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FAA Outage Creates Cancellations, Delays

FAA Outage Creates Cancellations, Delays

Wednesday, January 11th, 2023

We wake up to a new market day without any major economic prints or earnings reports hitting the tape ahead of the opening bell, but we do have a news event: the Federal Aviation Administration (FAA) had grounded all domestic flights for a period this morning, as a result of a pilot technology outage across the nationwide system. We’ve since seen restoration of service in Atlanta and Newark hubs, but expect major delays if you were planning to fly anywhere within the U.S. today.

This brings to mind the level of technology in domestic aviation in the first place, which is notably out of date. The major airlines in the U.S., which have finally been enjoying something of a halcyon period with higher prices not curbing pent-up demand post-pandemic, can’t seem to catch a break, long-term. It also brings to mind the massive numbers of calculations at Southwest ( Free Report) more recently, also on technological issues. Southwest also sees a rating downgrade this morning.

After today’s closing bell, we’ll get an important homebuilder Q4 earnings report, from LA-based KB Home ( Free Report) . The stock, a Zacks Rank #5 (Strong Sell) largely on mortgage-rate pressures from the housing market in general that will not abate until the Fed reverses course on interest rates (“A long time,” says Raphael Bostic). That said, KB Home is expected to grow earnings +49% for the quarter, +19% on revenues. The company also is seeking its third-straight quarterly earnings beat.

The big news is still in front of us this week: Consumer Price Index (CPI) figures for December are out tomorrow morning. This, pragmatically speaking, is basically the last chance economic prints have to change the Fed’s mind about hiking interest rates another 50 bps on February 1st. We are looking for the lowest core year-over-year CPI print since December of last year, 5.7%, 90 bps lower than the 6.6% reported in September — the cycle high. Falling much farther than that would be where the narrative shifts about the Fed’s intentions.

Otherwise, the biggest Wall Street banks all report earnings on Friday, which is the unofficial kick-off of earnings season. All are expected to deliver lower earnings growth, with only Wells Fargo ( Free Report) also expected to bring in fewer revenues than in the year-ago quarter. This will be the first major sector to report nearly in full, and will give us a peek into what we can expect otherwise for Q4 earnings.

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Written by Susan Bellini