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Drum Roll of Earnings Season Getting Loud This Week

The first two weeks of January were up and away for all 11 market sectors fueled by the grand reopening of China, a rally in bonds, a selloff in the dollar…

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The first two weeks of January were up and away for all 11 market sectors fueled by the grand reopening of China, a rally in bonds, a selloff in the dollar and crude oil catching a fresh bid.

The third week of January had the market giving back most of the gains, except for Friday’s rally that smacked of options expiration manipulation and short-covering on strong earnings from a video streaming company and news of tens of thousands of techies losing their jobs to slash costs.

The optimism a soft read on the Producer Price Index (PPI) generated last Wednesday turned to despair as the narrative radically changed. Wall Street took to heart the very negative reports on retail sales, manufacturing and industrial production against the furthering of the Fed’s drumbeat that short-term rates are headed to 5.0%, regardless of the alarm bells going off along the yield curve. The 10-year Treasury yield is down to 3.48% from 4.34% exactly three months ago. In the meantime, the six-month T-Bill is paying 4.83%. The 1-year T-Bill is at 4.69% and the two-year T-Note is 4.18%.

We’re talking serious inversion as “provisions for credit losses (PCLs) among the top four lenders in the United States ballooned to $6.2 billion in the fourth quarter of 2022 — the most in over a decade, bar the Covid-19 pandemic’s earliest months. PCLs collectively booked by Bank of America, Citi, JP Morgan and Wells Fargo were up 35% compared with the previous quarter and marked the third-largest amount since Q4 2012.” The 10/2 spread closed Friday at -66 bps, off the high of -84 bps set on Dec. 7, but nowhere near a level that suggests the bond market isn’t highly worried about the Fed overtightening.

On the flip side, some of the root causes that were responsible for the spike in inflation, namely supply chain disruptions, soaring commodity prices and shipping costs have all eased materially from a year ago. In supply chain circles battered by more than two years of upheaval, the word “normal” is creeping into the outlook for 2023.

In the latest Logistics Managers’ Index, “September’s future predictions hint at normalization and a return to business as usual over the next year.” Analysis from Sea-Intelligence, gauging the amount of bogged-down shipping capacity, shows “all three models suggest we should be back at the ‘normal’ 2% capacity loss baseline by early 2023.” The year-to-date improvements in New York Fed’s Global Supply Chain Pressure Index “suggest that global supply chain pressures are beginning to fall back in line with historical levels.”

Federal Reserve Bank of New York – January 13, 2023

It has also been reported that ‘someone above’ must give a hoot about Europe, because that region has effectively skirted tough winter conditions as warm weather has brought huge relief from the threat of gut-wrenching heating and power bills for businesses and consumers alike. Here too, what was a highly anticipated inflationary hyper-catalyst never really materialized.

Although still high, inflation across Europe dropped for the second consecutive month in December, according to preliminary data shared by Eurostat, the European statistics agency. Eurozone annual inflation was down to 9.2% year-on-year last month from 10.1% in November, finally dropping from the realm of double-digit-percentage figures reached for the first time in October, when it surged to the 41-year high of 11.1%.

In yet another positive development, commodity prices are easing off the 2022 highs that peaked in May 2022. Although up from the low of September 2022 due to the anticipated reopening of China, prices for most commodities, especially those in the agricultural sector, have stabilized, even as the war in Ukraine carries on.

www.tradingecoomics.com

Against this backdrop of Consumer Price Index (CPI), PPI, industrial production, retail sales and personal savings trending lower with a counter lever of a rebounding Chinese economy driving demand for U.S. goods and services, one can argue the proposition of the S&P 500 maintaining a trading range is reasonable. But this assumption comes with the fact that investors are flying blind into earnings season where evidence of cautionary spending by both consumers and businesses could call into question the soft-landing narrative that has been touted by the Fed and embraced by a growing read on investor sentiment based on recent surveys like that of the American Association of Individual Investors (AAII).

https://www.aaii.com/sentimentsurvey

Stock indexes could very well be weighed down by underperformance by the mega caps that rule the major averages. And at the same time, one out of five companies will likely beat expectations and raise guidance, making this a quintessential stock picker’s market, at least for the next few months, until the economy proves it will avert a recession altogether and effect a soft landing that results in a broad revenue and earnings recovery accompanied by the Fed’s reduced rates amid falling inflation with the yield curve normalizing.

Again, the market is driving into the thick fog of earnings season. The market went from a very downtrodden finish to December 2022, to a euphoric first half for January 2023, followed by a sharp pullback this past week based on a reality check that bad economic news isn’t good news for inflation and stocks — but instead, is bad news for corporate profits. And nothing can spoil the party on Wall Street more than the price-to-earnings (P/E) contraction, which hammers valuations and stock prices in kind.

So, welcome to fourth-quarter earnings season. In the words of head risk manager Eric Dale, played by Stanley Tucci in the now-cult movie “Margin Call” based on the 2007-2008 mortgage meltdown on Wall Street, as he is handing a zip drive to his protégé after being fired: “Be careful.”

I couldn’t agree more.

The post Drum Roll of Earnings Season Getting Loud This Week appeared first on Stock Investor.

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Government

Federal Food Stamps Program Hits Record Costs In 2022

Federal Food Stamps Program Hits Record Costs In 2022

In early January, The Wall Street Journal Editorial Board warned that one peril of a…

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Federal Food Stamps Program Hits Record Costs In 2022

In early January, The Wall Street Journal Editorial Board warned that one peril of a large administrative state is the mischief agencies can get up to when no one is watching.

Specifically, they highlight the overreach of the Agriculture Department, which expanded food-stamp benefits by evading the process for determining benefits and end-running Congressional review.

Exhibit A in the over-reach is the fact that the cost of the federal food stamps program known as the Supplemental Nutrition Assistance Program (SNAP) increased to a record $119.5 billion in 2022, according to data released by the U.S. Department of Agriculture...

Food Stamp costs have literally exploded from $60.3 billion in 2019, the last year before the pandemic, to the record-setting $119.5 billion in 2022.

In 2019, the average monthly per person benefit was $129.83 in 2019, according to the U.S. Department of Agriculture. That increased by 78 percent to $230.88 in 2022.

Even more intriguing is the fact that the number of participants had increased from 35.7 million in 2019 to 41.2 million in 2022...

All of which is a little odd - the number of people on food stamps remains at record highs while the post-COVID-lockdown employment picture has improved dramatically...

Source: Bloomberg

If any of this surprises you, it really shouldn't given that 'you, the people' voted for the welfare state. However, as WSJ chided: "abuse of process doesn’t get much clearer than that."

In its first review of USDA, the GAO skewered Agriculture’s process for having violated the Congressional Review Act, noting that the “2021 [Thrifty Food Plan] meets the definition of a rule under the [Congressional Review Act] and no CRA exception applies. Therefore, the 2021 TFP is subject to the requirement that it be submitted to Congress.” GAO’s second report says “officials made this update without key project management and quality assurance practices in place.”

Abuse of process doesn’t get much clearer than that. The GAO review won’t unwind the increase, which requires action by the USDA. But the GAO report should resonate with taxpayers who don’t like to see the politicization of a process meant to provide nutrition to those in need, not act as a vehicle for partisan agency staffers to impose their agenda without Congressional approval.

All of this undermines transparency and accountability for a program that provided food stamps to some 41 million people in 2021. The Biden Administration is using the cover of the pandemic to expand the entitlement state beyond what Congress authorized.

The question now is, will House Republicans draw attention to this lawlessness and use their power of the purse to stop it to the extent possible with a Democratic Senate.

And don't forget, the US economy is "strong as hell."

Tyler Durden Sat, 01/28/2023 - 09:55

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Spread & Containment

A Royal Caribbean Cruise Line Adult Favorite Has Not Come Back

The cruise line has almost fully returned to normal after the covid pandemic, but one very popular activity hasn’t been brought back.

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The cruise line has almost fully returned to normal after the covid pandemic, but one very popular activity hasn't been brought back.

In the early days of Royal Caribbean Group's (RCL) - Get Free Report return from its 15-month covid pandemic shutdown, cruising looked a lot different. Ships sailed with limited capacities, masks were required in most indoor areas, and social distancing was a thing.

Keeping people six feet apart made certain aspects of taking a cruise impossible. Some were made easier by the lower passenger counts. For example, all Royal Caribbean Windjammer buffets required reservations to keep the crowds down, but in practice that system was generally not needed because capacities were never reached.

Dance parties and nightclub-style events had to be held on the pool decks or in larger spaces, and shows in the big theaters left open seats between parties traveling together. In most cases, accommodations were made and events more or less happened in a sort of normal fashion.

A few very popular events were not possible, however, in an environment where keeping six feet between passengers was a goal. Two of those events -- the first night balloon drop and the adult "Crazy Quest" game show -- simply did not work with social-distancing requirements.

One of those popular events has now made its comeback while the second appears to still be missing (aside from a few one-off appearances).

TheStreet

The Quest Is Still Mostly Missing

In late November, Royal Caribbean's adult scavenger hunt, "The Quest," (sometimes known as "Crazy Quest") began appearing on select sailings. And at the time it appeared like it was coming back across the fleet: A number of people posted about the return of the interactive adult game show in an unofficial Royal Caribbean Facebook group.

It first appeared during a Wonder of the Seas transatlantic sailing.

Since, then its appearances continue to be spotty and it has not returned on a fleetwide basis. This might not be due to any covid-related issues directly, but covid may play a role.

On some ships, Studio B, which hosts "The Quest," has been used for show rehearsals. That has been more of an issue with the trouble Royal Caribbean has had in getting new crew members onboard. And while that staffing issue has been improving, some shows may not have had full complements of performers, so using the space for rehearsal has been a continuing need.

In addition, while covid rules have gone away, covid has not, and ill cast members may force the need for more rehearsals.

Royal Caribbean has not publicly commented on when (or whether) "The Quest" will make a full comeback

Royal Caribbean Balloon Drops Are Back   

Before the pandemic, Royal Caribbean kicked off many of its cruises with a balloon drop on the Royal Promenade. That went away because it forced people to cluster as music was performed and, at midnight, balloons fell from the ceiling.

Now, the cruise line has brought back the balloon drop, albeit with a twist. The drop itself is appearing on activity schedules for upcoming Royal Caribbean cruises. Immediately after it, however, the cruise line has added something new: "The Big Recycle Balloon Pickup."

Most of the dropped balloons get popped during the drop. Previously, crewmembers picked up the used balloons. Now, the cruise line has made it a "fun" passenger activity.

"Get environmentally friendly as you help us gather our 100% biodegradable balloons in recycle baskets," the cruise line shared in its app. 

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Spread & Containment

What’s Still Missing on Royal Caribbean Cruises Post Covid

The cruise line has almost fully returned to normal after the covid pandemic, but one very popular activity hasn’t been brought back.

Published

on

The cruise line has almost fully returned to normal after the covid pandemic, but one very popular activity hasn't been brought back.

In the early days of Royal Caribbean Group's (RCL) - Get Free Report return from its 15-month covid pandemic shutdown, cruising looked a lot different. Ships sailed with limited capacities, masks were required in most indoor areas, and social distancing was a thing.

Keeping people six feet apart made certain aspects of taking a cruise impossible. Some were made easier by the lower passenger counts. For example, all Royal Caribbean Windjammer buffets required reservations to keep the crowds down, but in practice that system was generally not needed because capacities were never reached.

Dance parties and nightclub-style events had to be held on the pool decks or in larger spaces, and shows in the big theaters left open seats between parties traveling together. In most cases, accommodations were made and events more or less happened in a sort of normal fashion.

A few very popular events were not possible, however, in an environment where keeping six feet between passengers was a goal. Two of those events -- the first night balloon drop and the adult "Crazy Quest" game show -- simply did not work with social-distancing requirements.

One of those popular events has now made its comeback while the second appears to still be missing (aside from a few one-off appearances).

TheStreet

The Quest Is Still Mostly Missing

In late November, Royal Caribbean's adult scavenger hunt, "The Quest," (sometimes known as "Crazy Quest") began appearing on select sailings. And at the time it appeared like it was coming back across the fleet: A number of people posted about the return of the interactive adult game show in an unofficial Royal Caribbean Facebook group.

It first appeared during a Wonder of the Seas transatlantic sailing.

Since, then its appearances continue to be spotty and it has not returned on a fleetwide basis. This might not be due to any covid-related issues directly, but covid may play a role.

On some ships, Studio B, which hosts "The Quest," has been used for show rehearsals. That has been more of an issue with the trouble Royal Caribbean has had in getting new crew members onboard. And while that staffing issue has been improving, some shows may not have had full complements of performers, so using the space for rehearsal has been a continuing need.

In addition, while covid rules have gone away, covid has not, and ill cast members may force the need for more rehearsals.

Royal Caribbean has not publicly commented on when (or whether) "The Quest" will make a full comeback

Royal Caribbean Balloon Drops Are Back   

Before the pandemic, Royal Caribbean kicked off many of its cruises with a balloon drop on the Royal Promenade. That went away because it forced people to cluster as music was performed and, at midnight, balloons fell from the ceiling.

Now, the cruise line has brought back the balloon drop, albeit with a twist. The drop itself is appearing on activity schedules for upcoming Royal Caribbean cruises. Immediately after it, however, the cruise line has added something new: "The Big Recycle Balloon Pickup."

Most of the dropped balloons get popped during the drop. Previously, crewmembers picked up the used balloons. Now, the cruise line has made it a "fun" passenger activity.

"Get environmentally friendly as you help us gather our 100% biodegradable balloons in recycle baskets," the cruise line shared in its app. 

Read More

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