Here are five things you need to know this morning.
Data dump: The U.S. economy expanded more than expected in the fourth quarter even as it cooled from the previous quarter. Still, expansion at 3.3 per cent is pretty gosh-darn good. For the markets, good news is good news. Indeed, these all-time highs in the U.S. have been achieved against the backdrop of the market lowering expectations for a rate cut in March. We also got a read of prices, which didn’t advance as much as expected. A goldilocks situation of resilient economic growth but cooler price growth. The pre-market rally is even more impressive when you consider Dow heavyweights Boeing and UnitedHealth are under pressure right now. Boeing was dealt a blow from regulators who won’t let them increase 737 Max production, while UnitedHealth is being taken down in sympathy with a profit warning from rival Humana. The TSX could catch a decent bid with oil around an eight-week high.
Shifting gears: Shares of Tesla were plunging in the pre-market, poised to open at a two-month low. The EV maker helmed by Elon Musk missed sales and profit expectations in the quarter. But it’s the outlook that is really worrying investors. Tesla warned that its growth rate was going to be notably lower, leaving investors to fill in their own blanks about what exactly that means. Dan Ives at Wedbush didn’t mince words about the vague outlook. “We were dead wrong expecting Musk and team to step up like adults in the room and give a strategic and financial overview of the ongoing price cuts, margin structure, and (fluctuating) demand,” Ives posted on X. “We got a high level view with another train wreck (conference) call for street.”
Big blue: IBM is a real comeback kid this morning. And in fact has been for the last three years. Prior to 2020 the, IT company had consistently melted lower. Since then, however, the stock is up about 90 per cent. IBM is poised to open at a 10-year high this morning after delivering a rosy outlook for 2024. Having toiled away on AI long before it was cool, it is finally gaining traction. The IBM CEO said demand for AI offerings doubled from the third quarter to the fourth quarter. Even with all that hype, the stock trades at a relatively undemanding 17-times forward earnings.
Slip up: I’ll watch shares of Parkland this morning. Already feeling pressure from activist investor Engine Capital, the gas station operator announced it had to shutdown processing operations at its Burnaby refinery for about four weeks. The company says they “encountered an issue” with the unit on Sunday. Raymond James’ Steve Hansen estimates this could be a $60-million hit to the bottom line for the year. However, he is sticking with his buy rating, believing the company will still be able to hit their overall profit target by the end of the year.
Dexit: It’s been a while since we’ve had to worry about the breakup of the European Union and it remains a remote possibility. Nevertheless, just wanted to put this little term on our radar. “Dexit,” or Germany leaving the European Union, is what the far-right leader of Germany’s Alternative for Germany party said she would put to referendum if she were in power. Given that Germany literally carries the union financially, it’s something to worry about. Not today, but perhaps some day.