The cut that never came
The S&P 500 made new highs this week despite the Fed pushing back rate cuts until May at the earliest
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1. The cut that never came
“Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that (cut rates). But that’s to be seen”
Jerome Powell, Chairman, Federal Reserve.
The fed funds futures market had been pricing in a March rate cut by a probability of 58% before the FOMC announcement, and by 36% afterward.
The unanimous decision by the committee, the fourth consecutive such meeting, voted to keep rates unchanged this Wednesday.
That didn’t stop the S&P 500 from reaching a new all-time high this week closing at 4948.
2. Everyone has a job
Non-farm payrolls for January 2024 came in at 353,000 v expectations of 185,000.
It is a MASSIVE difference and I’m not sure whether that is because the US economy is doing well or that forecasters are having an off day.
The unemployment held at 3.7%, v the estimate for 3.8%.
The December jobs report showed 216,000 jobs were created, v 170,000 were expected.
“Make no mistake, this was a blowout jobs report and will vindicate the recent posturing by the Fed which effectively ruled out an interest rate cut in March.”
George Mateyo, chief investment officer at Key Private Bank.
As per Bloomberg: if you talk to American workers today, they’ll probably tell you they’re happy to be employed — but not about much else.
3. Zuckerberg wants to give you cash
Mark Zuckerberg has a net worth of $165 billion.
He is wealthier than Microsoft co-founder Bill Gates.
And in the spirit of generosity, Meta, the company he founded will pay its first-ever dividend on 26th March.
Zucks will receive roughly $174 million in cash and an annual dividend of circa $690 million.
The results for the fourth quarter:
EPS: $5.33 v $4.96 per share expected.
Revenue: $40.1 billion v $39.18 billion.
A $50 billion share buyback program.
“We had a good quarter as our community and business continue to grow… We’ve made a lot of progress on our vision for advancing AI and the metaverse.”
Mark Zuckerberg, CEO, Meta
Buy why pay a dividend now?
Has Meta reached maturity? Is Zucks trying to woo investors away from other tech names that do not pay a dividend?
In all honesty, he has done the right thing for shareholders since the debacles of 2022 when the stock traded at $90 a share.
At Friday’s close, it was $474 a share.
Don’t get too excited about the dividend though, it equates to about a 0.4% yield.
4. Norway’s tech trade
Norway’s sovereign wealth fund, the world’s largest, made a record $213 billion profit in 2023.
“Despite high inflation and geopolitical turmoil, the equity market in 2023 was very strong, compared to a weak year in 2022. Technology stocks in particular performed very well”
Nicolai Tangen, CEO, Norges Bank Investment Management.
5. Tech fourth quarter results
A snapshot of tech earnings from this week:
APPLE:
- EPS: $2.18 vs. $2.10 estimated.
- Revenue: $119.58 billion vs. $117.91 billion estimated.
- 2% sales growth in the fourth quarter.
- Gross margin rose to nearly 46% and showed sales growth in all regions except for Greater China, which fell nearly 13%.
AMAZON:
- EPS: $1.00 v 80 cents per share expected.
- Revenue: $170.0 billion v $166.2 billion expected.
META:
- EPS: $5.33 v $4.96 per share expected.
- Revenue: $40.1 billion v $39.18 billion.
- First-ever dividend and a $50 billion share buyback program.
- Operating margin more than doubled from a year earlier to 41%, due to Zuckerberg’s ‘year of efficiency’.
- Net income more than tripled to $14 billion, from $4.65 billion a year earlier.