Archive for January, 2024

• Morning News: January 19, 2024
  Eddy Elfenbein, January 19th, 2024 at 7:05 am

  China’s $6.3 Trillion Stock Selloff Is Getting Uglier by the Day

  Taiwan’s Democracy Draws Envy and Tears for Visiting Chinese

  China’s Travelers Stay Home, Draining $130 Billion from Global Tourism

  Why India Isn’t the New China

  EU Eying New Russia Sanctions Ahead of War’s Two-Year Mark

  EU Tells Banks to Put Capital at Center of New Transition Plans

  German Economy Isn’t Sick, Just Tired, Finance Minister Says

  Davos Sees Global Economy Settling Into Strange New Dynamic

  Congress Approves Funding to Avert US Government Shutdown

  Americans Are Finally Feeling Better About the Economy

  Wall Street’s Counterattack on Gary Gensler Strikes at SEC’s Foundations

  Futures Climb as Chips, Megacaps Gain; Corporate Earnings on Tap

  Grayscale CEO Says Most of the 11 Approved Bitcoin ETFs Won’t Survive, Defends Highest Fees In Industry

  Best Short Call of 2023 Belongs to Amateur ‘Dirty Bubble’ Sleuth

  TSMC Thanks You for Your Love of Chat Bots

  Is This Really ‘the Worst Time to Buy a Home’?

  A Clean-Energy Bet Goes Bad for Power Companies

  The Multibillion-Dollar Bet That Truckers Will Ditch Diesel for Electricity

  J.B. Hunt Profit Falls Amid Weak Freight Demand

  Spirit Airlines Is on Shaky Footing After Judge Blocks JetBlue Deal

  How Sweden Quit Smoking Without Quitting Nicotine

  Billionaires Wanted to Save the News Industry. They’re Losing a Fortune

  Wayfair Boss, Weeks After Viral Memo, Cuts 13% of Staff

  The Real Reason You’re Paying for So Many Subscriptions

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• Morning News: January 18, 2024
  Eddy Elfenbein, January 18th, 2024 at 7:07 am

  Did China’s Economy Really Grow 5.2% in 2023? Not All Agree

  China Goes All In on Green Industry to Jolt Ailing Economy

  Some ECB Officials Worried Markets Risk Derailing Disinflation

  Dollar Dominance Is Triggering Intervention Fears Across Markets

  What Is the Basel III Endgame, and Why Are Banks So Upset About It?

  The Bitcoin Hype Is Back and About Just as Hollow as Before

  You Switched the Lights On. Traders Made Billions of Dollars

  A Former NSA Chief Caught SPAC Fever, and Investors Got Burned

  Barclays CEO Defends Investment Bank Ahead of Investor Day

  Goldman Sachs Wants to Hire in Wealth and Asset Management Units

  Consumers Start 2024 on Strong Footing After a Jolly Holiday

  OpenAI Coup Less Stressful Than Superintelligent AI, Altman Says

  TSMC’s Profit Drops on Sluggish Chip Demand, Weaker Margins

  TSMC Thinks 2024 Will Repower Chip Sales

  Some CEOs See Growing Potential for Tech Acquisitions

  Bain Mulls £2 Billion Sale of Payroll Tech Firm Zellis

  Boeing Secures Orders for 150 Max Jets, A Boost Amid U.S. Grounding

  FedEx Express Revamp Hangs on Fate of USPS, Pilot Talks

  EV Sales Run Out of Juice in Europe as Germans Tighten Belts

  Hybrid Cars Enjoy a Renaissance as All-Electric Sales Slow

  Six Reasons Drug Prices Are So High in the U.S.

  How Coffee Farmers in Hawaii Fought Counterfeit Kona Beans

  Where Gummi Bears Come From

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• Morning News: January 17, 2024
  Eddy Elfenbein, January 17th, 2024 at 7:07 am

  OPEC Sees Robust Oil Demand Next Year in First Look at 2025

  Shell to Sell Its Onshore Nigeria Oil Business for $1.3 Billion

  Maersk, Hapag-Lloyd Form Shipping Alliance in Industry Reshuffle

  US and UK Airstrikes Slow Iran From Supplying Weapons to Houthis, Officials Say

  In ‘War on Guns,’ Caribbean Allies Ask Which Side the US Is On

  Japan’s Market Roars Back to Life—With Old-Timers Leading the Way

  China’s Economic Growth Disappoints, Fueling Stimulus Calls

  China Told Women to Have Babies, but Its Population Shrank Again

  Nearly Half of European Investors Seek to Cut Property Exposure, Survey Finds

  Markets Expect Rate Cuts Soon. Central Banks Say Not So Fast.

  Lagarde Says It’s Likely ECB Will Cut Rates in Summer

  A Fed Governor Reiterates That Rate Cuts Are Coming

  Consumer Bureau Proposes Overdraft Fee Limits for Large Banks

  Traders Heed Central Bank Pushback Against Bold Rate-Cut Bets

  JPMorgan to Hire This Year Amid Wealth, Dealmaking Revival

  A Pandemic-Era Tax Break Is Unraveling, and the Lawsuits Are Flying

  Your Bonus Might Be Smaller This Year in Tighter Job Market

  Billionaire-Backed Developer Asks Voters to Approve New California City

  Tesla Price Cuts Send European, Chinese Auto Stocks Lower

  Electric Car Owners Confront a Harsh Foe: Cold Weather

  Airbus Is Pulling Ahead as Boeing’s Troubles Mount

  JetBlue’s $3.8 Billion Spirit Deal Turns Into a Nightmare

  3-Year Cruise Passengers Seek Fraud Charges Over Cancellation

  Congrats, and Goodbye, to Peak TV

  Americans Are Ditching Weeknight Fun. Can They Be Tempted Back?

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• CWS Market Review – January 16, 2024
  Eddy Elfenbein, January 16th, 2024 at 6:36 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  Stocks Near a New High? Not Adjusting for Inflation

  The S&P 500 has been getting very close to a new all-time high. This is exciting. We haven’t had a new high for more than two years. Earlier today, the index broke above 4,800, something it hasn’t done in two years. Unfortunately, we couldn’t hold on and the market closed down a bit today.

  The all-time record close came on January 3, 2022, at 4,796.56. That was the first day of trading of 2022. Last Friday, the S&P 500 closed at 4,783.83. That’s less than 0.3% from a new all-time high.

  Still, calling this a new all-time high is a little deceiving because we’ve had an unpleasant bout of inflation over the last two years.

  Here’s a look at the S&P 500 but this time it’s divided by the Consumer Price Index, in other words, inflation:

  

  Looking at it this way, you can see that we’re still well below the peak from two years ago. We need another 10% to reach a real new high. (To make the chart easier to read, I adjusted the index so its peak level is 100 on the chart.)

  The chart above shows just how destructive inflation is to financial markets. Not only do stocks and bonds go down in value, but those values are diminished by inflation as well.

  In retrospect, it’s interesting to note that stocks started to fall once inflation exceeded 7%, and stock prices didn’t rally again until inflation fell back below 7%. On Wall Street, there are plenty of sophisticated models trying to predict share prices, but a simple 7% level did the trick pretty well.

  The S&P 500 reached its closing low on October 12, 2022 at 3,577.03. From head to toe, the index lost 25.4% in a little over nine months. Since then, the S&P 500 has rallied back more than 33%.

  We could also add another important stat which is that the stock market has gained, on average, about 7% per year over the long pull once you include dividends and inflation. In plain English, that means the stock market needs to climb about 20% or so just to reach the long-term trend line.

  Traders appear to be looking for an excuse to push the market up to a new all-time high. The latest opportunity is earnings season which started last week.

  Taking a Look at Bank Earnings

  There’s no official opening to earnings season. No one fires off a canon or anything, but the unofficial start came on Friday when several major banks reported their earnings. All told, the banks didn’t do very well last year.

  Here’s a look at how the S&P 500 Financials ETF (XLF) did compared with the S&P 500 ETF (SPY):

  

  See that drop in March? That’s when Silicon Valley Bank went kablooey.

  To be fair, the banks handled a very difficult climate as well as you could expect. Despite the troubles, JPMorgan, Bank of America, Wells Fargo and Citigroup earned a combined $104 billion last year. That’s 11% more than 2022. At the same time, Wells Fargo, Bank of America and Citigroup together culled their workforces by a combined 17,700 in 2023.

  Here’s a brief summary of some of the major earnings reports:

  Bank of America (BAC) got dinged on Friday after the bank said it made 70 cents per share last quarter which was a two-cent beat.

  The problem is that BAC’s revenue came in below expectations ($22.1 billion versus $23.74 billion). For the quarter, revenue was down 10%. The bank also had a pre-tax charge of $1.2 billion. Shares of BAC closed lower today for the sixth session in a row. The bank is currently going for about 10 times forward earnings.

  BlackRock (BLK) had another very good quarter. These folks seem to make money in any environment. The company is the largest asset manager in the world. Last quarter, BLK made $9.66 per share while Wall Street had been expecting $8.84 per share. Revenue was $4.63 billion which matched expectations. The company now manages more than $10 trillion in assets.

  Bank of New York Mellon (BK) also had a big one-time charge. That seems to be the theme this season. To be fair, many banks had to help replenish the FDIC after the regional bank troubles from last year. Excluding that, BK made $1.28 per share last quarter. That was a 15-cent beat. Revenues were up 10% to $4.31 billion. The stock got a nice 4% jump in Friday’s trading, and it hit a new 52-week high today.

  Wells Fargo (WFC) made 86 cents per share but once that’s adjusted for charges, then the bank made $1.29 per share last quarter. That beat expectations by 12 cents per share. Revenue came in at $20.48 billion which was a little bit below expectations.

  I like to look at net interest income which is the core of what a bank does. For last quarter, net interest income fell 5% to $12.78 billion. Wells warned that net interest income would come in lower this year. The shares pulled back after Friday’s report. I haven’t been terribly impressed by Wells recently.

  JPMorgan Chase (JPM) is the Grand Poobah of banking. Its market value is close to half a trillion, so it’s worth seeing what it had to say. Also, Jamie Dimon, the CEO, is never shy about his beliefs. JPM has nearly $4 trillion in assets and a very strong balance sheet.

  For Q3, JPM made $9.3 billion or $3.04 a share, but there was a big $2.9 billion payment to the FDIC. The bank said its merger business fell 18% last year. For the quarter, JPM earned $3.04 per share. That compares with Wall Street’s increase of $3.32 per share. (That may not be the exact comparison. There appears to be some uncertainty here.) JPM had revenues of $39.94 billion which was a little more than expectations of $39.78 billion.

  Citigroup (C) said it lost $1.8 billion last quarter, but that’s after (you guessed it) several large charges. Clearing all that away, Citi said it made 84 cents per share last quarter. Revenues came in at $17.44 billion which was $1.3 billion below expectations. CEO Jane Fraser said the results were “very disappointing.” Citigroup also said it’s cutting 20,000 jobs.

  We had a few more banks report this morning. Goldman Sachs (GS) shredded expectations. The Wall Street powerhouse said it made $5.48 per share last quarter. Expectations were for $3.51. (As with JPMorgan, there appears to be some doubt over which figure is the final profit figure.)

  Last year was a tough year for many Wall Street firms as major deals dried up. That’s another effect of higher interest rates. At Goldman, investment banking fees fell 12% to $1.65 billion.

  Shares of Morgan Stanley (MS) took a hit today even though its earnings report wasn’t as bad at it looks on the surface. Last quarter, Morgan made 85 cents per share where the Street was expecting $1.01 per share. The bank had quarterly revenues of $12.90 billion which beat expectations of $12.75 billion. Morgan’s investment banking revenue edged up 5% thanks to a big lift from fixed income. The stock fell 4.9% today.

  PNC Financial Services (PNC) made $3.16 in Q4 compared with estimates of $2.71 per share. One year ago, PNC made $3.47 per share for last year’s Q4. The stock dropped sharply at today’s open, but it gradually made back most of what it lost. PNC’s CEO said, “We grew revenue, controlled core expenses, added to our loan portfolio and maintained strong credit metrics.”

  Earnings for Our Buy List Stocks

  We still don’t have all the earnings dates for our Buy List, but it looks like our first stocks to report will come next Wednesday, January 24, from Amphenol (APH) and Abbott Labs (ABT). (I’ll have more on these on Thursday for our premium subscribers.)

  I’m especially looking forward to Abbott’s report. The stock is very close to breaking its 52-week high from July. A new high may come any day now.

  If you’re not familiar with Abbott, check out this long-term chart:

  

  That’s a very impressive chart. Abbott is up 38-fold in 33 years. Note also how consistent it’s been.

  In October, Abbott’s Q3 report beat Wall Street’s consensus, and it narrowed its full-year guidance to a range of $4.42 to $4.46 per share. If you want to be technical, that’s an increase to the mid-point of its previous range.

  Let’s do a little math. For the first three quarters of this year, Abbott made $3.25 per share. With the updated guidance, that implies Q4 earnings of $1.17 to $1.21 per share. That’s quite good. For its part, Wall Street is playing it safe and the consensus is for $1.19 per share.

  Abbott is as blue chippy as they get. Last month, the company increased its dividend for the last 52 years in a row. The dividend was increased from 51 to 55 cents per share. There aren’t many companies that can boast of a track record like that. I’m looking forward to more good news from Abbott next week.

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

  P.S. If you want more info on our ETF, you can check out the ETF’s website.

• Morning News: January 16, 2024
  Eddy Elfenbein, January 16th, 2024 at 7:03 am

  California’s Long-Embattled Ports Are Winning Back Imports

  China Weighs More Stimulus With $139 Billion of Special Bonds

  Global Regulators Set Out Blueprint to Bolster Markets Facing Stress

  A Pessimist’s Guide to Global Economic Risks in 2024

  Fed Tiptoes Toward Dialing Back Key Channel of Monetary Tightening

  Rogoff Sees Six Fed Rate Cuts as ‘Pipedream’ If Economy Holds Up

  Inside a Plan to Save Homeowners Hundreds of Dollars Closing Their Mortgages

  AI Fever Takes Over Davos Pushing Crypto Aside as the New Cool Kid on the Block

  ETFs Make Bitcoin’s Problems Even Worse

  Supreme Court Fishing Case May Hobble Agency Power on Climate to Crypto

  Goldman Tops Estimates as Stock Trading Surges Past Expectations

  Morgan Stanley Wealth Unit Beats Forecasts as Traders Fall Short

  PNC Financial Reports Drop in Net Income

  Microsoft’s Nadella Wants Stability at OpenAI, Not Control

  Europe’s Top Stock Rolls-Royce Gets Rare Sell Rating on Engine Worries

  Boeing to Add Further Quality Inspections for 737 MAX

  Elon Musk Pressures Tesla’s Board for Another Massive Payday

  Elon Musk Seeks Greater Control Over Tesla Ahead of AI Advancements

  The $65 Million Perk for CEOs: Personal Use of the Corporate Jet Has Soared

  Burger King Owner to Buy Biggest Franchisee for $1 Billion

  In the Ozempic Age, Has ‘Craveable’ Lost Its Selling Power?

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• Morning News: January 15, 2024
  Eddy Elfenbein, January 15th, 2024 at 7:03 am

  The War Has Reined In Ukraine’s Oligarchs, at Least for Now

  After 100 Days of War, Israel Is Not Backing Down

  Turkey Relieved Despite Budget Deficit Blowout of Almost 900%

  China Holds Key Rate as Economy Prepares for ‘Difficult Year’

  ECB’s Holzmann Warns Rate Cuts Aren’t Guaranteed This Year

  Europe’s Growth Engine Is Broken

  Dubai Sales of $25 Million Homes Double as Global Elite Move In

  Davos Elite Size Up the Global Risks of Another Trump Presidency

  US Congress Unveils Temporary Spending Bill to Avert Shutdown

  A Fight Over a Fishing Regulation Could Help Tear Down the Administrative State

  The Businesses That Rescued America From Inflation, Recession, Lost Jobs

  Bone-Chilling Cold Tests Power Grids From Texas to Alberta

  California Has Dealt a Blow to Renewable Energy, Some Businesses Say

  Flush With Investment, New U.S. Factories Face a Familiar Challenge

  Robots Are Looking Better to Detroit as Labor Costs Rise

  For Some Young People, a College Degree Is Not Worth the Debt

  De Beers Cuts Diamond Prices to Revive Sales

  Apple Offers Rare iPhone 15 Discount in China Amid Demand Fears

  Apple to Shutter 121-Person San Diego AI Team in Reorganization

  Boeing’s Legacy Vanished Into Thin Air. Saving It Will Take Years

  A Few Words About Netflix’s Success: Vivid. Snappy. Tags.

  Chiefs-Dolphins Playoff Game on Peacock Sets Records for U.S. Streaming and Internet Usage

  ‘Mean Girls’ Musical Triumphs at Box Office, With a TikTok Assist

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• Morning News: January 12, 2024
  Eddy Elfenbein, January 12th, 2024 at 7:03 am

  Banks Lead Nigerian Stocks to World’s Second-Best Gains in 2024

  Large Backers of Private Equity Are Asking For Their Money Back

  JPMorgan Posts Record Net Interest Income and Predicts Even More for This Year

  BofA Bond Traders Post Surprise Drop as Profit Slumps by Half

  Citigroup Posts $1.8 Billion Fourth-Quarter Loss After Litany of Charges

  Wells Fargo Posts Higher Fourth-Quarter Profit, Helped by Higher Interest Rates and Cost Cutting

  Grayscale Faces New Risk-Management Challenge With Bitcoin ETF Approval

  BlackRock Buys Infrastructure Firm GIP for $12.5 Billion

  Companies Are Still Cutting White-Collar Jobs

  What America’s Relocation Boom Means for Election 2024

  $6 Trillion in Taxes Are at Stake in This Year’s Elections

  America’s Gas Bonanza Brings Biden New Political Dilemmas

  ‘Remarkable’ Surge in Auto Insurance Costs Fans US Inflation

  Tesla to Halt Production in Germany as Red Sea Conflict Hits Supply Chains

  Hertz Will Shrink Electric Fleet After Being Burned by Tesla’s Price Cuts

  Delta Air Walks Back 2024 Profit Goal on Higher Costs, Wages

  $1.2 Trillion US Travel Industry Is Plummeting, Says New Study

  Costco’s New China Store Triggers Shopping Frenzy on Opening Day

  The Billionaires Spending a Fortune to Lure Scientists Away From Universities

  Removal of Netflix Film Shows Advancing Power of India’s Hindu Right Wing

  Peacock Enters Uncharted Waters by Streaming N.F.L. Playoff Game

  How Belichick Helped Patriots Go From Laughingstock to Economic Powerhouse

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• Morning News: January 11, 2024
  Eddy Elfenbein, January 11th, 2024 at 7:02 am

  World Trying to Quit Fossil Fuels Gets Flood of Gas Instead

  Oil Tanker Hijacked Off Oman Forced to Alter Course to Iran

  Chesapeake, Southwestern to Merge as New Gas Behemoth

  Biden Hands Out $623M to Build Out US-Wide EV Charging Network

  China’s Solar Dominance Faces New Rival: An Ultrathin Film

  What’s at Risk as Half of the World’s GDP Heads Into an Election Year

  Brexit’s Aftershock: The Economic Hit From Leaving the EU

  US CPI Report to Show Soft Core Inflation After Goods Prices Slide

  December Inflation Report: Price Rises Expected to Remain Moderate

  Effort to Revamp I.R.S. Faces Challenges Despite Funding Infusion

  Bitcoin Heads to Wall Street. Now What?

  Bitcoin Volume Jumps as US Spot ETFs Tied to Token Begin Trading

  Goldman Traders Ride ‘Rallying Cry’ to Dethrone Morgan Stanley

  Citigroup’s Jane Fraser Embarks on Another Pivotal Year of Bank Cuts

  Blackstone Taps Two Firm Veterans to Help Oversee Trillion-Dollar Asset Pile

  How AI Replaced the Metaverse as Zuckerberg’s Top Priority

  No, That’s Not Taylor Swift Peddling Le Creuset Cookware

  U.S. Diet Panel Adds Another Researcher With Alcohol Industry Ties

  New Weight-Loss Drugs Like Wegovy Will Supercharge Pharma Revenue

  ‘Gas-Station Heroin’ Sold as Dietary Supplement Alarms Health Officials

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• Morning News: January 10, 2024
  Eddy Elfenbein, January 10th, 2024 at 7:00 am

  Xi’s Empty Dream City Shows Limits of His Power, Even in China

  How the War With Hamas Has Damaged Israel’s Tech Firms and Economy

  Importers Face Surging Shipping Costs, Delays as Red Sea Diversions Pile Up

  This Inflation Measure Is Running Hot. It’s Probably Wrong

  US Inflation Is Set to Fade in 2024 as Goods Prices Keep Falling

  Top US Banks Eager for Relief From Rate Pressure After Fed Hikes

  The Big Bitcoin Tease

  SEC’s X Account Hacked to Falsely Say Bitcoin ETF Approved

  The Bond Market Rally Is Overlooking a Soaring $2 Trillion Debt Problem

  Global Activist Investors Pressed Companies to Sell or Spin in 2023 as M&A Dropped Off

  Mortgage Rates and Inflation Could Draw Attention to the Fed This Election

  Elections and Disinformation Are Colliding Like Never Before in 2024

  Trumponomics 2.0: What to Expect If Trump Wins the 2024 Election

  The Class of 2024 Gets Ready for the Real World

  Boomer Retirement Bomb

  Nu Mexico to Roll Out Enhanced App to Receive Money From the US

  The Next Front in the U.S.-China Battle Over Chips

  Microsoft Debates What to Do With A.I. Lab in China

  Equinix Raises Debt Abroad to Clip Interest Costs

  BMW Converts Century-Old German Plant to Only Make Electric Cars

  Vietnam’s VinFast Aims to Qualify for Biden’s EV Tax Credits

  Boeing CEO Says Company Needs to Acknowledge ‘Our Mistake’

  Unstoppable in Red

  Brick-Filled Boxes. Bogus Receipts. Retailers Battle Fraudulent Returns

  Is America’s Ultra-Processed Diet That Bad? Big Food Fights Back

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• CWS Market Review – January 9, 2024
  Eddy Elfenbein, January 9th, 2024 at 8:07 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  Wall Street Gets Off to a Slow Start for 2024

  The stock market is off to a somewhat slow start this year. Last week, the S&P 500 snapped a nine-week winning streak. The index has now closed lower in five of the past seven sessions.

  In reality, the current market action is closer to how we should expect markets to act, at least in the near-term. What was unusual about this market was the furious rally that closed out last year.

  

  As late as mid-October, last year was looking to be a fairly standard year for investors. However, once it became clear that the Fed was done with its interest rate hikes, stocks started to rally. In less than two months, the S&P 500 jumped 16%.

  As we got to the finish line for 2023, many of those prominent growth stocks and riskier “high-beta” stocks lagged the market. This trend lasted into the first few days of 2024 but has since reversed.

  Q4 Earnings Season Is About to Begin

  There are two events to look out for this week. The first will be on Thursday when the government releases the inflation report for December. For the most part, inflation has been better behaved, but I don’t want to call victory too soon. Older investors will remember how inflation kept coming back in the 1960s and 70s. In fact, each peak got progressively higher.

  The other event will be the start of Q4 earnings season. This is unofficial, but on Friday, several major Wall Street banks and financial institutions will tell us how well they did during the final quarter of 2023.

  Some of the financial institutions due to report on Friday include Bank of America (BAC), Bank of New York Mellon (BK), BlackRock (BLK), JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC).

  Overall, this looks to be a rather sluggish quarter for earnings growth. According to the latest numbers, Wall Street expects Q4 earnings growth of 1.82% for the S&P 500. That’s down from 2.85% from one month ago.

  Within industry sectors, analysts expect 15.80% growth from Consumer Discretionary. That’s up from 13.52% from one month ago. For Tech, analysts have raised their estimate from 14.74% growth from one month ago to 15.08% now.

  The big loser is the Energy sector. Profits for Energy are expected to fall 26.94%. As bad as that is, it’s dropping. One month ago, analysts had been expecting Energy’s profits to fall by 23.42%.

  The first of our Buy List stocks to report will probably be in about two weeks. I’ll caution you that companies often need a little more time to compile their Q4 earnings reports compared with the other three quarters.

  Don’t get worried if a company needs a little extra time. If a company reports its Q1 earnings on, let’s say, April 27, you can most likely expect its other earnings to be around July 27 and October 27, but the Q4 report may be a week or so after January 27.

  The U.S. Economy Added 216,000 Jobs in December

  Last Friday, the government said that the U.S. economy added 216,000 net new jobs last months. That was much better than expectations. Wall Street had been looking for an increase of 170,000 new jobs. The unemployment rate held steady at 3.7%. Wall Street had been expecting it to rise to 3.8%.

  

  While the jobs numbers for December were decent, the jobs gains for October and November were revised lower to 173,000 and 105,000, respectively.

  The U-6 rate, which is a wider measure of joblessness, increased to 7.1%. The labor force participation rate (LFPR) fell 0.3% to 62.5%. That number is now at its lowest point since February.

  The labor force participation rate had been improving for several months. The problem with the LFPR is that it can be distorted by demographic factors. For example, more retirees will drive down the LFPR. If we look at it just for folks in the prime working-age category (25 to 54), then the LFPR is close to a 20-year high.

  

  Perhaps the most important stat in the jobs report is average hourly earnings. Last month, average hourly earnings rose by 0.4%. That’s good, but I hope to see better. Over the last year, average hourly earnings are up by 4.1%. The problem is that so much of the wage gains have been eaten up by inflation.

  One of the problems with this jobs report is that the job gains have been concentrated in a few areas while important sectors of the economy have actually seen job losses:

  The December hiring boost as reflected in the Labor Department report came from a gain of 52,000 in government jobs and another 38,000 in health care-related fields such as ambulatory health-care services and hospitals. Leisure and hospitality contributed 40,000 to the total, while social assistance increased by 21,000 and construction added 17,000. Retail trade grew by 17,000 as the industry has been mostly flat since early 2022, the Labor Department said.

  On the downside, transportation and warehousing saw a loss of 23,000.

  For the year, the U.S. economy added 2.7 million jobs. That’s a noticeable drop off from 4.8 million in 2022.

  The Federal Reserve meets again at the end of this month, and again, I don’t expect to see any changes to interest rates. The March meeting is a different story. Currently, the futures market thinks there’s a 64% chance that the Fed will cut rates. That’s down a bit from the odds before the jobs report.

  Later this month, we’ll get the initial report on Q4 GDP growth. The Atlanta Fed’s GDP Now model said that the economy grew at a real, annualized rate of 2.2% for Q4.

  The End of the Month Effect

  One of my peculiar habits is that I maintain a very large database of historical market stats. For example, I have every closing for the Dow Jones Industrial Average since the index was birthed in 1896. That’s more than 30,000 data points.

  At the end of each year, I update all the numbers. I then slice and dice the numbers several different ways to see how the market has performed historically. (I know…I need a better hobby.)

  Today I wanted to share with you one of the more fascinating results I got which is the end-of-the-month effect. Very simply, all of the stock market’s gains over the last 13 decades have come on the first and last days of each month. The rest of the month has been net flat.

  Make no mistake. I’m not advocating for some kind of trading strategy to try and profit from the end-of-the-month effect. I’m still a buy-and-hold guy, but I find the effect fascinating.

  I took all the numbers and squished them together to show you what the average month has looked like for the DJIA since 1896. Here it is:

  

  I used the days of January as a placeholder for the horizontal axis, and I started the series at 100 at the start of the month. On average, the Dow has gained 0.650% each month.

  During the first six days of the month, the Dow has had an average gain of 0.615%. During the rest of the month, the Dow has eked out a miniscule 0.035%.

  If we dig a little further, we see that the Dow has lost an average of 0.216% by investing from the 6th to the 25th of each month. That’s roughly one-third of the entire monthly gain. From the 25th to the 6th, the Dow has gained an average of 0.867%.

  What causes this? I’m not certain, but I’d guess that that’s when investors have gotten new money to add to stocks. It’s amazing that 130 years of data shows such a large impact from the calendar.

  That’s all for now. The stock market will be closed on Monday in honor of Dr. Martin Luther King’s birthday. He would have been 95 years old. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

  P.S. If you want more info on our ETF, you can check out the ETF’s website.