Before the Open (Oct 3-7)

Good morning. Happy Friday.

The Asian/Pacific markets were weak. Japan, Hong Kong, Taiwan, Australia, Malaysia and Indonesia posted the biggest losses. Europe, Africa and the Middle East currently lean down. Turkey is down, but Denmark, Poland, Russia, Finland and Sweden are down. Futures in the States point towards a moderate gap down open, thanks to the latest employment numbers.

————— Leavitt Brothers Overview –>> here —————

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

Stories/News from Seeking Alpha…

Risk of Armageddon

Weekend Bite, a Seeking Alpha Original Series: In this episode, we’re joined by Jeremy Kokemor, Founder of Right Tail Capital, who pitches two stocks he believes are great additions to any long-term portfolio. Plus, Jerry Kronenberg discusses this week’s Catalyst Watch, and a recap of last week’s Twitter poll.

The nuclear rhetoric is getting louder as Ukraine continues to make serious battlefield advances. The country’s forces have regained control of thousands of square miles of territory since the beginning of September, especially in the areas recently “annexed” by Russia. The developments are pushing Vladimir Putin into a difficult corner, where he must decide how to paint the war as a victory and means for negotiation, or double down on a strategy of increasingly dark destruction.

Quote: “For the first time since the Cuban Missile Crisis, we have a direct threat to the use of nuclear weapons, if in fact things continue down the path they’ve been going,” President Biden declared. “I don’t think there’s any such thing as the ability to easily (use) a tactical nuclear weapon and not end up with Armageddon.” When ordering a partial mobilization on Sept. 21, Putin pledged to defend Russia’s territorial integrity with “all the means [of destruction] at our disposal,” adding that the threat was “not a bluff.”

“I’m trying to figure out: what is Putin’s off-ramp? Where does he find a way out?” Biden continued. “Where does he find himself in a position that he does not only lose face, but lose significant power within Russia?”

Nuke risk: As the threats and warnings increase, the U.S. Department of Health and Human Services shelled out $290M on Amgen’s (NASDAQ:AMGN) drug called Nplate, which is used to treat acute radiation sickness in the event of a nuclear emergency. The HHS said it wasn’t in “response to the situation in Ukraine,” but was rather part of “ongoing work for radiological security,” and adds to its stockpile of Leukine which has been in place since 2013. Closer to the front, Ukraine’s capital of Kyiv is stocking evacuation centers with potassium iodine pills, which can help prevent radiation absorption.

Time for payrolls

FOMC policymakers and investors will be closely watching the September jobs report this morning – released at 8:30 a.m. ET – for clues on how much the economy is slowing. Nonfarm payrolls are expected to slip to 250K in September from 315K in August, while economists expect the unemployment rate to hold at 3.7%. Meanwhile, average hourly earnings are expected to increase 5.1% from a year ago, little changed from the 5.2% Y/Y jump seen in August, though any deviation could signal that the Fed needs to get even more aggressive on inflation.

Quote: “I want Americans to earn more money. I want families to have more money to put food on the table. But it’s got to be consistent with a stable economy, an economy of 2% growth” in inflation, Minneapolis Fed President Neel Kashkari said during a Q&A session on Thursday. “Wage growth is higher than you would expect for an economy delivering 2% inflation. So that gives me some concern.”

Many will also be eyeing how tighter monetary policy is affecting the “unsustainably” strong labor market, and if easing there could help relieve inflationary pressures. Even if the number comes in weaker than expected, the central bank isn’t likely to change its policy based on one month’s data, as it will be two more months before the Department of Labor finalizes September’s figures. On Wednesday, Atlanta Fed President Raphael Bostic additionally warned that reversing policy too early can make matters worse and lead to entrenched elevated inflation expectations.

Watching employment: While there have been some announcements of layoffs, especially in tech, it hasn’t been significant. On Tuesday, San Francisco Fed President, whose district includes Silicon Valley, said the bank is only hearing about a “smattering” of layoffs and companies are rather slowing hiring. While the Challenger Job Cuts Report showed a 68% Y/Y jump in job cuts in September to almost 30K, with the most coming from retail (9,273) and technology (4,212), for the YTD figures, job cuts of 209,495 declined 21% from the same period a year ago. The gap between labor supply and demand also remains significant, as there were 1.7 jobs available for each unemployed worker in August. (7 comments)

Lighting up

Major cannabis companies all closed markedly higher on Thursday as they appeared to be beneficiaries of comments made by President Biden in regards to a review of marijuana as a Schedule I substance. 38 U.S. states have already legalized pot either medically or recreationally, but it is still illegal in some states and at the federal level. Biden’s comments come just a month before the midterm election, and as the Senate contends with the significant marijuana reform measure – the Cannabis Administration and Opportunity Act.

Market movement: Tilray Brands (TLRY), which will report FQ1 results before the opening bell, rose 31% during the session, while Canopy Growth (CGC) added 22% on the day. The ascent of Canadian producers was joined by U.S. multi-state operators like Curaleaf (OTCPK:CURLF) and Trulieve Cannabis (OTCQX:TCNNF), but keep in mind that the sector can see outsized losses just as fast as it tacked on gains.

President Biden also pardoned 6,500 individuals convicted of “simple marijuana possession,” which will apply to federal offenders and those charged in the District of Columbia. “We classify marijuana at the same level as heroin – and more serious than fentanyl. It makes no sense,” he said in a statement. “Too many lives have been upended because of our failed approach to marijuana. It’s time that we right these wrongs.”

Outlook: 1 in 6 Americans are smoking marijuana these days, according to a Gallup poll from the summer, which highlights how the times are rapidly changing. However, annual arrests for marijuana possession still reportedly account for around half of all drug arrests in the U.S. According to cannabis market research firm BDSA, legal weed sales nationwide are expected to increase 7% Y/Y to $27B in 2022, despite an inflationary environment and recession concerns that have dampened consumer spending. (36 comments)

On-again, off-again

Twitter’s (TWTR) trial to force Elon Musk to go through with a $44B buyout has been paused until the end of the month to allow both sides to wrap up the deal. Media reports and filings now suggest that the issues in contention are “debt financing conditions,” as well as “existing litigation,” “contractual obligations” and fears of further “mischief and delay.” Shares of Twitter closed the session on Thursday back at the $48-level, factoring in a risk discount to the original $54.20/share agreement.

Quote: “This action is stayed until 5 p.m. on Oct. 28, 2022, to permit the parties to close on the transaction,” wrote Chancellor Kathaleen McCormick of Delaware’s Court of Chancery. “If the transaction does not close by 5 p.m. on Oct. 28, 2022, the parties are instructed to contact me by email that evening to obtain November 2022 trial dates.”

Concerns over Elon Musk’s Twitter distraction are prompting fears that he may need to allocate less time to Tesla (TSLA). The stock has plunged 25% to $236 over the past two weeks on the concerns, as well as a reality check that Musk (who’s personally on the hook for $33.5B) could be forced into another selldown of his TSLA shares. The haters are calling it a typical PR distraction, but Musk took to Twitter overnight to overlay the recent downturn with a new product announcement (in a similar fashion conducted in August). “Excited to announce start of production of Tesla Semi Truck with deliveries to @Pepsi on Dec 1st!” he wrote in a tweet. “500 mile range & super fun to drive.”

Go deeper: PepsiCo (PEP) ordered 100 Tesla Semis in 2017, with the aim of cutting its fuel costs and emissions. At the time, production was expected to commence in 2019, with the 500-mile-range version starting at $180K. While the price tag is likely a lot higher today, as an all-electric Class 8 truck, it would qualify for a tax break of up to $40K under the Inflation Reduction Act. Should the Tesla Semi be everything the company says it is, the vehicle could revolutionize the freight transport industry, with its cost savings and smaller carbon footprint. (21 comments)

Today’s Economic Calendar
8:30 Non-farm payrolls
10:00 Fed’s Williams Speech
10:00 Wholesale Inventories (Preliminary)
11:00 Fed’s Kashkari Speech
12:00 PM Fed’s Bostic Speech
1:00 PM Baker-Hughes Rig Count
3:00 PM Consumer Credit

What else is happening…

AMD (AMD) preliminary Q3 sales miss estimates by wide margin.

Strong dollar, supply issues prompt Levi (LEVI) to cut guidance.

DraftKings (DKNG) jumps after report of a partnership with ESPN.

TikTok parent sees 2021 losses triple, but may turn around in 2022.

Pixel 7 phones and Watch launched at ‘Made by Google’ (GOOGL) event.

U.S. to begin screening travelers coming from Uganda for Ebola.

Amazon (AMZN) is hiring 150K employees for the holiday season.

Walmart (WMT) buys warehouse automation company Alert Innovation.

Juul Labs (MO) cancels international expansion, plans staff cuts.

—————

Good morning. Happy Thursday.

The Asian/Pacific markets were mixed. Japan, South Korea and Taiwan posted gains; Hong Kong, New Zealand and the Philippines posted losses. Europe, Africa and the Middle East currently lean up but are mostly quiet. Poland, Turkey, South Africa, Israel and the Czech Republic are up; the UK, Italy and Sweden are down. Futures in the States point towards a moderate flat open for the cash market.

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

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

Stories/News from Seeking Alpha…

Black gold

No outsized moves were seen in crude markets yesterday after OPEC+ slashed production by a whopping 2M barrels per day from November. That’s because traders had been pricing in the cut since Sunday, sending up WTI crude futures (CL1:COM) from $79 to $86 over the course of the week, before contracts ended Wednesday’s session at $87/bbl. Analysts also note that the 2M headline figure will really translate into just over 1M barrels per day, or ~1% of actual global supply, given that many OPEC nations are currently producing well below their individual quota levels.

Snapshot: The bigger deal is that Saudi Arabia and Russia are not only willing to work together to prop up crude markets, but they are deepening their ties despite the war in Ukraine. The cut is a big win for Moscow, which has already lost about 1M bpd of production due to sanctions from the conflict, and faces an EU oil embargo starting in December. It’s also a blow to U.S. efforts of re-engaging with Saudi Arabia after President Biden labeled the country a “pariah” and refused to talk with Crown Prince Mohammed bin Salman for years following the killing of U.S.-based columnist Jamal Khashoggi.

Biden even undertook a trip to Riyadh in the summer after U.S. gasoline hit $5/gallon, promising at the time that the Kingdom would “take additional steps” to increase oil supply. While the sentiment took hold and prices at the pump came down, there are fresh fears over what an increase could mean for the U.S. economy, especially with gas costs already climbing over the past week (due to Midwest refinery problems and West Coast maintenance). For its part, OPEC+ painted the decision as a “preemptive” move against a slowdown in global demand, as well as not repeating the mistakes of central banks who took too long to respond to inflation.

Statement from the White House: “The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” National Security Advisor Jake Sullivan declared. Biden will also consult with Congress on ways to “reduce OPEC’s control” over energy prices (signing of NOPEC legislation?) and continue to direct Strategic Petroleum Reserves releases “to protect American consumers and promote energy security.” Meanwhile, new reports suggest that the administration is preparing to scale down sanctions on Venezuela, which would allow Chevron (CVX) to resume pumping oil and reopen exports to American and European markets. (266 comments)

Raising prices

Companies across the auto industry have suffered from parts shortages since the pandemic, and Ford (F) is no different. The shortages span several industries, ranging from EV materials like nickel and cobalt to components such as semiconductor chips and controls. The developments have even resulted in carmakers needing to store uncompleted vehicles, which is affecting their bottom line and adding to sticker prices across the nation.

Inflation deepens: It was only two weeks ago that Ford shocked the auto sector, disclosing that it expects to have 40K to 45K “vehicles on wheels” at the end of the third quarter that are lacking parts currently in short supply. On top of that, the company warned that inflation-related Q3 supply costs would be ~$1B higher than originally estimated. Suppliers are also facing a world where raw commodity prices are going up, and they are passing along those costs to automakers and their consumers.

As a result, Ford previously raised the price of its Mustang Mach-E SUV, and just upped the cost of its F-150 Lightning by $5,000 for the 2023 model year. It’s the second time that Ford has raised the price on the electric pickup over the past two months, with its “most affordable” Pro model now coming in at $51,974 (up 11% from August and 30% from the truck’s $39,974 price tag in May 2021). Customers that hold existing orders with Ford won’t be affected by the price increase.

Outlook: The F-150 Lightning is still way cheaper than the starting Rivian (RIVN) R1T ($68,575) and GMC (GM) Hummer EV ($86,645). Also keep an eye on the coming price tags of the Chevrolet (GM) Silverado EV and Tesla (TSLA) Cybertruck. (53 comments)

‘Tis the season?

Holiday sales are coming even earlier this year as retailers hope to get consumers excited and stave off a slowdown in demand. Target (NYSE:TGT) is kicking off its biggest “Deal Days” event – featuring hundreds of thousands of items from Oct. 6-8 – and will commence its “Holiday Price Match Guarantee” as of today. Amazon (NASDAQ:AMZN) is also holding an “Early Access Sale” for Prime members next week, marking the first time the e-commerce behemoth has ever done two Prime Day events in one year.

Bigger picture: The early deals could work in their favor. A recent Bankrate survey has found that half of all winter holiday shoppers plan on starting their buying before Halloween. Only 12% will wait until December to take out their wallets for the holidays, with many fearful of the supply chain snarls that have occurred over the past couple of years. Some even hope the early action could provide a boost to the sector, with the SPDR S&P Retail ETF (XRT) down 34% YTD to trail the performance of the broader market.

“Holiday shopping will look different this year with inflation around 40-year highs,” noted Ted Rossman, senior industry analyst at Bankrate. “Consumers are still spending, but they’re being especially thoughtful about where each dollar goes.”

Case in point: 84% of holiday shoppers are implementing measures to reduce the cost of their purchases, like taking advantage of more coupons, discounts and sales. Nearly 3 in 5 (59%) plan to buy fewer items than in previous years, while 21% are opting for cheaper brands. Furthermore, 17% of those who plan on holiday shopping are redeeming rewards to offset costs, and another 17% plan to shop at outlets where they have loyalty programs or store credit cards.

All-time high

America’s national debt has topped $31T for the first time, according to the latest figures from the Treasury Department. The record amount of red ink and gloomy fiscal milestone are adding to worries about the economic health of the country, which is grappling with red-hot inflation and a higher interest rate environment. Other factors like an aging population, elevated healthcare and defense costs, and a tax system that doesn’t bring in enough revenue to cover spending are also worrying as the federal government kicks the can down the road.

Quote: “So many of the concerns we’ve had about our growing debt path are starting to show themselves as we both grow our debt and grow our rates of interest,” said Michael Peterson, CEO of the Peterson Foundation, which promotes deficit reduction. “Too many people were complacent about our debt path in part because rates were so low.”

Long gone are the days of austerity conversations, the Tea Party movements or the balanced budget talk that made some political brownie points. Instead, many of the discussions today have shifted to whether the passing of more mega spending bills would be a net positive or negative for the overall economy. In fact, the U.S. has returned to the record debt-to-GDP ratio last seen in the aftermath of World War II, leaving the nation with a debt burden so large that it would need to spend an amount larger than the entire annual economy in order to pay it off (the debt-to-GDP percentage totaled 121% in Q2).

How much is too much? There’s no magic number or level for when a government’s debt begins to hurt its economy, but conventional thought said that as long as interest rates stayed low, the country could handle a much heavier debt load than was once thought possible (and even use those conditions to remain competitive on the international stage). However, the federal debt cannot grow faster than the economy indefinitely, especially as higher rates make servicing the debt more costly. Both the prior and current White House administrations have contended that trillions were needed to be spent fighting the COVID pandemic and a recession, but only time will tell if that just postponed the inevitable. (4 comments)

Today’s Economic Calendar
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:50 Fed’s Mester Speech
10:30 EIA Natural Gas Inventory
1:00 PM Fed’s Evans Speech
4:30 PM Fed Balance Sheet
5:00 PM Fed’s Waller Speech
6:30 PM Fed’s Mester Speech

What else is happening…

Fed must stay ‘purposeful and resolute’ in inflation fight – Bostic.

Apple (AAPL) to shift some AirPods, Beats production to India.

Turnaround strategy? GE (GE) lays off workers at onshore wind unit.

Real estate brokerage Compass (COMP) jumps on takeover interest.

Mortgage applications down on higher rates, hurricane arrival.

Tesla Model S (TSLA) barely beats Lucid Air (LCID) in Edmunds’ review.

South Korea’s reprisal blows up after Pyongyang missile success.

LAMF Global Ventures I (LGVC) may merge with soccer’s Everton FC.

—————

Good morning. Happy Wednesday.

The Asian/Pacific markets posted big gains. Hong Kong, India, Taiwan and Australia led with 1% gains. Europe, Africa and the Middle East are currently down moderately. The UK, Poland, France, Germany, Russia, South Africa, Finland, Hungary, Spain, the Netherlands, Italy, Portugal and Sweden are down the most. Futures in the States point towards a moderate gap down open for the cash market.

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

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

Stories/News from Seeking Alpha…

Twitter turnaround

Not to be outdone by the new U.K. government and its reversal on tax cuts, Elon Musk stunned Wall Street with a bigger U-turn, reviving his original bid for Twitter (TWTR) of $54.20 per share. Musk’s move came just days before his scheduled deposition in the Delaware trial over the deal and after the release of texts leading up to the original offer.

Investors can only speculate as to Musk’s motives. But whether you think he caved to avoid awkward questions about deleted texts, saw no chance of victory in Delaware, strategically delayed to shore up financing or something else, the $44B deal looks tentatively back on.

After a long news-pending halt, Twitter shares closed up 22% on Tuesday at $52, with a small arb gap for any further twists and turns. In an updated SEC filing, Musk attached the letter his attorneys sent to Twitter offering to pay as originally agreed (bots or no bots). He proposed going through with the deal pending a stay of the Twitter v. Musk et al. trial action, as well as receiving the debt financing. That debt financing could be trickier now with the 10-year Treasury yield (US10Y) at 3.70%. It stood at 2.83% on the day Musk first made his offer in April.

Twitter acknowledged the letter, saying: “We received the letter from the Musk parties which they have filed with the SEC. The intention of the Company is to close the transaction at $54.20 per share.” But citing unnamed people close to Twitter, several outlets reported that the social media company was wary about Musk’s move and thought it may just be a tactic to delay the trial in Delaware Chancery Court due to begin on Oct. 17.

“This is a clear sign that Musk recognized heading into Delaware Court that the chances of winning vs. Twitter board was highly unlikely and this $44 billion deal was going to be completed one way or another,” Wedbush’s Dan Ives said. “We see minimal regulatory risk in this deal although now Musk owning the Twitter platform will cause a firestorm of worries and questions looking ahead among users and the Beltway. This is a smart move for Musk to go ahead with the deal given the legal hurdles that were ahead into Delaware.”

Everything app: For his part, Musk at least sounded like the happy acquirer of Twitter again, taking to the platform with his first substantial comment since the dramatic developments.

“Buying Twitter is an accelerant to creating X, the everything app,” Musk tweeted Tuesday evening – referring to his previous idea for creating something of a Twitter rival using his currently inactive X.com Internet domain.

Responding to a user who suggested it would be easier to start X from scratch, Musk said “Twitter probably accelerates X by 3 to 5 years, but I could be wrong” – reiterating a point of view he expressed in August.

Musk’s hints (after he publicly tried to back out of the Twitter deal) that he would start a competing service became part of the record in the case deciding the deal’s fate. “It’s important to keep in mind the person to whom we’re being asked to turn this data over to,” Twitter’s attorneys said in an August hearing. “This is someone who has publicly mocked Twitter for seeking to enforce a nondisclosure agreement. Who has insinuated that this litigation would be used as a vehicle for publicly disclosing Twitter’s internal data. And who recently and publicly reaffirmed that if he is able to get out from the contract that he signed, his plan is to start a competing business: X.com.” (54 comments)

OPEC+ output

Crude oil (CL1:COM) (CO1:COM) (USO) (BNO) is pulling back this morning after running up into today’s OPEC+ meeting in Vienna.

There are reports the group will consider cutting production by as much as 2M bbl/day at this week’s meeting, compared with prior reports of a 1M bbl/day cut. A production cut could be the cartel’s largest reduction since those at the outset of the COVID-19 pandemic in 2020, but the actual impact on global oil supply could be less significant than the headline number would suggest, as some members already are pumping well below their official targets. They could automatically be in compliance with new limits without actually reducing production.

Goldman Sachs analysts said Tuesday they remain constructive on the energy sector in the current macro environment and expect Q4 “will be another strong quarter for the group, as key macro drivers remain elevated, despite a softening in Q3.” (28 comments)

Winner winner, Twitter dinner

Famed activist investor Carl Icahn is said to have amassed a well over $500 million stake in social media company Twitter that paid off Tuesday. Icahn paid in the mid-$30s for his stock, which means profit for his Icahn Enterprises L.P. (IEP) may be over $250 million, according to a WSJ report.

Other notable hedge funds including D.E. Shaw and Dan Loeb’s Third Point also took stakes in Twitter in recent months and are expected to make some nice gains. (17 comments)

Rivian – room to run

Morgan Stanley stayed bullish on Rivian Automotive (RIVN) following the electric vehicle maker’s Q3 deliveries report and reiterated full-year guidance. The firm has an Overweight rating on Rivian and a price target of $60 represents almost 67% upside potential for shares from the current level. Rivian topped out at $179.47 per share last year when the IPO created huge early buzz.

“We believe Rivian should be able to get most (if not all of) FY23 behind them before they would need more capital. Our model currently assumes a $3bn equity raise in FY23, $2bn in FY24 and $1bn in FY25,” Morgan Stanley lead analyst Adam Jonas said. (15 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Goods and Services Trade
9:45 PMI Composite Final
10:00 ISM Service Index
10:30 EIA Petroleum Inventories
4:00 PM Fed’s Bostic Speech

What else is happening…

Trump SPAC Digital World (DWAC) falls 5% after Musk proposes completing Twitter (TWTR) deal.

Exxon (XOM) expects another strong quarter but below Q2’s record.

JUUL Labs (JUUL) said to prepare for potential Chapter 11 filing.

U.S. crude stockpiles fell by 1.8M barrels last week, API says.

NBC (CMCSA) streaming service Peacock built growth in Q3, CEO says.

COVID subvariant Omicron BA.4.6 continues to account for more cases – CDC.

Gold rebounds above $1,700 as dollar, Treasury yields extend decline.

FTC decision on Microsoft’s (MSFT) Activision (ATVI) deal may come by late November – report.

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Good morning. Happy Tuesday.

The Asian/Pacific markets posted big gains. Japan, South Korea, India, Taiwan, Australia, New Zealand, Singapore, Thailand and the Philippines rallied at least 1%. Europe, Africa and the Middle East are currently up big. UK, Denmark, Poland, France, Turkey, Germany, the UAE, Greece, South Africa, Finland, Switzerland, Hungary, Spain, the Netherlands, Italy, Portugal, Israel, Austria, Sweden, Saudi Arabia and the Czech Republic are up 1% or more. Futures in the States point towards a big gap up open for the cash market.

————— VIDEO –>> The Market May Enter Crash Mode if it Doesn’t Bounce Soon —————

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

Stories/News from Seeking Alpha…

Is this the bottom?

Hopes of bulls are rising that the stock market could be seeing capitulation after Wall Street saw the third-best start to Q4 since 1930.

The major averages rallied sharply on Monday as bond yields (TBT) (TLT) (SHY) fell with the U.K. market crisis receding and weak ISM Manufacturing added some ammo to the case for a more dovish Fed. And buying support continues Tuesday, with S&P futures (SPX) (SPY), Nasdaq 100 futures (NDX:IND) (QQQ) and Dow futures (INDU) (DIA) up more than 1%.

Wall Street is more than six months into a bear market that has taken stocks down about 25%, raising the question of whether this is an inflection point.

Rock bottom: Investors have reached what could be considered peak pessimism on equities as other asset classes attract cash. The Goldman Sachs’ Sentiment Indicator came in negative for a near-record 31st-straight week, with strategists saying that points to the end of the There Is No Alternative, or TINA, trade. (See last week’s Wall Street Breakfast.) But extremely bad sentiment is seen as a contrarian bullish indicator.

The latest AAII Sentiment Survey showed bears, or those seeing stocks lower in six months, topping 60% for the second week in a row. “This poll has been around since 1987 and this is the first time it has ever happened,” Carson Group’s Ryan Detrick tweeted. “Not during the crash of ’87, tech bubble, financial crisis, or 100 year pandemic. Contrarian?”

BofA’s Bull & Bear Indicator remains at a max bearish nadir at 0.0 on deteriorating bond flows and credit technicals. But strategist Michael Hartnett warns that the contrarian buy signal for this indicator doesn’t work when a two-standard-deviation credit event is brewing as in 2008.

Don’t bet on a Fed flinch: “There were multiple factors driving (Monday’s) rally, but the main one was growing speculation that central banks could soon pivot towards a more dovish stance, particularly after the market turmoil over the last couple of weeks,” Deutsche Bank’s Jim Reid wrote. Morgan Stanley’s Mike Wilson says that the Fed would have to follow the Bank of England’s lead by ending QT and restarting QE for stocks to “rebound sustainably.”

“Markets are smelling blood in the water, but do they have enough evidence to price a policy turnaround? Not yet in our view,” ING said. “The BoE’s reluctance to buy gilts is a sign that it hasn’t given up the fight against inflation.” The BoE bought just 22M pounds in gilts Monday and rejected nearly 2B pounds in offers.

Later yesterday, “New York Fed President Williams noted it may take years to get inflation back to target given the current supply and demand imbalance in the economy, and that the Fed still had ‘a way to go’, invoking the 4.6% fed funds dot for the end of 2023, specifically,” Reid said. “Not exactly ‘pivot’ language from the core of the FOMC.”

“The next few days might deliver additional information on how fast economies are slowing down or – more realistically – how widespread financial stress is,” ING added. “But, for the moment, we fear the bond rally is running short of tangible evidence of a change in monetary policy.”

Any Fed tilt would hinge on a shift in labor market dynamics and September payrolls arrive on Friday. (Take the WSB Weekend Bite Twitter poll on how you see job growth.) (9 comments)

Cash not trash?

Ray Dalio, the founder of hedge fund Bridgewater Associates, has changed his view about cash as an asset, saying he no longer thinks it’s trash.

“As John Maynard Keynes is credited with saying: ‘When the facts change, I change my mind. What do you do, sir?’ Along these lines, the facts have changed and I’ve changed my mind about cash as an asset: I no longer think cash is trash,” he wrote in a Twitter post. Cash, meanwhile, saw inflows of $30.3B, while global equity funds experienced outflows of $7.8B for the week through Sept. 21. (32 comments)

My precious

Gold prices popped and silver surged to its strongest daily percentage gain in 20 months on Monday, helped by declines in the U.S. dollar and Treasury yields.

“The fundamental backdrop is getting less bearish” for gold, analysts at the Sevens Report said, but investors should expect the yellow metal to sink to new lows “if we do not see a peak in yields and the buck.” “You’re going to have to see a close back above $1,700 to get the (gold) bulls revived a little bit, and even that, really doesn’t change the technical posture a whole lot,” Kitco’s Jim Wyckoff said. (24 comments)

Rivian on track

Rivian Automotive (RIVN) reported that it produced 7,363 vehicles at its manufacturing facility in Normal, Illinois in Q3 and delivered 6,584 vehicles during the quarter. The electric vehicle maker noted that the deliveries tally was in line with the company’s expectations. Rivian also said it is still on track to deliver 25K vehicles for the full year. (8 comments)

Tesla tumble

Tesla (TSLA) peeled off 8.6% on Monday to mark the biggest drop for the electric vehicle stock in four months. The selling pressure followed Tesla reporting Q3 deliveries below expectations.

Oppenheimer thinks the selloff may be overdone. Analyst Colin Rusch noted that TSLA continues to raise prices and that custom configurations have estimated delivery dates of late Q1 and Q2 of 2023. The Oppenheimer team anticipates manufacturing margins will remain robust for Tesla and Q4 deliveries could surprise to the upside. (148 comments)

Not so bullish

Citi and Credit Suisse lowered year-end targets for the broader stock market Monday, with Citi bearish on 2023 and Credit Suisse looking for lower-than-average returns next year.

Citi cut its 2022 S&P 500 (SP500) (SPY) target to 4,000 from 4,200. Credit Suisse is cutting its target for 2022 to 3,850 from 4,300. For 2023, Citi expects the S&P to end lower than where it starts, down to 3,900. Credit Suisse set a target of 4,050 for the end of 2023 with returns “primarily driven by earnings growth.” (33 comments)

Today’s Economic Calendar
9:00 Fed’s Williams Speech
9:00 Fed’s Logan Speech
9:15 Fed’s Mester Speech
10:00 Factory Orders
10:00 Job Openings and Labor Turnover Survey
1:00 PM Fed’s Daly Speech

What else is happening…

Kim Kardashian to pay $1.26M over Instagram post touting crypto.

U.S. Steel (X) idles second blast furnace in less than a month.

Akamai (AKAM) may be worth well over $150/share in a potential takeover.

Cathie Wood’s ARKK (ARKK) declined in September, yet attracted over $400M of capital inflows.

Warren Buffett-backed BYD (OTCPK:BYDDF) reported booming September and Q3 sales.

U.S. nat gas tumbles to 12-week low on high storage, mild weather outlook.

US Supreme Court eliminates COVID travel health notices for countries.

CDC eliminates COVID travel health notices for countries.

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

The Asian/Pacific markets leaned down. Japan and the Philippines did well, but Hong Kong, India, Taiwan, New Zealand and Thailand were weak. Europe, Africa and the Middle East currently lean to the upside. Turkey, Russia, Finland, Hungary, Portugal, Israel and Saudi Arabia are doing well while Poland and the Czech Republic are weak. Futures in the States point towards a positive open for the cash market.

————— VIDEO: The Market May Enter Crash Mode if it Doesn’t Bounce Soon —————

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

Stories/News from Seeking Alpha…

Propping up prices

WTI crude prices (CL1:COM) rocketed 4.7% to over $83.20 a barrel early Monday as OPEC+ considers cutting production by 1M bbl/day or more at the group’s meeting this week. The move would help prop up declining oil prices, which have been on a steady descent since hitting more than $120/bbl in late June. It would also mark the cartel’s second consecutive monthly cut – after it reduced production by 100K bbl/day in September – and the biggest since the early days of the pandemic.

Bigger picture: As gasoline prices in the U.S. soared to over $5 a gallon this summer, the Biden administration asked the Saudis and OPEC+ to pump more to bring down prices. The president also unleashed a record number of barrels from the Strategic Petroleum Reserve to help put a lid on energy costs, and those efforts bore some fruit, especially when compounded with a slowing global economy. Growth worries are now everywhere, like in China, where COVID-19 lockdowns are hurting demand, as well as other economies that are suffering from consequences of rapidly rising rates and a surging U.S. dollar.

“OPEC+ are very focused on stronger U.S. interest rates and its impact on emerging-market demand,” noted Amrita Sen, Director of Research at Energy Aspects. “Hence, they want to pre-empt any possible surpluses.”

Thought bubble: The latest dynamics once again show the key relationship between OPEC+ heavyweights – Saudi Arabia and Russia. The ties have been able to survive Russia’s invasion of Ukraine, and the country’s oil chief – Alexander Novak – may even show up in person in Vienna despite being sanctioned by the U.S. on Friday. Besides propping up crude prices, the Saudis may be prepared to slash output to keep some production capacity in reserve, given that Russian output is forecast to drop off later this year as the West tightens its growing list of economic sanctions. (11 comments)

U(K)-turn

Volatility is the name of the game these days as markets move from crisis to crisis. From inflation and a looming recession to energy scares and food security, 2022 has been a tough year for investors, and governments are not feeling any different. The latest turmoil is playing out in the United Kingdom, with fears that a cost-of-living crisis could spiral out of control.

Backdrop: Controversial tax cuts that were announced as part of Britain’s so-called “mini-budget” have been scrapped, as backlash over the measures spread from the population to a growing number of Tory MPs. The decision deals a blow to new Prime Minister Liz Truss, who insisted as of Sunday that she was still pressing ahead with the plan. The pound jumped on the latest news, climbing by more than a cent against the greenback to over $1.12, after crashing to the $1.02 level only a week ago and triggering chaos in financial markets.

“It is clear that the abolition of the 45% tax rate [paid by people earning over £150K a year] has become a distraction from our overriding mission to tackle the challenges facing our economy,” Chancellor of the Exchequer Kwasi Kwarteng said in a statement. “As a result, I’m announcing we are not proceeding with the abolition of the 45% tax rate. We get it, and we have listened.”

More turmoil brewing: Strikes hit the U.K. over the weekend as tens of thousands of transport workers walked off the job and shut down most of the nation’s railway network. It’s the latest labor unrest over the rising cost of living, and wages that have not kept up with 40-year-high inflation. Postal workers, nurses, teachers and public defense lawyers have also threatened industrial action, while “Don’t Pay” protests are making headlines over the soaring cost of energy bills. (18 comments)

Bull killer

During the third quarter of 2022, the Federal Reserve jacked up its key policy rate by 150 points across two meetings, accounting for half of its rate hikes since it started tightening policy in March. That, and Fed officials’ insistence that they’ll keep rates higher for longer to beat down inflation, put a damper on asset prices. The S&P 500 (SP500) closed Q3 down a total of 5.3%, with the benchmark index ending in bear market territory for a second consecutive quarter.

Not to be ignored: The Fed’s actions to shrink its balance ramped up during the quarter, reaching its full reduction rate in September. At its full pace, the central bank is letting $60B of Treasury securities and $35B of agency debt and agency mortgage-backed securities roll off its balance sheet, an action that reduces liquidity to the financial markets. In response, investors finally realized that the central bank is serious about removing the punch bowl to ratchet down the economy in an effort to reign in prices.

During the past three-month period, the 10-year Treasury yield has also increased by 93 basis points to 3.829% on the last session of the quarter. Last Wednesday, it touched as high as 4.0%, its highest level since the global financial crisis of 2008. Remember, as bond yields rise, bond prices fall.

Commentary: “Markets welcome the arrival of monetary injections from central banks very warmly,” said Interactive Brokers economist José Torres. “The departure of those injections and the reintroduction of liquidity withdrawals, however, are not warmly welcomed and are accompanied by volatility as market participants sweat while discovering true prices in less distorted markets.” Analysts expect the S&P 500 to continue sinking, with Bank of America and RBC Capital Markets believing the index could fall to as low as 3,000 points. Goldman Sachs cut its year-end forecast for the index to 3,600 points, and anticipates it to end 2023 at 4,000 points in the case of a soft landing and 3,750 points in the case of a hard one. (42 comments)

China exodus

Google (GOOG, GOOGL) has shut down its Translate app for China, ending one of the few remaining products the tech giant still operates in the world’s second-largest economy. Mainland Chinese users are now shown a static image of a generic Google search bar, as well as a link to the company’s Hong Kong-based domain, which is blocked for mainland Chinese users. The abrupt suspension adds even more bricks to China’s Great Firewall and disrupted some Chinese apps that relied on Google for translation.

Backdrop: Google first entered the Chinese market in 2006 with a version of its search engine that was subject to government censorship. The engine was pulled in 2010 following state-sponsored hacks and government-ordered blocks in response to YouTube clips showing Chinese security forces clashing with Tibetans. In 2018, Google briefly entertained the idea of relaunching Google Search in China as part of a project code-named Dragonfly – which would have censored results and location data – but the plan was abandoned following an uproar at the company and backlash from politicians.

“We are discontinuing Google Translate in mainland China due to low usage,” Google said in a statement, though recent figures may show otherwise. According to web analytics platform Similarweb, the page notched 53.5M visits from desktop and mobile users combined in August, while growing at a 30% pace over each of the previous two months.

Go deeper: Many U.S. businesses have shuttered their services in China over the past year, as they get caught in the middle of tech tensions between Washington and Beijing. Companies like Amazon (NASDAQ:AMZN) and Airbnb (NASDAQ:ABNB) have closed their local operations, while others like LinkedIn (NASDAQ:MSFT) have sought to comply with new internet regulations by removing the social feed from its China platform. Domestic competitors, such as Baidu (NASDAQ:BIDU) and Tencent (OTCPK:TCEHY), have benefited in the wake of their exits, and have dominated the Chinese internet landscape from search and translation to social media and gaming.

Today’s Economic Calendar
9:05 Fed’s Bostic Speech
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
11:45 Fed’s Barkin Speech
12:30 PM Investor Movement Index
2:15 PM Fed’s George Speech
6:45 PM Fed’s Bostic Speech

What else is happening…

Tesla (TSLA) shows off humanoid robot, Q3 deliveries miss estimates.

Amazon’s (AMZN) Rings of Power dominates streaming with debut.

Biden signs stop-gap funding into law, averting government shutdown.

L3Harris (LHX) nears deal for Viasat’s (VSAT) military comms unit – WSJ.

Valuation cut? Intel’s (INTC) Mobileye files for initial public offering.

Moderna (MRNA) declined Chinese efforts to hand over virus technology.

Turkish inflation tops 83% and even more rate cuts are expected.

Brazil election: Lula da Silva and Bolsonaro head to runoff vote.

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