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This week's data tells 2 conflicting stories about the economy

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Investors looking for earnings this week to wave a magic, clarifying wand over the economic and markets picture may end up being disappointed.

Take UPS (UPS) and General Motors (GM) as two examples of earnings that muddy the economic portrait.

UPS CEO Carol Tomé characterized 2023 as a “difficult and disappointing year” as the package delivery giant forecast sales for 2024 that fell short of estimates. UPS also announced it’s cutting 12,000 workers this year.

Those jobs won’t come back, Tomé said on the company’s conference call, as the company permanently streamlines its operations and aims to use technology and other efficiency levers to be able to meet rebounding demand when it arrives. (CFO Brian Newman said volumes should rise 2% to 4% by the end of the year. They fell 7.4% in the US last quarter, and dropped 8.3% internationally).

On the flip side, consider GM.

“Consensus is growing that the US economy, the job market, and auto sales will continue to be resilient.” That’s how CEO Mary Barra kicked off the earnings call. It accompanies the automaker’s forecast for earnings per share this year of $8.50 to $9.50, compared with the $7.70 predicted by analysts.

Of course, these companies’ circumstances aren’t entirely centered on the economy. They both have idiosyncratic factors — GM’s expensive bet on electric vehicles and its Cruise self-driving unit, for example, both of which it’s managing differently this year.

Expanding the aperture, though, doesn’t necessarily help bring the economic picture into focus, as my co-anchor Josh Lipton pointed out.

Whirlpool shares tumbled after the appliance maker warned consumer spending was softening. Visa shares traded at a record intraday high after the stock shook off concerns over January weather and investors heeded the commentary from CEO Ryan McInerney: “Consumer spending remained resilient.”

Canaccord Genuity’s Tony Dwyer warned investors against expecting too much from this week’s numbers: “This week is unlikely to do much to clear up the economic or market confusion. It is one of the busiest weeks for earnings reports, the Fed is meeting, and who knows how they will guide at the press conference, and we get key economic data late in the week,” he wrote in a note sent Monday to clients.

Indeed, the above examples don’t even take into consideration the economic data, including an encouraging job openings report, aka JOLTS, or today’s pending Fed interest rate commentary, which could give hints about the pace and timing of rate cuts.

Nor do they factor in large-cap tech, which seems to exist in a parallel, AI-driven economy.

As Dwyer wrote, maybe “now is not the time to make a big call in either direction.” There’s still a lot more data to come.

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