US equity futures are pointing to a positive open with stocks being lifted this morning by upbeat results from Netflix (NFLX) but also comments from former St. Louis Federal Reserve President James Bullard, who thinks interest rate cuts could happen as soon as March before inflation hits the central bank's target of 2%. Despite current Fed officials indicating otherwise in recent days and weeks, Bullard’s comments pushed yields lower, with the U.S. 10-year Treasury yield falling 4 basis points to 4.10%.
Friday’s December PCE Price Index and what it shows about the pace of inflation improvement will be a far better indicator of the Fed’s intentions when it comes to monetary policy. Comments on input and output prices found in today’s January US Flash PMI data out later this morning should be a leading indicator for what is found in the forthcoming January CPI and PPI reports.
At 9:45 AM ET, the Flash January US Manufacturing and Services PMIs from S&P Global will be released. The Flash Manufacturing figure is expected to remain steady at 47.9, while the one for the Services sector is forecasted to dip to 51.0 from December’s final reading of 51.4.
Shares of Netflix (NFLX) popped after the company added 13.12 million global streaming net paid accounts during the December quarter and issued upside guidance, overshadowing mixed December quarter financial results. EPS for the quarter came in below consensus expectations, while revenue rose 12.5% YoY to $8.83 billion, ahead of the $8.72 billion consensus. For the current quarter, Netflix sees EPS of $4.49 vs. the $4.10 consensus forecast. Management shared it is not interested in acquiring linear assets. Netflix expects the streaming industry to remain highly competitive but in its shareholder letter laid out plans to increase its content amortization by a “high single-digit percentage year over year…”.
SAP SE (SAP) reported mixed December quarter results but the company’s shares are moving higher this morning after revealing plans to restructure 8,000 jobs to boost artificial intelligence growth. The restructuring will affect over 7% of SAP's 108,000 full-time workforce, though the headcount will remain constant at year-end. SAP will focus on strategic growth areas, particularly Business AI, and transform its operational setup to capture organizational synergies and AI-driven efficiencies. For 2024, SAP sees cloud and software revenue of €29.0-29.5 billion up 8%-10% YoY in constant currencies.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Artificial Intelligence, Cybersecurity, Digital Identity & Data Privacy
CHIPs Act
Chipmaking equipment maker ASML Holding (ASML) reported fourth-quarter earnings that beat expectations and its best-ever quarterly orders… The company registered orders of more than 9 billion euros in the quarter - more than triple third-quarter levels…” Read more here
Cloud Computing
“Amazon Web Services (AWS) said on Friday it plans to invest 2.26 trillion yen ($15.24 billion) in Japan by 2027 to expand cloud computing infrastructure that serves as a backbone for artificial technology (AI) services… That comes on top of 1.51 trillion yen spent from 2011 to 2022 to build up cloud capacity in Japan, AWS said.” Read more here
Consumer Inflation Fighters
“The latest Survey of Consumer Expectations Household Spending Survey, which is released every four months, also showed that households expect to spend less in the year ahead… Survey respondents said they expected to spend less on everyday essential spending.” Read more here
EV Transition
“The White House has set a goal of building a national network of at least 500,000 public chargers by 2030, but researchers at the National Renewable Energy Laboratory have projected that the country will need more than one million public charging ports by the end of the decade.” 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.