Here are five things you need to know this morning:
Who’s scared of inflation?: We got a read of inflation in the U.S. that came in hotter than expected, but unlike the reaction to consumer inflation, the markets are taking it in stride. Producer prices in the U.S. advanced more than anticipated both on a headline and core basis. We will watch for how the markets digest this as this week risks seeing the S&P 500 fall for the first time in six weeks. The TSX meanwhile has benefited from the reflation trade and is now positive for the year. Today we will watch for the TSX’s ability to close higher for the week after two straight weeks of losses. A surge in financials and energy have helped to power returns over the past week.
Come on in, the water’s fine: Fairfax Financial had the most profitable year ever in its history. Earnings at Fairfax Financial for the fourth quarter also came in significantly higher driven by gains in its investment portfolio. This comes just a week after short-seller Muddy Waters said Fairfax is overstating the value of some of its assets, which Fairfax pushed back on, calling the allegations “false and misleading.” The conference call is underway right now and I am listening for questions. Muddy Waters posted on X yesterday saying they are still short the stock and they have questions for the management today. Most of them are around clearer disclosure about investments and loans made to Fairfax portfolio companies. Haven’t got to the Q&A portion of the call as I write this, but tune in to BNN Bloomberg for all the insight and analysis. National Bank’s Jaeme Gloyn, who is the most bullish analyst on the street with a $2,000/share price target, is taking comfort in the results saying the results “will support upside in the shares near term.”
The seatbelt sign is on: We will watch shares of Air Canada this morning after many analysts call the airline’s latest set of results disappointing. Earnings came in below expectations but revenue was higher. While Air Canada touts 2023 as a very successful year and promises to grow earnings more than expected in 2024, analysts are focusing on higher costs that are weighing on profit margins. “Q4 came in below expectations (and below our street-low forecast),” wrote RBC’s Walter Spracklin in a note to clients”…which will likely not be well received given trends among U.S. peers for better results off strong top-lines.” Spracklin says that Air Canada’s rosy profit outlook assumes the ability to increase airfare tickets. which he sees as a risk.
Swoosh is slashing: Shares of Nike are trading lower after announcing it will be laying off about 2 per cent of its global workforce. While it didn’t disclose numbers, at last count Nike employs around 84,000 employees. This was telegraphed in December when Nike said they were looking for $2 billion in cost savings. Oppenheimer’s Brian Nagel is downgrading the stock worried about “spotty consumer demand” and “lulls in product innovation”