Recapping earnings results, executive orders and the latest on tariffs.
Amid watching still soaring financial markets, inaugurations, executive orders and the tragedy of even more California fires this week, I had the personal reprieve to attend my younger sons’ winter concert. They attend an all-boys school, and it should not surprise you that in between the obligatory classics, there was a smattering of more contemporary hits, including from none other than U2. I had goosebumps hearing the lyrics of the always haunting “One” sung by a chorus of young men: “Well it’s too late tonight/To drag the past out into the light/We’re one but we’re not the same/We get to carry each other, carry each other/One!” Bono’s anthem is notable because it acknowledges that even without unity, we are bound together, whether we like it or not.
As changes happen around us, sometimes pressures can build to make modifications to our own plans and circumstances, especially given the many ways we are bound to each other. As we all calibrate to the new administration and the priorities being revealed, it is important to remember that we are building plans for you that aim to transcend a political season and in fact are filled with investments in enduring companies with earnings growth.
Speaking of earnings growth, Netflix on late Tuesday posted earnings that boosted shares as the streaming giant’s big bet on sports helped add a record 18.9 million subscribers in the holiday quarter, ballooning its already sizeable advantage over other players. The company also unveiled price hikes on Tuesday in markets including the U.S., aiming to boost revenue just as it shifts focus from subscriber growth to other performance metrics such as sales.
Meanwhile, American Airlines, Delta Air Lines, United Airlines and Alaska Airlines all announced bumper results. Legacy airlines have benefited from higher ticket prices for domestic flights after budget operators came under pressure and cut unprofitable routes over the summer. In contrast, Boeing reported another disastrous and painful quarter with a $3.5 billion loss. Recall that last year Boeing experienced a seven-week labor strike that ended in November, which halted production, delayed deliveries and resulted in a new labor agreement raising wages by 38%. They have not turned an annual profit in six years, after the fatal crashes of its best-selling 737 Max in 2018 and 2019 and a midair door plug failure in January of 2024 reignited safety concerns. The company ended up delivering roughly half the number of planes expected at the start of 2024.
In a bit of a head-scratcher for parents everywhere, shares of Electronic Arts tumbled after the video game publisher cut its full year bookings guidance, highlighting challenges with sales, especially with its soccer franchise. Perhaps kids are going outside again and actually playing soccer on grass versus on a screen?
Finally, Procter & Gamble posted a solid quarter thanks to stronger sales of household items in both the U.S. and China, Verizon reported its best quarterly wireless subscriber growth in five years, and American Express confirmed that the U.S. consumer is still in business with record revenue growth.
Turning to Trump news, following his inauguration, the president made quick work to fire out executive orders that have most of the country reeling to keep up. As expected, he declared a national emergency at the Mexico border, and reinstated a “Remain in Mexico” policy for asylum seekers while their cases are considered.
One of his boldest moves has been an order to end birthright citizenship for those born to undocumented immigrants. This order is already being challenged, but it demonstrates President Trump’s level of commitment to his campaign promises on this issue.
Likewise, Trump declared a “national energy emergency” and has rescinded former President Biden’s protections around Alaska’s coastal areas. Trump signed an order withdrawing the U.S. from the Paris Climate Agreement and the World Health Organization.
There were also orders dismantling diversity, equity and inclusion (DEI) programs and policies targeting transgender Americans, extensive pardons of January 6 defendants charged with participating in the Capitol riot, a full and unconditional pardon for Ross Ulbricht, the creator of the unlawful Silk Road marketplace who was sentenced to life in prison in 2015, and an order to promote the advancement of cryptocurrencies and to work toward developing a national digital asset stockpile.
Given the market’s technology tilt, Trump’s move to rescind the Biden executive order regulating AI got notice this week. That executive order had required artificial intelligence companies to share safety test results and other information with the federal government. It also created the U.S. AI Safety Institute inside the Commerce Department to create voluntary guidelines and best practices for AI use. Oh well, so much for AI safety.
It was also announced that OpenAI, Softbank and Oracle are planning a joint venture called Stargate for AI infrastructure, supported by a billions-of-dollars pledge from the federal government under the Trump administration. This was exciting for everyone but Elon Musk.
But the biggest news of the week was Trump cooling some of his rhetoric on tariffs. We started on Monday with news that Trump planned to put a 25% tariff on products from Canada and Mexico beginning on Feb. 1, and an additional 10% tariff on Chinese products by the same date. His threat left just 10 days before significant levies could go into effect on the U.S.’s three largest trading partners, a move that could throw American diplomatic relationships and global supply chains into disarray.
Last night, President Donald Trump said he’d prefer not to have to impose tariffs on China: “We have one very big power over China, and that’s tariffs, and they don’t want them,” Trump told Fox News host Sean Hannity in an interview that aired Thursday in the U.S. “And I’d rather not have to use it. But it’s a tremendous power over China.” A reprieve for now, maybe, but we remain very cautious on this treacherous tariff territory that could inflict serious damage on many stocks priced for perfection.
Next week brings a Federal Reserve meeting, the first following President Trump’s address to an assembly of global leaders at the World Economic Forum in Davos yesterday, where he said, “I’ll demand that interest rates drop immediately” in his first strike at Fed officials in his new term.
Enjoy your weekend, as it appears we will have another full week of news ahead of us.
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