This week ahead || Mar 4th - Mar 8th 2024
Here's your news for the week ahead.
Fed’s Powell to double down on ‘no rush to cut’ message
Federal Reserve Chair Jerome Powell is anticipated to reiterate his stance on not rushing to cut interest rates, particularly following recent inflation data indicating persistent price pressures. Powell will deliver his semiannual monetary policy testimony to Congress this week, emphasizing patience in deciding rate adjustments given the underlying strength of the US economy. Democrats may press him on the rationale behind keeping borrowing costs high, concerned about the impact on the economy and upcoming elections. The focus will also be on the monthly jobs report, expected to show moderated payroll growth in February. Additionally, the Fed will issue its Beige Book survey, and other data include surveys of purchasing managers, January trade balance, and job openings. In Asia, attention will be on China's National People's Congress, offering insight into potential stimulus measures. Japan's inflation figures and Australia's GDP data will be closely watched. In Europe, the UK budget announcement and the European Central Bank decision will be key events. Data releases include manufacturing numbers from Germany, France, and Spain, as well as inflation figures from Switzerland, Poland, and Serbia. In Latin America, Brazil's industrial production data and Peru's interest rate decision will be notable, along with inflation readings from Colombia, Mexico, and Chile.
Lawyers who voided Elon Musk's pay as excessive want $6 billion fee
Lawyers involved in voiding Elon Musk's $56 billion compensation sought a record $6 billion legal fee, payable in Tesla's stock, after a Delaware judge nixed the pay package. The fee request, described as unprecedented in size, translates to an hourly rate of $288,888. Musk criticized the request as "criminal," while Tesla and Musk's attorney did not immediately respond. The fee would be paid by Tesla, benefiting from the return of Musk's pay package, which included 266 million shares. The lawyers justified the fee structure as directly linked to the benefit created for the company and suggested it would be tax-deductible. Judge Kathaleen McCormick labeled Musk's pay "unfathomable." While Tesla may object to the fee, the legal team argued that their effort, including a one-week trial, warranted the requested compensation, representing about 11% of the judgment.
Top 5 things to watch in markets in the week ahead
- Nonfarm Payrolls: Investors await Friday's jobs report to gauge the timing of the first Fed rate cut amid concerns about inflation if the economy remains strong. Economists anticipate 190,000 new jobs, with the unemployment rate steady at 3.7% and moderated wage growth after January's robust gain.
- Powell Testimony: Fed Chair Jerome Powell's semiannual testimony on monetary policy is scheduled for Wednesday and Thursday, likely reiterating a cautious approach to rate cuts given recent economic strength and inflation pressures.
- Stock Market Rally: The Dow, S&P 500, and Nasdaq closed February with gains, largely fueled by AI-related growth prospects, particularly in semiconductor stocks. Markets remain resilient despite elevated interest rates, suggesting a gradual shift away from a high-interest-rate cycle.
- ECB Decision: The ECB meets Thursday with no policy changes expected, though investors await indications on rate cut discussions. Eurozone inflation data supports a cautious stance, with concerns over persistent wage inflation complicating the ECB's policy decisions.
- Oil Prices: Oil prices rose as traders await OPEC+ decisions on supply agreements for the second quarter. Expectations for continued production cuts and geopolitical tensions in the Red Sea are key factors influencing prices.
5 big analyst AI moves: Morgan Stanley commends Apple’s shift from EVs to GenAI
- Apple's Strategic Shift: Apple's reported halt on its electric vehicle project and redirection of resources towards artificial intelligence, specifically generative AI solutions, has been deemed a positive move by Morgan Stanley analysts. This shift is seen as a strategic reallocation of assets towards more promising ventures like Gen AI, reflecting relative cost discipline.
- Dell's AI Leadership: Dell Technologies' strong performance in the AI server market, as evidenced by impressive backlog and order growth, has led Morgan Stanley to reinstate it as a Top Pick with a raised price target of $128, citing bullish supply chain checks and leadership in the AI hardware and services sector.
- Broadcom's Outlook: Ahead of Broadcom's fiscal Q1 2024 earnings release, Bank of America raised its price target on the stock to $1500, anticipating continued momentum driven by AI market trends. Despite potential volatility, BofA expects any pullback to be short-lived, given investors' anticipation of Broadcom's AI Investor Day and its unique position as a low-beta AI beneficiary.
- HPE Downgrade: Hewlett Packard Enterprise received a downgrade from Wells Fargo, citing concerns about the pace of revenue conversion and underlying profitability despite positive strategic positioning in areas like HPC and AI. The delay in growth normalization due to customer inventory adjustments led to the downgrade.
- AI Failures Predicted: Macquarie analysts foresee potential high-profile failures in generative AI technologies in 2024, citing recent incidents such as ChatGPT's malfunction and criticism of Google's Gemini project for producing historically inaccurate images. Regulatory and alignment efforts aim to address emerging issues, but incidents like these underscore the challenges in ensuring AI accuracy and reliability, particularly in high-stakes contexts like elections.
