 but missed the FactSet consensus of $2.09.
• For 2024, the company expects net sales to rise between 3% and 7% from 2023, while the current FactSet sales consensus of $4.36 billion implies 8.5% growth.
• While residential product sales are expected to grow in the “mid-teens” percentage range, which is better than the implied 13.2% growth implied by the FactSet consensus, C&I sales are expected to fall about 10%, compared with expectations for a 2.5% increase, due primarily to weakness with certain telecom, rental and “beyond standby” customers.

Uber Stock Jumps After Ride-Hail Company Authorizes First Buyback Plan – Wall Street Journal, 2/14/2024

• Uber shares rose in premarket trading after the ride-hail company said it had authorized its first share repurchase plan.
• The company said Wednesday that its board has authorized the repurchase of up to $7 billion in stock.
• Chief Financial Officer Prashanth Mahendra-Rajah said Uber will first seek to use the buyback plan to offset its stock-based compensation.

Bezos Sells $4 Billion of Amazon Stock in Four Trading Days – Bloomberg, 2/13/2024

• Less than two weeks after disclosing a plan to dispose of as many as 50 million shares of the company he founded, Bezos has offloaded 24 million shares, worth more than $4 billion.
• The sales, revealed in regulatory filings, took place over just four trading days.
• The world’s second-richest person previously hadn’t sold stock since 2021.
• He announced on Nov. 2 he was moving to Miami from the Seattle region.
• He adopted a so-called 10(b)5-1 plan on Nov. 8.
• Washington state instituted a 7% capital gains tax in 2022 — something Florida doesn’t have — meaning Bezos’s relocation is likely saving him $288 million so far.

US ECONOMY & POLITICS

US 30-Year Mortgage Rate Climbs to a Two-Month High of 6.87% – Bloomberg, 2/14/2024

• US mortgage rates rose last week to a two-month high, reversing some of the momentum in the nation’s housing recovery.
• The contract rate on a 30-year fixed mortgage increased 7 basis points in the week ended Feb. 9 to 6.87%, the highest since early December, according to Mortgage Bankers Association data released Wednesday.
• The rise in borrowing costs is unwelcome news for a resale market plagued by low inventory, with many homeowners already locked into low mortgage rates and unwilling to list their homes.
• The MBA’s index of applications for home-purchase mortgages fell 2.5% to 149.6, a five-week low.
• Meantime, the MBA’s overall index for mortgage applications, which tracks both home purchases and refinancing, slipped 2.3% last week.
• The MBA’s index for refinancing fell 2.1%.

Fed’s Goolsbee: Rate Cuts Will Be Warranted as Inflation Slows – Wall Street Journal, 2/14/2024

• A Federal Reserve official suggested Wednesday that January’s unexpectedly high inflation reading shouldn’t necessarily be an impediment to an interest rate cut in the months ahead.
• Inflation doesn’t necessarily need to be as low as it was during the last six months of 2023 for the Fed to have confidence that it is returning to its 2% goal, Chicago Fed President Austan Goolsbee said in remarks prepared for a discussion at the Council of Foreign Relations on Wednesday.
• Instead, he said that even if inflation comes in a bit higher for a few months, “it would still be consistent with our path back to target.”
• Goolsbee repeated Fed Chair Jerome Powell’s contention that the Fed should not wait until inflation has reached 2% on a 12-month basis to cut interest rates. Rather, rate cuts should face a somewhat easier test of being “tied to confidence in being on a path toward the target.”
• Goolsbee said he thinks interest rates are “quite restrictive” and that “if we stay this restrictive for too long, we will start having to worry” about unemployment rising too much.
• Goolsbee challenged the common view that the proverbial “last mile” of bringing down inflation will be more difficult.
• The reason: expectations of future inflation remain at the Fed’s target.
• He argued this should make the Fed’s job bringing inflation back to 2% no more difficult than it has been.

Republican-Led House Impeaches Alejandro Mayorkas on Second Try – Wall Street Journal, 2/14/2024

• The Republican-led House of Representatives impeached Homeland Security Secretary Alejandro Mayorkas on a largely party-line vote Tuesday, succeeding on the second try after an embarrassing defeat last week.
• With the 214-213 vote, Mayorkas became the first sitting cabinet official in history to be impeached.
• The GOP has been pursuing the impeachment for more than a year, alleging that Mayorkas has willfully refused to enforce the nation’s immigration laws, pointing to the record number of illegal crossings at the southern border in the past few years.
• Mayorkas has called those allegations false and defended his record.
• The GOP effort is expected to hit a dead end in the Democratic-controlled Senate, where a two-thirds supermajority would be needed to remove him from office.

Democrat Tom Suozzi Wins Race to Succeed George Santos in Congress – Wall Street Journal, 2/14/2024

• Democrat Tom Suozzi won a special election Tuesday on Long Island, flipping a seat in Congress from the GOP and sending a signal that his party can withstand Republican attacks on immigration in swing districts far from the border.
• Suozzi defeated Republican Mazi Pilip, the Associated Press said, to reclaim his seat representing New York’s Third Congressional District.
• The campaigns and outside political-action committees spent more than $20 million on ads and organizing.
• Part of that centered on the record-setting number of illegal crossings at the border—a point of scrutiny for President Biden and down-ballot Democrats heading into November.
• Special elections often feature lower voter turnout than general elections, so the lessons of the result are limited.
• But it brings immediate implications for the House of Representatives.
• Suozzi will cut into an already narrow GOP majority in the chamber, where the party breakdown is currently 219 Republicans and 212 Democrats.

Strong Nor’easter Brings Heavy Snow and Canceled Flights – Wall Street Journal, 2/14/2024

• A major winter storm rolled across the Northeastern U.S. Tuesday, causing about 1,200 flight cancellations, snarling commutes and dumping several inches of snow.
• The storm dropped nearly 7 inches of snow on parts of New York City while parts of Long Island got about 9 inches, according to the National Weather Service.
• More than a foot of snow fell in Connecticut and about 9 inches landed in areas of New Jersey.
• About 3 inches of snow fell on New York’s Central Park, less than initially forecast but still the most since January 2022.
• Roughly 1,200 flights within, into or out of the U.S. had been canceled, according to FlightAware.
• LaGuardia, Boston Logan, Newark Liberty and John F. Kennedy airports were particularly affected.
• New York City schools were closed and classes held remotely, local authorities said.

EUROPE & WORLD

Sony Group Posts Profit Beat, Prepares to List Financial Unit – Wall Street Journal, 2/14/2024

• Sony Group has raised its full-year net profit view after third-quarter profit beat expectations, saying it will take steps to drive growth in its entertainment business as it prepares to spin off its financial unit.
• Third-quarter revenue increased 22% from a year earlier to Y3.748 trillion.
• The Japanese entertainment and electronics company’s net profit increased 13% from a year earlier to 363.92 billion yen ($2.41 billion) for the three months ended Dec. 31, thanks partly to higher earnings from the image-sensor and music businesses.
• PlayStation 5 sales rose to 8.2 million units from 7.1 million units a year earlier.
• Sony trimmed its revenue forecast for the fiscal year ending March due to weakness in the game business but raised its net-profit projection, citing higher expected earnings from the financial business.
• It expects net profit to drop 8.5% to Y920.00 billion, compared with the previous view for a 12% decrease, and revenue to increase 12% to Y12.300 trillion, versus the previous forecast for a 13% rise.

Heineken Warns Sticky Inflation Will Hit Beer Demand This Year – Bloomberg, 2/14/2024

• Heineken shares slumped after the world’s second-biggest brewer warned that persistent inflation and economic worries will weigh on beer demand in 2024.
• The Amsterdam-based company said full-year revenue rose 5.5% on an organic basis, missing analyst expectations of a 5.8% increase.
• Beer volumes fell 4.7% on an organic basis, more than the estimate of a 4.4% decline.
• Operating income was up slightly at €4.4 billion, shy of the €4.5 billion from analyst estimates.
• Analysts expect the company to post organic revenue growth of 5.3% on operating income of €4.9 billion ($5.3 billion) in 2024, according to consensus estimates compiled by Bloomberg.
• The Dutch brewer gave a wide-ranging operating profit growth forecast of low to high single digits for 2024 as the premium beer market faces challenges.
• It forecast moderate operating profit growth between 1% and 5% this year as beer drinkers cut back.
• The Dutch brewer has been raising prices to keep revenue growing even as volumes decline.
• Heineken raised beer prices by double digits in the first half of last year and high single digits in the second.
• It expects the pace of price increases to moderate this year, but says input costs are still rising.

ASML Sees Signs of Rebound With Semiconductor Market at Nadir – Bloomberg, 2/14/2024

• ASML Holding said the semiconductor market has reached its nadir and there are now are signs of a rebound.
• “We believe that the market has now reached the lowest point of the dip,” ASML Chief Financial Officer Roger Dassen said in comments in the company’s 2023 annual report published on Wednesday.
• “Although we cannot predict the exact nature of the slope ahead, the recovery is nascent.”
• “The longer-term trends are unmistakable,” Dassen said, citing artificial intelligence, electrification and the energy transition as boons to ASML’s business.
• Dassen said a large number of fabs are set to open in the next couple of years and “all of these new fabs will need our tools.”

Ukraine Says Its Drones Hit Russian Warship in Black Sea – Bloomberg, 2/14/2024

• Ukraine’s military said it destroyed a Russian warship off the south coast of Crimea, the latest in a string of operations targeting Kremlin navy vessels in the Black Sea.
• Ukrainian military intelligence said a special unit sank the Caesar Kunikov, a Russian large landing ship off Alupka in occupied Crimea, according to a video published by Ukraine’s military intelligence on the X social media platform.
• Naval drones were used in the attack, it said.
• The Russian vessel “was upgraded to a submarine,” the Defense Ministry said in a separate X post.
• The landing ship was in Ukrainian waters, it said.
• Airborne attacks on Ukraine from Russian maritime unit can be ruled out “for a long time,” Andriy Yusov, a spokesman for Ukrainian military intelligence said in Kyiv.
• The ship carried ammunition and most of the crew perished after the strike four kilometers off the coast.

Israel Is Hit by Missile Barrage as Lebanon Attacks Escalate – Bloomberg, 2/14/2024

• Northern Israel came under rocket fire from Lebanon in what appears to be an escalation of attacks from Hezbollah territory, prompting Israeli fighter jets to begin extensive strikes in Lebanon in response.
• One woman was killed in the Wednesday assault, Israeli media reported, while emergency services said seven were wounded.
• While no group has claimed responsibility for the bombardment, the missiles came from an area largely controlled by Iran-backed Islamist militant group Hezbollah.
• The missiles landed further into the country than previous attacks by Hezbollah, one of a number of Iranian proxies operating across the Middle East.
• The flare-up coincides with threats by Israel’s military to start an offensive on Rafah, the southern Gaza city where more than 1 million Palestinians have taken refuge from fighting elsewhere in the enclave.
• Israel’s strikes on Lebanon hit several villages in the Iqleem al-Tuffah southern province in what appeared to be the fiercest attacks since the confrontation began four months ago.

Factmonster – TODAY in HISTORY

• Oregon became the 33rd state in the United States. – 1859
• Arizona became the 48th state in the United States. – 1912
• The League of Women Voters was founded. – 1920
• Members of Al Capone’s gang killed rival gang members in the St. Valentine’s Day massacre. – 1929
• Iran’s Ayatollah Khomeini issued a fatwa, calling for the death of Salman Rushdie, author of The Satanic Verses. – 1989
• The Kansas Board of Education reversed its 1999 ruling and restored evolution to the state’s science curriculum. – 2001
• Dolly the sheep, the first cloned mammal, was euthanized because of incurable lung cancer. – 2003

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