Listen below or on the go on Apple Podcasts and Spotify
As the ICR retail conference starts, most big names are seeing selling. (0:15) Oil keeps climbing on sanctions on Russia. (1:59) Nvidia hits out at new AI Diffusion rule. (4:51)
This is an abridged transcript of the podcast.
Our top story so far. The ICR Conference from January starting today has already led to a flood of holiday sales and guidance updates. One of the highest-profile retail conferences of the year, ICR will include participation from management teams from more than 250 premier public and private growth companies.
Here’s a sample (sale) of what’s hit the wires so far:
Macy’s (NYSE:M) says net sales are anticipated to be at, to slightly below, the low end of the previously issued range of $7.8 billion to $8 billion vs. $7.83 billion consensus.
Shake Shack (SHAK) is under pressure despite saying preliminary unaudited results indicated that same-Shack sales rose by 4.3% in Q4 and total revenue by 14.8% to top consensus expectations.
Abercrombie & Fitch (ANF) is plunging, boosting its guidance for the holiday quarter and full year. Traders appear to be punishing A&F for only matching consensus expectations.
But Jefferies analyst Corey Tarlowe sees the sell-off as an opportunity for investors, saying, “With strong Holiday period sales and updated expectations to significantly outpace long-term guidance, we see ANF as one of our top picks in 2025.”
Shares of iRobot (IRBT) are also tumbling after it said it now expects sales of $171 million versus the initial outlook of $175 million to $200 million, and a loss of $47 million in operating income, exceeding its prior forecast for a loss between $22 million and $31 million.
And Lululemon (LULU) now expects Q4 revenue will be in the range of $3.56 billion to $3.58 billion, which was above its prior range of $3.475 billion to $3.51 billion and the consensus estimate of $3.47 billion. The expected range represents growth of 11% to 12% for the crucial holiday quarter.
In today’s trading, crude oil prices are at their highest levels in nearly five months, driven by wider U.S. sanctions on Russian oil that threaten to disrupt global supplies.
WTI crude (CL1:COM) is up nearly 3%, and Brent (CO1:COM) is up nearly 2% and above $81/barrel.
On Friday, the Biden administration unveiled much-anticipated curbs on Russia’s energy industry, targeting two major producers and vessels shipping Russian oil. The measures are expected to disrupt oil trade with China and India, potentially forcing the top buyers of Russian crude to seek alternative supplies.
ING’s head of commodities strategy, Warren Patterson, says: “These latest sanctions have the potential to erase the surplus we expect for the oil market this year. The Middle East physical market has been stronger as buyers look for alternative grades.”
In equities, stocks are lower, with growth seeing the most selling and the Nasdaq (COMP.IND) the weakest among the major averages. Longer rates are moving slightly higher, with the 10-year Treasury yield (US10Y) facing some resistance at 4.8% following the post-jobs jump on Friday.
Torsten Slok, chief economist at Apollo Group, says recent jobs, same-store sales, and prices paid numbers indicate a solidly expanding U.S. economy. And he pointed out that restaurant reservations have been rising heading into this year, according to daily data from OpenTable.
“The bottom line is that momentum in the economy is strong, and the narrative that monetary policy is restrictive is wrong,” Slok said. “Combined with higher animal spirits and the latest Atlanta Fed GDP estimate at 2.7%, we see a 40% probability that the Fed will hike rates in 2025.”
Fed funds futures aren’t pricing in any chance of a 2025 hike yet, but have priced in a one-in-three chance the Fed does – in the words of Ned Flanders – nothin’ at all.
Among active stocks, Goldman Sachs (GS) plans to merge three businesses in its global banking and markets division to bolster its share in providing financing to the world.
The combined businesses will be called the Capital Solutions Group. It will include the financial sponsors team, the global financing group, and a big part of its fixed income commodities and currency (FICC) financing team that makes loans tied to collateral to other lenders.
Evercore boosted Caterpillar (CAT) to In Line from Underperform after surveying dealers of construction equipment and heavy machinery.
Analyst David Raso said, “Caterpillar is leaning somewhat on price to move equipment, but it’s generally working. Caterpillar dealers’ six-month sales and purchasing outlooks are above survey industry average.”
And Moderna (MRNA) is slumping after the biotech firm cut its revenue guidance for 2025 on slow demand for its Covid and RSV vaccines.
The company projects revenue in the range of $1.5 billion to $2.5 billion for this year, compared to the previous estimate of $2.5 billion to $3.5 billion. It expects to end 2025 with cash and investments of approximately $6B.
In other news of note, the White House released an interim final rule on ‘Artificial Intelligence Diffusion,’ which is already seeing a pushback from Nvidia (NVDA).
The rule is designed to “enhance U.S. national security and economic strength, it is essential that we do not offshore this critical technology and that the world’s AI runs on American rails.”
The new rule streamlines licensing hurdles for both large and small chip orders, bolsters U.S. AI leadership, and provides clarity to allied and partner nations about how they can benefit from AI, according to the government.
Nvidia criticized the new effort, saying, “By restricting access to mainstream computing applications around the world, the new “AI Diffusion” rule will derail AI progress for industries at home and abroad. It will stifle innovation and undermine America’s global technology leadership.”
And in the Wall Street Research Corner, as earnings season kicks off, Goldman Sachs says breadth of profit growth will be a key sign of market health.
Strategist Davis Kostin says: “The continued dominance of the Magnificent 7 will depend on the evolution of the expected earnings growth differential relative to the rest of the market.” David Kostin, strategist at Goldman Sachs, said in a January 10 report.
The Magnificent 7 are Apple (AAPL), Amazon (AMZN), Alphabet (GOOG) (GOOGL), Meta (META), Microsoft (MSFT), and Tesla (TSLA).
Kostin added, “We expect the relative performance of the Magnificent 7 versus the S&P 493 will narrow in 2025. However, the bar for the Magnificent 7 posed by consensus estimates is much lower in 2025 relative to the last few years.”
