US stocks took a breather on Monday after closing out a dizzying week at record highs as investors braced for a looming inflation update that could put that rally to the test.
The Dow Jones Industrial Average (^DJI) closed down 0.2% while the S&P 500 (^GSPC) fell 0.4% on the heels of notching new closing highs last week. The Nasdaq Composite (^IXIC) fell 0.1% following a stellar week for tech stocks.
New inflation data in the coming days will test the staying power of the breakout rally that followed Nvidia's (NVDA) results. A hotter-than-expected CPI report spooked the market and sparked a stock sell-off earlier in February, and investors are already weighing the chances of a surprise in Thursday's PCE index reading.
Given the PCE index is the Federal Reserve's preferred inflation gauge, the reading will factor into the ongoing debate on the timing of a rate cut, already pushed back.
The inflation report is the highlight of this week's data, with temperature checks on the consumer and manufacturing also on deck. What they say about the health of the US economy may determine whether the bullish mood in stocks continues.
Berkshire Hathaway (BRK-B) closed in on a $1 trillion market value after the Warren Buffett-led conglomerate posted a record annual profit for the second year in a row. In his annual letter to shareholders at the weekend, Buffett said Berkshire is "built to last" and paid tribute to the part played in that by his right-hand man, Charlie Munger.
Elsewhere in corporate results, Domino's Pizza (DPZ) shares popped 6% after the restaurant and delivery chain lifted its dividend and beat fourth quarter sales estimates.
Shares of crypto platform Coinbase (COIN) gained 16% as Bitcoin (BTC-USD) hovered above $54,000 per token.
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Ines Ferré
Stocks retreat from record highs ahead of inflation data this week
Stocks took a breather on Monday ahead of a data-packed week. The Dow Jones Industrial Average (^DJI) closed slightly below the flatline while S&P 500 (^GSPC) fell 0.4%.
The Nasdaq Composite (^IXIC) fell 0.1% after hovering above the flatline for most of the session. Nvidia (NVDA) shares closed up 0.3% following a stellar rally last week.
Shares of crypto platform Coinbase (COIN) gained 16% as Bitcoin (BTC-USD) hovered above $54,000 per token.
Investors await the latest Personal Consumption Expenditures (PCE) index due on Thursday. The reading is the Federal Reserve's preferred inflation gauge.
Data on ISM manufacturing and mortgage applications are also expected this week.
Ines Ferré
Here's how SECURE 2.0 helps student loan borrowers save for retirement
For borrowers, that means payments they make on their student loans count toward their company’s matching contributions to 401(k), 403(b), or SIMPLE IRA plans — even if they aren’t currently contributing themselves. The provision is optional and took effect in January.
Ford delays shipping certain 2024 F-150 gas-powered and Lightning EV pickups
Ford (F) has halted shipments of its 2024 F-150 Lightning EV pickup and only just started shipping its brand new 2024 F-150 gas-powered truck after a multi-week delay, due to quality checks.
As Yahoo Finance's Pras Subramanian reports, a delay affecting Ford’s high-profit F-150 sales and more possible EV troubles could potentially impact Ford’s first quarter performance.
The Automotive News first reported that a 2024 F-150 Lightning “stop-ship” order went into effect Feb. 9 due to an undisclosed quality issue and that “hundreds, if not thousands” of gas-powered 2024 F-150 trucks have been piling up in Ford holding lots since production began in December, before deliveries began late last week.
Ford shares were trading just below the flatline on Monday.
Josh Schafer
Stock buybacks are rising this earnings season
Stock buybacks are increasing in a sign that companies are feeling better about the trajectory of the US economy.
Companies such as Meta (META), Disney (DIS), and Uber (UBER) all announced plans to repurchase shares this earnings season. And according to data from Deutsche Bank companies are acting on these buyback authorizations, with S&P 500 members repurchasing $63 billion worth of their own stock during the first week of February, the highest single-week total for buybacks since May 2023.
Deutsche Bank director of global asset allocation and US equity strategy Parag Thatte explained to Yahoo Finance that as earnings rise, buybacks often follow suit. This happens because as earnings improve, companies' free cash flow often increases. Corporates will first spend that money on paying down debt. Then, remaining funds are often utilized for paying dividends, boosting capital expenditures to reinvest in the company, and, potentially, buying back shares.
Stock buybacks lower the amount of total shares outstanding to the public, boosting investors' stake in the company and their share of any potential dividends. It's viewed as a positive for investors, but is often the first thing to be cut when times are tough.
This means that the return of buybacks can be seen as a sign that companies feel they're in a stronger position than the past few quarters when buybacks hit a lull.
"They're not yet stating that all is clear and we are maybe completely free of a slowdown," Thatte said. "But at the margin they are saying, 'Yes, we are seeing signs or things turning up.'"
Investors are keeping an eye on shares of Walmart after the retailer enacted a 3-for-1 stock split on Friday after the market close.
The move is seen as cosmetic since it won't change the underlying value of existing investments in the company.
Investors who own Walmart will now have more shares than they did last week, but at a price adjusted for the split. Those who are looking to buy the stock can now purchase it at a nominally lower price.
Micron stock jumped 5% on Monday after the company announced mass production of its high-bandwidth memory semiconductors for use in Nvidia's (NVDA) latest artificial intelligence chip.
The HBM3E (high bandwidth memory 3E) is expected to consume 30% less power than other semis, according to Micron.
Shares of Chinese electric vehicle maker jumped as much as 15% on Monday after the company beat fourth quarter earnings expectations.
The automaker reported its first-ever annual net profit, delivering 131,805 vehicles in the quarter —representing a 184.6% year-over-year increase.
Ines Ferré
FTC sues to block Kroger acquisition of Albertsons on claims grocery prices will rise
The Federal Trade Commission filed a lawsuit to block Kroger's (KR) proposed deal to buy Albertsons (ACI) for $24.6 billion.
The agency claims the merger would "eliminate fierce competition" between the grocery chain operators, "leading to higher prices for groceries and other essential household items for millions of Americans."
"The loss of competition will also lead to lower quality products and services, while also narrowing consumers’ choices for where to shop for groceries," read the FTC statement on Monday.
The Kroger Co. responded on Monday stating,"Contrary to the FTC's statements, blocking Kroger's merger with Albertsons Companies will actually harm the very people the FTC purports to serve: America's consumers and workers. Kroger's business model is to take costs out of the business and invest in lowering prices for customers."
The Kroger Co. announced plans to buy Albertsons Companies back in 2022.
Brian Sozzi
The next AI stock plays: Fast food
The search for AI derivative plays on Wall Street is well underway, trust me.
To make life easier for you, here is one space to start your homework on: fast food.
I am prepping for an interview with the CEO of a very large restaurant chain today. They boast around 30 million-plus rewards members. These are loyal folks of the brand logging on to this restaurant's app and ordering food and hoping to get something free or something unexpected. Said restaurant is installing new AI software to better mine the data from these loyal rewards members.
The buzzword used by them and others in the fast-food space: suggested selling. In other words, tapping into data using new technology to upsell you or get you to order more frequently. Starbucks has led the way in this, but it's starting to spread like wildfire in the space.
It's a major potential value unlock for fast-food players. And so is the use of AI tech inside the restaurant, say to scan if food is being weighed and priced correctly.
I think talk of AI on its earnings call today is lifting shares"g of Domino's Pizza (DPZ). The company's same-store sales recovery appears underway, but this AI talk from the earnings call caught my attention (note Domino's is seen as the first to really pioneer the use of tech in the fast-food industry):
From Domino's CEO Russell Weiner:
"The answer to your Microsoft question is, we're working really in two areas with Microsoft and generative AI. One is on the consumer ordering side. We are not waiting for the new website to come in to see something on that. So you'll see something on that in 2024. And then also on the store side and what can we do with generative AI to make the experience better on our team members in store."
Ines Ferré
Li Auto stock surges on first-ever annual net profit, EV peers jump
Shares of Li Auto (LI) jumped more than 14% on Monday after the Chinese electric vehicle maker beat fourth quarter earnings expectations.
The company reported its first-ever annual net profit, delivering 131,805 vehicles in the quarter —representing a 184.6% year-over-year increase.
Gross margin was 23.5% in the fourth quarter of 2023, up from 20.2% during the same period in 2022.
Electric vehicle peer stocks also rose on Monday. XPeng (XPEV) was up more than 7%. NIO (NIO) American depositary receipts (ADRs) rose more than 5%.
US rival Tesla (TSLA) jumped roughly 4% during the session.
Electric vehicle stocks jumped on Monday
Ines Ferré
The Dow's Amazon-Walmart-Walgreens shakeup is a reminder why it's no longer the benchmark
On Monday Amazon (AMZN) replaces Walgreens (WBA) on the Dow Jones Industrial Average, following a move by Walmart (WMT) to split its stock 3-for-1.
Yahoo Finance contributor Allan Sloan points to the Dow's triple play involving Walmart, Walgreens, and Amazon as an example of how creaky and cumbersome the ancient Dow Jones Industrial Average (^DJI) has become compared with modern market metrics.
The swap was done to keep retail companies’ weight in the average from falling sharply because of Walmart’s stock split.
Stocks drifted slightly higher on Monday following a dizzying week of record levels. The Dow Jones Industrial Average (^DJI) and S&P 500 (^GSPC) opened little changed after notching new all-time high closings. The Nasdaq Composite (^IXIC) rose slightly following a stellar week for tech stocks.
Investors await the latest Personal Consumption Expenditures (PCE) index due for release on Thursday. The reading is the Federal Reserve's preferred inflation gauge.
The print will test the staying power of the breakout rally spurred by Nvidia's (NVDA) results last week.
Data on ISM manufacturing, mortgage applications, and home sales are also expected this week.
The research team at Deutsche Bank put a few numbers behind all of this ahead of the opening bell today, and it borders on stunning:
The S&P 500 has now advanced for 15 of the last 17 weeks. That has only happened one other time in the last 50 years, back in 1989.
If the S&P 500 finishes positive again this week, that would make 16 out of 18 positive weeks. The last time that happened was in 1971, shortly before the end of the Bretton Woods system. Achieving 16 out of 18 positive weeks would also be a joint record since the index’s creation, says Deutsche Bank.
The gains have Deutsche Bank highlighting a few areas where the market rally looks vulnerable.
"Inflation persistence could be an issue for markets, as it would mean central banks have to keep rates higher for longer. Indeed, when the US CPI report for January saw an upside surprise, it led the S&P 500 to fall -1.37% that day. So this is a theme that markets are still vulnerable to," says Deutsche Bank strategist Henry Allen.
Brian Sozzi
Key quotes from Buffett's annual letter
Priced at $435 in the pre-market amid a 5% post-earnings bump, Berkshire Hathaway (BRK-B) finds itself on the Yahoo Finance trending ticker page. The company will inch closer to the $1 trillion market cap for the first time after closing at $905 billion on Friday.
Makes sense to me.
Buffett is cleaning up on his ahead-of-the-curve investments in Japan, is collecting gobs of dividends from Coca-Coca (KO) and American Express (AXP), and is sitting on a record $167.6 billion in cash. Sure Buffett struck a cautious tone to anyone invested in the railroad space (citing tough regulations and intensive capital investments needed), and to a lesser extent those in the energy patch.
But for me, this was one of Buffett’s best annual letters in a decade because of the sharp investing wisdom he shared to a world currently infatuated with AI stocks like Nvidia (NVDA).
A couple Buffett reminders to start the week:
“Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring.”
“At Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies — and simply sitting tight — can deliver wealth almost beyond measure.”
“Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than when I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.”
“One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital.”
“We did not predict the time of an economic paralysis but we were always prepared for one.”
Donald Trump’s aides have drawn up secret plans to oust the chairman of the Federal Reserve and allow the president to set interest rates, according to reports.
There are benefits to investing in stocks that have reasonable multiples and aren't as dependent on future earnings growth to justify their valuations.
