A Soft Landing in Sight, the Magnificent Seven, and Boeing Turbulence
Editor’s Note: Can we have a do-over on the New Year?
I mean, we’re just 10 days into it and nobody seems particularly satisfied.
Most of my friends — and myself, if I’m being honest — have already scuttled their resolutions. Bad weather and a nasty flu will ruin your plans to eat more healthily every time, right?
In addition, the stock market has been… depressing.
I’m with David Lynch on this one:
Brace Yourself… for a Soft Landing
Last Friday, the Bureau of Labor Statistics shocked practically everyone by announcing that the economy added 216,000 jobs in December.
That’s far more than the 175,000 jobs economists had been expecting, according to Bloomberg.
It’s also a big increase from the 173,000 jobs added in November.
Not only that, but unemployment didn’t tick higher to that 3.8% rate economists had been expecting. It stayed flat at 3.7%.
In addition, wages rose 0.4% over the previous month and 4.1% on a year-over-year basis. Again, that was higher than what economists had been expecting.
These hotter-than-expected numbers led U.S. Treasury Secretary Janet Yellen to pronounce: “What we are seeing now I think we can describe as a soft landing.”
The Federal Reserve has been hoping for a soft landing — that is, a correction of rampant inflation growth without plunging the U.S. into a recession — ever since it started hiking rates back in 2022.
However, because the labor market is still apparently red-hot, it’s looking less likely that the Fed will kick off an aggressive rate-slashing campaign in 2024.
According to the CME Group’s FedWatch Tool, the Fed Funds futures market is now pricing in only a 60.9% chance that the Fed will cut rates by 25 basis points at its March meeting. Last week, that percentage had been 73.4%.
Instead, it looks like a growing number of analysts are now expecting the Fed to keep hitting the “Pause” button well into 2024.
A Food Fight in France
Last week, one of the world’s largest grocery retailers said “Non!” to PepsiCo’s (NSDQ: PEP) price hikes.
France-based Carrefour operates more than 14,000 stores around the globe. And according to a company statement, it will no longer restock products made by the soft-drink and junk-food behemoth, including the Pepsi, Lipton, Lay’s, and Doritos brands.
(Why would you want to when you have amazing wine and pastries?)
Anyway, Carrefour will not replace PepsiCo products once they’ve sold out. Its stores in France will also display a sign that says: “We are no longer selling this brand due to unacceptable price increases. We apologize for any inconvenience caused.”
Carrefour has been waging war against “shrinkflation” — the phenomenon in which companies reduce the amount of product in a packaged good sold for the same price — for nearly a year now. Shrinkflation is why bags of Doritos keep getting smaller and smaller.
Now, PepsiCo has been hiking prices despite the fact that the costs of most of its raw materials have been falling. According to the U.N.’s Food and Agriculture Organization (FAO) Food Price Index, food commodity prices have fallen by nearly 14% year over year — the biggest annual drop since 2015.
Still, PepsiCo’s CEO, Ramon L. Laguarta, recently announced that due to expectations of “higher inflation,” the company will continue to raise prices into 2024.
PepsiCo was one of the biggest laggards on the S&P 500 last year. And so far into 2024, its stock isn’t doing so great, either.
Meet the Magnificent Seven
We can finally say goodbye to annoying acronyms like FAANG and GAFAM.
Instead, analysts are now labeling the best-performing Big Tech stocks as the “Magnificent Seven.”
These stocks are Nvidia (NSDQ: NVDA), Meta Platforms (NSDQ: META), Tesla (NSDQ: TSLA), Amazon (NSDQ: AMZN), Alphabet (NSDQ: GOOGL), Microsoft (NSDQ: MSFT), and Apple (NSDQ: AAPL) — all of which trounced the S&P 500 in 2023.
Take a look:
You will find more infographics at Statista
There may still be plenty of juice left in these stocks, too — especially when you consider that some of them (such as Tesla, Amazon, and Google parent Alphabet) still have not reclaimed their 2021 year-end highs.
Moderna’s Revenue Drop Was in Line With Expectations
On Monday, mRNA vaccine maker Moderna (NSDQ: MNRA) announced that revenue from its COVID-19 vaccine plunged by roughly two-thirds in 2023.
Apparently, revenue from the vaccine last year totaled only $6.7 billion. That’s quite a difference from the more than $18 billion in revenue Moderna booked in 2022.
However, the revenue plunge was in line with the company’s own forecast for the year. Back in November, Moderna had estimated that its full-year sales from the COVID vaccine should hit $6 billion.
It just goes to demonstrate the danger of being a one-trick pony.
Unlike rival Pfizer (NYSE: PFE), which has a healthy catalog of products, the COVID jab is currently Moderna’s only commercially available vaccine.
The company is hoping that its RSV (respiratory syncytial virus) vaccine will be approved by the U.S. Food and Drug Administration (FDA) this spring. Moderna expects that combined, its RSV and COVID vaccine revenue will total just $4 billion in 2024.
And thanks to some new treatments in the pipeline — including nine products currently in late-stage FDA trials — Moderna expects a return to growth in 2025, although it won’t reach break-even until 2026, if all goes well.
Boeing Takes a Nosedive
Boeing’s (NYSE: BA) turbulence has made more than a few people queasy so far this year.
Shares of the aerospace giant have been plummeting after the Federal Aviation Administration (FAA) temporarily grounded the company’s 737 Max 9 fleet.
It’s all so that something little like… you know… a portion of the plane doesn’t pop off in mid-flight again, as what happened on an Alaska Air (NYSE: ALK) flight last Friday.
The FAA is now requiring inspections of 171 Boeing 737 Max 9 jets.
It’s likely that Boeing will be required to compensate its customers — airline carriers — for lost revenue related to the FAA’s order, on top of the costs to fix the planes.
And apparently, United Airlines (NSDQ: UAL) has already discovered problems with the planes while preparing for the inspections.
“Since we began preliminary inspections on Saturday, we have found instances that appear to relate to installation issues in the door plug — for example, bolts that needed additional tightening,” a statement from United Airlines said on Monday.
Boeing has come under scrutiny for quality control issues in recent years — especially involving its 737 Max jets after two deadly crashes in 2018 and 2019.
Problems with the planes led the Seattle-based company to report four years’ worth of consecutive annual losses from 2019 through 2022. And it’s more than likely we’ll see a continuation of this trend when the company reports its 2023 results.
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