Axios Closer

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February 13, 2024

🎉 Happy Mardi Gras! Have a pączki for us.

Today's newsletter is 694 words, a 2½-minute read.

🔔 The dashboard: The S&P 500 closed down 1.4%, as January's inflation reading came in hotter than expected. (See below.)

  • Biggest gainer? Ecolab (+9.0%), the water solutions company, broke a revenue milestone and forecast higher-than-expected adjusted profit for 2024.
  • Biggest decliner? Moody's Corp. (-7.9%), the credit ratings agency, delivered disappointing revenue and earnings for the fourth quarter.

1 big thing: Propped up by prices

Illustration: Aïda Amer/Axios

The surprisingly high rate of price increases in January can be traced in part to a continued trend of sticker hikes by some of America's biggest consumer goods companies, Nathan writes.

Why it matters: Today's Consumer Price Index figures exceeded expectations and reignited concerns about inflation, triggering a market sell-off and ending any holdout hopes for a Fed rate cut in March.

  • Prices rose 0.3% in January from December and 3.1% from a year ago.

Between the lines: Several major companies say price increases are continuing to prop up their sales figures:

  • Coca-Cola's fourth-quarter organic revenue rose by 12%, three-quarters of which was driven by price/mix. In North America, volume was down by 1%.
  • For cereal maker WK Kellogg, price/mix was up 7.5% in the fourth quarter, while volume was down 10.1%.
  • At beer giant Molson Coors, price/mix was up 4.2% in the fourth quarter, while volume rose only 0.8%.

What they're saying: "U.S. consumer spending power has held up pretty strongly," Coca-Cola CEO James Quincey said today on a conference call. But "there's a section of the population that has come under pressure from ... the real spending power squeeze from the inflationary effect."

The other side: Watchdog group Accountable.US says the food industry is engaged in "gross profiteering" at the expense of consumers.

The big question: Was this just a one-month blip or will consumer prices continue to outpace expectations?

  • There's "plenty of time to re-establish the disinflation narrative if (as we expect) the January inflation data prove to be a blip rather than the start of a new trend," Bank of America economist Stephen Juneau wrote today in a research note.

2. Charted: Love can hurt

Data: U.S. Federal Trade Commission; Chart: Axios Visuals

This Valentine's Day, keep an eye out for romance scams, Nathan writes.

  • More than 64,000 cases were reported to the FTC in 2023, with losses totaling $1.14 billion.

Threat level: While frequency has fallen, their median loss of $2,000 per victim makes them the costliest of any form of imposter scam, including business or government, the FTC notes.

How it works: The typical romance scammer contacts their target through social media, feigning love and deceiving people into sending money — often in the form of cryptocurrency or gift cards.

The bottom line: "A good rule of thumb: sad stories are usually scam stories," the FTC says.

3. What's happening

📺 CBS owner Paramount Global is cutting about 800 jobs, days after record Super Bowl viewership. (Bloomberg)

🧠 ChatGPT will create a digital memory to help personalize its responses. (Axios)

4. Learnings from earnings

Illustration: Natalie Peeples/Axios

Here are Nathan's takeaways from key major earnings reports today:

🏨 Marriott International: The hotel giant said it sees growth "normalizing" this year. Investors sent the stock down 5.6% — down from its all-time high last week.

🪀 Hasbro: This is a company in search of answers. The toymaker's full-year revenue fell 15%, and it now it expects all three of its major segments to report sales declines in 2024.

🍔 Restaurant Brands International: Like many of its competitors, the fast-food giant — whose brands include Burger King, Popeyes and Tim Hortons — is experiencing challenges due to the "conflicts in the Middle East."

5. Supply chains are like a box of chocolates...

Chocolate truffles are prepared and packaged at Katherine Anne Confections, an artisanal chocolate shop and cafe in Chicago. Photo: Scott Olson/Getty Images

The price of Valentine's Day chocolates is especially bitter this year, Nathan writes.

State of play: Cocoa futures "have skyrocketed," doubling over the last 12 months, CNN reports.

Between the lines: "Climate issues in West Africa – home to more than 60% of global cocoa production — are damaging crop yields, constraining cocoa supply and causing prices to soar," according to CNN.

  • Candymaker Hershey is cutting up to 5% of its workforce as the increased cocoa prices undermine its profitability, Reuters reported.

What they're saying: "Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business," Hershey CEO Michele Buck told investors on Thursday.

💭 Nathan's thought bubble: I've been trying to cut down on sugar lately — little did I know that this would amount to a savings plan, too.

6. What they're saying

"So, my name is Ackman — it's like Activist Man."
— Activist investor and Harvard antagonist Bill Ackman, to New York magazine, on his belief in nominative determinism: the theory that people pursue careers based on their names.

Today's newsletter was edited by Pete Gannon and copy edited by Sheryl Miller.

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