YOUR QUIVER | January 23, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Tech Earnings Preview
We’ve got a lot of big-name earnings again this week, from $MSFT to $TSLA. An NABE survey states that almost 20% of US firms expect to reduce headcount in the next few months, and we expect we’ll continue to hear about reductions from the tech side. $SPOT just announced a 6% cut too.
Downgrades Galore
RBC noted that we’re experiencing the fastest pace of earnings forecast downgrades since 2010. While cuts have been cross-sector, the biggest hits have come in Energy and Financials (oil and gas, plus banks). So, they’re advocating for going long the areas with the sharpest downgrades versus those where earnings have been resilient. We’re not so sure about that, as it assumes we’re at a 1-and-done event. You’ll definitely get paid if you can pick names who keep showing resilience, but we get the point. Come in after the negative news.
Early Warning
$JPM, $BAC, $WFC and 4 other banks plan to launch a digital wallet in 2H23 to compete with PayPal and Apple Pay, according to the WSJ. It will be managed by Early Warning Services, the co that ops money-transfer service Zelle.
Giving Credit
Traders expect $20-25 bn of new IG bonds this week after some biggies report earnings (e.g., American Airlines, AT&T, Chevron, J&J, Tesla).
ECB Hawkishness
Knot and Rehn rattled cages with language around multiple 50 bps hikes and “grounds for significant increases” through to the spring.
Lights Out
The UK’s grid operator asked folks to cut energy usage after lower wind power and freezing temps. European nat gas moved with Norwegian supplies expected to fall to the lowest in more than 2 mo. The ACER will publish its initial assessment of the EU's temporary gas price cap.
Making an Offer
The BOJ offered around $7.7 bn of 5-yr loans to commercial banks in Japan, and demand was 3x that level. Proceeds are likely to go into gov debt to help the central bank keep yields lower. Interestingly, the BOJ minutes showed officials tried to hit the pause button, surprised at the planned tweaks to yield curve control.
The More the Merrier?
Elliiott Mmt supposedly took a big stake in $CRM, making it the fourth activist in the name behind Starboard and 2 others. If Benioff wasn’t busy before…Now just hot off the press, Jeff Ubben’s Inclusive Capital has taken a position in Salesforce, according to sources, CNBC’s David Faber reported Monday.
Making New Friends
Apple is looking to manufacture 25% of its iPhones in India.
Warning Signs
42Macro’s models are highlighting bearish signals for China $FXI post ramp from China reopening + stimulus flows. They recommend sitting on the sidelines if you’ve been thinking of starting a position, given potential negative flow dynamics.
Quiet Period
That’s what the Fed is now until their next meeting. Per UBS’ BBG chart below, you quickly get their point. It may be quiet now, but unless labor turns quickly, the current dovish 2H23 projection embedded in the market won’t last.
