Well. Let’s get straight to the old/new point.

Although there’s been a bevy of US Federal Reserve governors talking up the soft landing they’re determined to give the Big US Economy, the cracks in the runway are starting to widen.

Coming in way hotter-than-expected during the last US session was the always exciting personal consumption expenditures price index (for January). That little rocket sent Wall Street sharply lower on Friday.

Bank of America (BoA) reckons The Fed might now have to take its benchmark funds rate to the 6% range.

After a few early 2023 signals that rising inflation was on the run, most of last week’s key US indicators suggest that instead of receding, inflation has been pausing for breath. Jobs are tight, shoppers are shopping.

Senior economist Aditya Bhave says the BoA economics team has already concluded US consumer demand will probably have to weaken a whole lot more for inflation to return to the target range around 2%.

That means a hard landing for the US economy with a capital R.

“This will likely lead to a recession, because the non-consumer sectors of the economy already look soft. The strength in the January activity and inflation data suggests that the Fed might have to hike considerably further to find the point of pain for the consumer. Right-tail risks to the terminal rate are growing.”

Last week the last FOMC minutes didn’t help.

Turns out that at the meeting, where the benchmark rate grew by another 25 basis points (bps) to a range of 4.5%-4.75%), there were already several loud Hawkish voices arguing for the full 50 bps and the ensuing medicine of a market in cardiac arrest.

Here are their names. Fans of Fedspeak won’t be surprised. Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard.


We are not there yet

Friday saw some heavy selling in the Tech Heavy’s tech heavies. Out front with the losses were last week’s special guest Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOG , GOOGL). All eyes this week will be just where Tesla (TSLA) boss Elon Musk likes them – watching him during a TSLA circus event and hoping for another bunny from the money hat.

Wall Street’s 3 majors copped their worst weekly fall of the year last week.

The Dow took on 3.7% of water – its 4th straight sinking week. The S&P 500 lost 2.6%.

The Nasdaq was schooled and staggered. Down 3.3%.

The inflationary monster, and the gun-totin’ Fed, has made Wall Street home to silence and tumbleweeds over the past 3 weeks. Hidden behind closed doors US traders are once again asking one another – when are we going to hit the bottom?


The week ahead

The Fed aren’t done with us.

This week is quiet in the states on the economic front which gives Chair J Powell’s people lots of airtime to conflate the uncertainty with abstractions and generally discombobulate with misdirected doublespeak.

See below for full details of the economic week ahead.


Elon Watch

The good news: Shares in Elon’s cars are up circa 60% YTD.

The bad news: Shares in Elon’s cars are still half what they were in November 2021.

The good news: Elon’s cars have an ‘Investor Day’ on Wednesday, where he’ll be intro’ing factory expansions and what he’s going to spend his/their money on.

The bad news: Elon’s ‘Master Plan Part 3’, is the centrepiece of the day, but there’s no word if TSLA’s long dreamt-of cheap-priced Tesla is part of that.

Elon shelved the US$25,000 Model 2 last year. Because it doesn’t work. Or does it…?

I don’t know.




Earnings spotlight

Wall St’s March quarter reports are almost there. We’re on the home stretch this week with some 93% of S&P500 companies reporting in and almost 70% beating expectations Vs the historical average of 76%.


NIO (NIO), Wednesday March 1

Wall Street has Nio looking at a 23 cent per share loss on revenue of US$2.56 billion Vs March qtr last year when it reported a per-share loss of 21 cents on revenue of US$1.55 billion.

NIO stock  has had a bad 6 months.

Shares in the Chinese EV maker are down 50%, Vs the 3% loss in the S&P 500.

The problems here began when NIO reported  a 12% slide in January delivery numbers of barely 8,400 vehicles.

That’s the worst out of some 9 very ordinary months. On the upski – some analysts are saying that’s probably the bottom. I choose that word because it’s so very very dodgy right now.

Last quarter NIO management who’ve been telling everyone about how they’re going to swallow TSLA, boasted of a new production capacity of 20,000 vehicles per month (this was just afore Christmas).

They’ve copped China’s zero-COVID nonsense sweetly on the chin. The above decleration looks nice, but pre-pandemic projections were at around 30,000 a month. Now the problem might be whether there’ll be buyers for all the new cars.

Elon cut prices to boost market share, and his EV competitors have followed.

NIO management forecasts a 90% rise in fiscal 2023 revenue, driven by higher volumes. But if Nio is forced to cut prices to keep up with Tesla, its profit margins might not be as strong as expected. On Wednesday the sense is NIO can really turn heads by hitting a top to bottom beat on expectations, with a firm guidance promising shareholders of more cars and some fresh ideas – both delivered quicker.

Li Auto (LI) and Occidental Petroleum (OXY).

Target (TGT), AutoZone (AZO), J.M. Smucker (SJM), HP (HP),  Rivian Automotive (RIVN), and AMC Entertainment (AMC).

Lowe’s (LOW), NIO (NIO), Dollar Tree (DLTR), Kohl’s (KSS), Royal Bank of Canada (RY), Salesforce (CRM), Splunk (SPLK), and Snowflake (SNOW). *Watch for potential fireworks with Tupperware Brands (TUP)

Anheuser-Busch InBev (BUD), Best Buy (BBY), Macy’s (M), Costco (COST), Broadcom (AVGO), Dell (DELL)

Hibbett (HIBB).


The US Economic Calendar
Monday February 27 – Friday, March 3

US Durable goods orders, Jan
US Pending home sales, Jan
Fed Speak Fed Gov. Jefferson

US Pending Home Sales, Jan
US Dallas Fed Manufacturing Index, Feb
US Fed Speak Fed Jefferson

US S&P/Case-Shiller Home Price MoM
US S&P/Case-Shiller Home Price YoY
US Chicago PMI, Feb
US CB Consumer Confidence

US ISM manufacturing, Feb

US Fed Speak Fed Gov Waller