GDP cools as firms prep for tariffs

Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news and analysis.

Good afternoon, today's Thursday, January 30th, and I'm your host, Kim Khan. Our top story so far. US GDP grew at an annual rate of 2.3% in Q4, down from the strong 3.1 pace in Q3, and lower than the 2.6% consensus. Growth in consumer and government spending was partly offset by a decline in investment. Inflation picked up some from Q3. PCE prices rose 2.3% quarter on quarter versus 1.5% prior.

And core PCE prices increased 2.5% right in line with expectations and up from 2.2% prior. Joseph Russuelis, RSM US Chief Economist, says firms accumulated inventory during the final quarter of the year to avoid the expected tariffs in 2025, providing a drag of 0.93% on GUP.

So X inventory and trade overall growth increased by 3.1%, which is a better barometer of the direction of the economy, given the uncertainties caused by the shift in trade policy that are likely to arrive this year, he said. Pantheon Macro noted that the 7.8% drop in overall equipment investment is less terrible than it looks, given that aircraft investment has swung even more widely than usual of late due to the Boeing strike that ran from mid-September to early November.

Well, Fargo economists say the numbers remind us it's not just actual policy, but the prospect of such policies that can dictate economic behavior. To the extent your end volatility is tariff related, we'd expect to see similar forces at play in the first quarter among continued tariff threats. But any tariff pulled forward will eventually be met with a low in demand.

Further, while the macro impact from tariffs depends on the size and scope of tariffs implemented, and a stronger dollar in elevated profit margins can help mitigate some of the cost impact, tariffs will likely weigh on growth and boost inflation to some extent this year. In today's trading, the initial unsurprising move after a weaker than expected GDP print of stocks up and yields down unwound quickly. The major stock averages are slightly higher, with treasury yields a little changed.

After yesterday's Fed decision and Jay Powell's presser, some analysts argued we are moving into a new era where the Fed's impact on stocks is dwindling. T.S. Lombard's strategist Stereo Perkins says, Powell yesterday confirmed that the policy has moved from preemptive easing, cutting to prevent bad things happening in the future, to reactive easing, cutting when bad things happen.

But another way, Fed policy isn't a reason to be bullish on stocks anymore. Michael Brown, senior research strategist at Pepperstone, says risks surrounding the policy outlook this year are considerably more two-sided than those present in 2024. Consequently, the Fed put, which is acted as a comfort blanket for risk assets over the last 18 months or so, is no longer present, with a metaphorical strike price for that put falling each month that incoming data remains solid.

Among active stocks, UPS is the biggest decline in the S&P after the company said it reached a deal with Amazon to lower its volume by more than 50% by the second half of 2026. Although well-telegraphed, the decision marks a major shift in the relationship between the two companies, as Amazon has been the company's largest customer, accounting for about 11.8% of UPS' total revenue in 2023.

On the earnings call, CEO Carol Tomay noted that while Amazon's UPS is overall largest customer, it is not its most profitable customer. That lines up with the long-term view of some analysts that the UPS could benefit on the margin front down the road by reducing its reliance on Amazon.

But seeking out for analyst John Bowman says, losing the business may be detrimental to UPS, especially if the slack is picked up by competitors, can more effectively compete with UPS like FedEx. Amazon is going to need a logistics partner and somebody will fill that void. Comcast is tumbling after the company continued to see a decline in broadband and video subscribers. In Q4, domestic broadband customers fell by $139,000 to $31.8 billion.

The company lost 311,000 domestic video customers, which brought the total down to 12.1 million subscribers during the quarter reflecting the diminishing landscape for cable TV. That overshadowed Comcast boosting its annual dividend by 8 cents to $1.32 per share and approving a new $15 billion stock buyback program without an expiration date effective at the end of the month. Another stock that is slumping despite boosting return to shareholders is Altria.

The board authorized a new $1 billion buyback program, but guidance disappointed. Altrius sees 2025 adjusted EPS of 522 to 537, midpoint 529 and a half, versus the 535 consensus. In other news of note, a group of American investors, which includes at least three tech entrepreneurs and top YouTuber MrBeast, is willing to offer more than $20 billion to buy TikTok US from ByteDance.

Jesse Tinsley, the founder of Employer.com and the bids organizer, told Bloomberg that the group secured more than $20 billion for their offer. The group, which includes Roblox CEO Dave Baszuki and head of crypto platform Anchorage Digital Nathan McCauley, estimated it would take $25 billion to secure a deal.

Tinsley said their bid is significantly higher than the $20 billion offer from Arrival Buyer, possibly referring to Project Liberty's bid organized by real estate mogul Frank McCourt and Shark Tank investor Kevin O'Leary. But Tinsley's group has not been in direct contact with ByteDance, which has maintained that the app's US business is not for sale.

And in the Wall Street Research Corner, goodbye tech hello health care. BTMG Chief Market Technician Jonathan Krensky says a period of heightened volatility like we're seeing now can see a shift in market leadership. Krensky noted that on Monday, the momentum-long factor had its worst day since COVID, and while it's still probably premature to call the end-of-tech leadership for this cycle, the declines did do significant damage to tech's relative trend, which was already moderating.

Chip stocks are clearly the focus group within tech right now to see if there is a downside follow-through or stabilization. And giving the weight of tech in the S&P 500, we think it likely remains under pressure and still expect a test of the 200-day moving average later this quarter. On the other hand, health care is among the best sectors this year. We think that should be an upside focus, Krensky said.

That's all for today's Wall Street Lunch. Look for links for stories in the show notes section. Don't forget, these episodes will be up with transcriptions at seekingalpha.com. And for a full suite of news, analysis, ratings, and data on stocks and ETFs, go to seekingalpha.com slash subscriptions.