Earnings, Fed Speakers, and the Atlanta Fed’s GDPNow Update
February 7, 2024
US equity futures are pointing to a flat to slightly lower open. Earnings digestion continues this morning as the latest wave takes us further beyond Big Tech earnings and has investors rifling through downside guidance this morning from CVS Health (CVS), Kennametal (KMT), Hilton (HLT), and weaker-than-expected results from Yum! Brands (YUM). As the market works its way through those reports and conference calls, it will also be getting ready for this afternoon’s next wave of Fed Speakers - Fed Governor Adriana Kugler, Boston Fed President Susan Collins, Richmond Fed President Tom Barkin, and Fed Governor Michelle Bowman.
Yesterday Cleveland Fed President Loretta Mester largely reiterated Fed Chair Powell’s recent comments that the strong economy means rate cuts may not be needed until “later this year”. Based on economic data of the last few days that showed the US economy on stronger footing than previously thought odds are today’s speakers will make similar comments. Those could push rate cut timing expectations back even further, but an even greater source of pushback is likely to come from the Atlanta Fed when it shares the latest update for its GDPNow model later today. Ahead of the January Employment Report and this week’s January Service PMIs, that rolling GDP forecast model sat at 4.2% for the current quarter. The strength in those recent data points argues for an upside revision, which will support the Fed’s more conservative position on when to begin its rate-cutting cycle.
Snap (SNAP) shares were hard hit in aftermarket trading last night after the company issued revenue that trailed consensus expectations and guidance that also came up short. Daily Active Users increased 10% YoY in the December quarter with Snapchat+, the company’s subscription service that offers exclusive, experimental, and pre-release features, reaching over 7 million subscribers. However, average revenue per user came in at $3.29, missing the $3.33 expectations. For the current quarter, Snap sees revenue in the $1.095-$1.135 billion range vs. the $1.12 billion consensus. Earlier this week, Snap said it would cut 10% of its global workforce, which equates to about 500 employees.
elf Beauty (ELF) crushed December quarter expectations led by its 84.9% YoY jump in revenue to $270.9 million, significantly ahead of the $238.89 million consensus. The company issued upside guidance for 2024 with revenue in the range of $980-$990 million vs. its prior guidance of $896-$906 million and the $927 million consensus.
Taiwan Semiconductor (TSM) announced its net revenue for January 2024 was ~NT$215.79 billion, an increase of 22.4% from December 2023 and an increase of 7.9% from January 2023. That is certainly a positive for our Digital Infrastructure & Connectivity model below.
Moody's downgraded New York Community Bancorp's (NYCB) long-term issuer rating to Ba2 long-term issuer rating to Ba2 while its other ratings are on review for further downgrade.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Aging of the Population
“More Americans are turning 65 this year than any prior time in history. Today’s 65-year-olds are redefining a milestone long associated with retirement parties and the end of productive years. They are wealthier and by many measures, healthier, and expected to live another 20 years. A growing share are divorced. Many turn their focus to what they want in this next stage.“ Read more here
EV Transition
“China has said it will strengthen support for the country’s electrified vehicle industry as the sector increasingly faces trade restrictions from the European Union and the US. The ministries of commerce, foreign affairs, and customs as well as four other government agencies on Wednesday called EV exports a “key pillar” in optimizing China’s foreign trade.” Read more here
Precision Ag & AgriScience
“The federal government could help spur the adoption of precision agriculture practices in a number of ways, including increased research funding and assistance to farmers for enhancing data analysis, the Government Accountability Office says… Precision ag technology ranges widely from remote sensing platforms on drones and robots to in-ground sensors that monitor soil temperature and moisture, and targeted sprayer systems and automated weeders.“ Read more here
The strategies behind our Thematic Models:
Aging of the Population - Capturing the demographic wave of the aging population and the changing demands it brings with it.
Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
CHIPs Act – Capturing the reshoring of the US semiconductor industry and the $52.7 billion poised to be spent on semiconductor manufacturing.
Cloud Computing – Companies that provide hardware and services that enhance the cloud computing experience for users, such as co-location, security, and edge computing.
Consumer Inflation Fighters - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
Core Holdings – Companies that reflect economic activity and are large enough to not get pushed around by day-to-day market trends. Low-beta, large-cap names able to better withstand economic turmoil.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
EV Transition - Capturing the transition to EVs and related infrastructure from combustion engine vehicles.
Guilty Pleasure – Companies that produce/provide food and drink products that consumers tend to enjoy regardless of the economic environment and potential long-term health hazards associated with excessive consumption.
Homebuilding & Materials – Ranging from homebuilders to key building product companies that serve the housing market, this model looks to capture the rising demand for housing, one that should benefit as the Fed returns monetary policy to more normalized levels.
Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Luxury Buying Boom - Tapping into aspirational buying and affluent buyers amid rising global wealth.Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Nuclear Energy & Uranium – Companies that either build and maintain nuclear power plants or are involved in the production of uranium.
Precision Ag & Agri Science – Companies that look to address shrinking arable land by helping maximize crop yields utilizing technology, science, or both.
Rebuilding America - Turning the focused spending on rebuilding US infrastructure into revenue and profits.
Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
Space Economy – Companies that focus on the launch and operation of satellite networks.
The strategies behind our Dividend Income Models:
Monthly Dividend Model – Pretty much what the name says – this model invests in companies that pay monthly dividends to shareholders.
ETF Dividend Model – High-yielding ETFs that provide a range of exposures from domestic equities, international equities, emerging market equities, MLPS, and REITs.
ETF Enhanced Dividend Model – A group of high-yielding ETFs that utilize options to enhance yield through collecting option income.