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Apple Is Not the Economy. Why the Fed’s More Bullish Than Tech.

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One big takeaway from Apple, Amazon and Alphabet earnings on Thursday is that it isn’t easy out there. All complained of weak demand ahead.

The sector is bracing for a slump by slimming down. More than 57,000 tech workers were laid off in the first three weeks of January alone.

But don’t expect that to show up in jobs data just yet. The unemployment rate remains the lowest it has been in decades, and economists say tech cuts are unlikely to have a big impact on the rest of the economy.

Yet everyone seems convinced the Federal Reserve will start cutting interest rates by the end of the year.

The gap between what central bankers say and what investors expect is yawning. That’s not just in the U.S.—European Central Bank President Christine Lagarde on Thursday not only raised rates by more than the Fed, she also promised another outsize move in March. But the euro fell as traders focused on the idea that there’s an end to rate hikes on the horizon.

That’s probably not what Lagarde hoped for. And Fed Chairman Jerome Powell, while not aggressively hawkish on Wednesday, also wasn’t particularly dovish. At one point, he even explained again that it would be worse to stop raising rates too early than to hike too far.

What’s more, there’s a kind of prisoners’ dilemma going on between the Fed and markets now—the more markets price in rate cuts, the less likely the Fed can actually deliver them. Powell wants to be good and sure that inflation is vanquished before he lets up.

Maybe the market is right and rate cuts are in the pipeline. But it seems like a risky bet.

Brian Swint

*** Join Mansion Global reporter Leslie Hendrickson today at noon for a discussion with Danielle Hale,’s chief economist, and Kristina Quesada, a
Douglas Elliman
agent based in San Diego, about emerging luxury markets, real estate trends, and what’s ahead in 2023. Sign up here.

Try your hand at the Barron’s crossword puzzle and sudoku games, now running daily along with a weekly digital jigsaw based on the week’s cover story. To see all puzzles, click here.


Apple Misses Earnings Estimates on Disappointing iPhone, Mac Sales

missed analysts’ expectations for its fiscal first quarter, posting a 5% drop in revenue amid underwhelming sales of iPhones, Macs, and wearables. iPhone sales fell 8% to $65.8 billion in the quarter, whereas analysts tracked by FactSet expected $67.8 billion. Apple shares fell 3.2% after hours.

  • After setting a revenue record in its September quarter, Mac sales declined 29% to $7.7 billion, while analysts had estimated $9.4 billion. Apple warned in November that iPhone 14 Pro and Pro Max shipments would be affected by pandemic-related restrictions at a Foxconn facility in China.

  • Apple’s profit fell 13%, to $30 billion from the year-earlier quarter. Earnings per share of $1.88 was also down from $2.10 a share a year earlier, and below expectations. Revenue from iPads rose 29.6% to $9.4 billion, better than estimates.

  • To date, Apple hasn’t unleashed the massive layoffs hitting other big tech companies. It hired at a slower pace during the Covid-19 pandemic, increasing its workforce by about 20% over three years, The Wall Street Journal reported. CEO Tim Cook said he is stopping hiring in certain areas.

  • Sales in Apple’s services business, including the App Store and Apple TV+ streaming, rose 6% to $20.8 billion. Cook has sought to boost the services unit as a way to strengthen the company’s earnings potential beyond iPhone sales.

What’s Next: Chief Financial Officer Luca Maestri said total revenue growth for the March quarter would be similar to that in the December quarter, and Mac and iPad sales will both be down double-digits from a year ago due to difficult comparisons, but that iPhone sales should accelerate.

Janet H. Cho


Amazon, Alphabet Stocks Fall After Earnings Misses’s
shares fell more than 4% in late trading Thursday after the company posted its least profitable holiday quarter since 2014, and its largest annual loss on record. Its Amazon Web Services cloud-computing revenue and first-quarter outlook also fell below analysts’ expectations.

  • Fourth-quarter sales rose 9%, to $149.2 billion, beating expectations, and net income was $300 million, or 3 cents a share, due largely to a loss on its stake in electric-truck maker
    Rivian Automotive.
    Softness in cloud revenue is consistent with weaker growth at Microsoft’s Azure business.

  • Amazon sees first-quarter revenue ranging from $121 billion to $126 billion, up 4% to 8%, but short of Wall Street’s consensus for $139.2 billion. CEO Andy Jassy said Amazon is “encouraged” by its continued progress in reducing costs and “quite optimistic” about long-term opportunities.

  • An advertising spending slowdownweighed on Google parent
    during the fourth quarter. The company reported earnings of $1.05 a share, on revenue of $76.05 billion. Analysts polled by FactSet expected earnings of $1.18 a share and revenue of $76.18 billion.

  • Revenue growth slowed to just 1% during the quarter. Revenue in the ‘Google Search & Other’ category fell 1.6%, YouTube ads revenue fell 7.8%, and Google network revenue fell 8.9%. Google Cloud revenue grew 32%. Alphabet’s shares fell 5% in extended trading on Thursday.

What’s Next: Alphabet, one of Barron’s 10 top stocks for 2023, has rallied 22% this year but is still down nearly 25% over the past 12 months. Chief Financial Officer Ruth Porat said significant work is under way to improve Alphabet’s cost structure to deliver “long-term, profitable growth.”

Janet H. Cho


Officials Tracking Suspected Chinese Spy Balloon Hovering Over U.S.

U.S. officials are tracking a suspected Chinese surveillance balloon that was detected floating at high altitudes above Montana. President Joe Biden was briefed on the matter and discussed having it shot down, The Wall Street Journal reported. Ultimately officials decided that was a danger to the public.

  • The balloon was spotted on Thursday and was reported flying over Montana after passing over Canada and the Aleutian islands, the Journal reported, citing U.S. officials. It was drifting and remained over the U.S. on Friday morning. Defense Secretary Lloyd Austin was traveling in the Philippines on Thursday, according to his tweets.

  • Pentagon spokesperson Brig. Gen. Patrick Ryder said in a statement the balloon was above the continental U.S. and that the U.S. would continue to track and monitor it closely. He said its altitude was “well above” commercial air traffic and wasn’t a military or physical threat to those on the ground.

  • The Associated Press (AP) quoted an unnamed senior defense official saying the U.S. had “very high confidence” the object is a Chinese high-altitude balloon collecting information. Montana hosts one of the nation’s three nuclear missile silo fields at Malmstrom Air Force Base, it reported.

  • Ryder, in a statement, said similar balloon activity had been spotted in the past several years, and that the U.S. had taken steps to make sure no sensitive information was collected. The AP quoted the unnamed official saying the U.S. has “engaged” with Chinese officials about the matter.

  • China said Friday it is looking into the matter and urged calm, AP reported. “China is a responsible country and has always strictly abided by international laws, and China has no intention of violating the territory and airspace of any sovereign country,” Foreign Ministry spokesperson Mao Ning is reported to have said.

What’s Next: Secretary of State Antony Blinken has been expected to visit China next week, and it isn’t known if that visit will still happen. Reuters reported the meeting with China’s Foreign Minister Qin Gang was slated for Feb. 6 in Beijing, though the State Department hasn’t officially announced it.

Liz Moyer and Patrick O’Donnell


Surges on Report Activist Ryan Cohen Has Taken a Stake

Shares of retailer Nordstrom were spiking more than 30% on Friday after a report that activist investor Ryan Cohen has taken a big stake in the company.

  • The Wall Street Journal reported that Cohen, known for sparking big jumps in meme stocks such as GameStop a few years ago, has become one of the top five nonfamily shareholders of the company.

  • The luxury department store was hit hard by the Covid-19 pandemic and has had a tough time recovering since. Last month it said holiday sales were softer than it had hoped.

  • Nordstrom didn’t immediately respond to a request for comment from Barron’s early on Friday. The Journal cited a spokeswoman as saying the company is open to hearing Cohen’s views and that it will continue to take actions it believes are best for the firm.

What’s Next: Cohen plans to recommend changes to the board, the Journal said, Current member Mark Tritton, the former Bed Bath & Beyond CEO, may be a particular target for removal. Nordstrom is next scheduled to report results on March 2.

—Brian Swint


Merck Lowers 2023 Guidance, But Core Business Is ‘Strong’

fourth-quarter earnings beat analysts’ expectations, but shares fell 3.3% after its 2023 guidance fell short of Wall Street estimates. Merck expects lower sales of its Covid-19 antiviral Lagevrio, but Chief Financial Officer Caroline Litchfield told Barron’s its core business excluding Lagevrio is “strong” and growing.

  • Merck’s top-selling cancer immunotherapy drug Keytruda brought in $5.5 billion of revenue in the fourth quarter, up 19% from 2021. Investors worry that Keytruda could face competition from so-called ‘biosimilars’ (a biologic medical product that is almost an identical copy of an original product) as soon as 2028. Litchfield said Merck is preparing for that within and outside oncology.

  • Bristol Myers Squibb’s
    fourth-quarter earnings beat Wall Street expectations, but revenue fell 5% from 2021 on the impact of foreign exchange and lower sales of its cancer drug Revlimid. Bristol Myers expects 2023 adjusted earnings of $7.95 to $8.25 a share. Analysts forecast $7.99 a share.

  • Other Bristol Myers products performed better in the quarter, including blood thinner Eliquis ($2.69 billion in sales); arthritis drug Orencia ($913 million); and cancer drugs Opdivo ($2.22 billion), Pomalyst ($877 million), and Yervoy ($568 million). Shares rose 2.2% on Thursday.

  • Eli Lilly’s
    stock fell 3.5% Thursday after sales of its diabetes drug Mounjaro fell short of expectations. Fourth-quarter earnings of $2.09 per share crushed estimates, and revenue was largely in line at $7.3 billion. The company is launching four new medicines for “challenging diseases” this year.

What’s Next: Wall Street consensus expects Mounjaro’s sales to skyrocket to around $2.3 billion in revenue this year, on expectations the Food and Drug Administration will approve a weight-loss version of the treatment. Eli Lilly raised its 2023 earnings forecast to a range of $8.35 to $8.55 a share.

Janet H. Cho


Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to

1. For decades this part of the world’s economy has grown at a slower pace than the Chinese and U.S. economies. In 2022, however, it outpaced both, growing GDP by 3.5%. That part of the world is:

a. Africa

b. Eurozone

c. Australia

d. None, China’s GDP grew at a faster pace in 2022

2. The International Monetary Fund raised its 2.7% forecast for global economic growth citing slowing inflation and a resilient consumer. What is the new growth rate prediction?

a. 2.9%

b. 3.0%

c. 3.1%

d. 3.2%

3. Which major oil company reported record annual earnings of $55.7 billion for 2022 as oil prices surged in response to the war in Ukraine and increased consumer demand as global economies recovered from the pandemic?

Occidental Petroleum


Exxon Mobil


4. The Federal Open Market Committee raised interest rates by a quarter percentage point, the slowest pace of increase since last March. The increase followed a half-point hike in December, and how many consecutive three-quarter point increases before then?

a. 1

b. 2

c. 3

d. 4

5. Which pharmaceutical company has been cleared to sell a near-identical version of
blockbuster Humira arthritis drug, ending 20 years of patent protection?


Teva Pharmaceutical Industries


Alvotech Holdings

Answers: 1(b); 2(a); 3(c); 4(d); 5(a)

Barron’s Staff


—Newsletter edited by Liz Moyer, Patrick O’Donnell, Callum Keown


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