January 11, 2025
What You Need to Know Today:
Politburo signals big boost to China’s economy
Words count. And they move stocks when they come from China’s President Xi Jinping and the Politburo ahead of the March session of parliament that will set the budget–and stimulus spending for the year. The words? The Politburo vowed to embrace a “moderately loose” monetary policy in 2025, according to the official Xinhua News Agency. That’s a huge shift from the “prudent” strategy that’s held for nearly 14 years. The last time China adopted a “moderately loose” monetary policy was in the Global Financial Crisis as part of a big stimulus package to prop up the economy.
Tesla has more self-driving problems
The National Highway Traffic Safety Administration (NHTSA) has opened a new investigation into Tesla’s (TSLA) self-driving (FSD) technology over reports of four crashes where FSD software was engaged in an “area of reduced roadway visibility conditions.” Reduced roadway visibility includes conditions like sun glare, fog, or airborne dust.
China tries same old medicine again to address sluggish growth
Minutes after the release of government data that showed the economy grew at just a 4.6% year over year rate in the third quarter (the official target is 5% growth), the People’s Bank of China announced new measures to support the country’s financial markets. People’s Bank Governor Pan Gongsheng flagged the real estate and stock markets as key challenges in the economy that require targeted policy support. the 4.6% growth rate is the slowest pace in six quarters.
Taiwan Semiconductor Manufacturing beats on earnings and raises forecast
Shares of global chipmaking powerhouse rose 9.79% today to hit a record high after the chipmaker topped quarterly estimates and raised its target for 2024 revenue growth. The company—-the main chip manufacturer for Nvidia (NVDA) and Apple (AAPL)–expects sales to climb roughly 30% in U.S. dollar terms this year, up from previous projections for an increase in the mid-20% range. Taiwan’s largest company had raised its outlook for 2024 revenue just a few months ago in July.
Retail sales stronger than expected in September
U.S. retail sales strengthened in September by more than forecast. The U.S. economy continues to show solid growth. And the economic strength continues to say that there’s less need for the Federal Reserve to cut interest rates by a larger-than-usual 50 basis points at its November 7 meeting. The value of retail purchases, unadjusted for inflation, increased 0.4% in the month after a 0.1% gain in August, the Commerce Department reported today. Excluding autos and gasoline sales, retail sales climbed 0.7%.
Good news: What we now know about this coming earnings season
It’s still very early in third quarter earnings season, but I think we can already see a pattern.
Special Report A New World for Dividend Investors Pick #4 Equinor
Equinor (EQNR) is Pick #4 in my Special Report A New World for Dividend Investors. I posted this pick in my long Special Report post. But I wanted to flag it here as well so no one wouldl miss the pick. Dividend Pick #4: Equinor (EQNR)
Live Market Report (20 minute delay)
U.S. economy adds a whopping 353,000 jobs in January; forget about a March interest rate cut
I think you can kiss goodbye to the idea that the Federal Reserve will begin cutting interest rates with its march 20 meeting. Today, the Bureau of Labor Statistics reported that the U.S. economy added 353,000 jobs in January. The statisticians also revised upward the job totals for December and November. The unemployment rate held at 3.7%. Hourly wages accelerated from a month earlier, increasing by the most since March 2022. Economists surveyed by Bloomberg wee looking for the economy to add 185,000 jobs in January.
Please Watch My New YouTube Video: Microsoft Shows Priced-to-Perfection Risks
Today’s video is Microsoft Shows Priced to Perfection Risks. This quarter, the company reported Tuesday, Azure, its cloud services flagship, grew revenue by 30% last year. While a 30% growth rate would be a great for many companies, Wall Street and analysts were disappointed in this news from Microsoft. This is the “priced to perfection” problem. Although the company beat earnings estimates, beat revenue estimates, and showed 30% growth in a key part of the company, the stock went down. Maybe a $3 trillion market cap on Microsoft is a lot of weight to push up hill. We could see more of this during this earnings season as Amazon, Apple and Meta release their own reports. The “Magnificent Seven” that were responsible for most of the 24% gain in the S&P in 2023 are beginning to wobble. My hope was for more market leaders to emerge but that doesn’t seem to be happening. I don’t expect “wobble” to cause anything that terrible in the market, but a sideways move is likely as investors ponder their next move.
This economy is confusing–will tomorrow’s Jobs Report tell us how we’re doing?
A day before the January jobs report that everyone on Wall Street is awaiting with bated breath two other reports painted a conflicting picture of how the U.S. economy is doing. And just in case you’ve forgotten the strength and speed of economic growth is what will determine when the Federal Reserve first cuts interest rates and how many cuts investors will see in 2024.
Federal Reserve disappoints, comes close to taking a March cut in interest rates off the table
The Federal Reserve maintained its benchmark interest rate on Wednesday in a range of 5.25%-5.50%–as the financial markets expected. But the central bank pushed back more strongly than financial markets hoped on a March 20 schedule for the first cut in rates. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the Fed said in its policy statement.Fed chair Jerome Powell pushed back even moe strongly in his Wednesday press conference pushed back: A march cut is “probably not the most likely case or what we’d call the base case,” he said. “I don’t think it’s likely the Committee will reach a level of confidence by the time of the March meeting to identify March as the time to [cut rates].”
Microsoft beats on earnings, but stock is flat
It is perhaps too early to draw meaningful conclusions, but Microsoft’s failure to jump in after-hours trading on better than expected earnings sure seems like more evidence that this is a market priced to perfection.
Special Report: 10 Penny Stock Home Runs–Pick #1 LAZR, #2 PILBF, #3 GWH, #4 NLLSF, #5 LYSDY, #6 VWDRY, #7 LCCTF
Usually I start off one of these stock-picking Special Reports by building a paradigm that I can use to screen for the kind of stocks I’m looking for. For this Special Report: 10 Penny Stock Home Runs I’m going to reverse that process and begin with the 10 picks.My first pick is Luminar Technologies.
Please Watch My New YouTube video: Tesla’s headaches are causing real pain at GM and Ford
Today’s Trend of the Week video is Bad News from Tesla is even worse news for other electric vehicle companies. On January 24, after the close, Tesla announced a slight miss on their earnings report. Guidance was rather sparse but grim. Sales grew at about 38% in 2023, well below the 50% target that Tesla regularly touts. The 2024 guidance is even below that, (Wall Street estimates 24%). While this isn’t great for Tesla, it’s much worse for companies like Ford, GM and Volkswagen who are trying to figure out how much to spend and when to build market share for electric vehicles. The companies have been using estimates based on Tesla likely prices and profit margins in order to build their own projectors for their own profitability in electric vehicles. Those estimates, thanks to recent guidance from Tesla, appear to badly outdated, especially if Tesla is considering cutting prices again. Now companies like GM and Ford will have to decide how much pain, and for how long, they’re willing to take in order to get into this market.
Stocks rise and bond yields fall on Treasury surprise
Just days before the U.S. Treasury Department announces how much money it intends to borrow in the next quarter, the Treasury surprised traders by cutting its quarterly borrowing estimate to $760 billion. (Yeah, that would be a reduction from what had been expected.) The reduction fueled expectations on Wall Street that the Treasury would announce one last increase to its sales of long-term debt this week. That would be welcome relief after quarters when the size of Treasury auctions tested buyers’ appetites for government debt.
Hong Kong court orders China’s $300 billion in debt Evergrande property developer to liquidate
A Hong Kong court has ordered the liquidation of China Evergrande Group, the world’s most indebted property developer with more than $300 billion in liabilities. Thousands of unfinished but paid for apartments from the developer litter China.Of course, this being China, it’s unclear whether Chinese authorities will recognize the Hong Kong court’s ruling and allow international creditors to seize the company’s assets.
Please Read My New YouTube Video: Quick Pick ASML
Today’s Quick Pick is ASML Holding (ASML). ASML Holding is a chip equipment maker, specializing in high-end ultraviolet lithography. The stock released an impressive earnings report on Tuesday which sent the stock up 8.5% on that day. It’s up about 18% since I recommended the stock back in December. However, please remember, chip stocks and especially chip equipment stocks are cyclicals. They do well when demand is high, and then dip back down when demand is low. We’re currently in a big up cycle for chips with demand for new AI chips continuing to rise. ASML expects 2024 to maintain that upward swing and the stock is rising as expected. The thing I want to point out is how we know cyclical PEs to behave. The highest point for a cyclical PE tends to be down at the bottom, and as the stock goes up, the PE should go down. At the moment, the market is not at all focused on fundamentals and what we’re seeing is cyclical stocks trading like growth stocks. ASML is not a growth (forever) stock, but it’s currently trading at a PE of 39, the same as Microsoft, a definite growth stock (for comparison). There will be a top for ASML, it may not be 2024 but make sure you’re looking at fundamentals even if no one else in the market is.
Saturday Night Quarterback says, For the week ahead expect…
It’s a Federal Reserve meeting week, but I expect Apple’s (AAPL) earnings report for its December quarter to be the big event of the week. With the potential to move the tech sector and the market.
Visa beats but falls on guidance–that’s what “priced for perfection” means
After the close yesterday, Visa (V) reported earnings of $2.41 a share (after adjusting for one-time items) for the December 2023 quarter. (That the company’s fiscal first quarter.) Analysts had been looking for $2.34 a share in adjusted earnings. Revenue grew 8.8% to $8.63 billion, again beating analyst forecasts for $8.55 billion in revenue. Visa said payments volume grew 8%, and that its processed transactions rose 9% in the period. And yet the stock was down $4.70 a share, or 1.72%, to $267.91 at the close today, Friday, January 26. Why?
Special Report: My 10 Picks for how to invest in climate change NOW–3 first 3 picks, LAZR, PLBF and GWH
Here’s how I characterize developments in the global climate crisis in 2023: It was the year when hot air confronted cold cash. And as you might expect cold cash won.
Which gives me the framework for how to invest in the global climate crisis over the next 12 to 24 months. I’m going to use natural gas to develop my investing paradigm. And then I’m going to give you four sectors in which to concentrate your investments. And 10 specific picks for your money. I expect that I’ll be revisiting the topic of how to invest in the global climate crisis again before too long–because I think today’s paradigm will need substantial revision not all that far down the road.
In Part 1 today, I’m going to develop that paradigm. In Part 2 I’m going to tell you why I think nuclear energy, utility scale battery storage, wind and solar are the sectors that deserve your investment cash and attention (and why electric vehicles don’t make the cut now.) In Part 3, I’ll give you the ten stocks and ETFs I’d pick for these four sectors.
Please watch my new YouTube video: Too Far, Too Fast
Today’s video is Too Far, Too Fast. Yesterday, on January 24, the market hit Wall Street’s consensus 2024 target for the end of 2024. Yep, a bit early. The consensus target for the end of the year 2024 close is an average of 4867 and yesterday the S&P closed at 4868. The median target is 4950, and the high end forecast is around 5200–only 350 points from where we are. We’re still awaiting confirmation that the Fed will cut rates and when that happens (likely in June or July–not March), more money will come into the market. This mid-year injection of money is good, but how much of a reward is there in a market that may have already reached its target for 11 months from now? At this point, investors are chasing momentum in an attempt to make up for missing the mark in 2023. That leaves the market risky at the moment. There’s not a whole lot of reward in a market that moves sideways with very few big moves on the up side. We may very well finish the year flat from these levels.
U.S. GDP rose at a stronger than expected 3.3% rate in the fourth quarter
U.S. Gross Domestic Product (GDP) grew at an annual 3.3% rate in the fourth quarter, the Commerce Department announced today. That was down from the 4.9% annual growth rate in the third quarter, but substantially above the 2.0% rate expected by economists. For the full year, the US.economy expend at a 3.1% rate.
ASML–and chip stocks in general–soar on equipment-maker’s big growth numbers
Shares of ASML Holding (ASML) closed up 8.85% today after the company reported record orders for its chip-making equipment in the fourth quarter. ASML sales grew 12.5% year-over-year. And orders more than tripled from the third-quarter. I added shares of ASML Holding to my long-term 50 Stocks Portfolio on December 12, 2023. The position is up 17.6% since then as of the close on January 24.
Tesla misses on earnings but that’s not the worst news in today’s report
Today, after the market close, Tesla (TSLA) reported fourth-quarter earnings of 71 cents a share. The missed the consensus Wall Street forecast of 73 cents. Sales of $25.2 billion missed forecasts for $25.6 billion. But I’d argue that the earnings and sales misses weren’t the worst news in the report.
3M plunges as company delivers exactly the kind of bad earnings news investors fear
3M (MMM) fell 11.03% today, Tuesday, January 23, the most in nearly five years, after announcing projections for 2024 sales and earnings below Wall Street expectations. Now granted that 3M is a special case–the company is engaged in a huge restructuring effort that has met with a high degree of investor skepticism. In short, investors doubt that the company can pull it off without cutting its dividend. So the stock is especially sensitive to any news that suggest that the restructuring is failing. But the stock’s big drop today is also an indication of how worried this market, trading at record highs, is about the possibility that earnings growth for the fourth quarter, the subject of the current earnings season, won’t support prices at these levels.
Xi’s plan for stimulus and stock market boost fails to convince China traders
China will launch a new stabilization package including about 2 trillion yuan ($278 billion) to buy mainland shares via offshore trading links in the coming days, government sources say. This would come after a market rout that has erased more than $6 trillion in market value from mainland China and Hong Kong stocks since a peak reached in 2021. And certainly China’s stocks rallied on the news. The NASDAQ Golden Dragon Index of Chinese stocks traded in the United States closed up 4.84% today, Tuesday, January 23. But considering the extent of the losses and its duration, I’d count a less than 5% gain–especially since the index was up by more than 6% earlier in the day.
Please watch my new YouTube video: Trend of the Week Auto Semiconductors
Today's Trend of the Week is Auto Semiconductors. One of the biggest trends coming out of the Consumer Electronics Show this year was new technology for automobiles, including chips for automatic driving, entertainment, and advanced AI. Advanced Micro Devices (AMD)...
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