U.S. Federal Reserve Chairman Jerome Powell addresses reporters after the Fed raised its target rate by a quarter of a percentage point during a news conference at the Federal Reserve Building in Washington, Feb. 1, 2023.
Jonathan Ernest | Reuters
Here are the most important news items investors need to start their trading day:
1. Some room to move
The Federal Reserve raised its benchmark interest rate by a quarter of a point on Wednesday, as expected, but investors jumped at what they saw as slightly softer language from Chairman Jerome Powell. While he said it would be “premature” for the Fed to claim an inflation victory, Powell said the “disinflationary process has begun.” He also said the economy could make a soft landing after all: “My base case is that there will be positive growth this year.” All three major indices closed higher on Wednesday. Now markets will turn their attention to what meta reported Wednesday (see below) and a string of big earnings Thursday: Amazon, Apple, Starbucks and other key names all report after the bell. Read live market updates.
2. Meta’s music to Wall Street’s ears
We are way beyond “Move fast and break things”. It’s all about the “Year of Efficiency” at Mark Zuckerberg’s Meta. After a rough 2022, the Facebook parent told Wall Street exactly what it wanted to hear as it reported earnings after the bell on Wednesday. Zuckerberg said the company is “focused on becoming a stronger and more agile organization.” Meta also lowered its estimated total cost for 2023, while pledging to curtail non-performing or ultimately unimportant projects. The stock ripped about 20% higher in after-hours trading. Still, there are some lingering grounds for doubt, most notably the company’s continued commitment to its hitherto disappointing metaverse business. Meta’s Reality Labs lost $13.7 billion last year and there are no plans to make any cuts from now on.
3. Shell’s eruption year
Shell said last month that windfall taxes imposed by the European Union and the UK following the surge in profits would cost the group about $2 billion.
Paul Ellis | TBEN | Getty Images
Oil colossus Shell on Thursday reported its biggest annual profit ever: $39.9 billion in 2022. That’s more than double the profit for 2021, and it’s well above the previous record of $28.4 billion in 2008. Skyrocketing energy prices, driven by supply problems as a result of the war in Ukraine, the results boosted. Shell follows similar huge earnings reports from rivals Exxon Mobil and Chevron. All told, Big Oil is expected to break annual earnings records overall. This does not go down well with climate activists. “What we saw happening in 2022 is that the oil majors used the high oil prices and the energy crisis to convince investors that the energy crisis should overshadow the climate crisis – and that has led to a setback,” says Mark van Baal, founder of the Dutch activist. shareholder group Follow This, previously told TBEN.
4. It gets worse for Adani
Gautam Adani, billionaire and chairman of Adani Group, at an event at the Port of Haifa in Haifa, Israel, on Tuesday, January 31, 2023.
Kobi Wolf | Bloomberg | Getty Images
A small US-based short-seller has managed to create epic problems for India’s Adani Group, a sprawling conglomerate that includes power generation, ports and food processing. Since Hindenburg Research, the short seller in question, released a report last week accusing Adani of “brutal stock manipulation and accounting fraud over decades,” the company has lost $100 billion in value. Adani, which is led by politically connected tycoon Gautam Adani, called the allegations “nothing but a lie”. However, due to the chaos, Adani called off a $2.5 billion equity offering even though it was fully subscribed.
5. Biden and McCarthy start talking
U.S. House Speaker Kevin McCarthy (R-CA) leaves after addressing reporters following his meeting with President Joe Biden on the looming debt ceiling issue at the White House in Washington, Feb. 1, 2023.
Jonathan Ernest | Reuters
There is no deal yet on the debt ceiling, but President Joe Biden, a Democrat, and House Speaker Kevin McCarthy, a Republican, got the ball rolling on Wednesday. Both sides expressed cautious optimism about the talks as they try to prevent the United States from paying off its debt for the first time ever, which could be catastrophic for the economy. “We have different perspectives. But we’ve both laid out some of our vision of where we want to go. And I believe after I’ve laid out both of them, I can see where we can find common ground,” McCarthy told reporters . In the meantime, the Ministry of Finance has taken measures to prevent a payment default until at least the beginning of June.
– TBEN’s Alex Harring, Jonathan Vanian, Sam Meredith, Ruxandra Iordache, Christina Wilkie and Emma Kinery contributed to this report.
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