How long will the tightening cycle continue?

How long will the tightening cycle continue?

Corporate Earnings News

Will optimism reign? According to Refinitiv I/B/E/S data, more than half of all S&P 500 companies have reported quarterly earnings with nearly 70% of those beating profit expectations. This compares to a long-term average of 66%. However, corporate profits remain vulnerable. The consensus estimate (for an example of the breakdown estimates see Yardeni Research) for S&P 500 company earnings this year is $224 per share. As noted by Morgan Stanley, this forecast is based on 2020-2022 trends which are distorted due to the pandemic and its after effects. For the past 10 quarters, US nominal GDP has run between 9% and 14%, versus the long-run trend of 4-5%, and S&P 500 operating margins have averaged 14.5-16.5%, versus the 25-year average of 12.5%. Therefore the tendency for performance to revert to a long-term average could bring about a negative year-over-year change in earnings growth, known as a “profits recession.”

Is all that glitters gold? According to Refinitiv, Barrick Gold Corp would be open to taking over the Newmont Corporation stake in its Nevada Gold Mines joint venture, CEO Mark Bristow said on Wednesday. Barrick beat analysts' estimates for quarterly profit and announced a share buyback of up to $1 billion. It paid a record $1.6 billion to shareholders in 2022 through dividends and buybacks.

How to grow your network. Network and cloud system provider Cisco Systems said customers were keeping investments steady in systems related to cloud, artificial intelligence and tools for hybrid work. The easing of supply chain constraints have helped ease backlogs; Cisco said it reduced backlog 6% sequentially. For fiscal 2023, Cisco said it expects revenue growth of 9% to 10.5%, and adjusted per share earnings between $3.73 to $3.78. Its second-quarter adjusted earnings of 88 cents per share and revenue of $13.59 billion were both higher than market estimates. Like many across the tech sector, Cisco has been focusing on cost cutting and had announced a nearly 5% workforce reduction in November.

Corporate earning calendar 16 - 23 February 2023

Thursday: Applied MaterialsNestleAirbusSouthern CompanyDigital Realty TrustCenovus EnergyConsolidated EdisonEpam SystemsWest Pharmaceutical ServicesHubSpot
Friday: Deere & Co.AutoNationArbor Realty TrustAmerican Axle & Manufacturing HoldingsHermes InternationalConstellation EnergyDaimlerPPL Corp.Centerpoint EnergyBarnes GroupMarcus & MillichapSikaKingspan Group
Monday: Anglo American PlatinumBHP BillitonWilliams CompaniesCopartNordson Corp. 
Tuesday: WalmartMedtronicHome DepotCoinbase GlobalPalo Alto NetworksPublic StorageRealty Income Corp.HSBC HoldingsKeysight TechnologiesCoStar GroupDiamondback EnergyPublic Service Enterprise GroupAvangridWestlake ChemicalSmith & NephewEXACT Sciences Corporation
Wednesday: NvidiaFiverr InternationalEtsyLucid GroupTeladoc HealthUnity SoftwareVirgin GalacticPioneer Natural ResourceseBayRio Tinto
Thursday: Alibaba GroupKeurig Dr PepperModernaNewmont Mining CompanyBlockIntuitLemonadeLiberty GlobalAmerican Tower Corporation

Global Market Indices 

US Stock Indices
Nasdaq 100   4.85% MTD and  15.98% QTD 
Dow Jones Industrial Average   0.01% MTD and  2.84% QTD 
NYSE  0.13% MTD and  5.48% QTD 
S&P 500   1.49% MTD and  7.76% QTD 

Mega caps had a relatively good week with AlphabetAmazonAppleMicrosoftNvidia, and Tesla all  with Meta Platforms   .

Information Technology stocks such as Intel CorporationQualcommAutodeskAnalog DevicesAccenture Plc.Advanced Micro DevicesON Semiconductor and Oracle were all  this week while PayPal Holdings and Fidelity National Information Services  .

Energy stocks were very mixed this week with ShellEnergy Fuels, and Marathon Petroleum all  over the week and other stocks such as Devon EnergyDiamondback Energy and Apa Corp (US) all .

Materials and Mining stocks were also mixed this week with Cameco CorporationPPG IndustriesVulcan Materials Company and Ecolab Inc. all  while Lundin MiningMosaic, and Sibanye Stillwater were all .

European Stock Indices

Stoxx 600  2.46% MTD and  9.29% QTD 
DAX   2.50% MTD and  11.27% QTD 
CAC 40   3.08% MTD and  12.78% QTD 
IBEX 35  2.89% MTD and  12.95% QTD 
FTSE MIB  3.51% MTD and  16.14% QTD
FTSE 100   2.91% MTD and  7.33% QTD

Other Global Stock Indices 
MSCI World Index  0.68% MTD and  7.83% QTD 
Hang Seng  4.72% MTD and  5.71% QTD

Fixed Income

US 10-year Treasuries at 3.80%.
German 10-year bunds at 2.47%.
UK 10-year gilts at 3.48%.

US yields continue to climb this week after CPI was up 6.4% from a year earlier in January. Although annual CPI continues to decelerate, CPI rose 0.5% last month after gaining 0.1% in December, the most in three months, driven by energy and shelter costs. Core CPI rose 0.4% in January and was up 5.6% from a year earlier. With a labour market that shows few signs of slowing with 517,000 jobs added in January, unemployment at 3.4% and retail sales up 3% in January, it is becoming clearer to traders that the Fed will very likely continue to raise rates in March and May, with the probability of a June hike also increasing. 


Gold to $1,836.22 per ounce.
Silver to $21.62 per ounce.
West Texas Intermediate crude to $78.59 a barrel.
Brent crude to $85.38 a barrel.

Oil was up slightly this week as the International Energy Agency on Wednesday and OPEC on Tuesday raised their forecasts for global oil demand this year as China reopens its economy. Meanwhile, a robust dollar was pushing almost all commodities lower.


The USD was at near six-week highs this week due to strong employment data and retail sales in January along with still higher than expected core inflation data, suggesting the Fed will keep monetary policy tighter for longer. The GBP is  0.51% YTD against the USD and the EUR   0.15% YTD.

Bitcoin   5.54% MTD and  46.13% YTD.
Ethereum   5.59% MTD and  39.03% YTD.

Note:  As of 5 pm EST 15 February 2023

Key data to move markets this week

Friday: German Producer Prices.
Monday: Eurozone Consumer Confidence. 
Tuesday: German S&P Global/BME Composite, Manufacturing, and Service PMIs, Eurozone S&P Global Composite, Manufacturing and Services PMIs, Eurozone ZEW Economic Sentiment survey, German ZEW Economic Sentiment and Current Situation surveys. 
Wednesday: German Harmonised Index of Consumer Prices data, and German IFO Business Climate, Current Assessment and Expectations surveys.
Thursday: Eurozone Core Harmonised Index of Consumer Prices and Eurozone Harmonised Index of Consumer Prices.

Friday: Retail sales.
Tuesday: S&P Global/CIPS Composite, Services and Manufacturing PMIs.
Thursday: A speech by BoE MPC member Catherine Mann. 

Friday: Michigan Consumer Sentiment Index.
Tuesday: S&P Global Composite, Services and Manufacturing PMIs. 
Wednesday: FOMC minutes.
Thursday: Chicago Fed National Activity Index, GDP, Core Personal Consumption Expenditures, Initial jobless claims, Continuing jobless claims, and Personal Consumption Expenditures Prices.

Global Macro Updates

US debt ceiling worries are starting to appear. On Wednesday the nonpartisan Congressional Budget Office (CBO) said the US Treasury Department will stop being able to pay all its bills sometime between July and September and could default on its debt, delay certain payments, or both unless the current $31.4 trillion cap on borrowing is raised or suspended. It warned that a federal debt default could occur before July if not enough revenue flows into the Treasury in April when most Americans submit their annual income tax. The CBO also revised its projection for the size of the annual federal budget deficit; it now believes the deficit will total $18.8 trillion over the next 10 years. This is 20% higher than its May 2022 estimate of $15.7 trillion. As noted by CNBC, the CBO attributed the jump in the federal deficit to several factors including the cost of legislation passed by Congress last year, rising costs of Medicare, Social Security, veteran benefits and future interest payments on a higher national debt. Republicans are still insisting that President Biden has to agree to undefined spending cuts if the cap is to be raised. President Biden says he will not negotiate spending cuts as part of any debt limit legislation.

Will the UK’s disinflation path be different? Inflation in the UK fell to 10.1% in January, a five-month low. The drop is growing evidence that price pressures may have peaked. Core inflation, which strips out volatile food, energy, alcohol and tobacco prices, fell to 5.8% in January from 6.3% in December. Despite the fall, inflation is likely to stay higher for longer in the UK than in the Eurozone or US given the UK’s unique set of circumstances: the continuing aftermath of Brexit and Covid that resulted in acute labour shortages, trade frictions, higher natural gas prices and goods bottlenecks. Earlier this month BoE Chief economist Huw Pill warned of raising rates too high due to the lags in the transmission of monetary policy. “...there's quite a lot of the effects of those raises in interest rates still to come through," Pill said. UK GDP showed zero growth in Q4 2022 after a 0.2% fall in Q3. Output fell 0.5% in December, partly due to strikes and in the fourth quarter was still 0.8% below its pre-pandemic level. The BoE has forecast that Britain would enter a shallow recession starting in the first quarter of this year and lasting five quarters.

US regulators' crypto crackdown continues. The New York department of Financial Services has shut down further issuance of BUSD from 21 February, the Binance-branded stablecoin. According to the Financial Times, Paxos, the stablecoin company behind issuance of the token, said on Monday it would end its relationship with the Binance exchange over BUSD, which is used to help traders move more quickly in and out of the crypto market. The SEC is also tightening its grip on financial firms operating in the crypto space by proposing a rule that would effectively require registered investment advisors (RIA) to go outside the crypto industry for storing digital assets. According to Coindesk, the rule, approved in a 4-1 vote by the SEC on Wednesday, would expand the agency’s existing regulations that say an investment adviser needs to keep customers’ money and securities with a “qualified custodian.” The new version, if approved, would mandate custodians, including crypto exchanges, secure or maintain certain federal or state registrations. An appropriate custodian under SEC’s regulations would generally be considered to be a chartered organisation such as a bank or trust company, a broker-dealer registered with the SEC or a futures commission merchant registered with the Commodity Futures Trading Commission (CFTC). The purpose of such a ruling would be to safeguard customer assets should the advisor or custodian go bankrupt, by ensuring they are properly segregated. "Make no mistake: Today's rule covers a significant amount of crypto assets," SEC Chair Gensler said in a statement. "Based upon how crypto platforms generally operate, investment advisers cannot rely on them as qualified custodians… Through our proposed rule, investors would get the time-tested protections and, yes, qualified custodians they deserve." This ruling follows the deal made last week with crypto exchange Kraken to discontinue its crypto staking programme in the US and pay $30mn in a settlement with the SEC.

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