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- 👉 The Investing Week Ahead: 9/25/23
👉 The Investing Week Ahead: 9/25/23
Amazon drops $4 billion more in the AI bucket, Nike investors worry about China...
Welcome to your new week.
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Key Earnings Announcements:
A couple of retail giants are in focus — Costco and Nike.
Monday (9/25): Thor Industries
Tuesday (9/26): AAR, Cintas, Costco Wholesale, Ferguson, MillerKnoll, Progress Software Corp., TD Synnex, United Natural Foods
Wednesday (9/27): Concentrix, Duckhorn Portfolio, HB Fuller, Jefferies, Micron, Paychex, Worthington Industries
Thursday (9/28): Accenture, BlackBerry, CarMax, Jabil Inc., Nike, Vail Resorts
Friday (9/29): Carnival Corp.
What We’re Watching:
Costco’s earnings presentations are always some of the best in the game. They’re incredibly simple, and want any ‘Average Joe’ to feel that they can understand Costco’s approach to being the 3rd largest retailer around the globe. Their last presentation emphasized worldwide expansion and net income improvement.
Nike’s last earnings call was the definition of being a mixed bag. While revenue increased decently (+5%) and global expansion persisted close to expectations (as high as +16% in China) — margin pressure is clearly in the minds of Nike execs. We find the importance of the China growth also a bit troubling, with deglobalization on the back burner of everyone’s minds.
Jefferies even just downgraded Nike this morning due to concerns over consumer slowdown and its Chinese pressures.
Nike is one of those stocks that many don’t realize has underperformed quite significantly over the last five years. With the holidays around the quarter, investors will be looking for strong guidance to close out the calendar year.
Investor Events / Global Affairs:
Giving a hard look at Employment should be a priority for all investors, Amazon continues the AI craze, and the Hollywood strike comes to a halt — at least temporarily.
Employment Remains in Spotlight
You may remember the ‘HOPE’ train of thought that we’ve mentioned before — Housing, Orders, Profitability, and Employment. These are the four dominoes that are impacted during a rate-rising cycle — in that order.
We’ve seen housing activity come to a major slowdown, manufacturing data look bleak for months, and company profits (not revenue) begin to be reeled back over the last 6-12 months. While we are still likely in the ‘P’ section of the equation — it sure feels like unemployment increases have been creeping up on us.
Not to mention — check out this chart from the beginning of the summer. We’re not statisticians — but shouldn’t projections for financial data come within a pretty consistent balance of underperformance / outperformance?
The labor situation is worse than it appears, and we believe that the truth of that will come out in the coming months.
Amazon to Invest $4B in AI Startup Anthropic
Amazon is set to invest up to $4 billion in the San Francisco-based AI startup Anthropic, taking a minority stake in the company. The collaboration aims to advance generative AI technology — with a focus on safer AI models.
"Customers are quite excited about Amazon Bedrock, AWS’s new managed service that enables companies to use various foundation models to build generative AI applications on top of, as well as AWS Trainium, AWS’s AI training chip, and our collaboration with Anthropic should help customers get even more value from these two capabilities.”
— Amazon CEO Andy Jassy
Anthropic will primarily use Amazon Web Services (AWS) for mission-critical workloads, including safety research and model development. AWS will provide infrastructure support, including Trainium and Inferentia chips, and access to Anthropic's foundation models through Amazon Bedrock. This strategic partnership enhances Amazon's position in the competitive AI landscape, with a particular focus on generative AI applications.
The AI craze continues — which has been keeping “The Magnificent Seven” stocks outperforming and the rest of the S&P 500 very much in a state of “meh” performance.
Hollywood Strike Comes to an End (Tentatively)
Hollywood writers and studios have reached a preliminary labor agreement, potentially ending the nearly 150-day-long writers strike. Talks between the Writers Guild of America (WGA) and the Alliance of Motion Picture and Television Producers (AMPTP) resumed last week, leading to a tentative deal.
The details of the contract are still being drafted. The strike, initiated in May, sought protections against the use of artificial intelligence and increased compensation for streamed content.
The WGA has not disclosed specific provisions but called the deal exceptional with meaningful gains for writers in all sectors.
The strike is not officially over until the agreement is ratified.
Major Economic Events:
The Home Price Index and Core PCE are in focus.
Monday (9/25): N/A
Tuesday (9/26): Consumer Confidence, New Home Sales, S&P Case-Shiller Home Price Index (20 Cities), Speech by Fed Governor Bowman
Wednesday (9/27): Durable Goods
Thursday (9/28): GDP (Revision), Speeches by Fed Chair Powell & Fed Governor Cook
Friday (9/29): Chicago Business Barometer, Consumer Sentiment (Final), PCE Index, Personal Income, Personal Spending, Retail Inventories (Advanced), Trade Balance in Goods (Advanced), Wholesale Inventories (Advanced)
What We’re Watching:
The Home Price Index seeks to measures the value of residential real estate in 20 major U.S. metro areas — Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington, D.C.
Here’s a great resource of interactive charts / graphs where you can see how your neck of the woods has seen real estate changes.
You’ve heard this one before… the Fed cares about Core PCE prices in a big way. Powell made it very clear that inflation is not where it needs to be. Let’s see where this week’s results come in.
“Inflation remains well above our longer-run goal of 2 percent. Based on the Consumer Price Index, or CPI, and other data, we estimate that total PCE prices rose 3.4 percent over the 12 months ending in August; and that, excluding the volatile food and energy categories, core PCE prices rose 3.9 percent. Inflation has moderated somewhat since the middle of last year, and longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. Nevertheless, the process of getting inflation sustainably down to 2 percent has a long way to go”
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Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
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