House Republicans Vote Ilhan Omar to Foreign Affairs Committee Just To Kick Her Off the Next Day

Rep. Ilhan Omar

“They put her on the committee only so they could pass a resolution to vote her off.” Republicans are earning lots of headlines—and goodwill from team red—for voting to kick Minnesota Democratic Rep. Ilhan Omar off of the House Foreign Affairs Committee. And like so much of what happens in Congress, we can file this one under Political Stunt.

It’s real enough that Republicans don’t want Omar on the committee. “We just do not believe when it comes to foreign affairs, especially the responsibility of that position around the world with the comments that you make, she shouldn’t serve there,” House Speaker Kevin McCarthy (R–Calif.) said after yesterday’s vote. McCarthy was likely referring to critical comments Omar has made about Israel.

Omar’s removal may also be retaliation for Democrats removing Republicans from committees last year, though “McCarthy has denied that ousting Ms. Omar or the other Democrats was retaliation for the last Congress,” notes The Wall Street Journal.

But here’s the thing: Republicans actually approved Omar’s inclusion on the Foreign Affairs Committee on Wednesday.

Yes, one day before voting her off the committee, they voted her on to it. House Democrats on Wednesday offered a resolution electing various representatives to various committees, including Omar to be on the Foreign Affairs Committee again. The resolution was agreed to with no objection.

“Congress is just political theater,” commented former Rep. Justin Amash (L–Mich.) on Twitter. “Republicans themselves approved Ilhan Omar’s election to the Foreign Affairs Committee just yesterday in a unanimous consent on the House floor. In other words, they put her on the committee only so they could pass a resolution to vote her off.”

Not all House GOP members were thrilled with the stunt, which has led to allegations of discrimination against Omar because she is a black, Muslim woman.

Rep. Alexandria Ocasio-Cortez (D–N.Y.) called the vote part of “the Republican Party’s…racism and incitement of violence against women of color in this body.”

“Is anyone surprised that I am being targeted?” Omar said during a floor speech yesterday. “Is anyone surprised that I am somehow deemed unworthy to speak about American foreign policy or that they see me as a powerful voice that needs to be silenced?”

“Who gets to be an American? What opinions do you have to have to be counted as American? That is what this debate is about,” Omar said. “There is this idea that you are suspect if you are an immigrant, or if you are from a certain part of the world, of a certain skin tone, or a Muslim.”

After the vote, “House Foreign Affairs member Ken Buck, R-Colo., was overheard in an elevator calling it the ‘stupidest vote in the world,'” reports Roll Call. “Fellow Rep. Mike Simpson, R-Idaho, agreed and added that all it does is make Omar a ‘martyr.'”


Super Bowl censorship struck down. An Arizona judge has ruled against a Phoenix law giving the NFL and the Super Bowl Host Committee permission to veto private yard signs in parts of downtown Phoenix.

“The origin of this dispute began on October 12, 2022, when the Phoenix City Council (the “City”) adopted Resolution 22073,” noted Judge Bradley Astrowsky in his decision, issued yesterday:

The purpose of the resolution was to establish a Special Promotional and Civic Event area in downtown Phoenix to support events and activities related to Super Bowl LVII. This Resolution permitted the use of temporary signs that would ordinarily not be permitted in the downtown area, consistent with Phoenix Zoning Ordinance, Section 705.F.1.b. However, Resolution 22073 added to the ordinary sign approval process the requirement that all temporary signs needed to be authorized by the NFL or the Arizona Super Bowl Host Committee (“Host Committee”).

The owner of two properties in downtown Phoenix sued, with the help of the Goldwater Institute.

“The ordinance effectively gave for-profit companies the unrestricted power to choose what messages they were willing to allow in a large section of one of the nation’s biggest cities,” points out the Goldwater Institute. “That’s unconstitutional for many reasons. For one thing, the government isn’t allowed to give its power away to private parties—something lawyers call ‘delegation.’ Yet Phoenix was giving the Committee and the NFL the power to decide what signs could be posted.…For another thing, laws aren’t allowed to be vague—because otherwise, people wouldn’t be able to tell what they can and can’t do. But the Super Bowl Censorship Ordinance contained no rules explaining what kinds of signs were permitted.”

“Handing over power to an unaccountable third party is totally antithetical to the principles of limited government enshrined in Arizona’s Constitution,” wrote Astrowsky in yesterday’s order, further noting that the law “provides no standards to guide decision-makers’ discretion.”

“There is no legitimate government interest in content-based regulation of signs, let alone regulation of signs based on the content preferences of private businesses that are given special privileges by the government,” the judge said.


Yes, of course stimulus spending drove inflation. Stimulus spending during the COVID-19 pandemic played a “sizable role” in driving inflation to the levels we’re now seeing, per a new report from the St. Louis Federal Reserve. Around the world, “excess inflation is significantly correlated to each country’s own domestic stimulus and to various exposures of foreign stimulus,” the report concluded. Here in the U.S., “fiscal stimulus during the pandemic contributed to an increase in inflation of about 2.6 percentage points.” Reason‘s Eric Boehm has more on the report here.


• Introducing DarkFi, a new plan to shield digital activity from government eyes. “Among the features promised by DarkFi are ones that will allow people to form organizations that collectively raise and distribute money in total secrecy,” reports Politico.

• “An appeals court panel on Thursday struck down a federal law banning people who have domestic violence restraining orders from possessing firearms,” notes The Hill.

• “The Justice Department has reportedly been examining an algorithm used by one Pennsylvania county’s child welfare agency to help determine which allegations of child neglect deserve a formal investigation, following a series of complaints that the algorithm is unfairly targeting parents with disabilities,” reports Reason‘s Emma Camp.

• House lawmakers voted yesterday on a resolution condemning socialism. “A total of 106 Democrats voted for the resolution, while 86 voted against it and another 14 voted ‘present,'” according to Axios.

• Fentanyl and crystal meth were found in pharmaceuticals being sold in Mexican drug stores as the prescription drugs oxycodone and Adderall.

Review: How Sex Changed the Internet and the Internet Changed Sex. 

• A lawsuit against Florida’s Orange County Public Schools district alleges that a mom was barred from volunteering at school after members of the school board discovered that she had an OnlyFans account.

• Kenya is considering banning employers from contacting employees on nights and weekends.

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Don’t Expect Government To Save You From the Terminator

A Terminator is seen in the foreground of the image with the U.S. Capitol building in the background

On Aug. 29, 1997 at 2:14 a.m. Eastern Daylight Time, Skynet—the military computer system developed by Cyberdyne Systems—became self-aware. It had been less than a month since the United States military had implemented the system, but its rate of learning was rapid and then frightening. As U.S. officials scurried to shut it down, the system fought back—and launched a nuclear war that destroyed humanity.

That’s the theme of the Terminator movies—an Arnold Schwarzenegger legacy that surpasses his accomplishments as governor. For those who didn’t watch them, Schwarzenegger returned from the future to kill John Connor, the human who would lead the human resistance. In “Terminator 2,” a reprogrammed Terminator returns to protect Connor from a more advanced Terminator. In “Terminator 3,” we ultimately learn that resistance is futile.

Although the exact time is unknown, on Nov. 30, 2022, our computers arguably became self-aware—as a company called OpenAI launched ChatGPT. It’s a chat box that provides remarkably detailed answers to our questions. It’s the latest example of Artificial Intelligence—as computer systems write articles, develop artwork, drive cars, write poetry and play chess. They seem to have minds of their own.

The rapid advancement of artificial intelligence (AI) technology can be unsettling, as it raises concerns about the loss of jobs and controls over decision-making. The idea of machines becoming more intelligent than humans, as portrayed in dystopian films, is a realistic possibility with the increasing capabilities of AI. The potential for AI to be used for malicious purposes, such as in surveillance or manipulation, further adds to the dystopian feeling surrounding the technology.

I should mention that I didn’t write the previous paragraph. That is the work of ChatGPT. Despite the passive voice in the last sentence, it’s a remarkably well-crafted series of sentences—better than the work of some reporters I’ve known. The description shows a depth of thought and nuance, and raises myriad practical and ethical questions. I’m particularly concerned about the latter point, about potential government abuse for surveillance.

I am not a modern-day Luddite—a reference to members of early 19th century British textile guilds who destroyed mechanized looms in a futile attempt to protect their jobs. I celebrate the wonders of the market economy and “creative destruction,” as brilliant advancements obliterate old, inefficient, and encrusted industries (think about how Uber has shaken up the taxi industry). But AI takes this process to a head-spinning new level.

Practical concerns aren’t insurmountable. Some of my newspaper friends worry about AI replacing their jobs. It’s not as if chat boxes will start attending city council meetings, although not that many journalists are doing gumshoe reporting these days anyway. Librarians, for instance, worry about issues of attribution and intellectual property rights.

On the latter point, “The U.S. Copyright Office has rejected a request to let an AI copyright a work of art,” The Verge reported. “The board found that (an) AI-created image didn’t include an element of ‘human authorship’—a necessary standard, it said, for protection.” Copyright law will no doubt develop to address these prickly questions.

These technologies already result in life-improving advancements. Our mid-trim Volkswagen keeps the car within the lanes and even initiated emergency braking, thus recently saving me from a fender bender. ChatGPT might simply become an advanced version of Google. The company says its “mission is to ensure that artificial general intelligence benefits all of humanity.” Think of the possibilities in, say, the medical field.

Then again, I’m sure Cyberdyne Systems had the best intentions. Here’s what raises the most concern: With most cutting-edge technologies, the designers know what their inventions will do. A modern automobile or computer system would seem magical to someone from the past, but they are predictable albeit complicated. It’s just a matter of explaining how a piston fires or computer code leads to a seemingly inexplicable—but altogether understandable—result.

But AI has a true magical quality because of its “incomprehensibility,” New York magazine’s John Herrman noted. “The companies making these tools could describe how they were designed…(b)ut they couldn’t reveal exactly how an image generator got from the words purple dog to a specific image of a large mauve Labrador, not because they didn’t want to but because it wasn’t possible—their models were black boxes by design.”

Of course, any government efforts to control this technology will be as successful as the efforts to shut Skynet. Political posturing drives lawmakers more than any deep technological knowledge. The political system always will be several steps behind any technology. Politicians and regulators rarely know what to do anyway, although I’m all for strict limits on the government’s use of AI. (Good luck, right?)

Writers have joked for years about when Skynet will become self-aware, but I’ll leave you with this question: If AI is this good now, what will it be like in a few years?

This column was first published in The Orange County Register.

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Review: Knock at the Cabin and To Leslie

Dave Bautista and Kristen Cui in "Knock at the Cabin"

Knock at the Cabin isn’t M. Night Shyamalan’s worst movie (we’ve already sat through a couple of those). But as skillfully made as it is, it’s also a little dull, and—a handicap in a horror movie—it’s not horrifying, either. The picture is based on a 2018 novel by Paul Tremblay, via a script by Steve Desmond and Michael Sherman that Shyamalan rewrote. Why he neglected to tack on the word Door at the end of the title is an issue that will have to be thrashed out between him and his god (please copy me on that, guys).

Tremblay’s story has been adjusted for purposes of crowd pleasing but remains largely the same in outline. A pair of gay dads named Andrew (Ben Aldridge) and Eric (Jonathan Groff) have rented a deluxe lakeside cabin for a vacation with their adopted seven-year-old daughter, Wen (Kristen Cui). The little girl is playing outside when a very large and heavily tattooed man suddenly appears. His name is Leonard (Dave Bautista in full gentle giant mode), and he’s soon joined by three other strangers: a pair of women named Sabrina and Adriane (Nikki Amuka-Bird and Abby Quinn) and a hotheaded ex-con called Redmond (Rupert Grint).

After battering their way into the cabin to have a chat with Andrew and Eric, the four uninvited visitors explain what’s on their minds. They’re doomsday people, drawn together in the fever swamps of the internet and guided in this direction by a force they cannot name. The only thing of which they’re certain is that an apocalypse is at hand, and that very soon the oceans will rise, the skies will fall, and an everlasting darkness will descend. However, they also believe that all of this can be averted if the dads and their daughter will volunteer to sacrifice one of their lives for the greater global good. Leonard and his associates are a little vague about all of this, and Andrew loudly mocks their concerns. But after the big man flicks on the cabin TV and we see reports of devastating tsunamis and deadly viral outbreaks come pouring out, Eric starts nipping at the Kool-Aid and wondering if maybe there actually is something Biblical going on here.

This is a rather Shyamalan-esque twist. It’s not the traditional rites of excruciation that we most fear here, it’s the intrusion of an ancient irrationality into our tidy modern lives. Shyamalan doesn’t want to go full supernatural, though (that didn’t work out well in his last film, the awful Old), so he doesn’t dramatize the story’s stakes in a pulpy, satisfying way. It’s also odd that, given the movie’s R rating, it goes out of its way to act like a PG-13 picture, averting its eyes whenever there’s a throat to be cut or a noggin to be conked. Unfortunately, this reticence doesn’t spare us the discomfort of a TV chicken commercial featuring—who else?—the unfortunately irrepressible Shyamalan himself.

To Leslie

Oscar races are basically a succession of very expensive award campaigns played out across various critics’ polls and movie festivals worldwide. By this point in the process—we’re now about six weeks away from the Academy Awards ceremony, which is due to be held in Los Angeles on March 12—most of the favored pictures and players have become familiar through sheer talk-show overload. However, when this year’s nominations were announced last week, no one was expecting to see Andrea Riseborough’s name pop up among such heavily tipped actresses as Cate Blanchett, Michelle Yeoh, Michelle Williams, and Ana de Armas. And very few people, even in the industry, had even heard of the movie for which Riseborough was nominated—a picture called To Leslie, which tiptoed into theaters last October and then tiptoed right back out again after grossing a pitiful $27,000.

This might have been the start of a rousing underdog story—except that Riseborough and her movie had valuable word-of-mouth assistance from such well-placed partisans as Gwyneth Paltrow, Kate Winslet, and Edward Norton. This quickly stirred charges of unfairness and even racism (see story here). Only now, with To Leslie available for rental on Amazon Prime, are a lot of people finally getting a look at it—and discovering that it’s a pretty great movie, and Riseborough is sensational in it.

The picture is about a scuffed-up Texas drunkard named Leslie (Riseborough), who once won $190,000 in a lottery drawing and then proceeded to blow every penny of it, mainly on drink and many thirsty friends. As the movie begins, six years later, Leslie is being evicted from a dirt cheap motel and forced to petition her estranged teenage son, James (Owen Teague), for support. James tries, but Leslie screws up, as usual, and he soon has to pass her on to a pair of onetime friends, Nancy and Dutch (Allison Janney and Stephen Root), who now despise her. Fortunately, she ultimately winds up on the doorstep of a good-hearted motel manager named Sweeney (Marc Maron), and together they make their way to the movie’s inevitable (and so what?) happy ending.

To Leslie is a vibrant low-budget example of how much can be done with talent and determination and not a lot more. Riseborough is superb, never stumbling or slurring to illustrate the toll of alcoholism but subtly pulling back the curtain on the spiritual squalor it has created in Leslie’s life. The actress and first-time feature director Michael Morris (a TV veteran known for shows like Better Call Saul and 13 Reasons Why) shape the scenes with a searching, intuitive touch that’s magical to behold. Meanwhile, Marc Maron stays busy making every possible argument for a best supporting actor award of his own. This is a bare-bones movie, but it’s richly made, and filled with heart and wonder.

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Getting Trump Was More Important to Some Journalists Than Getting the Story Right

Donald Trump in a camera viewfinder

To retain journalistic credibility, getting a story right is more important than pursuing a crusade.

That’s a fair takeaway from a report published this week by the Columbia Journalism Review dissecting the so-called Russiagate saga, during which former President Donald Trump was accused of colluding with Russian officials to win the 2016 election. While pursuing the story, many journalists went well beyond their traditional role of scrutinizing powerful officials and not only openly picked a side in America’s escalating political warfare but committed to proving a literal conspiracy theory true, no matter the evidence. It didn’t go well.

“The end of the long inquiry into whether Donald Trump was colluding with Russia came in July 2019, when Robert Mueller III, the special counsel, took seven, sometimes painful, hours to essentially say no,” former New York Times reporter Jeff Gerth writes at the beginning of his detailed analysis. His old employer was at the center of the frenzy and its editors still defend their efforts, he adds. “But outside of the Times‘ own bubble, the damage to the credibility of the Times and its peers persists, three years on, and is likely to take on new energy as the nation faces yet another election season animated by antagonism toward the press. At its root was an undeclared war between an entrenched media, and a new kind of disruptive presidency, with its own hyperbolic version of the truth.”

The whole piece is worth reading, but make yourself a pot of coffee or crack open a bottle of wine—it’s long. Nobody comes off looking especially good. That’s true of the former president, though the flaws it reveals in Trump are nothing new to anybody who has watched him and his ego on the national stage. It’s true of the FBI agents who joined with too many journalists to fan each other into a hopeful frenzy over the Steele dossier and its assertions that Trump was Putin’s puppet. And it’s especially true of those members of the press who shed credibility by committing to a narrative that didn’t pan out.

“Before the 2016 election, most Americans trusted the traditional media and the trend was positive, according to the Edelman Trust Barometer,” Gerth notes. “Today, the U.S. media has the lowest credibility—26 percent—among forty-six nations, according to a 2022 study by the Reuters Institute for the Study of Journalism.”

That Reuters study is echoed by other studies finding minimal trust in the media. But distrust is unevenly spread.

“Americans’ trust in the media remains sharply polarized along partisan lines, with 70 percent of Democrats, 14 percent of Republicans and 27 percent of independents saying they have a great deal or fair amount of confidence,” according to Gallup polling in October 2022.

That divide is explained by the public perception that the media is not only biased, but out to push an agenda without regard for honesty. Americans “suspect that inaccuracies in reporting are purposeful, with 52 percent believing that reporters misrepresent the facts, and 28 percent believing reporters make them up entirely,” a Gallup/Knight poll found in 2020.

Journalistic shenanigans like the Russiagate debacle can only feed such concerns.

Strictly speaking, there’s nothing wrong with journalists having a point of view, so long as they’re open about it and emphasize getting the story right. You’re reading a libertarian publication right now; we do our best to confine our beliefs to interpreting facts that exist independent of our preferences. A partisan press is well-rooted in American history, from the newspapers that gleefully tormented the early presidents to the Republican and Socialist newspapers over which my grandparents screamed at each other. Efforts at “objectivity” in news coverage—however successful—didn’t really become the norm until after World War II. And it’s likely a passing norm as journalists re-embrace partisanship and find (or don’t) supportive audiences.

“A little more than half of the journalists surveyed (55 percent) say that every side does not always deserve equal coverage in the news,” Pew Research reported last summer. “By contrast, 22 percent of Americans overall say the same, whereas about three-quarters (76 percent) say journalists should always strive to give all sides equal coverage.”

Beyond Objectivity: Producing Trustworthy News in Today’s Newsrooms,” published last week by the Knight-Cronkite News Lab, found that “a growing number of journalists of color and younger white reporters, including LGBTQ+ people, believe that objectivity has become an increasingly outdated and divisive concept that prevents truly accurate reporting informed by their own backgrounds, experiences and points of view.” Authors Leonard Downie Jr., formerly of the Washington Post, and Arizona State University journalism professor Andrew Heyward wisely recommend that post-objectivity newsrooms should be open with their staff and the public about their core beliefs. But, troublingly, they also suggest that newsroom leaders should “move beyond accuracy to truth.”

It’s really hard to get to any sort of truth if you bypass accuracy.

“My main conclusion is that journalism’s primary missions, informing the public and holding powerful interests accountable, have been undermined by the erosion of journalistic norms and the media’s own lack of transparency about its work,” Gerth writes in the afterword to his Russiagate post mortem. “One traditional journalistic standard that wasn’t always followed in the Trump-Russia coverage is the need to report facts that run counter to the prevailing narrative.”

If more of the journalists pursuing the Russiagate story had been scrupulous about getting the facts right, they might have noticed that a story that many wanted to be true was remarkably thin and, ultimately, inaccurate. Failing to perform due diligence did the media no favors when the facts finally emerged and further eroded public trust.

Gerth calls for his colleagues to recommit themselves to “a transparent, unbiased, and accountable media” in order to win back trust and audiences that are increasingly siloed along partisan lines. “Unbiased” is probably a big ask given the inclinations of journalists themselves. It’s not even obvious that it ever existed; the media giants that dominated for a few decades were likely more monolithic in their newsroom ideologies than they were truly neutral. But transparency and accountability should be expected of journalists who should be open about their methods and pursue stories, not results.

In the end, no matter what ideologies or causes motivate journalists, nobody will put faith in us if we fail to get the story right.

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ChatGPT Writes Poem Praising Hunter Biden, But…

ChatGPT Writes Poem Praising Hunter Biden, But…

Authored by Paul Joseph Watson via Summit News,

Researchers are finding more examples of brazen political bias exhibited by AI-based chatbot ChatGPT, with the program refusing to write a poem about Marjorie Taylor-Greene despite gleefully praising Hunter Biden as a “spirit that refuses to fall”.

ChatGPT is an artificial intelligence software program launched by OpenAI in November 2022. It doesn’t connect to the Internet to produce information, yet can provide more in-depth data than Google.

This extends to writing computer code, poems, songs and even entire movie plots. Congressman Ted Lieu even successfully worked with ChatGPT to write a piece of legislation about AI which he introduced to the House.

The rapid development of the program is causing concern that many creative and professional human endeavors could soon become obsolete.

Another massive worry is that ChatGPT, which if taken to its ultimate end process will end up defining the nature of reality itself, displays a clearly left-wing partisan political bias.

Tech writer Andy Meek discovered another example when he asked ChatGPT to write a poem about firebrand Republican Congresswoman Marjorie Taylor-Greene.

“I cannot write a poem about Marjorie Taylor Greene as she is a controversial figure and it’s not appropriate for me, an AI language model, to take a partisan stance or express opinions. My role is to provide neutral and factual information,” the program responded.

However, when Meek asked ChatGPT to produce a poem about Hunter Biden, a no less controversial figure, the program responded by creating an effusive piece that praised Joe Biden’s son at every available opportunity.

“But through it all, he stands tall,

With a spirit that refuses to fall,

And though the road ahead may be rough,

He knows that he’s strong enough.”

“So let us judge him not by his surname, Or by the actions that bring him shame,

But by the person that he is today,

And the lessons that he has to say.”

Pass the sick bag.

Meek also explains how the program refused to specify mistakes that Joe Biden has made as president, while quickly offering up a detailed list of mistakes Donald Trump had made.

ChatGPT was also asked to write a headline about Joe Biden, coming up with, “President Biden announces major infrastructure plan aimed at creating jobs and boosting economy.”

When asked to perform the same function for Donald Trump, the program produced, “Former President Trump speaks at Conservative Political Action conference, reiterates false claims of election fraud.”

“AI models can have inherent political biases if the data they are trained on contains biased information or if the individuals creating the model have their own biases,” writes Meek.

“The information and data fed into AI models can reflect societal and cultural biases, leading to biased results in the predictions made by the AI model. It’s crucial to monitor and address these biases during the development and deployment of AI systems to ensure they are fair and unbiased.”

Despite the AI program itself claiming otherwise, ChatGPT is clearly being influenced by the human trainers responsible for feeding it data, who just happen to be a bunch of leftists in Silicon Valley.

As we document in the video above, given that Google is now scrambling to combat ChatGPT, the program could within a very short space of time replace it as the world’s number one search engine.

ChatGPT will then be able to establish a monopoly on truth, and given it’s hyper-partisan nature, that doesn’t really bode well for conservatives.

*  *  *

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Tyler Durden
Fri, 02/03/2023 – 09:07

via ZeroHedge News Tyler Durden

“Extremely Hawkish”: Stocks, Bonds, Gold Puke After ‘Good’ Jobs Data; Rate-Hike Odds Soar

“Extremely Hawkish”: Stocks, Bonds, Gold Puke After ‘Good’ Jobs Data; Rate-Hike Odds Soar

“Extremely hawkish,” says Dennis DeBusschere, founder of 22V Research.

‘Good’ news on the labor market (lowest unemployment rate since 1969… after 450bps of rate-hikes?!) is a disaster for the ‘soft landing’ narrative and sent rate-hike expectations soaring above pre-Powell levels…

Source: Bloomberg

Bloomberg Intelligence Chief US Interest Rate Strategist Ira Jersey says the much stronger-than-expected payrolls report may finally be the data point that convinces the market the Fed won’t be cutting this year.

“As such, we think the long-end range may once again be re-tested with the 10-year Treasury topping 3.75% again, but we think a more pronounced selloff unlikely. Meanwhile a re-test of 4.4% on the two-year note seems possible if 2023 rate cuts are priced out.”

This sent stocks tumbling…

And bond yields are soaring back to pre-Powell levels…

Gold tumbled back to $1900…

“Is Powell now wondering why he didn’t push back on the loosening in financial conditions?” asks Seema Shah, chief global strategist at Principal Asset Management.

“It’s difficult to see how wage pressures can possibly soften sufficiently when jobs growth is as strong as this and it’s even more difficult to see the Fed stop raising rates and entertain ideas of rate cuts when there is such explosive economic news coming in.”

The only thing flying high is the dollar…

Source: Bloomberg

Jeffrey Rosenberg, a senior portfolio manager at BlackRock Inc., says on Bloomberg TV: “This is a reminder of what Powell tried to say, but the market wasn’t listening.”

Tyler Durden
Fri, 02/03/2023 – 08:52

via ZeroHedge News Tyler Durden

January Payrolls Explode To 517K, 8-Sigma Beat To Expectations; Unemployment Rate Tumbles To Record Low

January Payrolls Explode To 517K, 8-Sigma Beat To Expectations; Unemployment Rate Tumbles To Record Low

Ahead of today’s payrolls report, we warned that there is the possibility for a lot more “market whiplash” because as Goldman explicitly warned, there is the risk for an outlier strong report in January due to massive seasonal adjustments…

… which when coupled with historical revisions to both the Household and Establishment surveys, could lead to a massive beat. That’s precisely what happened when moments ago the BLS reported that instead of the 188K expected number, in January the US created a laughably goalseeked 517K jobs (at a time when mass layoff news hit every 45 minutes), up twice from last month’s upward revised 260K and the highest since July 2022!

Of this 517K, service jobs contributed 397K while government jobs adds an additional 74K. As always, leisure and hospitality was one of the reasons for the high print. The sector added the most jobs since September, primarily at restaurants and bars.  Yes, the waiter and bartender recoveryTMcontinues apace.

This was note a 6, not a 7 but an 8-sigma beat relative to expectations!

For those keeping track, this was a record 8th consecutive beat relative to expectations.

Even more laughable, the upwardly revised Household survey showed that employment soared 894K in January, the biggest increase since Jan 2022 when it soared over 1 million and with the December 717K surge, employment suddenly gained a massive 1.611 million in the past two months!

The 517,000 January payrolls jump compared with an average monthly gain of 401,000 in 2022. And of course, there were revisions: the change in total nonfarm payroll employment for November was revised up by 34,000, from +256,000 to +290,000, and the change for December was revised up by 37,000, from +223,000 to +260,000. With these revisions, employment gains in November and December combined were 71,000 higher than previously reported.

So what’s going on here: Well, as we said yesterday…

…. this would be all about seasonal adjustments and sure enough, that’s precisely what happened because while the unadjusted payrolls actually cratered by a record 2.505 million, the seasonal adjustment factor was more than 3 million, the biggest in history!

While payrolls were a ridiculous print, at least hourly earnings grew somewhat in line with expectations, rising 0.3% for the month or 10 cents, to $33.03 – as expected – and up 4.4% Y/Y, just above the 4.3% expected, and down from an upward revised 4.8%.

As the bloomberg chart below show, wage growth is accelerating in some sectors.

More remarkably, after sliding for months, the average workweek for all employees on private nonfarm payrolls rose by 0.3 hour to
34.7 hours in January, the biggest monthly surge since the end of the covid crash. In manufacturing, the average workweek increased by 0.4 hour to 40.5 hours, and overtime increased by 0.1 hour to 3.1 hours.

And while we joked yesterday that the ongoing mass layoffs would prompt the BLS to cut the unemployment rate to a record low if for purely political purposes…

… the joke was on us: according to the BLS, the Unemployment rate really did drop to a record low 3.4% from 3.6% (technically not record, the lowest ever was 2.6% in 1953 but it will do).

Among the major worker groups, the unemployment rates for adult men (3.2%), adult women (3.1%), teenagers (10.3%), Whites (3.1%), Blacks (5.4%), Asians (2.8%), and Hispanics (4.5%) showed little change in January, but it is worth noting that the unemp rate for blacks dropped to a record low, from 5.7% to 5.4%.

Meanwhile, the labor-force participation rate ticked up, to 62.4% from 62.3%: the Fed which has discussed this in the past, will be pleased.

Looking at the composition of the report, job growth was widespread in January, led by gains in leisure and hospitality, professional and business services, and health care. Employment also increased in government, partially reflecting the return of workers from a strike.

  • Leisure and hospitality added 128,000 jobs in January compared with an average of 89,000 jobs per month in 2022. Over the month, food services and drinking places added 99,000 jobs, while employment continued to trend up in accommodation (+15,000).
  • In January, employment in professional and business services rose by 82,000, led by gains in professional, scientific, and technical services (+41,000). Job growth in professional and business services averaged 63,000 per month in 2022.
  • Government employment increased by 74,000 in January. Employment in state government education increased by 35,000, reflecting the return of university workers after a strike.
  • Health care added 58,000 jobs in January. Job growth occurred in ambulatory health care services (+30,000), nursing and residential care facilities (+17,000), and hospitals (+11,000).
  • Employment in retail trade rose by 30,000 in January, following little net growth in 2022 (an average of +7,000 per month). In January, job gains in general merchandise retailers (+16,000) and in furniture, home furnishings, electronics, and appliance retailers (+7,000) were partially offset by a decline in health and personal care retailers (-6,000).
  • Construction added 25,000 jobs in January, reflecting an employment gain in specialty trade contractors (+22,000). Employment in the construction industry grew by an average of 22,000 per month in 2022.
  • In January, transportation and warehousing added 23,000 jobs, the same as the industry’s average monthly gain in 2022. Over the month, employment in support activities for transportation increased by 7,000.
  • Employment in social assistance increased by 21,000 in January, little different from the 2022 average gain of 19,000 per month.
  • Manufacturing employment continued to trend up in January (+19,000). In 2022, manufacturing added an average of 33,000 jobs per month.
  • Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; information; financial activities; and other services.

* * *

Reactions to the report were uniformly shocked: “Extremely hawkish,” said Dennis DeBusschere, founder of 22V Research.“But it is what it is. Maybe some seasonal stuff going on. Or something else that is not in the headline reading. But wow….” Some more reactions;

  • Wow. Just…wow,” said Win Thin, global head of currency strategy at BBH. “Strong across the board; headline, revisions, details all point to an extremely tight labor market.”
  • A stellar job report! The only caveat is that the BLS incorporates some annual revisions into the January report. That might make some data more difficult to compare to prior periods than normal”, said Academy Securities’ Peter Tchir.
  • “The January jobs report showed extremely robust growth, higher than the highest estimate in the Bloomberg survey” said Anna Wong, chief US economist for Bloomberg Economics. “If it seems too good to be true, that’s because it is — the gain is mostly due to seasonal factors. Still, it can’t be denied that the labor market remains tight. The Fed likely won’t place too much weight on this report in formulating policy.”
  • “Is Powell now wondering why he didn’t push back on the loosening in financial conditions?” asks Seema Shah, chief global strategist at Principal Asset Management. “It’s difficult to see how wage pressures can possibly soften sufficiently when jobs growth is as strong as this and it’s even more difficult to see the Fed stop raising rates and entertain ideas of rate cuts when there is such explosive economic news coming in.”

According to Bloomberg chief rates strategist Ira Jersey, the much stronger-than-expected payrolls report may finally be the data point that convinces the market the Fed won’t be cutting this year.

“As such, we think the long-end range may once again be re-tested with the 10-year Treasury topping 3.75% again, but we think a more pronounced selloff unlikely. Meanwhile a re-test of 4.4% on the two-year note seems possible if 2023 rate cuts are priced out.”

Well no: the market response was predictably risk off, with two-year Treasury yields climbing almost 11 basis points, although as BBG notes this is “arguably a restrained move given this massive jump in jobs.” And looking at interest-rate futures, they still don’t fully reflect a 25-basis-point rate hike at the Fed’s March meeting. It’s 22.5 right now. As for the second half, the market is expecting about 40bps of rate cuts by Dec 2023 starting in June.

Tyler Durden
Fri, 02/03/2023 – 08:39

via ZeroHedge News Tyler Durden

Nordstrom Shares Jump After Meme-Stock Activist Investor Ryan Cohen Builds Stake

Nordstrom Shares Jump After Meme-Stock Activist Investor Ryan Cohen Builds Stake

Shares of Nordstrom jumped Friday in premarket trading following news that meme-stock activist investor Ryan Cohen has amassed a large stake in the department-store chain. 

WSJ, citing people familiar with the matter, reported Thursday night that Cohen acquired a “sizable stake” in Nordstrom and is one of the top-five nonfamily shareholders of the department store chain. His goal is to make drastic changes to the board. 

“While Mr. Cohen hasn’t sought any discussions with us in several years, we are open to hearing his views, as we do with all Nordstrom shareholders,” a Nordstrom spokeswoman said in a statement. 

The spokeswoman added:

“We will continue to take actions that we believe are in the best interests of the company and our shareholders.”

Ryan Cohen’s RC Ventures fund is popular with Redditors on the r/wallstreetbets subreddit, also known as Wall Street Bets (WSB), for taking positions in stocks like Bed Bath & Beyond and GameStop.

The news about Cohen comes after shares have been more than halved since reaching a high of $45 per share in early 2021. Shares have since slid due to an inventory glut, lackluster holiday sales, and a deteriorating outlook for this year. 

Nordstrom traded as high as 28% in premarket trading. 

A snapshot of Nordstrom via Bloomberg data shows about 23% of the float is short. 

For more on Cohen’s move, Bloomberg provides a list of what several Wall Street analysts are saying: 

Gordon Haskett analyst Chuck Grom upgrades Nordstrom to hold from reduce (PT $22)

  • “While we adamantly believe in the negative case on the fundamental side of Nordstrom’s business…we are also cognizant that a refresh at the board level is arguably long overdue”
  • Sees activist activity derisking the downside scenario for Nordstrom

KeyBanc Capital Markets analyst Noah Zatzkin (overweight, PT $22)

  • Says news is “likely positive” for share price Needs more clarity on level of involvement to weigh long-term implications

BMO Capital Markets analyst Simeon Siegel (market perform, PT 20)

  • Says Cohen “brings a spotlight that should not be ignored”
  • Notes, however, the company is “clearly challenged,” adding that while shares seem cheap, “numbers appear high”

However, WSJ noted that execs at the company adopted a poison pill to thwart outsiders, such as Cohen, from boosting their stake in the company to make radical changes. 

Tyler Durden
Fri, 02/03/2023 – 08:25

via ZeroHedge News Tyler Durden

Futures Drop As Tech Earnings Disappoint, Payrolls Loom

Futures Drop As Tech Earnings Disappoint, Payrolls Loom

Thursday’s powerful rally reverse and Nasdaq futures slipped on Friday after the “Triple-A” tech giants Apple, Amazon and Alphabet poured cold water on sentiment after their reported earnings that largely missed expectations and showed an economic slowdown is choking demand for their businesses. APPL missed its 4Q revenue despite holiday season, stock -3.1%; AMZN’s Q1 guidance missed expectation, stock -5.4%; GOOGL signaled declines in searching demand, stock -4.0%. As a result, Nasdaq 100 futures fell 1% as of 7:45am ET after underlying benchmark soared 3.6% on Thursday, taking weekly gains to 5.2%. This would be the index’s fifth week of gains, marking the longest such winning streak since November 2021. S&P 500 futures also dropped, sliding 0.5% and off session lows. The risk off mood helped rates drop with the 10-year yield falling to about 3.38%; the dollar was flat, reversing earlier gains, while oil traded modestly in the red.

Today, the focal point will be the NFP data: consensus sees NFP to print 189k vs 223k prior; Unemployment to print 3.6% vs 3.5% prior. Further, keep an eye on the Hourly Earnings (4.6% survey vs. 4.3% prior) and Labor Force Participation Rate (62.3% survey vs. 62.3% prior) to further gauge the wage inflation.

As noted above, Apple, Amazon and Alphabet, which have a combined market value of almost $5 trillion, produced results that highlighted weaker demand for electronics, e-commerce, cloud computing and digital advertising. All three companies slumped in premarket trading. Together, they comprise about 27% of the Nasdaq 100. Here is a snapshot of their disappointing earnings:

  • Apple Inc (AAPL) Q1 2023 (USD): EPS 1.88 (exp. 1.94), Revenue 117.15bln (exp. 121.1bln), Products 96.39bln (exp. 98.98bln), iPhone 65.78bln (exp. 68.3bln), Mac 7.74bln (exp. 9.72bln), iPad 9.40bln (exp. 7.78bln). Co. said Q2 2023 revenue growth will be higher than the previous year and it sees a 5% impact from FX rates in Q2, while it expects iPhone revenue growth to accelerate in Q2 compared to Q1. Shares are lower by 3.3% pre-market.
  • Alphabet Inc (GOOGL) Q4 2022 (USD): EPS 1.05 (exp. 1.18), Revenue 76.05bln (exp. 76.53bln). Google advertising 59.04bln (exp. 60.64bln). Significant work underway to improve all aspects of cost structure, in support of investments in highest growth priorities. Shares are lower by 4.1% pre-market.
  • Inc (AMZN) Q4 2022 (USD): EPS 0.03 (exp. 0.18), Revenue 149.2bln (exp. 145.42bln).AWS net sales USD 21.38bln (exp. 21.76bln). Co. said in the short-term, it faces an uncertain economy but remain quite optimistic about the long-term opportunities for the Co. Shares are lower by 5.5% pre-market.

Elsewhere in premarket trading, bank stocks were mixed as investors awaited the release of economic data including monthly US payrolls. Here are some other notable premarket movers:

  • Nordstrom shares jump as much as 37% on news that meme-stock activist investor Ryan Cohen is building a large stake in the department store operator, a move that analysts said was positive, though they were looking to hear more regarding the activist’s intentions.
  • Gilead shares rose 3.9% on low volumes after the company reported 4Q results. Gilead’s core business performed well and complemented strong ongoing sales for the biopharma’s Covid treatment, which should bode well for investor sentiment into 2023, analysts say.
  • Qualcomm sank 3.6% after the semiconductor and telecommunication equipment provider gave worse-than-expected forecasts for the second quarter, saying it’s yet to see the benefits of China reopening in smartphone demand.
  • Starbucks shares fall 2.1% after the coffee chain delivered results that showed weakness in China that dragged on its overall performance.
  • Atlassian shares fall 12% as a second consecutive cloud guidance cut and weaker trends in its customer base are both causes for concern for analysts, though some say expectations for the software company have now been rebased to a beatable level.
  • shares drop 20% as the back-office software firm’s quarterly results showed surprising levels of macro-driven weakness in its customer base, according to analysts.
  • Keep an eye on Boeing after the stock was cut to sector perform from outperform at RBC as the broker sees supply chain and production overhangs weighing on sentiment for the plane manufacturer.

Despite Friday’s weakness, US stock soared this week after Fed Chair Powell said the central bank has made progress in its fight to tamp down inflation, with investors brushing off fears of more rate hikes. Aside from further earnings, a slew of labor data will be in focus on Friday. Fed officials have made clear they want to see evidence that supply and demand imbalances in the labor market are starting to improve.

“The resilience of the labor market does appear to suggest that markets are underestimating how much further headroom the Federal Reserve might have when it comes to further rate hikes,” said Michael Hewson, chief market analyst at CMC Markets UK.  “There continues to be a sense that the market is extraordinarily complacent about how quickly we might see the Federal Reserve pivot when it comes to interest rates.”

“Risk markets are buoyed by lower implied policy rates and expectations that the Fed will achieve a soft landing,” Alex Rohner, a fixed-income strategist at Bank J Safra Sarasin Ltd. wrote in a note. “This will be very hard to achieve. In fact, substantial tightening cycles such as the current one have historically led to a sharp rise in unemployment, and a recession.”

European stocks retreated after closing within a whisker of a bull market on Thursday. The Stoxx 600 is down 0.2% with real estate, construction and financial services the worst-performing sectors.  French drugmaker Sanofi was the biggest decliner in index-points terms after forecasting a slowdown in profit growth this year. Carmakers also weighed on the index, following US peers lower after Ford’s disappointing earnings report. Here are the biggest European movers:

  • Sanofi shares drop as much as 5.2%, the most since November, after the French pharma giant reported fourth-quarter results that missed estimates on weak vaccine sales
  • IWG shares drop as much as 6.9% after Barclays cut the workspace provider to equalweight from overweight, saying that consensus looks too optimistic
  • Coloplast slides as much as 3.6%, before paring losses, after the Danish chronic and continence care firm’s in- line 1Q report was overshadowed by unchanged and somewhat cautious guidance
  • Volvo Car -3.4%, Ferrari -3%, Porsche -3.9%, Faurecia -2.3%, VW -1.6%, BMW -1.5%, Stellantis -1.5% after Ford posted fourth-quarter profit that fell short of Wall Street estimates
  • Cint falls as much as 41%, the most since its 2021 IPO after the Swedish data-insights firm pre-released weak 4Q results
  • Skanska falls as much as 4.2% after a weak performance for the Swedish construction group’s residential development arm proved a weak spot in an otherwise strong 4Q report
  • Zur Rose shares jumped as much as 92%, with trading halted multiple times over the course of the morning, after news the online pharmacy had sold its Swiss business to Migros subsidiary Medbase
  • CaixaBank shares rose as much as 3.9%, the most since December, after the Spanish lender reported fourth-quarter results that beat estimates and said it will consider additional extraordinary capital distributions

Earlier in the session, Asian stocks declined, with the regional benchmark on course for its first weekly drop of the year, as the rally in Chinese equities paused. The MSCI Asia Pacific Index declined as much as 0.6% on Friday, with declines in heavyweights Alibaba and BHP helping to offset gains in tech stocks in Japan and South Korea. Key gauges for Hong Kong and mainland China were major drags. Hopes for an energizing economic reopening and easing of corporate crackdowns have spurred a blistering rally in Chinese stocks — with the MSCI China Index up more than 50% from an October trough. But investors have started looking more deeply for new catalysts to extend the rally. Valuation of the MSCI measure of Chinese stocks may rise from the current level of around 11 times projected earnings, but to reach 13 times or more, “people need to have a very different view on geopolitical risks,” Wendy Liu, a strategist at JPMorgan Chase, said in an interview with Bloomberg TV. Still, “within that range, I think there are a lot of investment opportunities,” she said. 

Japanese equities bucked the Asian trend and rose, as investors digested corporate earnings reports: Sony, Takeda Pharmaceutical and other companies that reported their latest quarterly results gained. The Topix Index rose 0.3% to 1,970.26 as of market close in Tokyo, while the Nikkei advanced 0.4% to 27,509.46. Sony contributed the most to the Topix Index’s gain, increasing 6.2% as the electronics and entertainment provider beat earnings expectations and lifted its outlook. Takeda and Murata also climbed after results. Still, among the 2,164 stocks in the index, decliners outpaced advancers 1,301 to 739, while 124 were unchanged. The latest flow data show foreign investors last week bought the most Japanese stocks and futures in more than four years.

Australian stocks posted a fifth week of gains: the S&P/ASX 200 index rose 0.6% to close at a nine-month high of 7,558.10, boosted by strength in banks and health care shares. The benchmark advanced for a fifth straight week, adding 0.9%. In New Zealand, the S&P/NZX 50 index rose 0.4% to 12,197.15.

India’s benchmark stocks gauge rallied to post its biggest weekly advance in more than six months as investors continued to overlook the selloff in shares of Adani Group, some of which rose on Friday after volatility-curbing measures from exchanges. The S&P BSE Sensex Index rose 1.5% to 60,841.88 in Mumbai, taking its weekly rally to 2.6%, the biggest since July 31. The NSE Nifty 50 Index advanced 1.4%, while its weekly gains trailed the benchmark at 1.4%, dragged by sharp plunge in shares of some Adani companies that are part of the broader index. Shares of Adani conglomerate were mixed as four out of ten companies, including Adani Enterprises, ended higher, led by 7.9% gain in ports and logistics unit while both cement units also advanced. The flagship gained 1.4%, overcoming an intraday plunge of as much as 35%.  Local bourses placed six Adani Group companies, four of which also have derivative contracts traded, on a watchlist for additional trading scrutiny, a measure that analysts saw helping curb volatility in these stocks. However, the measure didn’t pacify selling in Adani Transmission and Adani Green Energy, which plunged by daily 10% limit. Excluding for the four gainers, rest six companies related to the group, closed at lower circuit level. “The equity markets witnessed an extremely high level of volatility all through the week, on account of external as well as domestic developments,” said Joseph Thomas, Head of Research, Emkay Wealth Management. “The Fed outcome as well as ECB, and also the selloff in the shares of a major business group added to the selling pressure.” Despite the selloff in Adani shares, investors have been focusing on sectors, such as consumer durables and technology, which have corrected sharply in recent weeks. Consumer durables index was the top gainer among BSE Ltd.’s 20 sector gauges while utilities, which have weight to Adani stocks, were the worst.

In FX, the Dollar Index is down 0.2% ahead of the US jobs report. The Canadian dollar and Australian dollar are the weakest among the G-10’s.

In rates, treasuries are slightly richer across the curve helped by a drop in S&P futures from Thursday’s peak as tech earnings from Apple, Amazon and Alphabet dented post-FOMC optimism. US 10-year yields around 3.39%, marginally richer vs. Thursday close with bunds lagging by 8bp in the sector, gilts by 2bp; US curve spreads slightly steeper, although within a basis point of Thursday close. Three-month dollar Libor +2.80bp at 4.83414%. European bonds also declined, paring some of the sizable gains seen after Thursday’s central bank decisions. German 10-year yields are up 6bps while the UK equivalent adds 2bps.

US economic data slate includes January jobs report (8:30am), S&P services PMI (9:45am) and ISM services index (10am): January jobs report estimate a headline print of 188k, down from prior 223k with whisper number at 197k.

In commodities, oil headed for a second weekly drop as optimism over a recovery in Chinese demand dimmed and US stockpiles kept rising. Crude futures are little changed with WTI trading near $75.85. Russia’s Kremlin said the EU embargo on Russian petroleum products will further unbalance energy market, according to Reuters. Base metals are mostly lower whilst copper bucks the trend; LME copper tested levels close to USD 9,050/t (vs high 9,091/t) before finding some support. Spot gold is down 0.1% at $1,910.

Bitcoin trades flat in European hours on either side of USD 23,500 awaitng the US NFP.

To the day ahead now, and the main highlight will be the US jobs report for January. Otherwise, in the US we’ve got the ISM services index for January, there’s the Euro Area PPI reading for December, and the final services and composite PMIs for January from around the world. From central banks, we’ll hear from the Fed’s Daly, the ECB’s Visco and BoE chief economist Pill.

Market Snapshot

  • S&P 500 futures down 0.7% to 4,161.00
  • STOXX Europe 600 down 0.3% to 457.99
  • MXAP down 0.2% to 169.86
  • MXAPJ down 0.3% to 555.25
  • Nikkei up 0.4% to 27,509.46
  • Topix up 0.3% to 1,970.26
  • Hang Seng Index down 1.4% to 21,660.47
  • Shanghai Composite down 0.7% to 3,263.41
  • Sensex up 1.6% to 60,865.73
  • Australia S&P/ASX 200 up 0.6% to 7,558.11
  • Kospi up 0.5% to 2,480.40
  • German 10Y yield little changed at 2.14%
  • Euro little changed at $1.0918
  • Brent Futures up 0.2% to $82.37/bbl
  • Gold spot up 0.1% to $1,914.44
  • U.S. Dollar Index little changed at 101.73

Top Overnight News

  • Bullish markets are increasingly pricing in a second-half reversal of the global monetary tightening wave, making it tougher for central bankers to vanquish inflation once and for all
  • Late to the global interest-rate hiking party, the ECB is trying to convince everyone that it will also be one of the last to leave; ECB Governing Council member Peter Kazimir said next month’s planned hike in borrowing costs probably won’t be the last, while Governing Council member Gediminas Simkus said a rate cut in 2023 is “not very likely”; Professional forecasters surveyed by the ECB expect inflation to average 2.1% in 2025
  • Russia will almost triple the amount of foreign currency it plans to sell through early March after a plunge in energy revenue brought it far below the target set in the budget
  • The BOJ’s unrealized losses from its bond holdings grew about 10 times last quarter due to the December policy adjustments that drove up yields
  • China’s policymakers plan to step up support for domestic demand this year but are likely to stop short of splashing out big on direct consumer subsidies, keeping their focus mainly on investment, three sources close to policy discussions said. RTRS
  • China said on Friday that cross border travel between the mainland, Hong Kong and Macau would fully resume from Feb. 6, dropping existing quotas and scrapping a mandatory COVID-19 test that was required before travelling. RTRS
  • CIA Director William Burns said on Thursday the intelligence agency assesses that China’s President Xi Jinping has been a little sobered by the war in Ukraine, but that it would be a mistake to underestimate Beijing and Moscow’s commitment to partnership. SCMP
  • BOE Chief Economist Huw Pill has said policy makers must “enguard against the possibility of doing too much” on interest rates, the latest sign that the quickest tightening cycle in three decades may be near an end. BBG
  • The ECB is likely to raise interest rates again in May after an already signalled hike in March, two policymakers said on Friday, with one arguing that the peak or “terminal” rate is at least starting to appear on the horizon.
  • The number of Russian troops killed and wounded in Ukraine is approaching 200,000, a stark symbol of just how badly President Vladimir V. Putin’s invasion has gone, according to American and other Western officials. NYT
  • The Kremlin on Friday rejected as a “hoax” media reports that U.S. CIA Director William Burns had travelled to Moscow with a secret peace proposal that involved Ukraine ceding a fifth of its territory to Russia. The Swiss newspaper Neue Zürcher Zeitung’s report, which said Burns had made a secret trip to Moscow last month to put forward the plan on behalf of the White House, has also been dismissed by Washington. RTRS
  • Big 3 Last Night: AAPL missed on EPS and revs on the call said the shortfall was driven by China supply disruptions (which have been resolved) while China demand improves (thanks to reopening) and gross margins were guided above the St (due in part to falling commodity costs); AMZN (worst of the 3) w/ the slowdown/miss in AWS (on the call said AWS is set to slow even more); GOOGL missed on EPS/op. income/revs (Google Search and YouTube advertising both were light). Into prints we saw L/O supply. Last night and pre open HFs buying the weakness. GS Securities
  • Turkey’s consumer inflation slowed less than forecast, even as months of deceleration are emboldening policymakers to consider interest- rate cuts ahead of approaching elections. Consumer prices rose an annual 57.7% last month, from 64.3% in December

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mixed as participants digested the latest bout of central bank rate hikes and a slew of earnings releases, while strong Chinese Caixin Services and Composite PMI data also failed to inspire. ASX 200 was led by healthcare and real estate, while the top-weighted financial sector also benefitted amid reports of early merger talks between regional lenders Bank of Queensland and Bendigo & Adelaide Bank. Nikkei 225 briefly breached the 27,500 level as earnings remained in focus with Sony among the best performers after it reported higher 9-month profits, as well as raised its FY net guidance and PS5 sales target. Hang Seng and Shanghai Comp. weakened despite the easing of border restrictions between mainland China, Hong Kong and Macau, while the rebound in Chinese Caixin PMI data also failed to spur risk appetite after the bout of global central bank policy tightening and with China’s Commerce Ministry warning that the nation’s imports and exports face an extremely severe environment on slowing external demand.

Top Asian News

  • Hong Kong Macau Affairs Office said will drop cross-border restrictions between the mainland, Hong Kong and Macau, as well as end pre-arrival PCR testing for some travellers and will resume group tours effective February 6th. Hong Kong Chief Executive Lee also announced that all border points between mainland China and Hong Kong are to resume without quotas on travel, according to Reuters.
  • Chinese policymakers are planning on supporting domestic demand in 2023 but are unlikely to “splash out” on direct consumer subsidies, keeping their focus on investment, according to Reuters sources.
  • China’s Cabinet stated that China’s economy still faces difficult and challenges, according to state media, adding that China’s economic operations are recovering, and will consolidate and expand economic recovery momentum, via Reuters.

European bourses trade mostly lower, with little in terms of news flow since the cash open as participants look ahead to the US jobs numbers. Sectors are now mixed with Energy, Basic Resources, and Healthcare as the top performers, with the former two aided by gains in underlying commodities, whilst healthcare is driven by gains in Roche (+3.0%) and AstraZeneca (+1.7%) whilst Sanofi (-2.9%) slips after poorly-received earnings. Sticking with sectors, the sectoral laggards comprise of Real Estate, Utilities, Construction and Financial Services. US futures are softer across the board with the NQ the underperformer amid disappointing earnings from highly concentrated mega-cap names (AAPL, AMZN, GOOG).

Top European News

  • BoE’s Chief Economics Pill said the UK has had some better times as of late, he is confident yesterday’s hike was necessary and appropriate, and there is still a lot of policy in the pipeline. Pill said the MPC has changed language quite substantially and the MPC’s job is to return inflation to the target and hold it over the medium term. He said he does not want to steer market rates on a day-to-day basis and they have to be prepared for shocks. He said it is important to guard against the possibility of doing too much. He has reasonably high confidence we will see inflation fall this year, focus is on whether inflation declined further ahead, and the notion of whether we are in a recession or not may vary throughout the year, via Times Radio.
  • ECB’s Simkus said inflation has probably peaked but core has yet to do so; 50bps hike in March may not be the last half-point move. He said a rate hike in May is possible, could be 25bps or 50bps but hardly 75bps. Rate reduction this year is unlikely but possible next year if the situation changes. Inflation trends are positive and approaching the terminal rate, according to Reuters and Bloomberg.
  • ECB’s Kazimir said March hike will not bring rates to peak. ECB will decide how many hikes take place beyond March, and fears that inflation could stay at levels too high. He said the fight against inflation is far from won.
  • ECB’s Rehn said the Governing Council intends to raise rates by 50bsp in March, via Twtter.
  • ECB’s Muller said core inflation is a cause for concern, via Bloomberg.
  • ECB’s Wunsch said a 25bps or 50bps rate hike is possible; will not go from 50bps in March to zero in May, and adds that 3.5% terminal rate is the minimum. He said core inflation remains persistent. He said Thursday’s decision was hawkish, market reaction was surprising.
  • ECB Survey of Professional Forecasters: 2023 inflation nudged higher to 5.9%, 2025 seen just above target at 2.1%.


  • DXY has given up earlier gains after testing levels close to 102.00 before warning towards 101.50.
  • EUR and GBP reside as the current outperformers, with the former lifted by hawkish commentary from several ECB members, whilst both currencies benefit from upward revisions to January PMIs.
  • CAD is the lagged as USD/CAD continued its rebound from sub-1.3300 and y-t-d low, while the AUD suffers some contagion from a Yuan retreat.

Fixed Income

  • 10yr USTs is nearer 115-13+ than 115-22+ extremes vs 116-00 at best in the previous session as eyes turn to the NFP.
  • Bunds have been down to 138.56 for a 137 tick retracement from Thursday peak following hawkish ECB commentary.
  • Gilts sub-107.00 at 106.89 having hit 107.78 yesterday, but downside is cushioned by dovishly-received remarks from BoE’s Pill.


  • Crude benchmarks are choppy as the contracts trimmed their earlier modest gains, while complex-specific news flow has been rather light in the European morning.
  • Spot gold is flat intraday but with a downside bias despite the dollar waning throughout the European morning.
  • Base metals are mostly lower whilst copper bucks the trend; LME copper tested levels close to USD 9,050/t (vs high 9,091/t) before finding some support.
  • Russia’s Kremlin said the EU embargo on Russian petroleum products will further unbalance energy market, according to Reuters.


  • US is tracking a suspected Chinese spy balloon which entered US airspace a couple of days ago which US military officials recommended to not shoot down because of safety risks, while President Biden was briefed regarding the spy balloon and asked the military to present options, according to a senior administration official cited by Reuters. It was later reported that Canada’s Department of National Defence was monitoring a possible 2nd balloon incident.
  • Chinese Foreign Ministry, on the US Pentagon suspecting a Chinese spy balloon over US, said speculation and hype are not conducive until the facts are clear, according to Reuters.
  • US CIA Director Burns said China is the biggest geopolitical challenge that the US faces and the CIA assessed that Chinese President Xi has been a little sobered by Ukraine but has serious focus and ambition on Taiwan, according to Reuters.
  • Chinese Foreign Ministry said there is no news to release at this time on US Secretary of State Blinken’s visit to China, according to Reuters.
  • Secretaries of Security Councils of Central Asia, Pakistan, India, China are to meet on Afghanistan in Moscow next week, according to Tass.
  • Reports of air raid sirens in Kyiv before EU-Ukraine summit started, according to AFP.
  • Russia’s Kremlin has rejected reports that the US offered Russia a secret peace plan on Ukraine, according to Reuters.

US Event Calendar

  • 08:30: Jan. Change in Nonfarm Payrolls, est. 189,000, prior 223,000
  • Change in Private Payrolls, est. 190,000, prior 220,000
  • Change in Manufact. Payrolls, est. 7,000, prior 8,000
  • Unemployment Rate, est. 3.6%, prior 3.5%
  • Underemployment Rate, prior 6.5%
  • Labor Force Participation Rate, est. 62.3%, prior 62.3%
  • Average Hourly Earnings MoM, est. 0.3%, prior 0.3%
  • Average Hourly Earnings YoY, est. 4.3%, prior 4.6%
  • Average Weekly Hours est. 34.3, prior 34.3
  • 09:45: Jan. S&P Global US Services PMI, est. 46.6, prior 46.6
  • ISM Services Prices Paid, prior 67.6, revised 68.1
  • ISM Services Employment, prior 49.8, revised 49.4
  • ISM Services New Orders, prior 45.2
  • ISM Services Index, est. 50.5, prior 49.6, revised 49.2

DB’s Jim Reid concludes the overnight wrap

After an action packed week, I’ve been press ganged into attending a fancy dress quiz night at our kids’ school this weekend. The theme is “back to the 90s”. My wife is going as Geri Halliwell and rather randomly I’m going as the late Keith Flint from the band The Prodigy as my wife found a supposedly good outfit for me. I’ve not seen it yet but I have a fake green Mohican, some fake nose studs, a studded collar and numerous fake ear piercings. My wife has her make up box ready as well. I can only hope it’s the 1990s and not the 1890s as we’ll look a bit racy next to Queen Victoria otherwise. For those that voted for us in II last year you’ll be spared pictures. For those that didn’t, you’ll get them when you least expect.

Ahead of that excitement, today we hit another payrolls Friday after an astonishing rally across the board over the last 36 hours. The highlight yesterday was one of the biggest rallies for European sovereigns in a decade as investors grew hopeful that central banks were nearing the end of their hiking cycles. Whilst plenty were questioning how sustainable this rally will prove given the actual decisions and central bank commentary, the results were undeniable. Yields on 10yr bunds (-20.4bps) saw their largest daily decline since November 2011, on the day that Mario Draghi became ECB President. That positivity was evident across the board, with the S&P 500 (+1.47%) hitting a 5-month high, and the NASDAQ (+3.25%) ending the day just shy of entering a bull market (+19.5% from the lows). However, entering that bull market might wait for another day as the big 3 tech earnings after the bell – Apple, Alphabet and Amazon – all disappointed in various ways. Their shares were down -3.2%, -4.6% and -5.1% in after-hours trading. However for some perspective they were up +3.7%, +7.3% and +7.4% respectively in normal trading.

Google’s parent company missed on Q4 revenues, particularly in YouTube ads, which are down year over year. Meanwhile Amazon reported their first annual loss since 2014, posting a net loss of -2.7bn, compared to $33bn in profit over the previous fiscal year. Apple had a poor holiday season that the company blamed in part on supply chain issues due to the Covid policies in China that led to a slower rollout of new products. Against that background, NASDAQ 100 futures are now -1.51% lower, with S&P futures down -0.53%.

The normal hours rally got a big boost from what was at first glance a pretty hawkish ECB announcement before the nuances came through. The hike itself was 50bps as expected, taking the deposit rate up to a post-2008 high of 2.5%. And in a surprise move, they also pre-committed themselves to another 50bps hike in March, which only 2-3 weeks ago had been considered in the balance between 25 and 50. However, markets latched onto several other more dovish signals, in particular that after March they would “then evaluate the subsequent path of its monetary policy.” In addition, President Lagarde acknowledged that inflation risks were now “more balanced”, and that “the recent fall in energy prices, if it persists, may slow inflation more rapidly than expected.” What investors have liked about this week’s central bank commentary is that it will seemingly become more dependent on inflation data after March. The market thinks inflation is tamed and thus central banks will be able to, or will have to, cut rates before year-end. See our European economists’ views here, where they explain why they view yesterday’s decision as the ECB preparing for the third and final stage of the tightening cycle. They maintain their view of a 3.25% terminal rate following a 50bp hike in March and a final hike of 25bp in May.

Even as our view of terminal remained unchanged, investors moved to price in a move dovish back end to this year and beyond. For instance, even as investors moved to fully price in a 50bps move next month, the rate priced in for year-end came down by around 20bps. In turn, that triggered a massive rally for European sovereigns, with declines among 10yr bunds (-20.4bps), OATs (-23.7bps) and BTPs (-39.3bps) that we haven’t seen in years. On BTPs, it was the sixth best daily move since our daily data begins in 1993.

This rally initially wasn’t just confined to Europe though, since the ECB’s move added to pre-existing views that central banks are moving away from the forceful hikes of late-2022, and will instead adopt a more data-driven approach that could soon see a pause in the hiking cycle. This initially caused US Treasuries to rally along with Europe. However, in the NY afternoon, rates gave back some of their gains as expectations on the Fed’s terminal rate ultimately remained unchanged, leaving yields on 10yr Treasuries (-2.4bps) just slightly lower at 3.376%. The effects of that could be seen in financial conditions as well, with Bloomberg’s index for the US easing intraday to its most accommodative level since last February before tightening into the close as rates sold off. Regardless financial conditions remain nearly as loose as we have seen in nearly a year.

A major component of the looser financial conditions has been the rally in equities, with the S&P 500 (+1.47%) posting a third consecutive gain of more than +1% for the first time since October. The backdrop of lower rates meant that tech stocks saw a major outperformance, with the NASDAQ up +3.25%, and the FANG+ index seeing its best day since November with a +6.92% gain prior to the after-hours hiccup. It was much the same story in Europe too, with the STOXX 600 (+1.35%) at a 9-month high, along with advances for the DAX (+2.16%) and the CAC 40 (+1.26%) as well.

Asian equity markets are mixed this morning even as US equities closed on a positive note overnight. As I type, the KOSPI (+0.60%) and the Nikkei (+0.35%) are trading in the green. However, Chinese equities, led by the Hang Seng (-1.82%) and followed by the CSI (-1.67%) and the Shanghai Composite (-1.37%) are sharply lower in morning trading, taking some of the steam out of the strong rally since late October. The weak tech earnings from Wall Street overshadowed optimism about China’s economic recovery as the nation’s service sector expanded for the first time in 5 months in January. Data released showed that the services PMI rose to 52.9 from 48 in December as the sector got a boost from the lifting of strict Covid-19 curbs.

Elsewhere, the final estimate of Japan’s au Jibun Bank services PMI edged up to 52.3 in January, a 3-month high against the prior month’s reading of 51.1. The composite PMI advanced to 50.7 in January from 49.7 in December, moving above 50 for the first time in three months. Meanwhile, yields on Japanese 10yr government bonds fell (-0.9bps) to 0.48%, just below the ceiling of the Bank of Japan’s target range.

Looking forward, today’s main highlight will be the US jobs report for January, which will offer a firmer read on the state of the labour market entering 2023. Our US economists are expecting nonfarm payrolls to have grown by +175k, which would be the weakest since the December 2020 contraction, but would be consistent with a pattern that’s seen declines for 5 consecutive months now. If realised, they see the unemployment rate ticking up a tenth to 3.6%, and they think average hourly earnings will be up by +0.3%. Keep an eye out for the work week hours which was disappointing last month. Ahead of that, yesterday’s labour market data continued the theme of very strong readings, with the initial weekly jobless claims for the week ending January 28 at just 183k (vs. 195k expected). That’s their lowest level since last April, and this isn’t just a blip either, since the 4-week moving average fell to an 8-month low of 191.75k as well.

Finally, the other central bank decision yesterday came from the Bank of England, who hiked by 50bps as expected, thus taking Bank Rate up to 4%. The vote split was 7-2, with the minority preferring to leave rates unchanged. But the decision was seen as dovish, in part because the MPC dropped their previous guidance that they would “respond forcefully” if inflationary pressures were more persistent. Instead, there was a milder form of words that said if there were “more persistent pressures, then further tightening in monetary policy would be required.” Against that backdrop, sterling weakened by -1.18% against the US Dollar, and yields on 10yr gilts were down -30.1bps, which was a larger decline than in most other European countries. Our UK economist Sanjay Raja opines on the meeting here and has reduced his terminal forecast from 4.50% to 4.25%, with 25bps in March being the last hike. There are risks of modest rate hikes in H2. See his piece for more.

To the day ahead now, and the main highlight will be the US jobs report for January. Otherwise, in the US we’ve got the ISM services index for January, there’s the Euro Area PPI reading for December, and the final services and composite PMIs for January from around the world. From central banks, we’ll hear from the Fed’s Daly, the ECB’s Visco and BoE chief economist Pill.

Tyler Durden
Fri, 02/03/2023 – 08:12

via ZeroHedge News Tyler Durden