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📊 Cracks in Consumer Spending

📊 Cracks in Consumer Spending

Ticker Tea
February 16, 2024

+ Markets ended positive yesterday with a rotation out of large-cap tech and into mid/small-cap energy, real estate and financials.

- Retail sales in January unexpectedly tumbled 0.8% m/m vs the estimate of -0.3% m/m. The prior release was +0.4% m/m. Market participants are viewing this as a warning sign for the economy.

Consumer resilience has been a key factor in US economic growth, which has been more robust than many policymakers and economists anticipated. Nevertheless, concerns remain that persistent high inflation might undermine future growth potential.

+ Despite the lackluster retail sales report, applications for unemployment benefits fell by 8,000 to 212k for the week ending Feb. 10. The street estimate was 220k.

» Earnings Today: Seagen, Arbor Realty, Constellation Energy, Vulcan Materials (Calendar & Estimates 👇)

» Economic Data Today: Building Permits, PPI, Michigan Consumer Sentiment, Housing Starts (Calendar & Estimates 👇)

» Fed Speaker Today: Barr, Daly

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- US retail sales experienced a significant decline of 0.8% in January, marking the largest decrease in nearly a year, following a robust holiday shopping season. This downturn, coupled with a dip in factory production, signals a cooling economic momentum, although not indicative of a major economic downturn, thanks to a strong labor market and easing inflation. This also comes at a time when credit card debt has sky rocketed 14.5% YoY and delinquencies surged more than 50% in 2023. (blog)

+ CBRE, a commercial real estate services provider, delivered strong fourth-quarter earnings, igniting a rally in the commercial real estate market with its optimistic outlook on office leasing recovery. The company's shares and those of its peers surged, buoyed the S&P 500 Real Estate Index and calmed fears over the sector's recent turbulence. (blog)

± Apple is on the verge of unveiling a new software tool designed to enhance app development through artificial intelligence, directly challenging Microsoft's GitHub Copilot. This initiative, part of Apple's broader foray into generative AI and large language models, is set to redefine the programming landscape by simplifying code generation and testing, with an expected debut as early as this year. (blog)

- Bill Ackman celebrates a moral victory over Herbalife as its stock plunges 32% to a 14-year low, affirming his long-held critique of the company as a pyramid scheme. Despite exiting his $1 billion short position six years ago, Ackman views the recent decline as validation, while Herbalife faces increasing pressures from pandemic recovery and economic factors. (blog)

± OpenAI introduces Sora, a groundbreaking AI model capable of generating high-definition video clips from textual descriptions, akin to the capabilities of its image-generation tool, DALL-E. As the AI landscape expands into video, Sora presents both vast creative potential and challenges in misinformation, amidst a surge in AI-generated deepfakes.(blog)

+ Shake Shack saw its stock leap by 26% following impressive fourth-quarter earnings, with shares hitting a 52-week high of $98.90. The company outperformed expectations with a net income shift from a loss to $6.8 million and projects strong growth and significant expansion in 2024. (blog)

- Yeti ($YETI) ended down nearly 13% after reporting earnings which missed their initial guidance. Of note, the CEO attributed it to “a more cautious and inconsistent spending on high-priced ticket items in our Coolers & Equipment category."

- Millennial’s efforts to bring back the once shunned Abercrombie ($ANF) has largely paid off, but cracks in consumer spending hint the massive run up in stock price (+103% since the October lows) is overdone. It is currently outperforming AI mania and Mag7 darling stock, NVDIA.