Before the Open (Oct 25-29)

Good morning. Happy Friday.

The Asian/Pacific markets were split with big movers in both directions. China, New Zealand and Indonesia did well; Hong Kong, South Korea, India, Australia and the Philippines were weak. Europe, Africa and the Middle East are currently weak. Poland and Hungary are up, but Denmark, Germany, Russia, Greece, Finland, the Netherlands, Sweden and the Czech Republic are down. Futures in the States point towards a moderate gap down open for the cash market.

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The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down. Bitcoin is flat.

Stories/News from Seeking Alpha…

Meet Meta

Facebook (NASDAQ:FB) CEO Mark Zuckerberg used his keynote address at the Connect conference on Thursday to unveil the social media giant’s new corporate identity: Meta. “Our mission remains the same,” he declared. “We’re still a company that designs technology around people, but now we have a new North Star. From now on, it’s going to be Metaverse first.” According to Zuckerberg, the Metaverse is an “embodied internet,” or the “next chapter of the internet,” where people can “interact in immersive, 3D and shared digital worlds.”

Snapshot: The rebranding comes at a time when the social network is reeling from a massive internal document leak, as well as a ramping up of regulatory pressure and Congressional testimony. The move wouldn’t just clear the company of bad vibrations, but follow in the footsteps of Google’s (GOOG, GOOGL) parent company changing to Alphabet. Meta wants to be known for more than social media and a separate parent name could put Facebook under a larger umbrella, along with Instagram, WhatsApp, Oculus and more.

As part of the re-branding, Meta will begin trading under the ticker symbol MVRS on Dec. 1. Shares climbed as much as 4% following Zuckerberg’s announcement, though they pared gains after the head of the firm’s Metaverse division cautioned investors that massive investments in the burgeoning technology might take more than a decade to fully pay off. “The Metaverse vision for us is a 5-, 10-, 15-year journey,” Vishal Shah told CNBC.

FAANG in flux: There have already been some contortions since Jim Cramer coined the FANG term in 2013 to refer to Facebook, Amazon (AMZN), Netflix (NFLX) and Google. It then moved to FAANG to accommodate Apple (AAPL), and Netflix later made room from Microsoft (MSFT) in some iterations, leading to FAAMG. While there was no appetite to change when Google became Alphabet – though Cramer did flag FAAAM for some time – Facebook’s move does allow for some new possibilities (post ideas in the comments section).

More Big Tech

Investors didn’t receive good news from Apple (AAPL) on Thursday, with shares falling 3.7% AH to $146.99. The iPhone maker can’t meet demand for its products, especially as the holiday season approaches, due to supply chain problems around the world. Looking ahead, CEO Tim Cook was unable to give a timeline for the chip shortage to ease, saying “it is unclear how long it will last” and it depends on how the economy performs in 2022.

By the numbers: Earnings came in at $1.24 a share, meeting expectations, but the $83.4B revenue figure missed estimates by $1.6B (for the first time since 2018). Sales were impacted by $6B in “industry-wide silicon shortages,” as well as “COVID-related manufacturing disruptions.” The company generated $38.9B in iPhone revenue (+47% Y/Y), Services totaled $18.3B (+26% Y/Y), Mac sales reached $9.2B (+2% Y/Y), iPad notched $8.3B (+22% Y/Y) and “Wearables, Home and Accessories” brought in $8.8B (+11% Y/Y).

Quarterly results didn’t look much better at Amazon (AMZN), which badly missed earnings and revenue forecasts for the third quarter. CEO Andy Jassy additionally said the retail giant expects to take on “several billion dollars” of extra costs in its consumer business in Q4 due to labor shortages, higher employee costs, global supply chain constraints and increased freight and shipping costs. “It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners,” he declared, as AMZN shares slipped 4% AH to $3,446.

For the first time ever: Revenue from Amazon services, like AWS, advertising, third-party seller services and Prime subscriptions, surpassed the retail sales division ($54.9B vs. $49.9B during the quarter).

GDP slows

Supply chain problems were on full display yesterday as the U.S. economy grew at its slowest pace in more than a year. GDP expanded at an inflation-adjusted 2% annual rate in Q3, slowing from a 6.7% pace in the previous quarter and below the 2.7% consensus penciled in by economists. Meanwhile, the pace of core inflation, the Fed’s preferred gauge, moderated somewhat, decelerating to 4.5%, from the 6.1% increase seen in the second quarter.

Bigger picture: Growth was hit by two main factors. The first was a resurgence in COVID infections (due to the highly contagious Delta variant) which led to additional labor shortages, factory shutdowns and supply bottlenecks. Catalysts like government stimulus, business reopenings and vaccination campaigns – which helped GDP grow at a robust rate in the first half of 2021 – also faded this past quarter.

Equities continued to march towards record highs despite the data, though futures edged down overnight following disappointing earnings from Apple (AAPL) and Amazon (AMZN). “We had a temporary set of impediments coming from a resurgence of the coronavirus that should ease as we move through the quarters ahead,” noted Carl Tannenbaum, chief economist at Northern Trust. However, much of Corporate America is seeing things as a little more than “transitory,” based on earnings calls heard over this past week.

From the transcript: “We don’t see the raw material or the inflation environment slowing down in any way,” 3M (MMM) CFO Monish Patolawala said on Tuesday. “Next year we anticipate a more challenging inflation environment,” added General Electric (GE) CFO Carolina Dybeck Happe. “On the cost side of the equation, we do not see any meaningful improvement until well into 2022,” declared Sherwin-Williams (SHW) CEO John Morikis, while Kimberly-Clark (KMB) CFO Maria Henry announced, “I think the headwinds and the increased distribution costs will certainly be with us into 2022.”


There’s a lot on the table for the future of the energy market as world leaders meet this weekend in Glasgow, Scotland. The talks, known as COP26 (Conference of the Parties’ 26th annual summit), will be eyed for clues to how a faster transition toward a zero-carbon economy will affect everything from investing sectors to individual stocks. Plans are expected to detail methods of cutting emissions, financing the steps away from fossil fuels and launching a tradable credit system that would offset polluting activities.

Quote: “For investors, current climate trends suggest making environmental considerations a part of their long- and short-term portfolio strategies,” said Sarah Norman, senior investment strategist at Bank of America.

The total cost of the transition is around $150T, per BofA, while decarbonization efforts could boost global inflation by up to 3% annually (as central bank balance sheets rise by $500B per year). “It’ll certainly be expensive, but we believe it can be done with technology, the economy, markets and ESG joining forces.” BofA also estimates that a third of global equity inflows are currently headed to funds with a sustainability label.

Cost of inaction: Besides disastrous environmental consequences for the planet, Bank of America forecasts that over 3% of GDP would be lost every year by 2030, growing to $69T by 2100. Around 5% of global equity stock market value (approximately $2.3T) could also be wiped out by climate policy re-pricing, with a “potentially extreme hit to corporate earnings for certain sectors.” Meanwhile, BofA says those looking to benefit from climate solutions should look to these names ahead of the COP26: NextEra Energy (NYSE:NEE), Enphase Energy (NASDAQ:ENPH), Generac (NYSE:GNRC), Lucid (NASDAQ:LCID) and Waste Connections (NYSE:WCN).

Today’s Economic Calendar
8:30 Personal Income and Outlays
8:30 Employment Cost Index
9:45 Chicago PMI
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
3:00 PM Farm Prices

Companies reporting earnings today »

What else is happening…

Roblox (NYSE:RBLX) is a better metaverse play than Facebook (NASDAQ:FB) – Tao Value.

Zendesk (NYSE:ZEN) to acquire Momentive (NASDAQ:MNTV) and its SurveyMonkey platform.

House panel grills Big Oil in climate ‘disinformation’ hearing.

Caterpillar (NYSE:CAT) climbs higher after easy Q3 earnings beat.

Coca-Cola (KO) nears acquisition valuing BodyArmor at $8B – Bloomberg.

Starbucks’ (NASDAQ:SBUX) comparable sales growth comes in below expectations.

SEC is said to not allow leveraged Bitcoin (BTC-USD) ETF – WSJ.

Lucid (NASDAQ:LCID) surges after confirming cars are finally out in the wild.

Travel rebound sends Hertz (OTCPK:HTZZ) to quarterly profit.

Merck (NYSE:MRK) sees up to $7B in sales of COVID pill through end of 2022.


Good morning. Happy Thursday.

The Asian/Pacific markets closed mostly down. Japan, China, Hong Kong, India, Malaysia, Indonesia and the Philippines posted the biggest losses. Europe, Africa and the Middle East are currently mixed. France, Greece, South Africa and Portugal are up; Russia, Finland, Norway, Hungary and Sweden are down. Futures in the States point towards a moderate gap up open for the cash market.

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The dollar is up. Oil is down; copper is up. Gold is up; silver is down. Bonds are down. Bitcoin is up.

Stories/News from Seeking Alpha…

Flatten the curve

A flattening of bond yields took place on Wednesday as rate traders reassessed their expectations of future central bank policy. In the U.S., the 10- and 30-year yields slid 7 basis points and 10 bps, respectively, while the 2-year Treasury yield rose to fresh 19-month highs. Solid demand for a $60B auction of 2-year notes and $60B in 5-year notes added to overall bids in the Treasury market, sending longer-dated yields lower.

Sentiment goes global: Canada’s 2/10 Treasury spread flattened by almost 23 bps, marking the largest such move since 2002, while yields on Australia’s three-year debt soared as much as 24 bps. Flattening yield curves were also seen in the U.K., Germany, Italy and France. “Even chronically low-demand economies like the eurozone and Sweden are moving towards pricing of tightening,” Bespoke Investment Group wrote in a note.

Investors may be looking ahead to key central bank meetings for clues on whether they would consider tightening monetary policy (and tapering). Some also see a period of peak monetary stimulus coming to an end, with the Fed and others set to tap on the brakes as the expansion of economic growth begins waning (not to mention inflation concerns). The loss of momentum is usually associated with flattening yield curves, and at its worst can turn into an inverted curve, which can foreshadow a recession.

Go deeper: Falling yields are usually a net positive for risk assets like stocks. The relationship supports equity valuations given their relative attraction to bonds, but that has mainly been in recent years when the declines were the result of quantitative easing. This time around the movement is being triggered by higher inflation and declining growth expectations, making the correlation a little more complicated.

Grab the chips

Get ready for the listing of one of the biggest names in the chip industry at a time when a semiconductor shortage rocks supply chains around the world. GlobalFoundries is set to list on the Nasdaq this morning under ticker “GFS” after pricing its shares in its IPO at $47 a piece. That was the higher end of its targeted price range, which will raise about $2.6B for the company and value it at about $26B.

Bigger picture: Many top semiconductor companies are now “fabless,” meaning they only design their chips and the technology inside of them. Other companies, known as foundries, fabrication plants or simply “fabs,” are contracted to actually make the chips. GlobalFoundries is part of the latter group, making silicon wafers for companies like AMD (AMD), Nvidia (NVDA) and Apple (AAPL). In fact, the company was spun off AMD in 2009 after the semiconductor firm wanted to get out of the fab business.

Compared to other foundry giants like SMIC (OTCQX:SMICY) and TSMC (NYSE:TSM), GlobalFoundries is billing itself as the largest silicon wafer supplier not dependent on China and Taiwan. That doesn’t mean the business will be U.S.-controlled or profitable (Abu Dhabi’s sovereign wealth fund Mubadala Investment holds a majority stake). GlobalFoundries also reported a loss of $1.35B in 2020, and has yet to swing to a profit, though it’s showing some signs of improvement given the strong chip demand.

Bottom line: GlobalFoundries is one of the marquee listings of 2021, which included names like Affirm (AFRM), Coupang (CPNG), DiDi (DIDI) and Robinhood (HOOD). There have also been a number of companies that have gone public via SPAC or direct listing, including Coinbase (COIN), Roblox (RBLX) and Warby Parker (WRBY). The IPO market is forecast to see around 375 deals this year that would raise $125B, according to Renaissance Capital, topping the $97B raised in 2000 during the dot-com era. However, in terms of returns, the Renaissance IPO ETF (NYSEARCA:IPO) is up only 4% YTD, compared with a 23% gain for the S&P 500.

Time for a breakup

Dan Loeb’s Third Point has taken a stake in Royal Dutch Shell (RDS.A, RDS.B) and wants the company to separate into “multiple standalone” companies. Specifically, the activist investor is pushing the oil major to create a company that houses its legacy refining business and another business that will hold its renewables and other units. Third Point is said to have taken a stake in Shell of around $750M.

Quote: “While daunting, there is perhaps no bigger ESG opportunity than in “Big Oil”, and specifically, at Royal Dutch Shell,” Loeb wrote in the letter. “We are early in our engagement with the company but are confident that Shell’s board and management can formulate a plan to accelerate decarbonization while simultaneously improving returns for its long-suffering shareholders.”

Shell said that it welcomes open dialogue and that its investor relations team has had preliminary conversations with Third Point. The firm also announced that it had set itself a bigger carbon reduction target after a Dutch court ordered it to take much more aggressive action in early May. The developments come after activist investor Engine No. 3 targeted Exxon Mobil (NYSE:XOM) over ESG concerns, while last week, the WSJ reported that Exxon was even debating whether to continue with several major oil and gas projects.

Market movement: Shell shares rose 2.3% yesterday on the Third Point news, but have taken a spill in premarket trading, sliding 5.5%. The Anglo-Dutch company posted adjusted earnings of $4.1B for the three months through to the end of September, compared to the almost $6B expected by analysts. Of particular note was a roughly $400M hit from Hurricane Ida, as well as “lower contributions from trading and optimization.”

Meme coin ‘flippening’

Meet Shiba Inu (SHIB-USD), a different puppy-inspired meme coin that has been making waves in recent weeks. A record rally has led the token to become the ninth-most valuable crypto in the world, with a market cap of around $38.5B. It’s climbed nearly 26% over the past 24 hours and 1000% over the past month, though the coin is still valued at less than a cent.

Snapshot: A “flippening” of sorts occurred on Wednesday after Shiba Inu undercut Dogecoin (DOGE-USD) in the crypto ranking. However, Doge was quick to bark back, climbing 36% to $0.32. Helping contribute to the Shiba rally was a tweet from Elon Musk, who said SHIB coin was going to the Moon on October 18 (he said the same about Doge). Rumors are also circulating that SHIB will soon be listed on the popular stock trading app Robinhood (HOOD) (Coinbase (COIN) added the token last month).

Outlook: While Shiba Inu may be a meme coin and have little underlying value in most cases, it’s been increasingly looked upon as having more advantages over Doge. First of all, SHIB is built on Ethereum, meaning it has the potential for more smart-contracting capabilities (think Shibaswap, a Uniswap-like decentralized exchange, as well as NFTs). SHIB is also a whole lot cheaper than Doge, making it more attractive to crypto traders that want to buy a million of something.

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 GDP Q3
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $62B, 7-Year Note Auction
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening…

eBay (NASDAQ:EBAY) tumbles as revenue guidance disappoints.

Starbucks (NASDAQ:SBUX) hikes wages, will hit $15 an hour minimum.

McDonald’s (NYSE:MCD) bottom line impresses despite labor, cost headwinds.

Q3 volumes at Coca-Cola (NYSE:KO) top pre-pandemic levels.

Slowdown in Teladoc (NYSE:TDOC) topline growth despite increase in visits.

Facebook (NASDAQ:FB) said to be investigated by FTC over internal disclosures.

Spotify (NYSE:SPOT) posts better-than-expected revenue as advertising outperforms.

Twilio (NYSE:TWLO) slumps despite surprise profit and strong guidance.

Strong Ford (NYSE:F) free cash flow leads to dividend resumption.

Boeing (NYSE:BA) reports Q3 core operating profit, improved cash flow.

Hertz (OTCPK:HTZZ) strikes deal with Uber (NYSE:UBER) for Tesla (NASDAQ:TSLA) rentals.


Good morning. Happy Wednesday.

The Asian/Pacific markets closed mostly down. China, Hong Kong, South Korea and Indonesia posted the biggest losses. Europe, Africa and the Middle East are currently mostly down. Poland, Russia, Norway and Sweden are leading to the downside. Futures in the States point towards a slight positive open for the cash market.

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The dollar is down. Oil and copper are down. Gold and silver are up. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

Earnings flurry

Google parent company Alphabet (GOOG, GOOGL) shattered expectations on Tuesday with Q3 results that showed the biggest quarterly revenue gain in 14 years. The figure rose more than 40% Y/Y (or 39% in constant currency) to over $65B amid stronger-than-expected advertising revenues. The search giant appears to be cashing in on a rebound in search traffic, especially with keywords related to travel and retail trends that are picking up globally.

Bigger picture: It’s looking to reverse the story of the past couple of days in social Big Tech, where Alphabet, Facebook (FB) and Snap (SNAP) all slid in the wake of latter’s quarterly results. Some even referred to the phenomenon as “ad-mageddon,” which reflected a painful hit to ad revenues from Apple’s (AAPL) update to iOS privacy policies (requiring a double opt-in for ad tracking). However, Google appears to have survived the change unscathed, given its own storage houses full of personal data.

Meanwhile, Microsoft’s (MSFT) shift toward more cloud-based software and services continued to pay off for the software giant and led it to report strong quarterly numbers. The company’s Azure cloud division grew by 36%, with FQ1 sales coming in at $20.7B. At Google, cloud computing missed elevated consensus estimates, but at $5B, it still notched Y/Y growth of 45%. Premarket: MSFT +2.6%; GOOG -0.1%; GOOGL -0.3%.

Analyst commentary: “I don’t know how much better it can get from Microsoft,” noted Brent Thill, an analyst with Jefferies. “To grow at that rate, at their size, is insane. I have no other way to put it… Both of these stocks [Microsoft and Google] have just been massive outperformers.” (62 comments)

Robinhood tanks

Shares of the stock-trading app tumbled over 10% AH to $35 on Tuesday as the company (which went public in July) reported Q3 revenues of $365M (+35.2% Y/Y), missing expectations by over $70M. Things didn’t look better with monthly active users, which fell to 18.9M, down from 21.3M in Q2 (but up 76% Y/Y). Options transaction-based revenue came in at $164M vs. $165M in Q2, while equities transaction-based revenue of $50M fell from $52M.

CEO Vlad Tenev: “This quarter was about developing more products and services for our customers, including crypto wallets. More than 1M people have joined our crypto wallets waitlist to date. With 24/7 live phone support, we believe that Robinhood (HOOD) is becoming the most trusted and intuitive platform for retail and crypto investors. And looking ahead, we’re committed to delivering tax-advantaged retirement accounts to help everyone invest for the long term.”

Investors specifically zoomed in on crypto trading revenues, which tumbled 78% to $51M from the second quarter. Remember, Dogecoin (DOGE-USD) had been responsible for 61% of all crypto-transaction revenue at Robinhood in Q2. The trends lead to considerably fewer new funded accounts, a slight decline in Net Cumulative Funded Accounts, and lower revenue in Q3 compared with the prior quarter.

Outlook: Robinhood expects that many of the factors that affected its Q3 results, “such as seasonal headwinds and lower retail trading activity” may persist into Q4. On a conference call, the brokerage also conveyed more of a linear outlook due to the difficulty in maintaining the record-setting volumes seen during events like the GameStop (GME) craze. “Historically our growth has come in waves – the surges have come during periods of increased volatility or market events,” added CFO Jason Warnick. “Going forward, we expect to continue to see the ebb and flow of our growth with market conditions, as well as product launches.” (4 comments)

Shots for kids

A key advisory committee of the FDA has voted to recommend authorization of the Pfizer-BioNTech (PFE, BNTX) COVID vaccine for children between the ages of 5 and 11 years old. The vote was nearly unanimous, with 17 members backing it and one abstention. Nearly 28M kids in the age group would be eligible for the shot, which would be distributed in smaller dosages and with smaller needles to make it easier to administer.

The debate: A lot of the advisors were asking if the authorization should be narrowed to kids that are more “at risk” or have pre-existing conditions. There was also discussion over the chances of myocarditis, a rare heart-related side effect that can cause inflammation (and has predominately been seen among young men after a second dose of an mRNA vaccine).

Children ages 5 to 11 account for about 9% of all reported COVID cases in the U.S., with the number of new cases remaining at high levels. More than 1.1M child cases have been added over the past six weeks, according to the American Academy of Pediatrics. Some parent and advocacy groups still argue that vaccinations for children are unnecessary, as studies show they are less likely to experience symptoms from the disease or suffer serious illness.

Next steps: Be on the lookout for a formal authorization from the FDA this week, while the CDC vaccine advisory group is expected to make its own recommendation on Nov. 2. If it issues an endorsement and CDC Director Dr. Rochelle Walensky signs off, shots for young kids could begin immediately. (11 comments)

Guaranteed basic income

Following in the footsteps of Los Angeles, the Chicago City Council is set to consider today the “largest basic income program in the history of the United States.” The $31.5M one-year pilot program will give 5,000 low-income households $500 per month and would be funded through federal money Chicago received from the Biden administration’s American Rescue Plan. While the program is supported by most of the city’s 50 aldermen, it has received pushback from the 20-member Black Caucus, which has urged Mayor Lori Lightfoot to redirect the cash to violence prevention programs.

How will it work? The 5,000 recipients will be chosen randomly and must be adults who make less than $35,000 a year. The city also plans to track the recipients’ expenditures during the first six months and then provide more targeted assistance, such as help with paying utility bills or for food. According to Chicago Alderman Gilbert Villegas, the costs of supporting the program “is well worth the investment,” when weighed against daily costs of poverty in Chicago, such as incarceration and gun violence.

Basic income programs have been implemented across the U.S. for decades, like the Eastern Band of Cherokee Indians Casino Dividend in 1997, the Alaska Permanent Fund in 1982 and some even include the “negative income tax” experiments conducted in the 1970s. However, it really only entered the national conversation in 2019, when Stockton, Calif., started providing $500 monthly stipends to 125 of its residents. According to the preliminary findings, the payments resulted in more full-time employment and improved mental and emotional well-being, while 40 other cities have since considered or started similar efforts.

Back to Chicago: The guaranteed basic income program is different than universal basic income, as it directs payments toward a defined group of people – with the goal often being to close wealth gaps. UBI on the other hand (an idea popularized by Andrew Yang during the 2020 presidential campaign) promises money to every recipient regardless of income or circumstance. Critics worry that these programs can discourage people from finding jobs or could drain the workforce – especially given recent supply chain problems – but proponents say they are an ideal way to invest in communities and lift people out of poverty. (10 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Durable Goods
8:30 International Trade in Goods (Advance)
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
11:30 Results of $28B, 2-Year FRN Auction
1:00 PM Results of $61B, 5-Year Note Auction

Companies reporting earnings today »

What else is happening…

Taiwan Semi (NYSE:TSM) founder calls U.S. chip buildout plans unrealistic.

DraftKings (NASDAQ:DKNG) drops $22B pursuit of Ladbrokes owner Entain.

Rolling in cash… Visa (NYSE:V) hikes quarterly dividend by 17% to $0.375.

GE (NYSE:GE) industrial FCF tops estimates; renewables breakeven date delayed.

CDC extends COVID-19 cruise ship restrictions until January.

UPS (NYSE:UPS) surges on Q3 earnings beats; raises full-year guidance.

Twitter (NYSE:TWTR) call: Modest Apple iOS impact, Olympics a big hit.

Year-end? AMD (NASDAQ:AMD) sees good progress on Xilinx (NASDAQ:XLNX) deal.

Supplier pain… Raytheon (RTN) stops Boeing (NYSE:BA) 787 Dreamliner shipments.

Lockheed Martin (NYSE:LMT) posts massive revenue miss, bearish guidance.


Good morning. Happy Tuesday.

The Asian/Pacific markets leaned up. Japan, South Korea, India, Taiwan and the Philippines did well while China and Hong Kong were weak. Europe, Africa and the Middle East are currently doing well. The UK, France, Turkey, Germany, South Africa, Spain, the Netherlands and Italy are leading. Futures in the States point towards a moderate gap up open for the cash market.

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The dollar is flat. Oil is up; copper is down. Gold and silver are down. Bonds are down. Bitcoin is down slightly.

Stories/News from Seeking Alpha…

Wild $T1mes!

Tesla (TSLA) received membership to an exclusive stock market club on Monday as its market capitalization topped $1T. Shares surged 13% to $1,025, marking its biggest one-day advance since March 9, while the momentum came only one session after the stock breached $900. The catalyst behind the yesterday’s advance was a deal with Hertz (OTCPK:HTZZ), which placed an order for 100K Model 3 sedans to rent in major U.S. markets and parts of Europe.

Bigger picture: The contract will bring in a reported $4.2B for Tesla, making it the largest-ever purchase of electric vehicles. The cars are slated for delivery within the next 14 months, according to Bloomberg, and customers will have access to Tesla’s network of superchargers. Hertz has even hired Tom Brady, the seven-time Super Bowl-winning quarterback, to star in ads showcasing the new Teslas.

Wedbush’s Dan Ives says the new deal is the “tipping point” for Tesla and welcomed the “watershed moment” of passing the $1T market cap. He also points to several advantages the company holds over latecomers to the industry, including the “battery technology moat, the supply moat… and then you look at just the brand and the cache that Musk has built.” “We’ve never viewed Tesla as an automotive company,” added Ives. “We’ve viewed it as a disruptive technology company,” highlighting his firm’s $1,500 bull-case price target.

Thought bubble: Tesla only builds around 500K cars per year – out of the 90M that are built worldwide – but it’s still worth more than the next nine automakers combined. That’s why many have compared its valuation to a technology company, similar to the way Apple (AAPL) is a tech giant that manufactures phones. While Tesla does have new revenue models that could demand a premium, like a subscription for full-self driving mode, there can also be meme forces at play for a company that is beloved by traders across the investing landscape. “Wild $T1mes!” Elon Musk exclaimed in an overnight tweet. (264 comments)

Bad press

Facebook’s (FB) public relations problem is not going away, if anything, it’s getting worse. Hundreds of documents that whistleblower Frances Haugen leaked to the Wall Street Journal and Congress have now been seen in redacted form by other journalists. Stories discuss internal fury and dissent over the website’s policies, as well as troubles over moderation, violence and radicalization, and failed efforts to curb abuse on its platform.

Zuckerberg responds: While large organizations should be scrutinized and criticism makes Facebook better, this is a “coordinated effort to use leaked documents to paint a false picture of our company.” Questions raised by the stories about Facebook’s interfaces with users’ mental health and the health of the country’s politics are not really about the business, he adds, but about balancing competing positions in society. As for whether the company is spurring political differences, “polarization started rising in the U.S. before I was born… The reality is if social media is not the main driver of these issues, then it probably can’t fix them by itself either.”

Another reveal was the company’s struggle with growth, particularly on Instagram and Facebook. It has had a hard time attracting teens and younger adults, and has been dealt a setback in terms of engagement. “Most perceive Facebook as a place for people in their 40s and 50s,” according to a presentation made to Chief Product Officer Chris Cox. “Teen acquisition is low and regressing further. They often have to get past irrelevant content to get to what matters.”

Don’t forget earnings! Revenues missed expectations for the first time since Q3 2018, but profits beat consensus, and the company added $50B in share repurchase authorizations. That sent shares up 1.5% in AH trading on Monday, though there could be some trouble ahead. Facebook said it’s facing tough competition from the likes of Snapchat (SNAP) and TikTok (BDNCE), while Q4 revenues would be hit by Apple’s (AAPL) privacy changes, which allows users to block tracking from advertisers. (68 comments)

More records

Stocks have gotten another shot in the arm in recent weeks due to a strong start to the Q3 earnings season (though the bond market continues to flash concerns about economic growth). So far, a quarter of S&P 500 companies have reported earnings, with 84% of them coming in better-than-expected, according to Refinitiv. Investors are now setting their eyes on the Q3 results of technology stocks, which have a weighting of nearly 30% in the S&P 500.

Another day, another record: The S&P 500 and Dow Jones Industrial Average closed at fresh highs on Monday, and futures are pointing higher ahead of the open: DJIA +0.3%; S&P 500 +0.4%; Nasdaq +0.7%.

On the earnings calendar today are high-profile names like Alphabet (GOOG, GOOGL) and Microsoft (MSFT), as well as AMD (AMD), Twitter (TWTR), Chubb (CB) and Robinhood (HOOD). Besides tech, there are also some traditional names due out with reports. Among them: General Electric (GE), 3M (MMM), Novartis (NVS), Eli Lilly (LLY), UPS (UPS), Visa (V), JetBlue (JBLU) and Lockheed Martin (LMT).

Analyst commentary: “Earnings season is off to another great start, but now the big test is will the big tech names step up?” said Ryan Detrick, chief financial strategist at LPL Financial. “With stocks at all-time highs, the bar is indeed quite high and tech will need to impress to help justify stocks at current levels.” Disappointing results last week from Snap (SNAP) could also be a “canary in the coal mine for the rest of the tech sector,” cautioned Michael Hewson, chief markets analyst at CMC Markets.

Vaccine mandate delay?

The American Trucking Associations (ATA) is set to meet today with White House officials at the Office of Management and Budget (OMB) for discussions on President Biden’s vaccine mandate. The order, which would require businesses with 100 or more employees to ensure they are vaccinated against COVID or tested weekly for the virus, is estimated to cover two-thirds of the private sector. The Occupational Safety and Health Administration delivered its final rule to the OMB on Oct. 12, and the mandate is expected to take effect soon after the agency completes its review.

What they’re saying: The ATA is warning that many drivers will likely quit rather than get vaccinated, further disrupting the supply chain at a time when the industry is short 80K drivers. Specifically, the association estimates that 37% of drivers could be lost through retirements, resignations and workers switching to smaller companies not covered by the requirements. Others, like Goldman Sachs, feel the mandate would actually boost employment by reducing COVID transmission and mitigating health risks.

Over the past few weeks, the Office of Management and Budget held dozens of meetings with labor unions, industry lobbyists and private individuals as the Biden administration conducts its final review. Today’s meeting at the White House will include dentists, staffing companies and realtors, among others. The Retail Industry Leaders Association has already cautioned that the mandate could trigger staffing problems ahead of the holiday season, while the National Retail Federation and U.S. Chamber of Commerce are asking to delay its implementation until January at the earliest.

Statistics: 30% of unvaccinated workers said they would leave their jobs rather than comply with a jab or testing mandate, according to vaccine data analysis firm KFF. Another 56% said they would get tested weekly, while 12% said they would get the shot. The industry concerns come after a record 4.3M workers quit their jobs in August, the highest turnover in 20 years.

Today’s Economic Calendar
8.55 Redbook Chain Store Sales
9:00 S&P CoreLogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 New Home Sales
10:00 Consumer Confidence
10:00 Richmond Fed Mfg.
1:00 PM Results of $60B, 2-Year Note Auction
1:00 PM Money Supply

Companies reporting earnings today »

What else is happening…

Disneyland (NYSE:DIS) boosts ticket prices, new top option for peak days.

Moderna (NASDAQ:MRNA) COVID vaccine shows strong response in children.

Iceberg Research goes short on Trump stock DWAC, sees deal renegotiation.

PayPal (NASDAQ:PYPL) currently not pursuing Pinterest (NYSE:PINS) acquisition.

Lucid Motors (NASDAQ:LCID) preps to deliver first vehicles to customers.

Natural gas surges 12%, lifting producers’ shares to YTD highs.

Apple (NASDAQ:AAPL) likely to face DOJ antitrust suit as probe speeds up.

AMD (NASDAQ:AMD) earnings: Semi-custom revenue to boost, chip crunch may dent.


Good morning. Happy Monday. Hope you had a good weekend.

The Asian/Pacific markets leaned down. China did well, but Japan, Indonesia, Thailand and the Philippines were weak. Europe, Africa and the Middle East are currently mixed and little changed. Russia, Spain, Italy, Israel and the Czech Republic are up; Hungary, Portugal and Sweden are down. Futures in the States point towards a positive open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is up. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is up.

Stories/News from Seeking Alpha…

Saudis go green

Saudi Arabia is joining the net-zero club, with plans to go carbon neutral by 2060. Neighboring Bahrain will also join the pledge, while Kuwait will be involved with the Saudi commitment. While the Kingdom’s framework aligns with China and Russia, the time frame falls short of other large economies like the U.S., U.K., and EU, which all are targeting net-zero by 2050.

Caveat: The promise doesn’t include emissions from the massive amounts of oil Saudi Arabia exports around the globe (it pumps one in 10 barrels of oil consumed each day). It will also allow the Saudis to continue burning fossil fuels for decades to come, as well as invest in new oil-and-gas development. Instead, the Kingdom plans on reaching its net-zero target by cutting emissions of methane (30% by 2030) and creating a “carbon circular economy,” which includes carbon capture, utilization and storage technologies.

“This protects the leading role of the Kingdom in strengthening the security and stability of global energy markets, in light of the maturity and availability of the necessary technologies to manage and reduce emissions,” Crown Prince Mohammed bin Salman said during a speech at the Saudi Green Initiative forum, which comes just days before the COP26 climate meeting in Glasgow, Scotland.

Go deeper: Saudi Energy Minister Prince Abdulaziz bin Salman has also argued that 2050 targets (like those set by the IEA) would cut supply before global demand drops significantly. That can risk a heavy oil price spike and burdening economies that are overly dependent on importing/exporting oil and gas. Some have even called the most recent price spike the first major energy crisis of the clean power transition, with the Biden administration calling on OPEC+ to increase oil production as crude hit multi-year highs and Russia offering to export record volumes of vital fuel to the EU.

Carbon offsets?

Many companies are turning to carbon offsets to help meet their “net-zero” pledges, but tallying that data can be tricky. It gets even more complicated with regulatory reporting requirements of greenhouse-gas emissions, which are increasingly being seen in Europe and the U.S. Already, the SEC is working on a potential climate-disclosure regulation and some 90% of companies in the S&P 500 currently produce sustainability reports.

Quote: “You have people saying some of these things [carbon offsets] are rubbish and other people say no, they’re really important,” said Thomas Lingard, Unilever’s sustainability director. “It’s super confusing to people and that can’t be the desired state for a world that is rapidly trying to deal with the climate crisis.” Another job for the COP26?

Currently, the most widely-used international framework is the Greenhouse Gas Protocol, which divides emissions into three categories. Those resulting from company operations are called Scope 1, while those resulting from energy the company buys are dubbed Scope 2. The most difficult ones to calculate are Scope 3, which are emissions that are related to a company’s product, but are produced by suppliers and customers.

Outlook: Prices for carbon offsets vary widely, ranging from a few dollars for credits linked to conserving grasslands, to thousands of dollars for capturing carbon to store in the ground. Their unclear structure also compounds the issues for businesses, regulators and investors to size up the effectiveness of projects that generate offset credits. According to Morningstar Direct, more than $51B flowed into sustainable funds in 2020, notching more than a quarter of overall U.S. fund flows and doubling the 2019 record.

Deal in sight

Democrats are getting closer to finalizing an agreement on Biden’s economic agenda that would allow for a bipartisan infrastructure bill to move forward. “We have 90% of the bill agreed to and written, we just have some of the last decisions to be made,” House Speaker Nancy Pelosi said on CNN’s State of the Union. The social spending measure previously stalled in the Senate due to objections from West Virginia’s Joe Manchin and Arizona’s Kyrsten Sinema, who cited concerns about hefty expenditures.

By the numbers: What had been a sweeping $3.5T plan is now being looked at as a $1.75T package, according to sources, but that figure may go higher.

Manchin appears to be on board with White House proposals for new taxes on billionaires and certain corporations. Earlier, the White House has floated a 15% minimum corporate tax rate that’s designed to ensure all companies pay what President Biden calls their “fair share.” If an agreement is reached by the week’s end, a House vote on a separate $1T bipartisan infrastructure bill could happen before Sunday, when a series of transportation programs expire (Biden also heads to Glasgow at the end of the week).

Quote: “It is less than what was projected to begin with, but it’s still bigger than anything we have ever done in terms of addressing the needs of America’s working families,” Pelosi continued. “I think we’re pretty much there now, it’s just the language of it.”

Transitory thesis

The inflation debate heated up over the weekend after Twitter (NYSE:TWTR) CEO Jack Dorsey weighed in on price pressures. “Hyperinflation is going to change everything. It’s happening,” he wrote. “It will happen in the US soon, and so the world.” To another reply, he tweeted that it is “Not a wish. Nor do I think it’s positive at all.”

Snapshot: Inflation is one of the biggest concerns for the economic recovery and the stock market, while the Federal Reserve recently shifted its strategy to allow higher inflation for longer to recover (flexible average inflation targeting, or FAIT). It argues that the recent spikes, with core CPI at 4% year-on-year, are transitory, though Fed Chair Jay Powell said this week they could last well into next year.

Former Treasury Secretary Larry Summers, who served under the Clinton administration, has also been making waves, ramping up the warnings about the effects that spending is having on inflation. “I think he’s wrong. I don’t think we’re about to lose control of inflation,” current Treasury Secretary Janet Yellen said on Sunday morning. “On a 12-month basis, the inflation rate will remain high into next year because of what’s already happened. But I expect improvement… by the middle to end of next year, second half of next year.”

Bottom line: Prices have also spiked up due to supply chain disruptions and labor shortages as demand increases with the reopening of the economy. In the latest job openings and labor turnover report released earlier this month, there were more than 10M job openings in August, and a record 2.9% of workers quit their jobs. (106 comments)

Today’s Economic Calendar
8:30 Chicago Fed National Activity Index
10:30 Dallas Fed Manufacturing Survey

Companies reporting earnings today »

What else is happening…

Bitcoin (BTC-USD) makes the Barron’s cover, slides below $60K.

Tesla (TSLA) roundup: Price hikes, FSD pause, Morgan Stanley raves.

HSBC’s (NYSE:HSBC) pre-tax profit jumps 76%; plans $2B buyback.

Supply crunch pushes crude oil to record ninth straight weekly gain.

Digital World Acquisition (NASDAQ:DWAC) likely to see more large swings.

Much-needed rain may provide relief for California utilities – Barclays.

Sibanye-Stillwater (NYSE:SBSW) nears $1B deal to buy Brazil commodity projects.


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