Wells VP Fired for Mile High Client Service

Your market recap, signals and noise

Author

Litquidity Capital
January 08, 2023

Good morning,

Consecutive down years don’t happen often for the S&P 500…but when they do, the second year is always deeper than the first. Core Euro-Area inflation just hit a new record while the US jobless rate fell last month to match a five-decade low.

Let’s dive into the market news buried over Friday afternoon, and preview the news you actually need to care about for the week ahead.

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Bad News Dumpster Dive

Market movers like to bury bad news, so we've decided to excavate them. 👀 = degree of sus.

👀👀👀

  • Party City is planning a bankruptcy filing in the upcoming weeks (WSJ)

  • Genesis parent company Digital Currency Group shut down its $3.5 billion wealth management division (The Information)

  • Ant Group says Jack Ma relinquished his control of the company (NYT)

  • Wells Fargo fired an executive accused of urinating on a fellow passenger aboard a flight to New Delhi (MarketWatch)

👀👀

  • The SEC is reviewing money flows between Barry Silbert’s DCG and other crypto companies (BBG)

  • Eisai and Biogen got accelerated approval for an alzheimer’s drug from the FDA (Reuters)

  • Cathie Wood sold 99% of her Silvergate stock this week (Yahoo)

  • McDonald’s is planning a reorganization and job cuts (CNBC)

  • China's deeply troubled property sector is set to see home sales fall for the second straight year in 2023 (Reuters)

👀

  • The SEC is now asking financial firms what diligence policies and procedures they have in place, if any, and whether they followed them when choosing to invest in FTX (Reuters)

  • The White House said the US is likely to head for an economic soft landing.

  • Anthony Fauci has said he has “no idea” what Elon Musk means with his threats to release the “Fauci Files” (CBS)

  • Big raises haven't kept up with rising prices due to inflation (CNBC)

  • Investor Leon Cooperman said on CNBC that "Anybody looking for a new bull market any time soon is looking the wrong way."

  • Billionaire investor Charlie Munger went on CNBC to advise investors to “Stop complaining” because "Everybody’s five times better off than they used to be."

Signal to Noise

Next week’s market outlook and whether you should actually care.

Signals 

  • Inflation release (1/12)

  • Delta earnings (1/13)

  • Consumer credit (1/9)

Noise

  • Fed Chair Jerome Powell speaks in Sweden (1/10)

  • Bed Bath & Beyond earnings (1/10)

  • Jobless claims (1/12)

  • Federal budget (1/12)

  • JPMorgan Chase earnings (1/13)

    Signals

    Inflation release (1/12)

    • Here’s to hoping Powell stays over in Sweden long enough after his speech, because he’ll be needing close and extensive access to that good Nordic alcohol.

    • Data included in Thursday’s release at 8:30am EST includes: Core CPI, CPI (year-over-year), Core CPI (year-over-year) and CPI excluding shelter (3-month SAAR).

    • Last week, the 3mo/10yr treasury curve inverted by 93 bps. You could see it as the market fighting the Fed - or as the market saying the Fed's forecast for inflation persistence is wrong.

    Delta earnings (1/13)

    • Southwest’s lives are about to get even worse as analysts are anticipating a strong Q4 earnings report from Delta Air Lines (DAL, $35.23) on Friday.

    • On the price chart, DAL stock gained 17.1% in the final three months of 2022. Shares have continued this momentum into 2023, up 7.2% for the year-to-date.

    • Analysts are anticipating notable Q4 growth, with an expected earnings per share (EPS) growth to $1.36, compared to its year-ago earnings of $0.22. Revenue is forecast to arrive at $12.4 billion, up 30.9% year-over-year (YoY).

    • Analysts expect this growth to continue into the new year and that demand for leisure travel will remain strong. They’re betting business travel will surpass 2019 levels.

    Consumer credit (1/9)

    • Tomorrow, the Consumer Credit report will cite the outstanding credit extended to individuals for household, family, and other personal expenditures (excluding loans secured by real estate).

    • Interestingly, consumer sentiment vs. S&P is at notable lows. In the past 50 yrs, by the time consumer sentiment gets this low, the recession has been nearly over.

    Noise

    Fed Chair Jerome Powell speaks in Sweden (1/10)

    • Markets are pricing a cut in rates despite the Fed's hawkish minutes.

    Bed Bath & Beyond earnings (1/10)

    • (Former?) home-goods giant Bed Bath & Beyond (BBBY, $1.31) says it's running out of money and may need to file for bankruptcy protection — or worse. It plans to offer further details on Jan. 10 during its quarterly earnings report to investors.

    • It’s said BBBY is considering restructuring, selling assets or going through bankruptcy. It further demonstrated its financial acumen in a statement this week that "These measures may not be successful."

    • BBBY expects to report sales declining by 33% compared to last year for the quarter that ended right after Black Friday, a reflection of "lower customer traffic and reduced levels of inventory availability." The forecast suggested losses would increase by almost 40% to $385.8 million.

    Jobless claims (1/12)

    • ICYMI: The economy added 223k jobs in December (vs. 200k expected).

    • Last week's jobs report continued a record streak of better than expected non-farm payrolls reports.

    Federal budget (1/12)

    • In the 12 months to November, M2 (the amount of money in circulation) growth was exactly zero, according to the Fed. This is the first time this has ever happened.

    • Money supply in 2020 was unprecedented — M2 gained more than 25% in a year. There have been big exercises in creating money before, notably the quantitative easing that followed the Great Financial Crisis in 2008. But that money went to plugging gaps in balance sheets. This latest money went into circulation.

    • Money supply growth peaked early in 2021, and the steady growth in prices came afterward.

    JPMorgan Chase earnings (1/13)

    • It’s a big week ahead for bank earnings, with avid recession-deniers JP leading the headlines. Other firms announcing Q4 earnings this week include Bank of America, BlackRock, BNY Mellon, Citigroup, First Republic Bank and Wells Fargo.

    • Analysts anticipate that JPMorgan Chase (JPM, $135.35) earnings will be steadier than most anticipate.

    • The real metric most will be watching for is net interest income (NII), a key measure of profitability for banks that shows the difference between revenue made on interest-bearing accounts like loans and the costs paid for those assets. In Q3, JPM said net income was up 34% year-over-year thanks to high interest rates and more loans.

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