Before the Open (Oct 10-14)

Good morning. Happy Friday.

The Asian/Pacific markets were mostly strong. Japan, China, Hong Kong, South Korea, Taiwan and Australia posted big gains; Indonesia was weak. Europe, Africa and the Middle East are currently up big. The UK, Denmark, Poland, France, Turkey, Germany, Greece, Finland, Sweden, Hungary, Spain, the Netherlands, Italy and Portugal are up 1% or more. Futures in the States point towards a gap up open for the cash market.

————— VIDEO: This is NOT the Bottom —————

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

Stories/News from Seeking Alpha…

Mr. Market’s Wild Ride

Bulls stampeded back onto Wall Street yesterday, inspiring a stock market comeback for the ages. Futures spiked on hope of a U.K. resolution to its debt liquidity crisis, plunged after core CPI came in hot, then rallied through the session. By the close, the S&P 500 (SP500) (SPY), Nasdaq (COMP.IND), Nasdaq 100 (NDX) (QQQ) and Dow (DJI) (DIA) had notched gains well above 2%. “The term rollercoaster is one of the most overused, lazy terms to describe markets, but the last 24 hours are best summed up by being a major rollercoaster ride and actually home to one of the biggest intra-day turnarounds in living memory,” Deutsche Bank’s Jim Reid.

Tale of the tape: S&P futures peaked +1.57% ahead of the CPI release, bottomed out -2.4% and the S&P 500 closed +2.6% with a roundtrip intraday range of 5.52%, according to Deutsche Bank. The Dow rallied +1,400 points from its low. The Tick Index, which compares gainers to losers at any point, went from -1,900 to +1,900, the first time there have been such extreme numbers on either end, according to Bloomberg data going back to 1990. It was just the 11th time since 1993 where SPY made a 52-week low and closed more than 4% above that low while also closing green, BTIG noted.

What sparked the buying?: The rally numbers are clear, but the reason behind the buying is not so much.

Some speculated that algos kicked in to buy when the S&P had given up 50% of its post-COVID rally. Bloomberg reported that options hedgers needed to unwind short positions when booking post-CPI profits on put options. Deutsche Bank’s Reid said there was “no obvious reason” other than stretched bears ahead of the CPI. Yesterday “saw the market turn abruptly at 9:32 am with the S&P at 3491.58 and then, magically, and mysteriously, the entirety of the algorithmic investing community (and red-blooded SPY traders, too) were assured by (Harvard economist) Jason Furman’s third swing at the ol’ horsehide that ‘Today’s report was probably “peak” inflation for the core CPI,'” John Roque, head of technical strategy at 22V Research, wrote.

A blip or a bottom?: The question remains whether this historic reversal signals a base where bulls can gain further traction.

“Many proclaiming that ‘THE’ bottom is in likely have said that many times this year already,” BTIG strategist Jonathan Krinsky said. “From a seasonality standpoint, a low today fits the narrative. On the other hand, the VIX (VIX) is still sitting around 30. Of the prior 10 (big reversal) occurrences … four saw the VIX close below 37 on the day of the reversal. Only one of those (Dec. ’18) marked the final low.”

22V’s Roque noted that the febrile buying was heavily concentrated in the SPY: “Advancing Stocks beat Declining Stocks in the SPY by a ratio of more than 15:1. However, Advancing Stocks beat Declining Stocks on the NYSE only by a ratio of 2:1. If (Thursday) was a full-fledged reversal I think that the Advance Decline Ratios for the SPY and the NYSE would be more alike.”

Yesterday’s action “definitely gives the bulls some ammo they have been lacking much of this year,” Krinsky said. “At the very least, this could give some near-term relief. With that said, it’s far from an all-clear signal and we aren’t yet ready to proclaim that the worst is behind us. There will be a day when a bullish narrative takes hold and the market makes its bear market low, but it’s hard for me to believe that’s happened just yet when private equity parties on the French Riviera are targeting retail investors,” Krinsky added. (4 comments)

Netflix with ads

Netflix (NFLX) has confirmed it will launch its ad-supported service level on Nov. 3, with plans starting at $6.99 per month. The company’s “Basic with Ads” plan will be in addition to its existing ad-free plans, which won’t change: Basic, Standard and Premium levels. In the U.S., Netflix offers its ad-free Basic plan at $9.99 per month; its Standard plan at $15.49 per month; and its Premium plan at $19.99 per month.

Twitter poll: Would you watch Netflix with ads? Take our poll and let us know. (68 comments)

Musk investigation?

Twitter (TWTR) claims that billionaire Elon Musk is under federal investigation over his on-again/off-again attempt to take the social-media giant private, and the firm wants correspondence his team exchanged with the SEC and FTC over the matter.

“Elon Musk is presently under investigation by federal authorities for his conduct in connection with the acquisition of Twitter,” TWTR wrote in a Delaware state court filing made public late Thursday. “Through counsel, he has exchanged substantive correspondence with those authorities concerning their investigations. Twitter wants those documents.” (11 comments)

Kroger shops for Albertsons

Kroger (KR) is said to be in talks to purchase small supermarket rival Albertsons (ACI) for about $25B. Kroger is expected to pay cash and stock for Albertsons, according to a Bloomberg report. The exact price and structure of the deal weren’t known.

Bloomberg earlier Thursday reported news of the transaction, though without giving any details on the possible value. Albertsons shares soared 12% in regular trading on Thursday. Albertsons has a market cap of over $15 billion. The reports come after Albertsons announced in late February that it was evaluating strategic alternatives for the supermarket chain. (20 comments)

Today’s Economic Calendar
8:30 Retail Sales
8:30 Import/Export Prices
10:00 Business Inventories
10:00 Consumer Sentiment
10:00 Fed’s George Speech
1:00 PM Baker-Hughes Rig Count

What else is happening…

Stubbornly high U.S. inflation could push rates to over 4.5%: JPMorgan’s Jamie Dimon.

China inflation hits 2-and-a-half-year-high.

Some U.S. officials fear price cap on Russian oil may backfire.

Amazon (AMZN) scraps multiple ventures, continuing cost-cutting moves.

Uranium names bounce as Cameco (CCJ) defends big Westinghouse deal.

Russia threatens to quit Black Sea grains deal.

Take-Two (TTWO) shutting down studio that made ‘Dots’ mobile game.

Deere (DE) invests $29.8M to shift production from China to Louisiana.

Cancer drug developer Enliven Therapeutics and Imara (IMRA) to merge in all-stock deal.

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Good morning. Happy Thursday.

The Asian/Pacific markets were weak across-the-board. Japan, Hong Kong, South Korea, Taiwan and Singapore posted the biggest losses. Europe, Africa and the Middle East are mostly down big. The UK, Denmark, Poland, France, South Africa, Finland, Sweden, the Netherlands, Switzerland and Saudi Arabia are down 1% or more. Futures in the States point towards a big gap down open for the cash market.

————— VIDEO: This is NOT the Bottom —————

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

Stories/News from Seeking Alpha…

Engaging the core (CPI)

Inflation is the focus for Wall Street and the global markets, with only an extremely tame rise in consumer prices likely to give Fed members cause to rethink rate trajectory. Core CPI is expected to revisit the peak it saw back when the Fed started its tightening cycle with what now looks like an almost quaint quarter-point hike. Now fed funds futures are pricing in an 80% chance of another 75-basis-point rise in November to bring rates up to 3.75%-4%.

A hot CPI report on the heels of a strong gain in September payrolls would cement the hawkish Fed path through to the decision early next month. For the numbers, economists expect headline CPI to rise 8.1% Y/Y in September, easing from the 8.3% pace in August. Meanwhile, core CPI, which strips out volatile food and energy prices, is expected to climb 6.5% Y/Y, faster than the 6.3% increase in the prior month. That would match the peak seen in March.

The economists expect the core number to outpace the headline number because the core CPI includes things like the cost of rent or services, such as health care, that are “stickier.” Once they go up, they’re not likely to go down.

Unwanted visitors: Bankrate Senior Economic Analyst Mark Hamrick expects Y/Y CPI growth to stay elevated through the rest of the year. “There has been relief from high gasoline prices which tend to aggravate consumers the most, but elevated food and shelter prices appear to be sticking around for a while as unwanted visitors,” he said.

September’s CPI is expected to increase 0.2% M/M, up from 0.1% in August. The consensus for core CPI is 0.4% M/M, down from 0.6% in the previous month. “The Fed will be looking at the month-over-month percent change in core CPI,” José Torres, senior economist at Interactive Brokers, told Seeking Alpha. “Sticky and price-resistant categories where once price increases are registered, price decreases are hard to come by. Food away from home, shelter, transportation services and medical services will be top of mind.”

Wildcards for this month include vehicle prices and airfares, according to Pantheon Macro. Wednesday’s Producer Price Index may give investors a clue of what to expect for the CPI, said Tuan Nguyen, an economist at RSM US, who analyzes high-frequency economic data “In two of the past three reports, a higher-than-expected CPI number was registered after producer prices came in above expectations,” Nguyen said.

Bears ready to rally? Interactive Brokers’ Torres expects that any indication that prices are easing will lead to increased stock-investing. “The market is oversold and the burden of proof has shifted to the bears,” he said. “Any moderate to positive news on the CPI front, even in-line results, a deceleration in services, rents, or good prices, can produce the next bear market rally.”

Meanwhile, SA contributor Logan Kane looks to a Cleveland Fed econometric model, which expects core CPI to rise 0.51% M/M in September and 0.53% in October. “If these projections are right, these numbers are bad and worse than the market expects, showing that the Fed is nowhere near stopping inflation and that a hard landing is the only way down,” Logan wrote Wednesday. (1 comment)

The strong dollar did it

The U.S. dollar (USDOLLAR) (UUP) will continue to see strength through at least the medium term, according to Citi. And while that may favor U.S. large-cap stocks on the global stage, it will also have an impact on earnings.

With roughly 30% of revenues for U.S. companies generated overseas, according to Goldman Sachs, the “strong dollar” may replace “supply chain issues” as the go-to excuse for missing consensus estimates. “A stronger USD has been historically correlated with a lower frequency of sales beats,” Goldman equity strategist David Kostin wrote in a note. (19 comments)

Hey, YALL

Wall Street has received a new thematic exchange traded fund that works to fight against the growing ESG trend.: the God Bless America ETF (YALL). YALL is an anti-ESG exchange traded fund that attempts to screen out companies that are listed as “activists.” The ETF has been launched by Toroso Investments and is sub-advised by Curran Financial Partners.

According to the fund’s perspective: “The Sub-Adviser eliminates companies that, in the Sub-Adviser’s assessment, have emphasized politically left and/or liberal political activism and social agendas at the expense of maximizing shareholder returns.” (220 comments)

Fed minutes

Federal Reserve officials acknowledged that their rate hike path will weigh on economic activity in the coming months and years. They “generally anticipated that the U.S. economy would grow at a below-trend pace in this and the coming few years, with the labor market becoming less tight,” according to the Federal Open Market Committee’s minutes for its Sept. 20-21 meeting.

Reflecting the central bank’s decisively hawkish tone, the word “restrictive” appeared 13 times in the September minutes, as opposed to 0 times in the July meeting’s minutes. Inflation showed up 89 times in the most recent meeting’s account vs. 7 times at the previous meeting’s minutes. (29 comments)

Activision battle

Microsoft (MSFT) is complaining about the influence of videogame console rival Sony (SONY) on UK regulators, as the country’s competition watchdog publishes the full text of its decision to give a phase 2 probe to Microsoft’s proposed $69B acquisition of Call of Duty maker Activision Blizzard (ATVI).

That decision “incorrectly relies on self-serving statements by Sony which significantly exaggerate the importance of Call of Duty to it and neglect to account for Sony’s clear ability to competitively respond,” Microsoft said. (15 comments)

Another ‘70s throwback: wheat

U.S. wheat futures fell after the U.S. Department of Agriculture cut its 2022-23 outlook for U.S. wheat exports by 50M bushels to 775M bushels, which would be the lowest amount of domestic wheat exports since the 1971-1972 marketing year. The USDA cited “reduced supplies, slow pace of export sales, and continued uncompetitive U.S. export prices” for the lower export forecast. (5 comments)

Today’s Economic Calendar
8:30 Consumer Price Index
8:30 Initial Jobless Claims
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
2:00 PM Treasury Statement
4:30 PM Fed Balance Sheet

What else is happening…

Applied Materials’ (AMAT) FQ4 outlook lowered on export regulations impact.

Trump SPAC Digital World (DWAC) jumps as Truth Social app appears in Google Play Store.

Boeing (BA) rated Underperform as Credit Suisse starts coverage of aerospace, defense.

Federal judge to rule on lawsuit seeking to overturn student loan forgiveness plan.

Victoria’s Secret (VSCO) rallies after updating on growth plans.

Gannett (GCI) launches austerity measures.

TikTok owner ByteDance (BDNCE) launches employee option buyback at higher price.

—————

Good morning. Happy Wednesday.

The Asian/Pacific markets were split. China, South Korea and India did well; Hong Kong, New Zealand and Singapore were weak. Europe, Africa and the Middle East lean down. Russia, Greece and Israel are up; the UK, Spain, the Netherlands, Italy, Portugal and Austria are down. Futures in the States point towards positive open for the cash market.

————— VIDEO: This is NOT the Bottom —————

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

Stories/News from Seeking Alpha…

Britannia blunder

It’s been a while since trading hinged on events in the U.K., but the sudden twists in Bank of England bond market intervention are reverberating globally. Many countries could soon be facing a similar battle between fiscal and monetary policy and traders said the Bank of England’s credibility could be on the line amid conflicting reports.

Pound sterling (FXB) continues its volatile trading Wednesday morning. It had moved higher against the dollar after the FT reported that the BoE told bankers it could extend its bond purchases beyond Friday. Those gains quickly disappeared after a BoE spokesman reaffirmed the Oct. 14 end date. Last night, BoE Governor Andrew Bailey sent not just sterling, but U.S. equities (SPY) (QQQ) and Treasury prices (SHY) (TBT) (TLT) lower when he declared a hard deadline on QE. S&P futures (SPX) are up 0.5%, but pared larger gains after the BoE dismissed the FT report.

Bailey bumble: Speaking after U.K. market hours in Washington on Tuesday, the Bank of England head spooked markets as he warned pension funds that have been struggling to meet margin calls to act fast. “And my message to the funds involved and all the firms involved managing those funds: You’ve got three days left now. You’ve got to get this done,” Bailey said.

But if the liability-driven investment managers, which help pension funds hedge, can’t shore up cash by Friday, another U-turn could be coming. Given that the BoE’s measured gilt purchases (it bought a much smaller amount than authorized) and expansion on types of purchases was quelling a surge in yields, Bailey’s comments looked like a fumble at the goal line (or closer to home, sending the ball over the bar with an empty net). His remarks are likely to go down as an “all-time central banking gaffe,” Bloomberg contributor John Authers wrote.

I “would say with the announcement by Bailey that help ends Friday his future now more in question,” economist Danny Blanchflower, a former member of the BoE’s Monetary Policy Committee, tweeted. “What if they have to step in again he looks like a fool again.” “Where are the MPC what is the point if they are nowhere to be seen in the midst of this crisis?” he said. “Groupthink means they are utterly irrelevant so no point in having them as they are all clones and have nothing to say just appoint 8 sheep cheaper and you get more wool.”

Fed standing firm: Across the pond, the message from Fed officials isn’t wavering from the hawkish stance. The market is still pricing in more than an 80% chance that the FOMC boosts rates by another 75 basis points in November.

Cleveland Fed President Loretta Mester said yesterday that the Fed has more hikes to go before the fed funds rate becomes restrictive, even at the expense of growth. “With growth well below trend over the next couple of years, it is possible that a shock could push the U.S. economy into recession for a time,” she said.

While a surge in gilt yields could translate to higher Treasury yields, that aids the Fed in its primary mission to bring down inflation. Global attention should turn to U.S. prices today with September PPI and especially tomorrow with CPI. (3 comments)

Headset is here

The Cambria headset is here, branded the Meta Quest Pro. “Quest Pro is the first in our new line of advanced headsets, built to expand what’s possible in VR,” Meta CEO Mark Zuckerberg said. “It takes what people love about Quest and adds a bunch of new technologies to help you do more in the metaverse.”

The Pro looks like a more streamlined version of the Quest headset, and features an open periphery to make it easier to see the world outside, though it comes with attachable light blockers for a more immersive approach. The headset’s displays have 37% more pixels per inch than the Meta Quest, and 75% more contrast, Zuckerberg said. (199 comments)

Bye-bye value?

Hedge fund manager David Einhorn said the days of value investing may be a thing of the past. “I don’t know that it ever comes back,” Greenlight Capital founder Einhorn said in a Bloomberg TV interview on Tuesday. “There have been serious changes to the market structure and pretty much most of the value investors have been put out of business.” Einhorn explained that value investing has gone away as investors have moved to passive investing and many strategies are based on quants or algorithms. (96 comments)

Gig-a-what?

Uber Technologies (UBER) and Lyft (LYFT) fell sharply on Tuesday after the Biden Administration issued a proposal that could result in gig economy workers becoming full-time employees.

The Labor Department unveiled the new proposal that would require companies to give workers such as janitors, home-care and construction workers, as well as ride-share drivers, employee classification and not independent contractors. (130 comments)

Saudi second thoughts

President Biden is re-evaluating the U.S. relationship with Saudi Arabia after OPEC+ announced plans to cut oil production, White House national security spokesman John Kirby said Tuesday, as the move “benefited Russia at a time when nobody in any capacity should be trying to benefit Vladimir Putin.”

Biden administration officials urged Saudi officials to delay the decision on a production cut by another month, warning that a cut would weaken support in Washington for the kingdom, the Wall Street Journal reported. (141 comments)

Disney shuffle

Walt Disney (DIS) has made a shift to its extensive Marvel film release schedule, delaying a range of them starting with its remake of Blade.

Blade (a new take starring Mahershala Ali as the vampire-killing hero) was the impetus for the shifts, amid the news that Marvel parted ways with the film’s director, Bassam Tariq. That production is on hold as the company looks for a new director. So, Blade moves from a Nov. 3, 2023, release to Sept. 6, 2024. And as the Marvel Cinematic Universe is increasingly made of interconnected stories, that means more delays. (14 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Producer Price Index
10:00 Fed’s Kashkari Speech
10:00 Atlanta Fed’s Business Inflation Expectations
1:00 PM Results of $32B, 10-Year Note Auction
1:45 PM Fed’s Barr Speech
2:00 PM FOMC Minutes

What else is happening…

SEC rejects WisdomTree’s (WETF) spot bitcoin ETF (BTC-USD) for second time.

Brookfield Business Partners (BBU) to sell Westinghouse to Cameco (CCJ), BEP (BEP) for $8B.

China food distributor Fortune Valley (OTCPK:FVTI) files for proposed $25M offering, uplisting.

Roche (OTCQX:RHHBF) launches next-gen rapid antigen tests for COVID.

Credit Suisse (CS) could face capital shortfall of up to $8B in 2024, Goldman analysts say.

Defendants in New Jersey deli stock fraud case hire ex-Madoff and Shkreli lawyers.

Tripadvisor (TRIP) appoints former Booking Holdings (BKNG) executive as new CFO.

—————

Good morning. Happy Tuesday.

The Asian/Pacific markets were mostly very weak. China did okay, but Japan, Hong Kong, South Korea, India and Taiwan posted big losses. Europe, Africa and the Middle East lean down but are mostly little changed. Poland and Turkey are up; the UAE, Norway, India, Israel and Austria are down. Futures in the States point towards slight down open for the cash market.

————— VIDEO: This is NOT the Bottom —————

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

Stories/News from Seeking Alpha…

Fire sale alarm

The Bank of England widened its intervention in the debt markets to include inflation-linked bonds Tuesday following a sharp rise in yields the day before. The BoE on Monday expanded the size of its bond-buying program designed to push yields lower to 10B pounds per day until Friday. It said today that 5B pounds of that purchasing power will be allocated to buy index-linked gilts, which are linked to inflation with a benchmark to the Retail Price Index. The surge in yields on Monday was driven by index-linked gilts, with yields on 10-year inflation-linked securities soaring 64 basis points. That was a record move going back to 1992 and more than twice the rise seen in conventional 10-year gilt yields, according to Bloomberg.

Material risk to financial stability: The “beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts,” the BoE said in a statement. “Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability.”

The BoE is also grappling with tight labor conditions after a record number of people stopped looking for jobs, driving the unemployment rate down to 3.5% in the three months to August, the lowest since 1974.

Pantheon Macro’s Samuel Tombs said that he expects gilt yields to be lower by year-end, but thinks the Monetary Policy Committee will have to be more cautious with hikes, boosting rates by 75 basis points at the next meeting (the market is currently pricing in 115 bps).

Will U.S. get caught up in QT protests? Longer Treasury yields are moving higher, with the 10-year yield (US10Y) (TBT) (TLT) up 6 basis points to 3.94%. The BoE move has little immediate impact for investors in U.S. securities, but the global markets are sending a signal that there will be adverse consequences as central banks try quantitative tightening. “The bottom line is, after decades of central bank stimulus inflating bubbles and financial leverage to grotesque heights, the markets are still in charge and they just won’t tolerate QT,” SocGen’s Albert Edwards wrote after the first BoE intervention. “I keep citing Mike Tyson’s famous quote, ‘everyone has a plan till they get punched in the face.’ Which reminds me, isn’t the Fed in the process of doubling its QT to $96bn a month? Good luck with that!”. The Fed’s Charles Evans said yesterday he sees QT completed in a few years. For stocks (SPY) (QQQ) (DIA) (IWM), BofA strategist Michael Hartnett said on Friday a risk would struggle to rally in Q4 if central bank “policy panics” fail and U.K. gilt yields “amazingly” rose despite the BoE’s new QE moves. Morgan Stanley’s Mike Wilson said the Fed may indeed have to follow the same path as the BoE with M2 money supply growth in the “danger zone.” “Some may argue that the UK is in a unique situation and so this doesn’t portend other central banks doing the same thing,” Wilson said. “However, this is how it starts. In other words, investors can’t be as adamant that the Fed will choose to or be able to follow through on its guidance.” (31 comments)

Twitter backing

Twitter (TWTR) rebounded after three off sessions as momentum seemed to shift toward an actually consummated transaction. The move came alongside a report that two big equity investors are sticking with their commitment to Musk to help fund the $33B portion of the $44B purchase price. The Information says Sequoia Capital plans to keep its funding in place – it’s committed $800M – and crypto exchange Binance is set to stand behind its commitment of $500M.

That reiterated support from two of the biggest equity backers is helping to shore up some concerns about funding that still seem to be dogging the deal. Poll: Do you think Elon Musk will eventually own Twitter? Vote in our poll. (10 comments)

Semis selloff

Qualcomm (QCOM), Nvidia (NVDA) and chip equipment makers led semiconductors lower on Monday as the industry deals with new export rules from the U.S. slated to curb the use of advanced chips in Chinese military applications.

On Friday, Nvidia told Seeking Alpha that the new export controls from the U.S. government would not have a “material impact” on its business. (61 comments)

Dimon spies disorder

JPMorgan Chase CEO Jamie Dimon said that current economic conditions will likely push the U.S. into a recession in the next six to nine months, amid “very serious” headwinds like inflation, rising interest rates, quantitative tightening and the war in Ukraine.

Speaking to CNBC, the head of JPMorgan also warned that markets could become “disorderly” as volatility increases in the face of a fast-changing economic situation. Looking at near-term circumstances, Dimon said the current economy was still doing well but faced significant headwinds that he thinks have already pushed Europe into a downturn. (47 comments)

Nothing like ‘08

Ben Bernanke, the former chairman of the Federal Reserve, said that the U.S. economy, which is showing signs of cooling amid the central bank’s aggressive interest-rate hiking campaign, is “certainly not in anything like the dire straits we were in” during the 2008 Great Financial Crisis.

Still, as pressures from Russia’s war in Ukraine as well as a soaring dollar squeeze economies around the globe, Bernanke, who earlier won the Nobel Prize in Economics for his research on banks and financial crises, noted “there are issues of financial stability in various markets,” he said during a press briefing at the Brookings Institution. (35 comments)

Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
11:30 Fed’s Harker: Economic Outlook
12:00 PM Fed’s Mester Speech
1:00 PM Results of $40B, 3-Year Note Auction

What else is happening…

GOP senators introduce bill to undo Medicare prescription drug negotiation.

Trump SPAC Digital World (DWAC) falls as deal extension meeting adjourned again.

Tesla (TSLA) ‘very likely’ experiencing demand destruction – Morgan Stanley.

Tesla (TSLA), ARKK (ARKK), bitcoin (BTC-USD) close to cracking as S&P heads to 3,400 – BTIG.

Portugal’s finance minister calls for 28% tax on capital gains from cryptos.

China’s September wholesale sales of passenger NEVs at record 675K units, up 94.9% Y/Y.

PayPal (PYPL) said to retract policy that would have fined users for misinformation.

Apple (AAPL) sees strong Mac growth in Q3, other PC vendors shrink on weak demand, supply: IDC.

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

The Asian/Pacific markets were very weak. China, Hong Kong, Australia, New Zealand, Singapore and the Philippines posted big losses. Several markets were closed. Europe, Africa and the Middle East are split. Denmark, Turkey, Germany, Israel, Austria and Sweden are up; Poland, the UAE, Russia, Hungary and Portugal are down. Futures in the States point towards a flat open for the cash market.

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

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

Stories/News from Seeking Alpha…

Earnings gloom

Earnings season for Q3 starts in earnest this week with the traditional curtain-raiser of big bank results. JPMorgan Chase (JPM), Citi (C) and Wells Fargo (WFC) all weigh in with numbers on Friday. But analysts and investors are not looking for bullish numbers that can give the overall market a boost, with expectations for earnings per share growth consistently coming down into reporting season and an overall sense that the broader market will react badly.

Downward revisions: Third-quarter S&P 500 (SPY) EPS growth is now expected to be 2.6%, down from 9.8% in July, according to FactSet. Analysts have cut profit forecasts by $34B and if the consensus is correct, it would be the worst quarter for bottom lines since Q3 2020, in the depths of lockdown, the FT reported.

What does that mean for stocks? According to the latest MLIV Pulse survey of investors, more than 60% believe this earnings season will push the S&P 500 lower. Among the more than 700 respondents, high-level asset allocators are the most pessimistic about the impact of earnings, while risk managers are the most optimistic.

The BlackRock Investment Institute said it thinks earnings estimates still look “optimistic.” It remains underweight U.S. equities “valuations have not come down enough to reflect weaker earnings prospects.”

“If we are headed into a recession next year, which seems highly probable, earnings uncertainty may replace rate pressure as the chief obstacle to higher equity prices,” MKM strategist Michael Darda wrote. “Thus, the next 10 months could be tricky.”

“Long-term investors should thus have time to build long positions into weakness and volatility during the quarters ahead,” Darda said. “Forward and trailing operating earnings for the S&P 500 have typically fallen 15%-20% in recessions. So far, estimates have peaked and plateaued rather than cratered. However, forward indicators do point to more weakness ahead.”

Key stocks to watch: Apple (AAPL) results will be the most crucial to the market, with 60% of MLIV survey respondents calling it the company that matters most this earnings season. That was followed by JPMorgan at 25% and Tesla (TSLA) at 6%, with Microsoft (MSFT) and Walmart (WMT) generating a significant number of votes, according to Bloomberg.

While shares of Apple have declined fairly steadily since the middle of August, they have managed to stay off the lows around $130 hit in mid-June. At the end of September, the 200-day moving average briefly crossed below the 50-day in a bullish signal. Demand for the iPhone 14 has been questioned and will be closely watched when the company reports. In the last three months, there have been 23 downward EPS revisions vs. 14 upward revisions, giving it a Quant Rating grade of C. BofA recently downgraded the stock to Neutral and SA contributor Albert Lin noted that while Apple is a great business, the stock isn’t always “a no-brainer.” Overall pessimism isn’t universal, though. J.P. Morgan’s data assets and alpha group team said that given “the slew of negative pre-announcements, the hurdle to beat earnings is low.”

“Almost universally, people expect Energy (XLE) earnings to be great and every other sector to be horrible,” they said. “Our view is that earnings will come in better than expected and will not act as a headwind for markets.” (2 comments)

Banks lose on Twitter?

Banks led by Morgan Stanley may lose about $500M in their effort to fund Elon Musk’s $44 billion purchase of Twitter (TWTR) as the debt markets have seized in recent months. Lenders including Morgan Stanley (MS), Bank of America (BAC), Barclays (BCS) and Mitsubishi UFJ originally committed $13B of debt financing for the transaction.

Those banks may now lose about $500M if they had to sell the debt now, according to Bloomberg calculations. They originally agreed to fund the purchase even if they couldn’t sell the debt and now it’s unlikely investors would want to buy the debt in the current markets. (63 comments)

Tesla China sales

Tesla (TSLA) sold 83,135 China-made vehicles in wholesale in September, smashing its record of monthly sales in China, according to a report released Sunday by the China Passenger Car Association (CPCA). The number marks an 8% increase from August and outpaced the more than 5% month-over-month growth of all wholesale electric vehicle sales in China, according to CPCA data.

It set a record for Tesla’s Shanghai factory since production began in December 2019, and topped the prior sales record of 78,906 in June, as the U.S. carmaker continues to invest in China production. (21 comments)

One BILLION minutes

Netflix (NFLX) had the most-streamed program of the week – stop us if you’ve heard that one before – but there was plenty of streaming viewing to go around, as several platforms logged hits and eyeballs.

A new season of Cobra Kai, its fifth, put Netflix back on top of Nielsen’s latest weekly streaming ratings (for Sept. 5-11), with 1.737B minutes streamed. But for the first time, Nielsen notes, four different streaming platforms had a billion-minute program. (11 comments)

Today’s Economic Calendar
9:00 Fed’s Evans Speech
12:30 PM Investor Movement Index

Companies reporting earnings today »

What else is happening…

Bank of England expands its bond-market support program.

China’s September wholesale sales of passenger NEVs expected to be record 664K units, up 87% Y/Y.

Rivian (RIVN) recalls thousands of vehicles due to fastener issue.

Boeing (BA) 737 MAX back in the skies over China after nearly four years.

Amazon (AMZN), Google (GOOG, GOOGL), Nvidia (NVDA) seen among those with ‘significant’ opportunities in cloud, semis.

Mortgage originations slide more as rates rise, season changes.

Amazon (AMZN) plans €1B investment in European electric van, truck fleet.

Pfizer (PFE)/BioNTech (BNTX) tap Marvel heroes to boost vaccine rollout.

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