A daily market update from FS Insight — what you need to know ahead of opening bell.
“Airspeed, altitude, and brains. Two are always needed to successfully complete the flight.” – Pilots’ proverb
Chart of the Day
Good morning!
The travel site Booking.com forecast healthy demand for travel this year, and the view from the airlines like Delta and United, and Alaska Airlines have all forecast record profits. That outlook is based on a demand forecast strong enough to give airlines pricing power.
The growth in demand has been particularly concentrated among the more affluent demographic – customers who are both willing and able to pay more for premium-level products and services. It’s no surprise that airlines are focusing on this demographic. Research released this week shows that affluent consumers account for a greater share of consumer spending than ever before – 49.7%, according to a Moody’s analysis.
Between this demographic trend and strong demand, airlines are showing more willingness to experiment with their frequent-flier programs – making fewer rewards seats available, employing dynamic pricing for rewards redemption, making it more difficult to achieve elite statuses, and imposing surcharges on reward seats that sometimes approach the price of buying the seat outright. It appears that airlines are betting that there are enough bigger-spending, less bargain-driven customers to scale back on efforts targeting consumers hoping for a less expensive way to score free or cheaper flights, upgrades, and perks.
Are the airlines right? It’s hard to say. Airlines are reporting that an increasing number of premium, business, and first-class seats are occupied by customers who proved a willingness to pay for the privilege (rather than those who scored an upgrade as a reward). As an example: in 2010, only about 12% of customers in first-class seats on Delta Airlines domestic flights had paid outright for their seats. That ratio is now around three quarters. It’s reasonable for an airline executive to therefore question the wisdom of offering generous miles-based perks if plenty are willing to cough up the cash instead.
Yet this could prove risky. Airlines often make more on flights paid for with miles than cash. Furthermore, since they first came on the scene, frequent flyer programs have often been more profitable for airlines than core flight operations, generating billions in revenues for airlines as they sell points to partners (particularly credit-card issuers). Miles programs have also been invaluable to helping airlines weather economic downturns, providing revenue and helping them secure financing when customers aren’t flying as much. Such programs can only be sustained with consumer participation. For the moment, airlines are still reporting strong growth in their rewards programs, but a growing number of longtime, high-spending participants are getting disillusioned and abandoning them. Perhaps more worryingly for airlines in the long-term, customers are also abandoning the airline loyalty that such programs were originally designed to foster.
Catch Up With Fundstrat
Good morning!
We believe the White House “put” still exists, as the White House wants to avoid an economy stalling into a recession.
TECHNICAL
The steep slide for US Equities that we’ve seen these past two weeks looks close to bottoming. Technology remains in good shape despite this past week’s decline, and AAII sentiment has reached one of the more bearish levels of all time.
CRYPTO
Mark Newton uses his lens of technical analysis perspective to walk through some key charts and highlight the critical levels he is monitoring for BTC, ETH, SOL, and LTC.
News We’re Following
Breaking News
- Fed’s favorite core inflation measure hits 2.6% in January, as expected CNBC
- Zelensky in Washington to discuss final details of Ukraine-US minerals deal with Trump BBC
- Hundreds in US climate agency NOAA fired in latest cuts BBC
Markets and economy
- Global stocks slide as tariff threats add to big tech jitters FT
- China vows to retaliate as necessary after Trump threatens another 10% tariff hike CNBC
- UK-US trade deal could mean tariffs ‘not necessary’, says Trump BBC
Business
- SEC flags concerns with State Street and Apollo private credit ETF FT
- Six big companies ditching DEI — and 6 that are sticking with it QZ
- Nvidia’s auto business doubled last quarter – here’s why CEO Jensen Huang believes it’s just the beginning YF
- BlackRock, Fidelity challenge hedge funds with trend-chaser bets BBG
Politics
- Judge finds mass firings of federal probationary workers were likely unlawful AP
Overseas
- Mexico extradites wanted drug lord to US in attempt to ward off tariffs FT
Of Interest
- Biodiversity deal agreed months after failed COP16 talks in Colombia SEM
- Measles was eradicated in the US. How did it make a comeback BBG
| Overnight |
| S&P Futures +20
point(s) (+0.3%
) Overnight range: -18 to +21 point(s) |
| APAC |
| Nikkei -2.88%
Topix -1.98% China SHCOMP -1.98% Hang Seng -3.28% Korea -3.39% Singapore -0.65% Australia -1.16% India -1.86% Taiwan flat |
| Europe |
| Stoxx 50 -0.53%
Stoxx 600 -0.31% FTSE 100 +0.15% DAX -0.31% CAC 40 -0.3% Italy -0.14% IBEX +0.03% |
| FX |
| Dollar Index (DXY) +0.1%
to 107.35 EUR/USD +0.06% to 1.0404 GBP/USD +0.02% to 1.2603 USD/JPY +0.33% to 150.31 USD/CNY -0.1% to 7.279 USD/CNH -0.2% to 7.2866 USD/CHF +0.29% to 0.9023 USD/CAD -0.04% to 1.4431 AUD/USD -0.3% to 0.6217 |
| Crypto |
| BTC -4.95%
to 80112.74 ETH -6.71% to 2126.68 XRP -7.14% to 2.0339 Cardano -6.6% to 0.5989 Solana -4.64% to 130.86 Avalanche -6.42% to 21.04 Dogecoin -9.62% to 0.186 Chainlink -8.82% to 13.79 |
| Commodities and Others |
| VIX -1.66%
to 20.78 WTI Crude -1.12% to 69.56 Brent Crude -1.19% to 73.16 Nat Gas -0.23% to 3.92 RBOB Gas flat at 1.997 Heating Oil -0.66% to 2.38 Gold -0.48% to 2863.74 Silver -0.44% to 31.14 Copper -1.5% to 4.511 |
| US Treasuries |
| 1M -1.6bps
to 4.2881% 3M -1.2bps to 4.2839% 6M -2.0bps to 4.2747% 12M -1.7bps to 4.0902% 2Y -0.0bps to 4.0506% 5Y -0.9bps to 4.0645% 7Y -1.0bps to 4.1587% 10Y -1.2bps to 4.2482% 20Y -0.7bps to 4.5589% 30Y -0.9bps to 4.5224% |
| UST Term Structure |
| 2Y-3
M Spread narrowed 0.2bps to -25.4
bps 10Y-2 Y Spread narrowed 0.9bps to 19.6 bps 30Y-10 Y Spread widened 0.3bps to 27.2 bps |
| Yesterday's Recap |
| SPX -1.59%
SPX Eq Wt -0.87% NASDAQ 100 -2.75% NASDAQ Comp -2.78% Russell Midcap -1.1% R2k -1.59% R1k Value -0.31% R1k Growth -2.63% R2k Value -1.0% R2k Growth -2.15% FANG+ -3.48% Semis -6.16% Software -2.65% Biotech -1.3% Regional Banks +0.15% SPX GICS1 Sorted: Fin +0.57% Energy +0.48% REITs +0.39% Cons Staples +0.02% Indu -0.37% Healthcare -0.41% Materials -0.69% SPX -1.59% Cons Disc -1.79% Comm Srvcs -1.84% Utes -2.23% Tech -3.79% |
| USD HY OaS |
| All Sectors +3.6bp
to 330bp All Sectors ex-Energy +3.1bp to 307bp Cons Disc +4.5bp to 300bp Indu +3.4bp to 250bp Tech +1.7bp to 329bp Comm Srvcs +3.1bp to 515bp Materials +5.8bp to 292bp Energy +3.5bp to 319bp Fin Snr +4.1bp to 279bp Fin Sub +1.4bp to 218bp Cons Staples +3.3bp to 302bp Healthcare +1.8bp to 351bp Utes +2.3bp to 239bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 2/28 | 8:30AM | Jan PCE m/m | 0.3 | 0.3 |
| 2/28 | 8:30AM | Jan Core PCE m/m | 0.3 | 0.16 |
| 2/28 | 8:30AM | Jan PCE y/y | 2.5 | 2.6 |
| 2/28 | 8:30AM | Jan Core PCE y/y | 2.6 | 2.79437 |
| 3/3 | 9:45AM | Feb F S&P Manu PMI | n/a | 51.6 |
| 3/3 | 10AM | Feb ISM Manu PMI | 50.5 | 50.9 |
| 3/5 | 9:45AM | Feb F S&P Srvcs PMI | n/a | 49.7 |
| 3/5 | 10AM | Feb ISM Srvcs PMI | 53.0 | 52.8 |
| 3/5 | 10AM | Jan F Durable Gds Orders | n/a | 3.1 |
| 3/6 | 8:30AM | 4Q F Nonfarm Productivity | 1.2 | 1.2 |
| 3/6 | 8:30AM | Jan Trade Balance | -91.25 | -98.431 |
| 3/6 | 8:30AM | 4Q F Unit Labor Costs | 3.0 | 3.0 |
