Highlights

• Overall stocks closed lower yesterday, with the Dow snapping a six day hot streak as investors started to get antsy about the size of the rate hike the Fed is likely to announce tomorrow.

• The employment cost index, a broad gauge of wages and benefits, increased 1% in the fourth quarter, according to the US Labor Department, less than a 1.1% estimate in a Bloomberg survey.

• One stock managed to soar in yesterday’s session: Carvana, the flailing online used car marketplace. Despite still being way down from the highs it hit during the pandemic, it’s up more than 100% from where it started this year.

Big News

It looks like the electric vehicle Black Friday has officially kicked off. Ford announced yesterday that it’ll cut prices on its electric Mustang Mach-E models by as much as 8%.

The move follows the unprecedented and sweeping discounts that rival EV manufacturer Tesla rolled out earlier this month. Both companies hope that making the cars cheaper will convince more customers to buy them.

Why discount now?

Demand for pricey EVs is under threat as high interest rates make financing auto purchases more expensive and recession fears leave people less willing to crack open their piggy banks to snag dream cars. Ford and Tesla may also be considering the government tax credits, worth up to $7,500, for EVs priced under a certain threshold (some Tesla Model Ys and Mach-E models will now be eligible). And there’s more competition from automakers like Nissan and Chevrolet that are producing increasingly cheap EVs.

But it’s not just EVs becoming more affordable.

New car prices have been slowing their ascent, and used cars were 9% cheaper last month compared to a year prior, when your 200k-miles-strong 2006 Corolla was a hot commodity amid supply chain issues and parts shortages.

Not everyone is celebrating. Major automakers, which enjoyed soaring profits last year, are now bracing for a reversal of fortunes and looking at ways to cut costs. But difficulties notwithstanding, many companies are still ramping up EV production, and legacy car manufacturers are pushing forward with electrification goals.

Sustainability News

Carbon disclosure becomes mandatory.

Carbon disclosure is being spotlighted on the international stage, with Belgium, Canada, Chile, France, Japan, New Zealand, Sweden and the United Kingdom among those requiring financial disclosures aligned with the Task Force on Climate-Related Financial Disclosure (TCFD). The United States will follow with the Securities and Exchange Commission’s proposed rule, the Enhancement and Standardization of Climate-Related Disclosures for Investors, which posits that the climate crisis creates financial risks for companies, requiring them to disclose their emissions and prospects in a climate-changing world.

The landscape can be confusing, and it will affect companies in different ways. Overall, there will be stricter standardization aimed at decreasing the mispricing of climate risk by investors and ensuring data that companies provide is comparable and "decision-useful." TCFD and the GHG Protocol, which standardized greenhouse gas reporting, will serve as the foundational principles for future reporting practices.

Scope 3 emissions — those from supply chains and customer use — are an infamously difficult topic within disclosure because they require gathering accurate data from suppliers and suppliers’ suppliers, reaching all the way back to raw material extraction. Prepare to see an increase in regulations and disclosure expectations around this, too, in the near future.

The tide is changing, and fast. Companies that move with the currents, rather than waiting to make changes after regulations become law, will find smoother sailing as disclosure becomes mandatory.

Stock Spotlight

McDonald's

McDonald’s fourth-quarter operating margin and its projection for 2023 both fell short of analyst estimates.

The measure of profitability came in at 43.6% for the most recent quarter, below the average estimate of 45.5% compiled by Bloomberg. Looking ahead, the fast-food giant expects its operating margin to be about 45% in 2023, below the consensus estimate of 46.5%.

Caterpillar

Caterpillar posted lower-than-expected quarterly profit for the first time since the start of the pandemic as raw material costs continued to climb.

The maker of iconic yellow bulldozers blamed higher input costs for driving unfavorable manufacturing expenses across its business segments in the fourth quarter, according to its earnings report. Caterpillar’s adjusted earnings of $US3.86 a share missed analysts’ estimates for the first time in 11 quarters.

Pfizer

Pfizer‘s 2023 forecasts fell short of analysts’ expectations on precipitously declining demand for its blockbuster COVID vaccines and Paxlovid treatment.The company is predicting 2023 adjusted earnings between $US3.25 and $US3.45 a share, well below analysts' average estimate of $US4.31 a share. Revenue for the year will be in the range of $US67 billion to $US71 billion, Pfizer said in a statement. Analysts had expected $US71.7 billion.

General Motors

General Motors expects its earnings momentum to grow this year on higher production volumes after reporting a better-than-expected profit in the last three months of 2022.

The Detroit automaker reported fourth-quarter adjusted profit of $US2.12 a share on Tuesday, beating analysts’ projection for $US1.67 a share. That surpassed a $US1.35 per share a year ago but came in below $US2.25 per share in the third quarter.

Douugh, did you know?

With Fee’s rolling out in the app today, there might be some questions looming in your head about what certain things mean. Specifically what FX fees are, and the difference between BPS and a % based fee.

FX fees (also known as foreign exchange fees) are the charges associated with converting one currency to another. These fees can be applied when you buy or sell foreign currency. The fees can take different forms, such as:

• Exchange rate spread: The difference between a currency pair's bid and ask prices.

• Commission: A flat fee the bank charges for the currency exchange transaction.

• Markup fee: A fee added to the interbank rate to make a profit on the transaction.

Whereas BPS (basis points) and % (percentage) are both units of measurement used to express the percentage increase or decrease of a value. BPS is equal to 0.01% (1/100th of a per cent), so 1 BPS is equal to 0.0001. 

If you need a little more information and explanation on each fee type, head over to our academy article.

^{Investing involves risk. You aren't guaranteed to make money, and you might lose the money you start with.}

^{Douugh Australia Pty Ltd ABN 76 617 000 138 operates under Douugh Australia Pty Ltd AFS License No. 500063. Although we endeavour to ensure the accuracy of information we provide, we do not accept responsibility of liability for any errors or from any loss from its use. Any information provided is general advice only and has been prepared without considering your objectives, financial situation or needs. We don't provide personalised advice or recommendations. Before making any investment decision you should consider whether it is appropriate for your situation and seek appropriate taxation and legal advice. For more details, see our FSG, Terms of Service and other disclosures.}