This time the most important are: (1) Is a correction on Mag7 imminent? (2) do you want to look at a good leading indicator.. try FedEx & UPS, and (3) still strong real data incoming from the labor market and the broader economy.
1) Mag7 correction ahead?
Tesla fell 12% after the results were announced (it has already made up for some of its losses);
Apple fell yesterday following a report by TF International Securities that it is lagging behind Samsung in genAI and foldable phones, as a result of which iPhone 14 and 15 shipments can be expected to decline by around 10-15% YoY in 2024;
Microsoft - after very good results in Q4 2023, there is no positive price reaction... (now -1.6% in after hours trading).
Alphabet – after good results, the price is falling (now -5.7% in after hours).
Microsoft results (detailed review will be published separately):
Total revenues $56.52 billion (+1.44% BEAT) – see Figure 1; EPS $2.93 (+5.4% BEAT) and the "Microsoft Cloud" business segment, which is very important for the markets, revenue $33.7 billion (+4.7% BEAT).
Alphabet results (detailed review will be published separately):
Total revenues $66.3 billion (+1.1% BEAT) – see Figure 2; EPS $1.64 (+3.1% BEAT) and the “Google Cloud” business segment, which is very important for the markets, revenue $9.19 billion (+2.7% BEAT).
2) Poor earnings and weak guidance were published by UPS and the price fell 8.2% yesterday. As a result of poor earnings, UPS also announced the layoff of 12,000 employees. Both UPS and FedEx are companies whose relative performance compared to the S&P500 can be treated as a good leading indicator. Both still indicate a slowdown in the economy...
UPS underperformed the S&P500 from April 2023, and FedEx from October 2023 – see Figure 3.
3) a short wrap-up of yesterday's strong data from the labor market and the broader economy:
- job openings (JOLTS report) increased significantly in December to the level of 9.03M vs. Exp. 8.75M (Prev. 8.79M, Rev. 8.923M);
- Consumer Confidence for January rose to 114.8 from 108.0 but the most interesting part are questions about the labor market: the share of respondents who thought jobs were plentiful rose to 45.5% (prev. 40.4%) and those who thought jobs are hard to get eased is 9.8% (prev. 13.1%). Historically, these two questions were a very good leading indicator of an approaching recession, but then “job plentiful” decreased and “hard to get” increased - the opposite of today...
- and in terms of the broader economy, we had a revision of GDP growth forecasts as part of the IMF World Economic Outlook. 2024 global economic growth forecast was raised to 3.1% (prev. 2.9% in October), China's 2024 GDP growth forecast was lifted to 4.6% from 4.2% while US 2024 GDP growth was raised to 2.1% (from 1.5%).
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