Hey Snackers,
It’s only nine days into the new year and California’s already abandoned Dry January: the Sunny State is having a drenching month with heavy rains and flooding.
In the first big rally of 2023, the S&P 500 gained 1.5% for the week after news that wage growth cooled last month. About that…
Oh the weather outside is frightful… but the December jobs report is apparently delightful. Stocks rallied Friday after fresh labor data showed a slowdown in wage growth. Normally, that wouldn’t be a great sign, but in this “good is bad” economy it serves as more evidence that inflation is cooling. Read: the Fed’s rate-hiking crusade is working.
But also: The job market’s still red hot. US employers added a stronger-than-expected 223K jobs last month and the unemployment rate fell to 3.5% (near historic lows).
But still: Investors celebrated cooling wages, which can translate to cooling prices, which could translate to the Fed being less aggro with rate hikes.
Everyone’s worried about jobs… and no one’s worried about the job market? We’re seeing this paradox playing out: Americans are on edge over job security, but in November there were 1.7 openings for every available worker. Still, job growth is losing steam (employers are adding fewer roles each month) and mass layoffs are only heating up.
Tech layoffs are happening at the fastest rate since the pandemic: last week Amazon announced plans to lay off 18K+ employees and Salesforce said it’s cutting 8K. Online styling service Stitch Fix said it would let go of 20% of staff, while struggling crypto lender Genesis slashed 30%.
Not just tech: While tech is a rate-sensitive industry, others like Goldman Sachs, Dodge maker Stellantis, and Redfin have announced big cuts.
The labor market needs to get more wrong to feel right… The strong job market is the last remnant of the pandemic-stimulus era (recall: near-zero interest rates, fat checks). Job data is a lagging indicator, and we’re finally starting to see hawkishness catch up to it. But Fed officials said they’d need to see sustained cooling before easing up on hikes — a scenario investors are hungry for. At least the trend is moving in the right (cough, wrong) direction.
Securing the vault… Chase, Wells Fargo, Bank of America, and Citi kick off bank earnings this week, and all eyes are on lending. So far, higher rates have boosted banking profits, since banks are earning more on deposits and loans (think: mortgages). In October, Chase reported that quarterly revenue jumped 10% to $33B while profit surged 34%. Bank of America and Wells Fargo also topped revenue estimates. While economic woes could hurt loan demand, delinquencies are still low, and analysts expect more growth when banks report.
Ready for takeoff… As Southwest went into a tailspin, Delta soared. Last month the Atlanta-based airline predicted its earnings would nearly double this year from last, jetting past expectations. CEO Ed Bastian said the post-Covid travel boom hasn't petered out, as people prioritize “experiential” spending over material goods. Delta seems to believe the good times will keep rolling: it agreed to multiyear raises for pilots and is adding customer perks like free Wi-Fi. We'll see if the highflying industry optimism lands in reality when Delta reports.
Cryptowned… Customers of bankrupt crypto lender Celsius got more bad news: a judge ruled that the $4.2B in crypto they'd deposited into 600K interest-bearing accounts belongs to Celsius. Now those customers will be last in line to get repaid. The biz's terms of service, updated eight times, sealed the deal (lesson: read the TOS). The ruling could set the tone for customer compensation in other crypto-related bankruptcies (think: FTX, BlockFi). Meanwhile, the New York attorney general accused Celsius' founder of fraud.
From phone screens to flat screens… stream-ification is coming for TV. Dongle icon Roku said it’s launching its own “streaming-first” TV sets. It’s good timing: in July streamers got more TV view time than cable networks for the first time as cord-cutting continued — and 87% of US households had a streaming sub last year. While televisions aren’t likely to go the way of cable, they could play a key role in a future where consumers toggle between services like Netflix and Disney+, changing streamers instead of channels.
Fold: Bed Bath & Beyond shares plunged 47% last week after the embattled retailer said it might file for bankruptcy. OG category-killers are struggling to compete against online options (ahem, Amazon).
Elon: Tesla delivered a record 1.3M cars last year, but the stock posted its worst drop in over two years after #s fell shy of targets. Now investors worry Musk is too focused on Twitter — to Tesla’s detriment.
Run: Silvergate, the bank that helped fuel the crypto boom, plans to cut 40% of its staff after wary customers pulled out $8.1B. Since Silvergate is a key crypto player, the wider industry could feel the fallout.
Authors of this Snacks own: shares of Amazon, Disney, Delta, Roku, and Tesla
ID: 2668229