The Long Term Investor

As I have said many times....for some reason the FED now thinks their jobs is to KILL the stock markets and investors. This is a FUNDAMENTALLY FLAWED approach.....the stock markets are NOT the economy and are NOT the cause of inflation.

The word that made stocks fall in love with the Fed: Morning Brief
He said it no fewer than a dozen times in Wednesday's press conference

https://finance.yahoo.com/news/stocks-love-fed-powell-disinflation-morning-brief-110013322.html

(BOLD is my opinion OR what I consider important content)

""Disinflation."

No fewer than a dozen times on Wednesday did Federal Reserve Chair Jerome Powell say the word "disinflation" during his latest press conference.

And Powell's repeated discussion of this dynamic helped supercharge a stock market rally following the central bank's decision on Wednesday to raise interest rates by another 0.25%.

When the closing bell rang on Wall Street, the tech-heavy Nasdaq was up 2%.

The key quote from Powell came about 20 minutes into his press conference, when, in response to a question from Reuters' Howard Schneider, Powell said, in part: "We can now say, for the first time, that the disinflationary process has started. We can see that."

Unlike inflation (prices going up) or deflation (prices going down) — both of which economists fear in large quantities — disinflation means prices rise at a slower pace. Headline CPI, for example, rose 6.5% over the prior year in December after having jumped as much as 9.1% over the prior year in July. This deceleration in the pace of price increases is disinflation.

To take the importance of Powell's comments a step further, disinflation suggests the Fed may well be able to complete its current interest rate hiking cycle and avoid a severe downturn in the economy.

After all, what the Fed has hoped to achieve is a "soft landing" in which economic growth slows and inflation comes down, but mass layoffs and a recession are avoided.

The Fed's own forecasts suggested a recession would likely follow in 2023 as a result of its 2022 rate hikes, but one month into the year the view from both investors and the Fed chair seems to suggest growing optimism over avoiding this scenario.

"I think most forecasters would say that unemployment will probably rise a bit" from its current level of 3.5%, Powell said Wednesday. "But ... I continue to think that there's a path to getting inflation back down to 2% without a really significant economic decline or a significant increase in unemployment."

"I think many, many forecasters would say it's not the most likely outcome," Powell added. "But I would say there's a chance of it."

In Powell's view, the current bout of inflation was borne out of a "collision between very strong demand and hard supply constraints." As both sides of this equation have moderated, the disinflation we're witnessing in goods and the housing market, as two examples, has followed.

And given the unique nature of this business cycle, Powell argued Wednesday similar dynamics will emerge economy-wide.

The market's positive read on Wednesday's comments, however, shouldn't overshadow the significance of the Fed's current program.

With its latest rate hike, the Fed has increased its benchmark rate by 4.5% since March 2022, and the Fed funds rate now stands at its highest level since October 2007.

Look at the stock market endured by investors in 2022. The negative effects of this campaign have been plain to see. And although Wednesday's rate hike marked another superlative in the Fed's current cycle, investors are looking to what the Fed's next moves might be.

Powell was explicit in saying he doesn't believe a decrease in rates will be necessary in 2023. But growing signs that inflation's most deleterious impacts have already been felt were cheered loudly by investors."

MY COMMENT

With the end of the rate increases soon.....Powell will have no ability to screw the stock markets. At that point no one will care about the FED....except for economists.

 

Here is an example of the thinking that I am talking about above:

The More Powell Spoke, the More Stock and Bond Markets Rallied

• Markets seized on financial conditions comment, says Rosenberg
• Odds increasing Fed is declaring victory too soon, says Dutta

https://www.bloomberg.com/news/arti...re-on-markets-breaking-loose-from-fed-control

(BOLD is my opinion OR what I consider important content)

"Behind closed doors, Federal Reserve policy makers worry rallying markets are impeding their efforts to control inflation. But every time Jerome Powell goes out in public he gives them more room to run.

When the Fed chairman took to the podium Wednesday afternoon, stock markets were hovering around their session lows. The central bank had just delivered an eighth straight rate hike and signaled more were to come, and some of the uber-bullishness on display in markets this year had faded a little.

By the time Powell was done speaking some 45 minutes later, stocks had soared. The S&P 500 reached its intraday high, up 1.8%, and traders were also quickly bidding up prices on Treasuries, corporate bonds and crypto.

Powell may have intended to deliver a stern message that the Fed still had a lot of work to do to tame inflation but that’s not what investors heard. Instead, they heard a chairman who indicated he was seeing clear evidence of slowing consumer price increases and who didn’t seem particularly bothered by the January rally in markets.

For the second straight meeting, the very first question he was asked at the press conference was whether he was worried about the rally creating easier financial conditions that could hamper his inflation fight and, once again, he chose not to push back hard. “Our focus is not on short-term moves,but on sustained changes” to financial conditions, he said.

“There’s a real disconnect between what he said, what the statement said, maybe what he wanted to say, and what the markets heard,” BlackRock’s Jeffrey Rosenberg said on Bloomberg TV. “But what the markets heard was this issue of the conflict between financial conditions easing, and whether or not that would impact the Fed’s policy making — he dismissed it.”




Powell’s response came on a day that was not without tough talk on inflation, with the chairman repeatedly stressing that while price pressures in the economy had eased, the battle was far from won. Policy makers lifted the Fed’s target for its benchmark rate by a quarter percentage point to a range of 4.5% to 4.75% and said ongoing increases will be appropriate, a signal to most that no pause in tightening is imminent.

But investors had been bracing for harsh commentary from the Fed aimed at cooling the recent run-up in risk assets. The chairman instead argued that readings have tightened “very significantly” over the past year as the Fed hiked.

The emphasis on tighter conditions is being taken by traders as evidence the latest rallies in equities and credit are not a major concern for policy makers, essentially freeing them to bid up prices. Some analysts question what measure Powell was referring to — a Bloomberg index of US conditions across markets sits today at a looser level than it was when the Fed began its tightening campaign last year.

“Powell has said that financial conditions have tightened considerably despite the fact that they have eased considerably,” wrote Neil Dutta, head of US economic research at Renaissance Macro Research LLC. “The fact that he has said this is dovish in its own right,” according to Dutta, who added: “the odds are increasing that the Fed is declaring victory too soon.”

Wednesday’s stock rally is a continuation of what’s been happening all year in markets, with stocks surging and volatility easing versus last year. The S&P 500 last month gained more than 6% in what was its best showing since October. The Cboe Volatility Index, a gauge of cost of equity options, fell to the lowest level since the immediate aftermath the S&P 500’s last all-time high reached in January 2022.

Traders who had braced for a hawkish Fed were caught off guard and rushed to short-term options to play catch-up. Contracts within 24 hours to expiry accounted for almost 40% of all S&P 500’s total volume, with trading in bullish calls outpacing bearish puts.

The expression of optimism was even more evident in the interest-rate swaps market, where traders are now pricing a half percentage point rate cut in the second half of the year after rates peak near 4.9%.

None of the market action is likely what the central bank wants to see as it looks to continue to rein in inflation, said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors.

“I’m surprised Chairman Powell didn’t use this opportunity to deliver a wakeup call to those investors who seem to have gotten ahead of themselves,” he said. “There are ways to acknowledge the progress that’s been made on inflation while still talking tough on the work that needs to be done.”

MY COMMENT

This type of thinking is FUNDAMENTALLY FLAWED. It is NOT the job of the FED to manage the course of the stock markets. It is their job......to pretend.....to manage the economy. Of course....they really dont have any control....it all happens in the fundamental results of business.......and in the halls of government.

I have noticed many times over the past couple of years.....numerous FED members coming out to speak and tank the markets on otherwise UP days. I have never seen this out of the FED in my past life. It is unneeded and not productive in any way.

 

An EXTREME rally today. I have my doubts if it will continue tomorrow....but.....I will not look a short term gift horse in the mouth so....

SHOW ME THE MONEY!

 

Looking at my account a minute ago....everything is up except for....of course.....HON. I am now YTD.....+14.06% with the gain today.

Today seems extreme to me.....but who knows. There was was much negativity in the markets all month and regarding earnings that I am sure there are many to the short side of the markets that are bailing to the long side right now. All the....."professionals"....will be jumping into sticks to "window-dress" their portfolios for their clients.

If we see good earnings from all the BIG CAP TECH companies today.....we could be in for an epic rally.

 

STILL....a big move up today...we are making money now. For the historical record here is more detail on my Honeywell earnings.

Honeywell International Inc. (HON) Tops Q4 Earnings Estimates

https://finance.yahoo.com/news/honeywell-international-inc-hon-tops-124512188.html

(BOLD is my opinion OR what I consider important content)

"Honeywell International Inc. (HON) came out with quarterly earnings of $2.52 per share, beating the Zacks Consensus Estimate of $2.49 per share. This compares to earnings of $2.09 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 1.20%. A quarter ago, it was expected that this company would post earnings of $2.16 per share when it actually produced earnings of $2.25, delivering a surprise of 4.17%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Honeywell International Inc. , which belongs to the Zacks Diversified Operations industry, posted revenues of $9.19 billion for the quarter ended December 2022, missing the Zacks Consensus Estimate by 0.38%. This compares to year-ago revenues of $8.66 billion. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Honeywell International Inc. Shares have lost about 3.5% since the beginning of the year versus the S&P 500's gain of 7.3%.

What's Next for Honeywell International Inc.

While Honeywell International Inc. Has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Honeywell International Inc. Mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $2.04 on $8.67 billion in revenues for the coming quarter and $9.12 on $36.87 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Diversified Operations is currently in the bottom 32% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

ITT (ITT), another stock in the same industry, has yet to report results for the quarter ended December 2022. The results are expected to be released on February 9.

This supplier of parts and services to a wide variety of industries is expected to post quarterly earnings of $1.24 per share in its upcoming report, which represents a year-over-year change of +17%. The consensus EPS estimate for the quarter has been revised 0.3% lower over the last 30 days to the current level.

ITT's revenues are expected to be $766.34 million, up 11.8% from the year-ago quarter."

MY COMMENT

A nice little general earnings beat......but the stock is down today. They have been lagging all year......in spite of four quarters of earnings beats.

 

A REALLY big day for me today. If nothing else....I have built up a very nice cushion in the event of a continuation of the bear market. I was green today in nine out of ten stocks. My one loser was.....NIKE.....by a small amount. I got in a HUGE beat on the SP500 today......by 1.89%.

Now....we see how much of this gain is going to b given back tomorrow.....or....do we continue up from here. This little January RALLY....perhaps even bull market.....has produced a lot of money for investors that are in the markets. A CLASSIC.....STEALTH RALLY. This is why I stay fully invested all the time.

 

The SP500 is now POSITIVE for the following time spans:

1 Day
5 Days
1 Month
6 Months
5 year

For......1 Year....it is showing a loss of (-6.65%)......we are moving toward the point where 2022 will be ancient history.

 

Here is the GOOGL earnings.

Alphabet misses on earnings expectations, as ad revenue falls

https://finance.yahoo.com/news/alph...pectations-as-ad-revenue-falls-210958819.html

(BOLD is my opinion OR what I consider important content)

"Google parent Alphabet (GOOG, GOOGL) announced its Q4 earnings after the bell on Thursday, falling short of expectations on revenue and earnings per share, as advertising declined year-over-year.

Here are the most important numbers from the report, compared to what Wall Street was expecting, as compiled by Bloomberg.

• Revenue (ex-TAC): $63.12 versus $63.2 billion expected
  
• Earnings per share: $1.05 versus $1.18 expected
  

Alphabet shares were down 4.2% immediately following the report.

Google's ad revenue fell from $61.2 billion in Q4 2021 to $59 billion in Q4 2022. Youtube ad revenue, meanwhile, missed analysts' estimates, coming in at $7.9 vs estimate versus $8.2 billion. Google Cloud, meanwhile, lost $830 million in Q4, better than the $1.7 billion it lost in the same quarter last year.

Alphabet, like Meta (META) and Snap (SNAP), is working to overcome a slowdown in the digital advertising market. Meta CFO Susan Li Q4 told analysts during the company's recent earnings call that revenue remained under pressure from weak advertising demand. Snap CEO Evan Spiegel, meanwhile, said that advertising demand hasn't improved by hasn't gotten significantly worse, either.

Microsoft also reported weakness in its advertising business, CFO Amy Hood explained during the company’s latest earnings report.

Alphabet’s results are its first since it laid off some 12,000 employees in January. CEO Sundar Pichai blamed the layoffs on Alphabet’s decision to staff up to meet the company’s demand during the pandemic. As people started venturing back into the real world and relied less on virtual options, though, Alphabet needed to cut staff.

"We have significant work underway to improve all aspects of our cost structure, in support of our investments in our highest growth priorities to deliver long-term, profitable growth," Alphabet CFO Ruth Porat said in a statement.

This is also the first time Alphabet will report earnings since the Department of Justice (DOJ) filed an antitrust lawsuit against the tech giant over its advertising business. In its complaint, the DOJ says it wants to break up the company’s ad business, which it accuses of operating at the expense of smaller rivals and advertisers.

In a research note, Needham analyst Laura Martin wrote that she expects it to take 7 to 10 years to resolve the case, and that every business decision Alphabet makes in the interim will need to undergo internal legal review.

“This implies value destruction, in addition to legal expenses, regardless of the outcome,” she wrote.

The DOJ isn’t Alphabet’s only existential threat, though. In January, Microsoft (MSFT) announced that it is making a multi-year, multi-billion dollar investment in ChatGPT developer OpenAI. Microsoft is already talking about adding the company’s AI capabilities to its various cloud products, and if it can attach natural language responses to its Bing search engine, it could cut into Google Search’s market share."

MY COMMENT

Not horrible....but still a miss. The stock should be down tomorrow.....but the company is STILL one of the most dominant companies in the WORLD.

 

Here is AMAZON.

Amazon stock drops after revenue beat, EPS miss

https://finance.yahoo.com/news/amazon-stock-drops-after-revenue-beat-eps-miss-150219157.html

(BOLD is my opinion OR what I consider important content)

"Amazon (AMZN) reported its Q4 2022 earnings on Feb. 2.

Here are the key numbers from Amazon's report, as compared to analysts' expectations compiled by Bloomberg.

Q4 Net Sales – $149.2 billion actual versus $145.8 billion expected

Q4 Online Stores Net Sales: $64.5 billion actual versus $65.03 billion expected

Q4 Physical Stores Net Sales: $4.95 billion actual versus $4.93 billion expected

Q4 Earnings Per Share (EPS): 3 cents actual versus 17 cents expected

Q4 Amazon Web Services (AWS) Net Sales: $21.3 billion actual versus $21.76 billion expected

Q4 Operating Income: $2.7 billion billion actual versus $2.51 billion expected

Amazon's shares declined about 47% over the course of 2022, as the company found itself in the throes of a digital advertising slowdown, high inflation, and rising interest rates. After the company grew rapidly to keep up with pandemic demand, the far-reaching economic uncertainty of the last year left Amazon in a bind. To that end, Amazon announced some of Big Tech's most notable layoffs, looking to shed 18,000 employees in the company's largest layoff ever.

2022 was the year a unionization push at Amazon fully materialized. In April, the Amazon Labor Union (ALU) won a union election at a warehouse in Staten Island, N.Y. The company's been fighting it since, but that hasn't stopped the labor movement from gaining momentum. This month, workers at a U.K. Amazon warehouse staged the first strike of its kind in that country.

MY COMMENT

A mixed bag.....some beats in some categories....and some misses. The company has a ways to go to get back in their former groove. The big unknown is how much of this is the recovery from the distortions of the pandemic.....versus.....the new management and a maturing company moving away from explosive growth.

I have no plans to sell this stock......but I will watch it over the coming years.

 

HERE is another take on both the above.

Alphabet misses on earnings and revenue as YouTube falls short

https://www.cnbc.com/2023/02/02/alphabet-googl-earnings-q4-2022.html

"Key Points

• The company missed top and bottom line expectations for the fourth quarter."

and

Amazon beats on fourth-quarter revenue but provides light guidance

https://www.cnbc.com/2023/02/02/amazon-amzn-earnings-q4-2022.html

"Key Points

• Amazon reported fourth-quarter results on Thursday that beat analysts’ sales estimates.
• The company said revenue in the first quarter will be $121 billion to $126 billion. Analysts were expecting $125.1 billion, according to Refinitiv."

 

And....here is Apple.

Apple misses Q1 earnings expectations as iPhone sales fall short

https://finance.yahoo.com/news/appl...ons-as-iphone-sales-fall-short-213355848.html

(BOLD is my opinion OR what I consider important content)

"Apple (AAPL) reported its Q1 earnings after the closing bell on Feb. 2, missing analysts' expectations on the top and bottom line as iPhone sales came up short. Revenue for the quarter declined 5% year-over-year.

Here are the most important numbers from the report compared to what Wall Street was expecting, as compiled by Bloomberg.

• Revenue: $117.1 billion versus $121.1 billion expected
• Adj. Earnings per share: $1.88 versus $1.94 expected
• iPhone revenue: $65.7 billion versus $68.3 billion expected
• Mac revenue: $7.7 billion versus $9.72 billion expected
• iPad revenue: $9.4 billion versus $7.7 billion expected
• Wearables: $13.4 billion versus $15.3 billion expected
• Services: $20.7 billion versus $20.4 billion expected

Apple shares were down more than 3% immediately following the report.

Apple faced significant headwinds throughout November and December, from COVID lockdowns and worker protests at manufacturer Foxconn’s facility in Zhengzhou, China. The plant, which employs 200,000 workers, produces the bulk of Apple’s iPhone 14 Pro and iPhone 14 Pro Max handsets.

The Pro and Pro Max, which start at $999 and $1,099, respectively, are two of Apple’s most important devices. Their steeper prices help boost the average iPhone selling price, driving higher revenues for the tech giant.

According to IDC’s Worldwide Quarterly Mobile Phone Tracker, shipments of Apple’s iPhone fell 14.9% year-over-year, from 85 million units in Q4 2021 to 72.3 million units in Q4 2022.

Despite the slowing sales, Apple has still managed to avoid large scale layoffs, unlike its peers including Microsoft, Google, and Amazon (AMZN)."

MY COMMENT

A clear MISS. To me the worst of the three BIG CAP TECH earnings today.

 

It will be interesting to see how we open and how wee close tomorrow to end the week. This has been a week of generally good earnings. I am sure the BIG CAP TECH earnings will weigh on the open.....but how will we end? We will see how many...."professionals"...use tomorrow to jump on the market bandwagon. We will also see the impact of any forward looking statements by the BIG THREE.

I assume the day will be down....but....you never know since the entire focus of the markets....should....be the future not the past.

 

You said it Smokie....all these companies need to get the hell out of China.

In hindsight allowing that country to capture our technology and manufacturing is INSANE. China....our largest economic competitor....the worlds most brutal communist dictatorship....and our top military foe in the world. So what do we do.....hand them control of nearly ALL manufacturing, assembly, and component manufacturing for our economy and country.

For being the leader of the free world.......we are incredibly stupid.

 

After hours:

GOOGL (-4.60%)

AAPL (-3.20%)

AMZN (-5.07%)

ALL were up by more than this today. Looks like we will give back some gains tomorrow. After that we are free of the FED for about 6 weeks......and....we will have most of the BIG CAP TECH earnings out of the way.

We should be seeing some pretty clean and normal market action during that time. We will get a chance to see if the positive market direction of the past 4-5 weeks is still intact.

As an aside.......after hours quotes and stock futures are notoriously representative of nothing. The open and especially the close will be all that counts tomorrow.