Kremlin Bans Sales of Russian Oil

MARKET MOVERS

• Kremlin bans sales of Russian oil to countries that impose price cap. Vladimir Putin banned the supply of Russian oil and oil products to countries that impose a price cap, allowing deliveries to those nations only on the basis of special permission* for the Kremlin leader. Mr. Putin Tuesday signed a decree announcing the retaliatory measures which are scheduled to come into effect on Feb. 1 and last through July 1, 2023.

• IBM beat all its large-cap tech peers in 2022 as investors shunned growth for safety. IBM is up 6% in 2022, topping every large-cap tech stock. The company has bolstered its consulting business with small acquisitions and cozied up to fast-growing cloud providers Amazon and Microsoft. IBM generated $752 million in free cash flow* in the latest quarter and paid out $1.5 billion in dividends.

• Southwest cancels 62% of flights. The chaos will prove costly to the airline, with Citi analysts estimating it could shave 3% to 5%* from Southwest’s fourth-quarter earnings. There’s also a reputational cost, with angry travelers stranded over the holiday season and the airline having to apologize, much as it did in a similar collapse after storms in October 2021.

• Oil prices boosted by China optimism. Crude oil prices were finding support to begin a holiday-shortened week after China on Monday took a step toward fully reopening the country to travel. Broader loosening of China’s once stringent COVID-19 curbs has provided support for crude*, which has bounced off nearly one-year lows set earlier this month. China’s COVID restrictions have been seen curtailing crude demand in 2022.

• Chip inventories swell as consumers buy fewer gadgets. The oversupply marks a sharp turnaround from a global shortage during two years of supercharged demand. Consumer appetite for electronics has weakened* against a backdrop of rising interest rates, a falling stock market, and recession fears. Chip inventories are swelling, mirroring what is happening in the wider economy.
  

WHAT TO WATCH

• Apple faces $98 million hit on back taxes in Japan, Nikkei says. The tech giant faces about $98 million in back taxes in Japan, a bill that appears to be tied to bulk sales of duty-free devices to foreign tourists, Nikkei reported. According to the report, Japan’s tax-free shopping for visitors staying less than six months doesn’t apply to purchases for resale purposes.*

• The outlook for 2023 looks gloomy. Analysts think there’s probably a double-digit downside as risk is still present and multiples still need to contract. We have to price in some more fundamentals and Fed fears. Health care, energy, and old-school tech stocks dominated as ports in the storm, while investors ditched pandemic winners struggling to earn money and reeling from higher rates.*

• Home prices fell in October for the fourth straight month. The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, fell 0.5% in October compared with September, the fourth straight month-over-month decline.* A surge in mortgage rates this year brought an end to a pandemic-driven housing boom.

• The single-family rental market is largely immune from the housing recession. The National Association of Realtors estimates a housing gap of between 5.5 million and 6.8 million units, representing several years of housing starts. Until there is a glut of housing in the United States expect to see continued strong occupancy and rental growth. The housing recession is mainly an issue for mortgage originators, real estate agents, home flippers, and home builders.

• Homeowners are projected to spend $448 billion nationally in the first quarter of 2023. That’s about a 34.1% increase from the $334 billion homeowners spent in the first quarter of 2020. The nation’s housing stock is aging, and older homes need repairs, maintenance, and updates. And despite the turmoil in the economy and financial markets, homeowners have high levels of equity they can tap to fund their work.