US FINANCIAL MARKET

Stock Rally Stalls at Start of Data-Packed Week: Markets Wrap – Bloomberg, 2/26/2024

• Stocks, bonds, and the dollar saw small moves as traders braced for a barrage of economic data and remarks from Federal Reserve speakers that would help shape the interest rate outlook.
• The economy is back to the forefront, with the Fed’s favored inflation gauge due Thursday expected to show the most significant rise in a year.
• The core personal consumption expenditures price index highlights the central bank’s bumpy path in achieving its 2% target.
• That means the data should also validate recent Fedspeak, underscoring officials are in no rush to ease policy.
• Traders will also closely monitor how the bond market will manage to absorb heavy Treasury and corporate issuance amid month-end positioning.
• The US investment-grade bond market is gearing up for robust issuance following the biggest sales spree in almost two years.
• Syndicates forecast about $35 billion in fresh bond sales this week.
• That means the February record of $150 billion — set last year — is within reach as companies race to exploit robust investor demand.
• The S&P 500 hovered near 5,100. The Nasdaq 100 rose 0.3%. The Dow Jones Industrial Average rose 0.2%.
• Amazon.com has effectively become a member of the Dow Jones Industrial Average, while Berkshire Hathaway set another all-time high, pushing the market value of Warren Buffett’s conglomerate closer to $1 trillion.
• Treasury 10-year yields rose four basis points to 4.28%.
• Muted corporate demand for software and hardware and cost-cutting efforts to protect margins will set the tone for report cards from Salesforce, Zoom Video, Dell, and HP this week.
• Warren Buffett’s Berkshire Hathaway posted increased operating earnings as higher interest rates and fewer catastrophes benefited the conglomerate’s insurance business.
• Members of the Walton family sold roughly $1.5 billion worth of Walmart stock at the end of last week as shares hovered near a record high.
• Microsoft, under mounting political scrutiny globally for its deep ties to OpenAI, has cut a deal with the startup’s primary European competition.
• On Monday, the French company Mistral AI announced a “strategic partnership” with the US software giant.
• Intuitive Machines sank after the spacecraft company said its lander, which successfully touched the moon last week, likely landed on its side.
• The Stoxx Europe 600 fell 0.3%.
• West Texas Intermediate crude rose 0.7% to $76.99 a barrel.
• Spot gold fell 0.4% to $2,026.35 an ounce.

Berkshire Inches Toward $1 Trillion Valuation After Results – Bloomberg, 2/26/2024

• Berkshire Hathaway shares rose in premarket trading on Monday, set to push the market value of Warren Buffett’s conglomerate even closer to $1 trillion.
• The Omaha, Nebraska-based firm posted higher operating earnings, boosting a stock crawling toward the trillion-dollar club since it hit a fresh record high last year.
• Surpassing that level would make Berkshire the first US company outside of the technology sector to reach such a market capitalization.
• “Extreme fiscal conservatism is a corporate pledge we make to those who have joined us in ownership of Berkshire,” Buffett wrote in his annual letter to shareholders. “Berkshire is built to last.”
• The conglomerate reported fourth-quarter operating earnings of $8.48 billion on Saturday, versus $6.63 billion for the same period a year earlier, helped by increased insurance underwriting earnings and investment income amid higher interest rates and milder weather.
• Meanwhile, Berkshire’s sheer size leaves meaningful deal-making more challenging, as there “remain only a handful of companies in this country capable of truly moving the needle at Berkshire,” according to Buffett’s letter.
• Its cash hoard has jumped to $167.6 billion as the conglomerate struggled to find transactions at attractive valuations.
• “All in all, we have no possibility of eye-popping performance,” Buffett wrote.

Domino’s Stock Rises as Pizza Giant Cooks up More Orders – Wall Street Journal, 2/26/2024

• Domino’s Pizza has two welcome words for investors: orders up.
• Revenue of $1.4 billion, up 1% from last year but below analysts’ expectations.
• The world’s biggest pizza company by stores and sales said Monday that its US same-store sales grew 2.8% in the three months ending December 31 compared to last year.
• Both domestic delivery and carryout orders increased during the period, the chain said.
• Domino’s Chief Executive Russell Weiner said that US sales benefited from improved service times, a new loyalty program providing deals sooner, and revamped advertising.
• Earnings per share of $4.48, exceeding analysts’ expectations polled by FactSet.
• Domino’s increased its quarterly dividend by 25% to $1.51 a share.
• The company’s board of directors approved up to $1 billion in additional share repurchases this month.
• Domino’s reaffirmed its long-term guidance given in December of at least 7% annual global retail sales growth and a net increase in 1,100 stores globally per year.
• The company expects US same-store sales to grow more than 3% this year, aided by its loyalty program and a new deal with Uber Eats.

KKR to Buy Broadcom’s End-User Computing Division for $4 Billion – Wall Street Journal, 2/26/2024

• KKR said it has agreed to buy Broadcom’s end-user computing division for about $4 billion, a deal that will see Broadcom divest itself of a unit it inherited through its $69 billion acquisition of VMware.
• The EUC division allows organizations to deliver and manage applications, desktops, and data across devices and platforms, KKR said.
• The business will become a stand-alone company once the deal closes and will continue to be run by its existing management team.
• KKR said it plans to pursue new strategic partnerships for the business while expanding research and development efforts.
• KKR also said it plans to invest in go-to-market functions focusing on customer relationships.
• KKR said it expects the deal to close this year.

AT&T to credit customers a full day of service for Thursday outage – Reuters, 2/26/2024

• AT&T will credit customers a full day of service for the carrier’s more than 10-hour outage on Thursday that affected more than 70,000 users, saying it was the “right thing to do.”
• “I believe this approach is fully manageable while achieving the 2024 business objectives we have set for ourselves and our stated financial guidance,” CEO John Stankey told employees in a letter.
• Service was restored late on Thursday on AT&T’s 5G network, which covers around 290 million people across the United States.
• An initial review found the outage was caused by the application and execution of an incorrect process used while working to expand the network, the company said, ruling out a cyberattack.
• “Outages sometimes have outsized impacts on some subscribers that may be greater than the face value of the credit,” Stankey said.
• “For that reason, I believe crediting those customers for a full day of service is the right thing to do.”
• The credit will be applied automatically, while prepaid customers will have options available if they were affected, he added.

US ECONOMY & POLITICS

US New-Home Sales Rise After Downward Revisions to Past Months – Bloomberg, 2/26/2024

• Sales of new homes in the US increased in January as builders and buyers capitalized on lower mortgage rates at the start of the year.
• Purchases of new single-family homes increased 1.5% to a 661,000 annual pace after the prior three months were revised lower, government data showed Monday.
• The median forecast in a Bloomberg survey of economists called for a rate of 684,000.
• The median sales price of a home decreased to $420,700 in January from a year ago, marking the fifth-straight decline as more homes became available for sale.
• According to the Census Bureau and Department of Housing and Urban Development report, • The new-home supply increased to 456,000 from the prior month, the most in over a year.

Billionaire GOP Donors Pivot to Congress After Haley’s Run Fades – Bloomberg, 2/26/2024

• First, Wall Street considered Ron DeSantis. Then it went for Nikki Haley.
• Now the Republican donor class is confronting a reality its wealthy members had hoped to avoid: being limited to exerting their clout in the 2024 election cycle only through state-level races, lest they be forced to bankroll Donald Trump’s White House comeback bid.
• With Trump’s overwhelming victory in the South Carolina GOP primary on Saturday, the former president moved closer to claiming his party’s nomination.
• On Sunday, the robust Koch network, one of the deepest pockets in conservative politics, announced that it would no longer fund Haley, South Carolina’s former two-term governor. This significant reversal underscored traditional donors’ inability to slow Trump’s momentum.
• The issue now is how big donors will redirect their money and influence, given the nation’s clangorous politics and gaping divisions.
• Billionaire Kenneth Griffin showed interest in DeSantis, the Florida governor, early on and then backed Haley, the former UN ambassador, with a $5 million donation in December, federal records show.
• But as Trump has dominated the Republican field, Griffin and others have said they’ll concentrate instead on other contests.

Biden Calls Leaders to White House as Shutdown Looms, Ukraine Aid Stalls – Wall Street Journal, 2/26/2024

• President Biden calls congressional leaders to the White House as the clock ticks toward a partial government shutdown Friday night and a Ukraine aid package remains stuck.
• The president called Tuesday’s meeting, seeking to break a logjam. House and Senate leaders have been working to negotiate the details of 12 funding bills totaling $1.6 trillion for federal agencies, which have been operating on temporary extensions since September 30.
• Funding for the Transportation Department and several other agencies expires after March 1, which would affect some housing, food, and veterans’ programs; the rest expires after March 8.
• House Speaker Mike Johnson (R., La.) told Republican colleagues on Friday night that lawmakers should expect to vote to finalize spending levels for federal agencies whose funding expires this week.
• But Republican infighting in the House—which doesn’t return to session until Wednesday—raises the prospect that a temporary shutdown may be unavoidable.
• Like his predecessor as speaker, ex-Rep. Kevin McCarthy (R., Calif.), Johnson has to decide whether to cut a government funding deal with Democrats that risks costing him his job.

EUROPE & WORLD

Microsoft Strikes Deal With France’s Mistral, an OpenAI Rival – Bloomberg, 2/26/2024

• Microsoft, under mounting political scrutiny globally for its deep ties to OpenAI, has cut a deal with the startup’s primary European competition.
• On Monday, the French company Mistral AI announced a “strategic partnership” with Microsoft, including making the startup’s latest artificial intelligence models available to Microsoft’s Azure cloud customers.
• Mistral develops algorithmic models similar to those from OpenAI used for chatbots and other AI services, but Mistral models are open-source and shared openly.
• With the announcement, the company also unveiled a model called Mistral Large that it says has “unique reasoning capacities” and is fluent in five languages.
• Mistral, formed in early 2023 by former engineers at Google’s DeepMind and Meta Platforms, has positioned itself as a brave European champion challenging US dominance.
• In December, the startup closed a $415 million round from a range of investors, including Salesforce and Nvidia.
• The financing valued the firm at about $2 billion.

Li Auto Forecasts Softer Sales After Posting Surge in Quarterly Revenue, Profit – Wall Street Journal, 2/26/2024

• Chinese electric vehicle maker Li Auto expects a sequential drop in deliveries in the first months of 2024, coming after a blockbuster quarter in which sales and profit more than doubled during the tail end of 2023.
• The Beijing-based company said Monday that its fourth-quarter revenue more than doubled from a year earlier to 41.73 billion yuan ($5.80 billion), beating consensus estimates for CNY40.20 billion in a poll of analysts by data provider FactSet.
• Deliveries of Li Auto’s popular SUVs and other cars nearly tripled from a year ago to 131,805 units.
• Net profit was CNY5.66 billion, up from CNY256.9 million a year ago and CNY2.82 billion in the third quarter.
• Li Auto’s 2023 vehicle margin came in at 21.5%, rising from 19.1% a year earlier.
• Its 2023 capital expenditure clocked in at CNY6.51 billion.
• It guided for revenue of CNY31.25 billion-CNY32.19 billion, down from the previous quarter but up from a year earlier.
• Li Auto said it expects to deliver between 100,000 and 103,000 vehicles in the first quarter of 2024, which would be its lowest amount since the second quarter of last year.

BYD Pitches Floating Luxury SUV to Win Over European Buyers – Bloomberg, 2/26/2024

• BYD underscores its European ambitions at the Geneva car show this week by showing off models, including a 1,200-horsepower luxury sport utility vehicle that can float on water.
• The Yangwang U8 plug-in hybrid — which can also make a 360-degree “tank turn” on the spot — would compete with the Mercedes-Benz G-Class and the Land Rover Defender and represents BYD’s push into the luxury market.
• While the Yangwang U8 is meant to showcase BYD’s technological prowess, the manufacturer also brings more mass-market products to Geneva.
• They include a revamped version of the five-seater Seal SUV and the fully electric Tang, which can drive 530 kilometers (329 miles) on a charge.
• BYD didn’t give many details on the price and availability of the vehicles it showcases in Geneva.
• The 17.5-foot-long Yangwang U8 is selling in China for around $150,000.
• Prices for the company’s models tend to be higher in Europe than in their home market.

Palestinian Authority’s Government Resigns, Yielding to International Pressure – Wall Street Journal, 2/26/2024

• The Palestinian Authority’s government resigned on Monday, an early step toward the overhauls the US and Middle Eastern powers see as a condition for the body to take charge of Gaza after the war.
• The move falls short of changes Western and Arab governments have pressured the Palestinian Authority to make, including replacing longtime career politicians with a technocratic team and for Mahmoud Abbas, the authority’s aging and unpopular president, to step aside and invest a new prime minister with some of the president’s powers.
• American and Arab negotiators are scrambling to broker a cease-fire to avoid more civilian casualties and prevent the conflict from further spreading across the region.
• In a sign of escalating tensions, Israel said it had struck aerial defense systems operated by the Lebanese militia Hezbollah 50 miles deep into Lebanon after an Israeli drone was downed by a surface-to-air missile there.
• Two Hezbollah members were killed in the Israeli strike in Lebanon, the group said.

Factmonster – TODAY in HISTORY

• Napoleon Bonaparte escaped from exile on the island of Elba. – 1815
• A 312-ft-long pneumatic subway was opened in New York City; funding for a larger version never materialized. – 1870
• Leaders of the Boxer Uprising in China, Chi-hsui and Hsu Cheng-yu, were beheaded. – 1901
• Grand Canyon National Park was established. – 1919
• Robert Watson-Watt first demonstrated RADAR (Radio Detection and Ranging). – 1935
• A bomb exploded at the World Trade Center in New York. The blast killed six people and injured more than 1,000. – 1993

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

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

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

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

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