RichLegg
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The top story to look out for this week
The February jobs report is due on Friday, with expectations for payrolls growth to ease back. January showed a whopping rise of more than 350,000 in nonfarm payrolls. Economists expect that they rose by 190,000 last month.
The unemployment rate is seen staying at 3.7%. Average hourly earnings are forecast to have risen by 0.2%, down from the 0.6% rise seen in the previous month.
Also on the labor front, the January JOLTS report is dues, along with ADP’s measure of private sector employment for February and the weekly initial claims figures.
The numbers come a little more than a week before the next Federal Reserve meeting. Expectations for the March FOMC meeting have whipsawed and the persistently tight labor market has had a lot to do with it.
Fed funds futures are now pricing in a 95% chance that the Fed keeps rates steady. Back in late December the odds were 90% that a cut was coming.
Apollo Management Chief Economist Torsten Slok argues that the Fed won’t cut rates until 2025.
He notes that the Fed’s hawkish pivot has given a strong tailwind to growth since December and the labor market remains tight, with jobless claims at low levels, and wage inflation between 4-5%. In addition, underlying measures of trend inflation are going up.
The market was expecting six rate cuts as 2024 started.
Pantheon Macro economist Ian Shepherdson says the bottom line is “that the FOMC’s consensus view that the Fed needs to wait for significantly more data before easing is quite strong.”
But he adds that the nature of turning points “is that things can change quickly, and we expect the labor market and inflation data by the time of the May meeting to signal that the Fed needs to ease.”
Earnings activity is slowing down, but this week has some big names in retail weighing in.
Target (TGT) will report on Tuesday. Seeking Alpha analyst Max Greve says the stock has long-term potential but short-term risks in light of the vague guidance that management gave for Q4 results. However, he says poor Q4 revenue – anything short of double-digit decline – is already baked in.
On Wednesday, Foot Locker (FL), Abercrombie & Fitch (ANF) and Victoria’s Secret (VSCO) report. On Thursday Kroger (KR), Costco (COST) and Gap (GPS) issue results.
Among the top stories of the weekend
OPEC+ on Sunday decided to extend cutbacks on oil production through the first half of the year to support prices by warding off a surplus.
The curbs of 2 million barrels a day will remain until the end of June, Bloomberg reported, citing delegates. Saudi Arabia makes up half of the promised cuts to production.
Brent crude (CO1:COM) has traded at about $80 a barrel this year as adequate supplies offset disruptions to shipping in the Middle East because of regional conflicts.
Fisker (FSR) is in talks with Japan’s Nissan Motor (OTCPK:NSANY) in an effort to try to save the struggling EV maker, according to media reports.
Nissan (OTCPK:NSANY) may invest as much as $400 million in Fisker’s truck platform and build Fisker’s planned Alaska pickup starting in 2026 at one of its U.S. assembly plants. A deal could close this month, The term sheet is ready and the transaction is going through due diligence, a source told Reuters.
The report comes after Fisker shares plunged 34% on Friday after the company expressed doubts it can continue as a going concern.
Three law firms have asked a U.S. court in Delaware to award them with Tesla (TSLA) stock worth nearly $6 billion as their fee for successfully getting Elon Musk’s $55 billion pay package nullified.
On January 30, Delaware Chancery Court Chief Judge Kathaleen McCormick voided a 2018 performance-based stock option grant worth $55 billion due to Musk after a shareholder lawsuit claimed that the package was unduly approved.
That shareholder lawsuit was filed by former heavy metal drummer Richard Tornetta on behalf of his fellow Tesla investors.
And activist investor Ancora Holdings reiterated its call for Norfolk Southern’s (NSC) CEO to be replaced after the railroad operator’s latest derailment in Pennsylvania.
A Norfolk Southern train went off the tracks in eastern Pennsylvania Saturday morning, leaving at least one railroad car partially submerged in the Lehigh River.
Ancora said: “Following this latest derailment, we call for the immediate termination of CEO Alan Shaw and stand ready to engage with the company about an orderly reconstitution of the board and a transition to capable management with a track record of actually delivering on safety commitments.”
Norfolk Southern didn’t immediately respond to a Seeking Alpha email request.
And in the Wall Street Research Corner
Morgan Stanley says we are in a boom-bust environment, with a cycle that will be “hotter but shorter.” That could bring a downside to EPS followed by a recovery in the second half of the year.
Another earnings boom will come after “a proper bust,” according to strategist Michael Wilson.
Wilson estimates the S&P 500 base next-twelve-months price target is 4,500, down 12%, with a next-twelve-months P/E target 17.7x, and EPS estimates for 2024 at $229, with 7% growth.
Overweight sectors include health care (XLV), consumer staples (XLP), and utilities (XLU). Morgan Stanley is Neutral on communication services (XLC), energy (XLE), financial services (XLF), industrials (XLI), materials (XLB), technology (XLK) and real estate (XLRE) and underweight broad consumer cyclicals (XLY).
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
