“Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria,” — Franklin Templeton

1. 4Q GDP up 2.9% in 4Q, Still Risks a Stall in 2023 — Gross domestic product rose at a 2.9% annualized pace, down from 3.2% in the third quarter. A separate report on labor markets published Thursday also pointed to a resilient economy, rather than one on the verge of a slump, with weekly jobless claims unexpectedly falling. For the Fed, which has hiked interest rates at the steepest pace in a generation over the past year, the data suggest that there’s still a path to what’s known as a “soft landing.” That’s a scenario in which tighter monetary policy cools household spending and lowers inflation – but avoids squeezing the economy so hard that it ignites mass layoffs nationwide.
2. Corporate Layoffs Spread Beyond High-Growth Tech Giants — this week, four companies trimmed more than 10,000 jobs, just a fraction of their total workforces. Still, the decisions mark a shift in sentiment inside executive suites, where many leaders have been holding on to workers after struggling to hire and retain them in recent years when the pandemic disrupted workplaces. Unlike Microsoft Corp. and Google parent Alphabet Inc., which announced larger layoffs this month, these companies haven’t expanded their workforces dramatically during the pandemic. Instead, the leaders of these global giants said they were shrinking to adjust to slowing growth, or responding to weaker demand for their products. The U.S. labor market broadly remains strong but has gradually lost steam in recent months. Employers added 223,000 jobs in December, the smallest gain in two years. The Labor Department will release January employment data next week.
3. Consumer Spending Fell 0.2% in December as Inflation Cooled — spending by U.S. households decreased 0.2% in December from the prior month, the Commerce Department said Friday, compared with a downwardly revised 0.1% decrease in November. Households cut spending on goods last month and increased spending slightly on services. The personal-consumption expenditures price index—the Federal Reserve’s preferred gauge of inflation—rose 5% in December from a year earlier, after increasing 5.5% in November.
The core PCE-price index, which captures underlying inflation after removing volatile food and energy prices, rose 4.4% in December from a year earlier—its slowest pace since October 2021. That compared with 4.7% in November. The central bank aims for 2% annual inflation.
4. Tesla Has Become One of the Hottest Stock-Option Trades on Wall Street — Tesla options trading has surged recently: Nearly three million contracts now change hands on an average day, according to Cboe Global Markets data. That is up from 1.5 million a year ago and more than any other stock. Only wagers on the SPDR S&P 500 ETF outpace those on Tesla. Tesla now accounts for roughly 7% of all options trading on an average day, based on Cboe and OCC data. On Jan. 6, the busiest day on record, more than 5.2 million contracts traded, nearly 10% of all options. Activity in Tesla options surpassed volumes tied to the Invesco QQQ exchange-traded fund—which tracks Nasdaq-100 stocks—in December for the first time in nearly two years. And it edged out trading in Apple Inc. options on a sustained basis in July, a notable feat for the S&P 500’s now sixth-largest company by market cap to leapfrog the leader.

The week ahead — Economic data from Econoday.com: