Podcast Summary
Daily Challenges, Innovative Business Solutions, and Political Turmoil: Individuals face daily struggles, small businesses use high-yield accounts, political dysfunction continues, Amazon cuts more jobs, and data plays a bigger role in finance.
The daily challenges and struggles of individuals, even those in the spotlight or successful, can often go unnoticed. Meanwhile, small business owners are finding innovative ways to make their money work harder for them, such as using high-yield business accounts. In other news, political turmoil continues in Washington as Kevin McCarthy faces opposition from hardline conservatives in his bid to become House speaker. President Biden has weighed in, expressing disappointment over the dysfunction. Additionally, Amazon is planning to cut more jobs than initially announced, with over 18,000 roles set to be eliminated. In the world of finance, data is increasingly playing a pivotal role in investment decisions and the construction of innovative enterprises. These are just a few of the stories making headlines today. Stay tuned for more updates.
Amazon Accelerates Layoffs Amid Economic Uncertainty: Amazon hastens job cuts in retail and HR, leaked info forces early communication, labor market shows rising unemployment and low jobless claims, Fed stays firm on inflation, economists predict stock market declines, Pope Francis delivers homily at Benedict's funeral
Amazon, in response to economic uncertainty, has accelerated layoffs, primarily affecting its retail division and human resources. The CEO, Andy Jassy, had planned to wait to communicate these cuts internally but was forced to address the issue prematurely due to a leak to the Wall Street Journal. Meanwhile, the labor market is expected to show rising unemployment and low jobless claims, but these readings may not significantly impact the markets, which are focusing on the upcoming jobs report. The Federal Reserve is standing firm on its efforts to combat inflation, despite the potential for a recession, and economists are predicting declines in the stock market, with Morgan Stanley's Mike Wilson forecasting a drop to 3,000 for the S&P 500. Additionally, Pope Francis delivered a homily at the funeral mass for former pope Benedict, who is being laid to rest in the crypt under Saint Peter's Basilica.
Biden to Visit Border Amidst Migration Surge, Supreme Court Hearing on Student Debt Relief: President Biden plans to visit the US-Mexico border next week amidst a surge in migration. The Supreme Court is set to hear arguments on the administration's student debt relief plan.
President Joe Biden is set to visit the US-Mexico border next week amidst a surge in migration, while his administration is urging the Supreme Court to uphold the student debt relief plan. New York City Mayor Eric Adams is engaging in a public feud with his predecessor Bill de Blasio's team, and California is experiencing heavy rain and strong winds as part of a series of atmospheric river storms. In sports, the Knicks won against the Spurs after Jalen Brunson's career-high performance, while the Nets ended their 12-game winning streak against the Bulls. The Red Sox lost Xander Bogaerts to free agency but signed Rafael Devers to a new contract. The Jets and Dolphins, both having lost five games in a row, are still in contention for the playoffs. The standoff between House Republican Leader Kevin McCarthy and GOP members blocking his bid to become the next speaker of the house continues in Washington DC.
Power struggle for Speaker of the House continues: Dissident Republicans' shifting demands and personal vendettas hinder McCarthy's Speakership bid, while the broader conference seeks a more consensus candidate, and a coalition government with Democrats is an unlikely solution.
The ongoing power struggle within the Republican Party for the position of Speaker of the House is unlikely to end soon. The 20 dissident Republicans have shifting demands and an outsized desire for influence, which cannot be met by one individual, and their demands are seen as a personal vendetta against current Speaker candidate Kevin McCarthy. The broader Republican conference is looking beyond McCarthy towards a more consensus candidate, be it conservative or centrist. The possibility of a deal being made with Democrats for a coalition government is also unlikely due to the differing incentives and non-negotiable positions on spending and debt limit. The situation remains uncertain as the voting for the next Speaker continues in Washington D.C.
US Stocks Flat as Investors Weigh China's Reopening and Fed Caution: US stocks are holding steady amid mixed economic signals, with investors weighing China's reopening against the Federal Reserve's cautious comments. European shares recovered some losses, while Amazon confirmed significant job cuts and the tech sector is under pressure.
US stock index futures are showing little change as investors weigh the signs of China's reopening against cautious comments from the Federal Reserve. European shares recovered some losses after a report showed euro area producer prices fell more than expected. Amazon confirmed plans to lay off over 18,000 employees, nearly double the previously reported number, raising concerns about the tech industry's slump. The US House will resume session after a standoff between Kevin McCarthy and GOP dissidents over his bid to become speaker. The Pope is honoring his predecessor, Benedict XVI, and there were losses in the NBA and hockey. The tech sector is under pressure as Amazon and Salesforce announce significant job cuts. The broader stock market performance and the Federal Reserve's comments are contributing to the tech sector's struggles. Despite the operational impact, the tech sector's woes are not entirely Amazon's fault as investors are finding better returns elsewhere.
Economic slowdowns impact tech sector and politics: Salesforce braces for ad revenue decline, Amazon plans to lay off over 18,000 employees, political turmoil in Washington, and the Fed keeps interest rates high to fight inflation
The tech sector, particularly companies like Salesforce that enable other businesses, are feeling the impacts of economic slowdowns. Salesforce, for example, is preparing for potential declines in advertising revenue as companies cut back on marketing spending. Meanwhile, Amazon is planning to lay off more than 18,000 employees, with most of the cuts coming from its retail division and human resources department. Elsewhere, political turmoil in Washington continues as lawmakers struggle to elect a new speaker of the house, with twenty conservatives blocking Kevin McCarthy's path. And the Federal Reserve is affirming its commitment to bringing down inflation, even if it means keeping interest rates high in the short term. Despite these challenges, the S&P 500 futures are little changed, while the 10-year treasury yield is down to 3.70% and the 2-year yield is at 4.38%.
Morgan Stanley Warns of Upcoming Earnings Recession: Morgan Stanley's Mike Wilson predicts stocks could decline more than 20% due to an upcoming earnings recession. Companies focusing on cost efficiency are expected to perform well.
While the stock market showed signs of recovery yesterday, Morgan Stanley's chief US equity strategist, Mike Wilson, is warning investors of rough days ahead due to an upcoming earnings recession. Companies that can deliver on cost efficiency are expected to continue performing until earnings are fully priced. Wilson predicts stocks could decline more than 20% from current levels. In other news, former Pope Benedict was remembered at his funeral with intellect and great questions being among his legacies. New York City Mayor Eric Adams called on his predecessor, Bill de Blasio, to stop criticizing his administration. President Biden plans to visit the US-Mexico border and consider sending military vehicles to Ukraine. Rick Singer, the mastermind of a nationwide college admissions bribery scheme, was sentenced to 3.5 years in prison. In sports, the San Antonio Spurs lost to the Brooklyn Nets, the Nets' 12-game win streak ended, and the Lakers won without LeBron James. The Devils won, and DeMar Hamlin showed signs of improvement from his cardiac arrest. Quarterback news included Washington starting rookie Sam Howell, Chicago starting Nathan Peterman, and Miami likely starting rookie Skyler Thompson. Jim Harbaugh spoke with the Carolina Panthers but expects to remain at Michigan.
Murdoch's Media Empire to Stay in Manhattan, NYC Invests in Electric Fleet: NYC invests in electric vehicles, Murdoch's media stays put, China's COVID-19 outbreak causes travel restrictions and supply chain concerns for Dell
Rupert Murdoch's media empire is committing to staying in Manhattan for another 20 years, while New York City is investing in electric fleet vehicles with the help of a federal grant. Elsewhere, China's COVID-19 outbreak is leading to new travel restrictions, and Dell is reportedly looking to reduce its reliance on Chinese-made semiconductors. The editorial board at Bloomberg Opinion suggests that testing before travel, combined with other measures, can help manage the global risk posed by the virus. Additionally, tensions between the US and China are causing Dell to consider diversifying its supply chain. In financial news, US markets are little changed, and the yield on 10-year treasuries is down. The house of representatives is continuing to try and elect a speaker, and Pope Francis is honoring his predecessor, Benedict XVI. A huge storm is threatening widespread flooding in California, and the NBA is seeing some changes in game results.
Transportation disruptions in London, US job market focus, Sumitomo Mitsui Financial Group's stake increase, and Wall Street bear's S&P 500 prediction: London transport disrupted by strikes, US job market forecast, Sumitomo Mitsui Financial Group buying more Jefferies shares, and a Wall Street bear predicts a 16% S&P 500 decline in 2023
There are significant disruptions in the transportation sector in London due to train drivers' strikes, while in the US, the labor market remains a focus with predictions of a modest job gain in the official employment data release. In corporate news, the potential increase of Sumitomo Mitsui Financial Group's stake in Jefferies Financial Group is causing a jump in shares. However, one of Wall Street's top bears predicts a 16% decline in the S&P 500 this year, which could be the fifth time in nearly a century that the benchmark index suffers from two consecutive years of double-digit declines. Eric Freedman, chief investment officer at US Bank Asset Management, believes that the market is more likely to experience downsizing over the next few months due to concerns about earnings estimates and the persistence of inflation, as well as the divergence between the Fed's and the market's view on interest rates. The Fed's upcoming meeting in February and the speaker series are expected to provide more information that could reinforce the idea of longer and higher interest rates. The predicted downsize could be material, but the exact amount of downside is uncertain and will depend on more information from the Fed.
Expected market test at S&P 500 3,600, economic recession with uncertain duration, back half improvement, focus on cash flow sectors: The market is expected to face a test at the S&P 500 level of 3,600, indicating a potential economic recession with an uncertain duration. Cash flow sectors like utilities, infrastructure, and energy are suggested for focus. The back half of the year is expected to improve, but there will be a shallow downturn first.
According to Eric Friedman, Chief Investment Officer at US Bank Asset Management, the market is expected to face a test of the S&P 500 level at 3,600, which is a key level where several moving averges converge. He also mentioned that the market is likely to experience a shallow economic recession, but the duration of the trough will be crucial. The back half of the year is expected to improve, but there will be a shallow downturn first. Friedman suggested focusing on cash flow sectors such as utilities, infrastructure, and energy as the market grapples with interest rates. He also mentioned that it's too early for technology and that cyclicals and value may offer relative opportunities. The interview took place before the Fed minutes were released, which caused S&P futures to rise by 2 points. The 10-year treasury yield was 3.69% and the 2-year yield was 4.37%. NYMEX crude oil was up 2.6% and COMEX gold was down 0.25%. The euro was slightly stronger against the dollar. The Supreme Court, which faced numerous controversies in 2022, including a draft opinion to overturn abortion rights and ethics scandals, was not mentioned in Chief Justice John Roberts' year-end report on the judiciary.
Supreme Court Report Lacks Transparency on Institutional Issues: The Supreme Court's year-end report failed to address the Dobbs leak investigation and other institutional issues, instead focusing on thanking Congress for already passed legislation. This lack of transparency raises questions about Chief Justice Roberts' stance and the role of political branches in the conversation.
This year's Supreme Court year-end report lacked transparency and reflection on the court's institutional issues, such as the investigation into the Dobbs case draft opinion leak and potential legislative reforms. Instead, it focused on thanking Congress for already passed legislation. The report's omission of the leak investigation and other significant issues raises questions about Chief Justice Roberts' stance on addressing these matters and the role of political branches in the conversation. The lack of transparency in the report aligns with the Supreme Court's general reluctance to disclose information, leaving many wondering about the true reasons behind the leak and its implications for the court's functioning.
