Traders Market Weekly: Rates, Debt and the Fed

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    Treasury yields moved noticeably higher after the 8:30 a.m. ET releases.
    The 2-yr note yield is up three basis points to 4.63%
    10-yr note yield is up two basis points to 3.83%.

    Helmholtz Watson

    “The Nazi agitator whom, many years ago, I heard proclaim to a wildly cheering peasants’ meeting: ‘We don’t want lower bread prices, we don’t want higher bread prices, we don’t want unchanged bread prices — we want National-Socialist bread prices,’ came nearer explaining fascism than anybody I have heard since.”

    — Peter Drucker, “The End of Economic Man: The Origins of Totalitarianism” (1939)


    Dow 33,696.85 -431.20 -1.26%
    S&P 500 4,090.41 -57.19 -1.38%
    Nasdaq 11,855.83 -214.76 -1.78%
    VIX 20.19 1.96 10.75%
    Gold 1,847.20 1.90 0.10%
    Oil 78.11 -0.48 -0.61%


    Equity indices in the Asia-Pacific region ended the week on a lower note.

    —Equity Markets—

    Japan’s Nikkei: -0.7% (-0.6% for the week)
    Hong Kong’s Hang Seng: -1.3% (-2.2% for the week)
    China’s Shanghai Composite: -0.8% (-1.1% for the week)
    India’s Sensex: -0.5% (+0.5% for the week)
    South Korea’s Kospi: -1.0% (-0.8% for the week)
    Australia’s ASX All Ordinaries: -0.9% (-1.0% for the week)


    South Korea plans to increase the number of flights from China by the end of the month.

    The Bank of Japan will launch a central bank digital currency pilot program in April.

    Reserve Bank of Australia Governor Lowe said that more rate hikes will be needed in the coming months.

    Pentagon’s top China official is expected to visit Taiwan in the coming days.

    North Korea vowed a response to joint U.S.-South Korea drills.

    Singapore’s January trade surplus SGD6.30 bln (last surplus of SGD5.51 bln)


    Major European indices trade in the red.

    —Equity Markets—

    STOXX Europe 600: -0.4% (+1.2% week-to-date)
    Germany’s DAX: -0.6% (+1.0% week-to-date)
    U.K.’s FTSE 100: -0.2% (+1.5% week-to-date)
    France’s CAC 40: -0.4% (+2.9% week-to-date)
    Italy’s FTSE MIB: -0.5% (+1.6% week-to-date)
    Spain’s IBEX 35: -0.2% (+2.1% week-to-date)


    European Central Bank policymaker Schnabel said that there is a risk of inflation being more persistent than what the markets currently expect while ECB Chief Economist Lane said that current monetary policy actions are clearly tightening financial conditions.

    Air France will exit state aid restrictions in April.

    Mercedes reported strong results for the quarter and guided for flat yr/yr unit sales in 2023.

    Eurozone’s December Current Account surplus EUR15.90 bln (expected surplus of EUR5.10 bln; last surplus of EUR13.60 bln)

    Germany’s January PPI -1.0% m/m (expected -1.6%; last -0.4%); 17.8% yr/yr (expected 16.4%; last 21.6%)

    U.K.’s January Retail Sales 0.5% m/m (expected -0.3%; last -1.2%); -5.1% yr/yr (expected -5.5%; last -6.1%). January Core Retail Sales 0.4% m/m (expected 0.0%; last -1.4%); -5.3% yr/yr, as expected (last -6.5%)

    France’s January CPI 0.4% m/m, as expected (last -0.1%); 6.0% yr/yr, as expected (last 5.9%)



    Applied Materials (AMAT 117.07, +1.68, +1.5%): beats by $0.11, beats on revs; guides AprQ EPS in-line, revs in-line; says a major supplier encountered a disruption that will impact Q2 shipments

    Deere (DE 411.75, +8.80, +2.2%): beats by $1.08, beats on revs; raises FY23 net income guidance

    Dropbox (DBX 24.47, +0.51, +2.1%): beats by $0.01, reports revs in-line; guides on call; forecasts Q1 and FY23 revs ahead of consensus

    DoorDash (DASH 70.69, +3.80, +5.7%): reports adjusted EBITDA at high end of prior guidance; beats on revs, Marketplace GOV increased 29%, beating prior guidance; Guides for FY23 adj. EBITDA of $500-$800 mln; authorized share repurchase program of up to $750 mln of common stock; 2023 investments going towards building out categories beyond restaurants in the U.S. and globally

    Texas Roadhouse (TXRH 99.70, -5.45, -5.2%): misses by $0.14, misses on revs

    Cognex (CGNX 50.91, -4.40, -8.0%): beats by $0.01, misses on revs; guides Q1 revs below consensus; few large customers paused investments, noticed slower trends carry into 2023

    DraftKings (DKNG19.44, +1.63, +9.2% ): beats by $0.05, beats on revs; raises FY23 guidance; upgraded to Buy from Neutral at BTIG Research

    AutoNation (AN 147.81, +6.55, +4.6%): beats by $0.53, beats on revs

    HubSpot (HUBS 404.09, +42.126, +11.7%): beats by $0.29, beats on revs; guides Q1 EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs in-line


    Moderna (MRNA 162.98, -9.33, -5.4%): announces interim phase 3 safety and immunogenicity results for MRNA-1010, a seasonal influenza vaccine candidate; Non-inferiority was not met for seroconversion rates and geometric mean titer ratios for the influenza B/Victoria- and B/Yamagata-lineage strains


    Roku (ROKU 72.57, +2.00, +2.8%): upgrade to Buy from Underperform at BofA Securities


    The S&P 500 futures are down 20 points and are trading 0.6% below fair value.
    The Nasdaq 100 futures are down 92 points and are trading 0.8% below fair value.
    The Dow Jones Industrial Average futures are down 118 points and are trading 0.2% below fair value.

    Treasury yields pulled back somewhat following the pleasing import-export price data for January.

    The 2-yr note yield was at 4.70% a short time ago, but sits at 4.66% now.
    The 10-yr note yield, at 3.90% a short time ago, sits at 3.88%.

    The U.S. Dollar Index also pulled back to 104.27 from 104.67.


    Import prices fell 0.2% in January following a revised 0.1% decrease in December (from +0.4%).
    Import prices, excluding oil, rose 0.3% in January after a 0.4% increase in December.

    Export prices rose 0.8% in January after a revised 3.2% decline in December (from -2.6%).
    Export prices, excluding agriculture, fell 0.8% in January following a revised 3.3% decrease in December (from -2.7%).


    Facebook Parent Meta Gives Thousands of Workers Subpar Reviews

    Facebook parent Meta Platforms Inc. gave thousands of employees subpar ratings in a recently concluded round of performance reviews, a signal that more job cuts may be on the way, people familiar with the matter said.

    The company also cut a bonus metric, the people said, one of several steps senior executives are taking after Chief Executive Mark Zuckerberg declared 2023 would be a “year of efficiency.”

    Meta’s leadership expects the ratings to lead more employees to leave in the coming weeks, the people said. The company will consider another round of layoffs if not enough depart, the people said. About 11,000 workers, or about 13% of employees at the company, were recently laid off.

    Meta managers gave approximately 10% of employees ratings indicating they are underperforming, the people said. That proportion wasn’t unprecedented in the years before the pandemic. But Meta’s employee count nearly doubled from 2019 to 2022, to 86,400, and about half its workers had never experienced a typical performance-review cycle at the company, several people familiar with the matter said.

    “We’ve always had a goal-based culture of high performance, and our review process is intended to incentivize long-term thinking and high-quality work, while helping employees get actionable feedback,” a Meta spokesman said.

    The recently wrapped performance reviews were seen as a return to form for Mr. Zuckerberg, who before the pandemic had developed a reputation for delivering direct feedback to workers, people familiar with the process said.

    One former worker described the process as a return to “OG Mark” or “old school Zuck.”

    “We’re working on flattening our org structure and removing some layers of middle management to make decisions faster as well as deploying AI tools to help our engineers be more productive,” Mr. Zuckerberg told investors earlier this month.

    Meta managers gave approximately 10% of employees a rating of “meets most,” people familiar with the matter said. There are five possible ratings at Meta, and “meets most” is the second lowest. The lowest—“meets some”—is rare, the people said. Workers who receive two “meets most” ratings in a row are placed on performance improvement plans, and those who receive ratings lower than that are automatically placed on an improvement plan, some of the people said.

    Within Meta, some employees take such a rating as a sign to look for new work opportunities, these people said.

    In conjunction with the performance reviews, Meta informed employees that one component of employee bonuses—the company’s performance—would be paid out at 85% of its target, according to people familiar with Meta’s pay.

    That figure is one of three used to determine each employee’s annual bonus. At 85%, it is down at least 15 percentage points from the prior year, and below 100% for the first time since the first half of 2018, according to people familiar with past bonus figures. The only other time the companywide multiplier has dropped that low was in the first half of 2012, the people said.

    The company has struggled over the past year and a half, encountering growing competition from upstart Chinese rival TikTok and a decline in advertising demand amid a difficult macroeconomic climate. The company’s prospects have begun to look up since it placed an emphasis on artificial-intelligence technologies in 2022 to improve its ads-targeting and content-recommendation tools.

    Since April 2021, Meta has contended with the effects of
    Apple Inc.’s ad-tracking changes, which the social-media company said last year would cost it roughly $10 billion in revenue in 2022. Over the past three quarters, Meta has recorded year-over-year revenue declines.

    Marne Levine, the company’s chief business officer during that period, on Monday said that she will be stepping down from the role later this month and leaving the company this summer.

    Meta responded to its challenging financial situation in November when it announced the layoffs. It also tightened its belt by reducing office space, moving to desk-sharing for some workers and extending a hiring freeze through the first quarter of 2023.

    The changes have begun to make an impact. Despite a continuing revenue decline, Meta this month reported a net profit of $4.7 billion for the fourth quarter, up from the prior quarter. That snapped a streak of three quarters in which profit had retreated from the preceding quarter—a slump unlike any the company had experienced in a decade.


    Dow 33,826.69 129.84 0.39%
    S&P 500 4,079.09 -11.32 -0.28%
    Nasdaq 11,787.27 -68.56 -0.58%
    VIX 20.02 -0.15 -0.74%
    Gold 1,851.30 -0.50 -0.03%
    Oil 76.33 -2.16 -2.75%


    February 19-26, 2023 FEAR NOT Brave Investors Where have we been and where are we going? Join our weekly market thread on Traders Community… The Week
    [See the full post at: Traders Market Weekly: Rates, Debt and the Fed]

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