Here are five things you need to know this morning:
March madness: Is the U.S. Federal Reserve going to cut rates starting in March? Yesterday, the odds moved higher because of weakness in the regional bank sector. This morning, however, those odds were being slashed as the U.S. economy added nearly double the jobs it expected. The U.S. added 353,000 jobs in January, the most in a year, while the unemployment rate remained at 3.7 per cent. Futures pared back their tech-induced gains (more on that below) even as Jerome Powell said on Wednesday we don’t need slower growth to get inflation down to target. Speaking of Powell, he will be on 60 Minutes this weekend, which should be interesting. Donald Trump said in an interview on Fox that he would replace Powell as head of the Fed if he was elected president.
Earning their keep: Shares of Amazon and Meta are surging after earnings, while Apple is under pressure. Amazon is rocketing higher after putting in its best holiday quarter since the beginning of the pandemic. More importantly, the cloud business, which is the profit engine, grew a little more than it has the last two quarters. Meta, meanwhile, is poised to open at an all-time high after sales jumped 25 per cent and profits tripled. Perhaps the most exciting part was that it issued its first-ever dividend and announced a US$50 billion buyback. One of my favourite newsletter writers Sam Ro had the best response to this: “Want to feel old? Facebook now pays a quarterly dividend.” We’ve all watched Mark Zuckerberg grow up in front of our eyes. Which brings me to Apple and its lack-of-growth pains. Shares are under pressure even as sales finally increased. It seems that could be a temporary state of affairs as the smartphone maker warned that sales could slump in the current quarter. China has been a real sticking point for the bears and those fears were validated the quarter. Sales in China fell 13 per cent with the CFO lamenting “we are not happy with the decline.” Neither are shareholders, it appears.
Yawn: We got a clunky set of results from the oil majors this morning. Exxon and Chevron both beat profit expectations, but there were lumps. Exxon is taking a charge on “regulatory obstacles.” Still, Exxon’s CFO says the company is ahead of schedule when it comes to their plan to double earnings after their big acquisition of Pioneer Natural Resources. Imperial was also out with results, beating expectations and boosting dividend by 20 per cent. While Chevron beat profit expectations, it was down sharply from last year and revenue missed by a wide margin.
Rise of the Kens: Shares of Mattel are trading higher as it finds itself in the crosshairs of an activist investor. Barington Capital sent a letter to the house of Barbie saying the company needs to ditch its Fischer-Price and American girl brands. Barington also wants to see a US$2-billion buyback. Mattel appears to be playing nice saying: “We welcome this initial outreach,” in a release. Worth mentioning activism in toys isn’t new. Hasbro dealt with activists in 2022 and successfully fended them off.
Page turner: Where to begin with this one? Indigo Books & Music says it received an offer to take the company private from a pair of companies controlled by Onex founder Gerald Schwartz. He also happens to be the husband of Indigo founder and CEO Heather Reisman. The offer represents a 50 per cent premium to where the stock closed yesterday and worth noting Schwartz basically owns about 60.6 per cent of the shares outstanding. Seems pretty open and shut? Cormark (which is the only shop that covers Indigo) blasts the offer as “wholly inadequate” with analyst David McFadgen saying the offer “should be rejected.” The shares are down 85 per cent over the past five years, but McFadgen says Indigo is capable of generating much higher profit and the market is not giving the company any credit for that. His price target of $3.40 per share stands in contrast to the $2.25 per share offer on the table. Indigo says it’s received the offer and established a special committee to review.
