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Trade Wars
The Deflation Doom Loop Trapping China’s Economy
Across China’s economy, consumers aren’t spending enough and producers are making too much. That leaves companies all along the supply chain earning less. Many feel they have no choice but to lower prices to unload inventory, eating into profits. With less money on hand, businesses are limiting wage growth, pausing hiring and shedding employees, which means workers have less to spend, continuing the vicious cycle.
China managed to keep overall economic growth steady at 5% last year thanks to robust exports. The country is making extraordinary leaps in cutting-edge technology, from artificial intelligence to robotics. Its ability to produce everything from rare-earth minerals to commercial ships is giving it a leg up in its trade war with the U.S. But its relentless pursuit of growth through manufacturing has also created a lopsided economy, with much of it stuck in a deflationary spiral. China’s GDP deflator, a broad price gauge, has been negative since 2023, a sign of inadequate demand at home.
Read more at The WSJ
Amazon, UPS Announce Layoffs
Amazon said it would cut around 16,000 corporate employees, the latest step in the technology giant’s efforts to slim down its workforce. The first round of cuts in October led to around 14,000 white-collar employees receiving pink slips. At the time, people familiar with Amazon’s plans said the company was targeting around 30,000 job cuts, around 10% of the corporate workforce. On Tuesday, Amazon said it was shutting down its Fresh and Go grocery stores, after deciding to focus its efforts on expanding Whole Foods Market stores and same-day deliveries of fresh food from warehouses. As a result, the company is laying off employees who helped run the Fresh and Go businesses, according to an internal memo reviewed by The Wall Street Journal. - WSJ
United Parcel Service will cut up to 30,000 operational roles and shut another 24 facilities in 2026, the world's largest package delivery company said on Tuesday, as part of a planned shift toward higher-margin shipments. Last year, the company eliminated 48,000 jobs, launched driver buyouts and closed operations at 93 buildings, targeting about $3 billion in savings this year. UPS said in January last year that it would accelerate a plan to slash millions of low-profit deliveries for Amazon.com, its largest customer and a growing delivery rival, calling the business "extraordinarily dilutive" to margins. - NBC
Chip Equipment Giant ASML Says AI Boom Fuels Record Orders, Gives Upbeat 2026 Guidance
ASML reported on Wednesday orders that smashed past expectations while 2026 sales guidance was also ahead of estimates as AI demand continues to support the Dutch chip giant’s business. Bookings, one of the most closely-watched metrics from investors, came in at 13.2 billion euros ($15.8 billion) in the fourth quarter of 2025, ahead of analyst expectations of 6.32 billion euros, according to Visible Alpha, as cited by Reuters. This was a record quarter for orders, according to ASML’s finance chief Roger Dassen.
The company said it expects net sales in the current quarter of between 8.2 billion and 8.9 billion euros and total sales for 2026 to come in at between 34 billion euros and 39 billion euros. The mid-point is above analyst expectations of 35.1 billion. ASML previously said it does not expect 2026 total net sales to be below 2025. The company’s new forecast points to revenue growth of between 4% and 19% compared to 2025, signaling an improvement on its prior commentary on 2026, when a rise in revenue was uncertain.
Read more at CNBC
Other Tech Company Earnings
International Business Machines (IBM) stock surged 8% in extended trading after growth in the company's software business drove 12% revenue growth for the fourth quarter. Revenue increased to $19.69 billion, beating forecasts of $19.21 billion, according to Bloomberg consensus estimates. Software revenue was up 14% in the quarter, Consulting revenue increased 3%, while Infrastructure revenue rose 21%. IBM has focused on its Hybrid Cloud and Red Hat software platforms, which have been primary drivers of the stock's 30% gain over the past year. Earnings per share came in at $4.52, compared to estimates of $4.32. – Yahoo Finance
Meta reported fourth-quarter earnings on Wednesday, providing stronger-than-expected sales guidance that caused shares to rise as much as 10% in after-hours trading. Earnings per share were $8.88 vs. $8.23 estimated and revenue was $59.89 billion vs. $58.59 billion estimated. The company said fourth-quarter sales rose 24% year-over-year. Its advertising business generated revenue of $58.1 billion for the period. Advertising made up nearly 97% of the company’s overall revenue for the quarter. Meta said it expects first-quarter sales to come in the range of $53.5 billion to $56.5 billion, ahead of analyst estimates of $51.41 billion. - CNBC
Tesla reported better-than-expected fourth-quarter results after the bell on Wednesday, but revenue for the year dropped 3%, the first time on record the company has recorded an annual decline. Earnings per share were 50 cents, adjusted vs. 45 cents, estimated and revenue was $24.90 billion vs $24.79 billion, estimated. Auto sales have been sluggish in recent quarters for Tesla, as the company faces an onslaught of competition in various parts of the world, most notably from BYD in China. Full-year revenue fell to $94.8 billion from $97.7 billion in 2024, the company said in an earnings release. The decline was caused, in part, by a “decrease in vehicle deliveries, and “lower regulatory credit revenue,” Tesla said. - CNBC
Microsoft shares fell 5% in extended trading on Wednesday after the software maker posted slowing cloud growth. Earnings per share were $4.14 adjusted vs. $3.97 expected and revenue: $81.27 billion vs. $80.27 billion expected. Net income, at $38.46 billion, or $5.16 per share, was up from $24.11 billion, or $3.23 per share, in the same quarter a year earlier. Adjusted earnings exclude impact from investments in OpenAI. The company’s gross margin was the narrowest it’s been in three years, coming in just over 68%. Revenue from Azure and other cloud services grew 39%. – Yahoo Finance
Activist Investor Elliott Weighs Tender Offer for Toyota Industries
Activist investor Elliott Investment Management is considering a tender offer for Toyota Industries, the Nikkei business daily reported on Wednesday, in what could further complicate an effort by the Toyota group to take the forklift maker private. Elliott has criticised the auto group's bid for Toyota Industries, at 18,800 yen ($123.21) a share, as too low, calling on shareholders not to tender into the revised offer price. Toyota Industries' shares closed at 19,585 yen on Wednesday before the Nikkei report.
The take-private plan, first proposed last June at 16,300 yen per share, has come under fire from investors criticising what they argued was an opaque valuation methodology and a process that failed to protect minority shareholder interests. The transaction is being closely watched by global investors as it coincides with Japan's push to unwind cross-shareholdings and bolster corporate governance standards. Toyota Motor, group real estate company Toyota Fudosan and Toyota Chairman Akio Toyoda are aiming to take the company private.
Read more at Reuters
Pentagon Taking Hatchet to Acquisition Regulations; 2,700 Rules Eliminated
The Pentagon in its campaign to eliminate red tape has excised thousands of Federal Acquisition Regulation rules from its books, a senior Defense Department official said Jan. 27. Michael Duffey, undersecretary of war for acquisition and sustainment, said 2,700 FAR and Defense Federal Acquisition Regulation Supplement mandates have been eliminated so far. Cutting the red tape began immediately after Secretary of War Pete Hegseth announced the Acquisition Transformation Strategy Nov. 7, Duffey said in a keynote speech at the APEX Defense conference in Washington, D.C.
“We're working through what kind of metrics do we want to measure ahead of outcomes that give us the clearest, most precise insight into whether or not we're headed down the right path,” he said. Meanwhile, instead of dictating to industry exactly what the U.S. military needs, the portfolio managers will lay out the problems that need solving, he said. The Pentagon currently has three priority problems it wants help with: to be able to see and communicate in a denied environment; defeat swarms of autonomous drones; and deliver supplies to distributed forces under constant threat, he said. “Then we challenge the brightest minds in this room and across the nation, in our labs, our startups, our commercial and defense corporations alike, to compete on a level playing field to solve our hardest problems. We unleash innovation instead of constraining it,” Duffy said.
Read more at National Defense
Contract to Expand B-21 Production Coming by March
Northrop Grumman expects to strike a deal with the Air Force to accelerate B-21 bomber production by the end of March, CEO Kathy Warden said Jan. 27. Warden also said the Pentagon and Northrop have agreed to a third lot of low-rate initial production for the B-21 as the secretive bomber moves closer to operations. Congress approved $4.5 billion for the “expansion of production capacity” for the B-21 as part of a massive reconciliation package passed last July, and officials have been hammering out the details even before that.
The contract will be large. The Air Force outlined plans in its 2026 budget request to spend all $4.5 billion from the reconciliation bill this fiscal year: nearly $2.4 billion in research and development and $2.1 billion in procurement. Warden did reveal that Northrop plans to invest between $2 to $3 billion over multiple years for “facilitizing for that acceleration,” though she did not explain what that meant. Northrop previously announced in April that it had spent $477 million on a “process change” to “enable a higher production rate.” The exact production rate for the B-21 remains classified, though sources had previously suggested it is around seven per year.
Read more at Air and Space Defense
Tesla to Invest $2 Billion in Elon Musk’s xAI, Cancel Two EV Models
Tesla said it entered into an agreement on Jan. 16 to invest in xAI’s Series E funding round. Tesla shareholders had previously voted down a proposal that asked the board to invest in the startup, with more “no” votes and abstentions than “yes” votes. SpaceX also invested $2 billion in xAI, a competitor to OpenAI, The Wall Street Journal reported last year.
Musk also announced the end of production for its Model S and Model X higher end vehicles, which have seen sluggish sales compared with its other EVs. Tesla will use the Model S and X factory space in Fremont, Calif., to manufacture Optimus robots, Musk said.“There’s still obviously many who doubt our ambitions for creating amazing abundance, but we’re confident it can be done,” Musk told investors. Musk said the company still plans to start production on Cybercab, a fully autonomous two-seater with no steering wheel or pedals, in April.
Read more at the WSJ
John Deere Details New Excavator Plant and Distribution Center
Deere & Co. has identified two capital investments totaling about $85 million as part of the $20-billion commitment to U.S. manufacturing that the company announced last summer. "Our investment in these new facilities underscores John Deere's dedication to strengthening the backbone of American industry and supporting local economies," stated chairman and CEO John May.
The larger of the two investments will be an expansion of its current manufacturing operation in Kernersville, N.C., where the Deere will begin production of “future generation” excavators now manufactured in Japan. That location now produces various models of hydraulic excavators and electric battery packs and charging systems. A new, 380,000-sq.-ft operation will produce smaller, 6- to 10-metric ton excavators (6–10 metric tons.) Employing approximately 150, it will “produce the only excavator designed, developed, and manufactured in the U.S.,” according to Deere. The second project, already in progress and also expected to employ 150, will be a new distribution center near Hebron, Ind., to aid in delivery of equipment and parts. Deere’s principal North American Parts Distribution Center, Milan, Ill., will remain.
Read more at American Machinist
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