Before the Open (Oct 24-28)

Good morning. Happy Friday.

The Asian/Pacific markets were mostly weak. Singapore did well, but China, Hong Kong, South Korea, Taiwan, Australia and the Philippine were weak. Europe, Africa and the Middle East currently lean down. Turkey, Russia, South Africa, Finland and the Netherlands are down the most. Futures in the States point towards a flat open for the S&P and a down open for the Nasdaq.

————— VIDEO: Trading Ideas Going Forward —————

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

Stories/News from Seeking Alpha…

‘Bird is freed’

A new era at Twitter (TWTR) means new leadership and Elon Musk has been quick to update his platform bio to “Chief Twit.” The billionaire has finally completed his $44B acquisition of the social network, which will now operate as a private company. Among those departing the firm will be CEO Parag Agrawal, CFO Ned Segal, as well as Vijaya Gadde, the head of legal policy, and Sean Edgett, who has been general counsel at Twitter since 2012 (their combined termination payouts are set to top $200M).

What’s next? “The bird is freed,” Musk wrote in his latest tweet, and reportedly brought in Tesla (TSLA) engineers to meet with Twitter product leaders to dig into details and help him understand programming code. Musk also showed up carrying in a kitchen sink to Twitter’s headquarters in San Francisco. He joked “let that sink in,” but some feel that he’s rather going to weed out everything but the kitchen sink.

“The reason I acquired Twitter is because it is important to the future of civilization to have a common digital town square, where a wide range of beliefs can be debated in a healthy manner, without resorting to violence,” he wrote. “There is currently great danger that social media will splinter into far right wing and far left wing echo chambers that generate more hate and divide our society. That said, Twitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences! In addition to adhering to the laws of the land, our platform must be warm and welcoming to all, where you can choose your desired experiences according to your preferences.”

Still gotta make money: “Fundamentally, Twitter aspires to be the most respected advertising platform in the world that strengthens your brand and grows your enterprise,” Musk continued. He has also suggested Twitter should move toward subscriptions and remove ads from Twitter Blue, a premium program that gives users additional features. More recently, Musk has indicated the need to step up product innovation in an attempt to create an “everything app” that incorporates payments, shopping and commerce. (188 comments)

Tech carnage

Forget the crypto winter, there’s a Big Tech winter taking place in the markets. Many of the inflated growth stock prices that had surfaced when the Fed held interest rates near zero have deflated in 2022, and the latest earnings are not making their case any better. A macro storm that includes an advertising slowdown, worries about expenses, and softening consumer spending are sending investors fleeing to the sidelines and wiping away billions of dollars in market value in the interim.

Quote: “Across the board, tech continues to miss and there is tactical pain ahead,” said Brent Thill, a tech analyst at Jefferies. “We’re in for a dark winter. From small to big to large – no one is immune. We are still probably a quarter or two away from the fundamentals bottoming.”

Amazon: Shares of the retail behemoth and cloud provider plunged 12.7% AH on Thursday after posting a downbeat sales forecast and missing on revenue estimates. Amazon Web Services (AMZN) also recorded its weakest growth on record, while the company’s gloomy outlook doesn’t bode well for the holiday shopping season. “As we’ve done at similar times in our history, we’re taking actions to tighten our belt, including pausing hiring in certain businesses and winding down products and services where we believe our resources are better spent elsewhere,” said CFO Brian Olsavsky.

Apple: The iPhone maker was initially down 4% in after-hours trading, but managed to finish the session by eking out a slight gain. Macs selling at a record pace outweighed a slight miss on iPhone sales, while Apple (AAPL) beat estimates on both the top and bottom lines. “We reported record revenue of $90.1B, which was better than we anticipated despite stronger-than-expected foreign currency headwinds,” noted CEO Tim Cook. “We reached another record on our installed base of active devices, and across our Services, we continue to see enthusiasm and strong engagement from our subscribers.”


The city of Wuhan, where COVID-19 all began (or at least was first recorded), has gone into lockdown, as China sticks to a zero-COVID policy despite heavy economic costs. More than 800K people in one district were told to stay at home until Oct. 30, and it’s not alone in observing the strict strategy with coronavirus cases spreading across the country. Nearly 30 cities are currently observing some degree of lockdown measures, according to analysts at Nomura, with around 207M people affected in regions accounting for almost a quarter of China’s GDP.

Quote: “The COVID situation in China has deteriorated at an alarming pace, but abandoning zero-COVID now could be perceived as conceding that the strategy did not work in the first place,” said Ting Lu, chief China economist at Nomura, when heavy lockdowns resurfaced earlier this year.

Since then, Communist Party leader Xi Jinping has only doubled down on the draconian measures, which seek to eliminate outbreaks as soon as they occur at just about any cost. China remains one of the only countries in the world to still employ such a strategy, which is likely to remain in place at least until March, “when the political reshuffle will be fully completed and the new leaders fully take over the cabinet.” China just wrapped up its 20th National Party Congress, which saw Xi Jinping tighten his grip on power and stack the new Politburo Standing Committee with allies, loyalists and protégés.

Movement: While China’s zero-COVID strategy has weighed on its economy and market in the past, additional forces were at play overnight. Equities in Hong Kong led losses across Asia, with the Hang Seng Tech Index tumbling as much as 6%, as U.S. Under Secretary of Commerce Alan Estevez commented on an agreement with allies to limit some chip-related exports to China. “We expect to have a deal done in the near term,” he told an event at the Center for a New American Security, outlining that the new curbs would restrain Beijing’s military systems. (23 comments)

Topping 7%

Rising Treasury yields and an aggressive Federal Reserve has sent mortgage rates soaring this year, with things doubling over the course of 2022. In fact, the 30-year fixed-rate mortgage averaged 7.08% with an average 0.8 point for the week ending Oct. 27, up from last week when it averaged 6.94% and higher than 3.14% a year ago, according to the Freddie Mac Primary Mortgage Survey. The developments are starting to cool real estate prices, with the increase in borrowing costs locking many potential customers out of the market.

Snapshot: While housing is generally one of the most volatile sectors of the economy, residential fixed investment was one of the lowlights of yesterday’s GDP report. The industry decreased at a 26.4% annual pace in Q3, its worst showing in relation to the metric since the subprime mortgage crisis in 2007.

“The 30-year fixed-rate mortgage broke seven percent for the first time since April 2002, leading to greater stagnation in the housing market,” said Sam Khater, Freddie Mac’s Chief Economist. “As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month. In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward.”

Commentary: “With average effective mortgage rates now north of 7%, virtually all housing affordability metrics we track are now in unprecedented territory – including our favored homeownership payment/income ratio,” Raymond James analyst Buck Horne wrote in a research note last week, downgrading homebuilders like KB Home (KBH), Lennar (LEN), M.D.C. Holdings (MDC) and PulteGroup (PHM). Horne now calculates that the monthly finance for a median existing home would now be almost 42% of a median family’s gross income, topping the prior 40% record that marked the 2006 housing peak. (5 comments)

Today’s Economic Calendar
8:30 Personal Income and Outlays
8:30 Employment Cost Index
10:00 Consumer Sentiment
10:00 Pending Home Sales
1:00 PM Baker-Hughes Rig Count

What else is happening…

U.S. GDP grows 2.6% in Q3, net exports biggest contributor since 1980.

ECB hikes rates by 75 basis points despite recession jitters.

Shopify (SHOP) rallies after posting smaller loss than anticipated.

Intel (INTC) rises as investors turn back on chipmaker’s weak outlook.

Google (GOOG, GOOGL) acquires AI avatar startup Alter for $100M.

Mastercard (MA) results exceed consensus, but growth slows from Q2.

Pinterest (PINS) soars as steady user numbers power financial Q3 beat.

Gen Z hotel operator Selina shares surge following SPAC merger.

Golden Arches: McDonald’s (MCD) comparable sales dazzle in Q3.

Caterpillar (CAT) jumps as record EPS beats estimates on rising sales.


Good morning. Happy Thursday.

The Asian/Pacific markets leaned to the upside. Japan and China were weak, but Hong Kong, South Korea, Taiwan, Indonesia and the Philippines posted solid gains. Europe, Africa and the Middle East currently lean down. The UAE, Russia and Norway are up; France, Turkey, Finland, Portugal and Sweden are down. Futures in the States point towards a flat open for the S&P and a down open for the Nasdaq.

————— VIDEO: Trading Ideas Going Forward —————

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

Stories/News from Seeking Alpha…


Meta Platforms (META) cratered 20% AH on Wednesday following a mixed Q3 earnings report where the company topped revenue expectations, but missed on profits and warned of near-term sales challenges. The results wiped $65B off of Meta’s market capitalization, and followed a megacap selloff prompted by the earnings of fellow tech giants Alphabet (GOOG, GOOGL) and Microsoft (MSFT) (and even Snap (SNAP) last week). Serious concerns have surfaced in the advertising space, partly due to Apple’s (AAPL) privacy changes, as well as rising competition from rivals like short-form video app TikTok.

By the numbers: Meta’s revenues fell by 4%, better than expected, to land at $27.7B, while costs and expenses weighed on operating income, which tumbled by 46% to $5.6B. Meanwhile, Facebook daily active users rose 3% to 1.98B, above an expected 1.86B, and monthly active users rose 2% to 2.96B (just short of expectations for 2.97B). As for its “Family of Apps,” including Instagram and WhatsApp, family daily active people rose 4% to 2.93B, and family monthly active people rose 4% to 3.71B. Ad impressions across the family even rose 17%, but average pricing per ad fell 18%.

“While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth,” CEO Mark Zuckerberg said in his typically terse initial earnings comment. “I appreciate the patience and I think that those who are patient and invest with us will end up being rewarded.”

Meta losses: Revenue from Reality Labs, the company’s metaverse unit, nearly halved to $285M in Q3, while losses were $3.7B compared with $2.6B a year ago. The company expects operating losses for the division to “grow significantly year-over-year” in 2023, but still believes that’s where its future lies. So far, Reality Labs has bled $9.4B this year and investor scrutiny will only increase over Meta’s experimental pivot to a digital avatar-filled universe. (400 comments)

GDP update

Following two consecutive quarters of negative growth, and a technical recession, the U.S. Commerce Department today will report GDP figures that will provide the latest snapshot of the American economy. Forecasters expect the nation to grow again in the July-to-September quarter, predicting an annualized expansion of 2.3%. That would mark a sharp reversal compared to the contractions of 1.6% in Q1 and 0.6% in Q2, and may mean the economy can weather more Fed rate hikes than previously expected.

Fine print: Pay extra attention to the details in the report, which could skew numbers in either direction. For example, slowing imports has led to a narrowing of the trade deficit and will likely boost the GDP number, though it’s also an indicator of slowing domestic demand. Other key components may be influenced by the central bank’s rapid hikes in interest levels, like residential fixed investment, which has been crushed by the recent surge in mortgage rates.

So far, a mixed bag of economic data has been on display, with the latest picture changing day-by-day. Employment numbers are still strong, while spending and retail figures continue to appear robust. On the other side of the equation, inflation (and core) continue to remain high, housing prices are beginning to decline, there’s an escalating energy crisis, and the Fed can’t guarantee that its aggressive monetary policy won’t push the economy over the edge.

A different perspective? “There’s a lot of stuff on the horizon which is bad and could – doesn’t necessarily – but could put the U.S. in recession. That’s not the most important thing we think about. We’ll manage through that,” JPMorgan (JPM) CEO Jamie Dimon told the Future Investment Initiative Forum. “I’d worry much more about the geopolitics of the world today. The relationships of the Western world would have me far more concerned than whether there’s a mild or slightly severe recession [in the U.S.]” (18 comments)

Brands dump Ye

“I can say antisemitic things and Adidas can’t drop me,” said Ye, formerly known as Kanye West, before the sportswear manufacturer dropped the embattled artist as a partner. It’s now been several weeks since his tirades against Jews have prompted headlines, as well as other racially insensitive incidents. In the meantime, a corporate backlash has ensued following Ye’s rants and remarks that have sparked widespread condemnation.

Snippets: “The Jewish people have their hand on every single business that controls the world… I’m going death con 3 On JEWISH PEOPLE… I’m #MeTooing the Jewish culture right now and saying ya’ll gotta come out and say what you have done… By the fact I cross the antisemite line… and vibe, calling out the Jewish media and mob culture, I’m here to finish the job.”

Prior to Adidas (OTCQX:ADDYY) dropping its lucrative partnership with the rapper (which will result in a $250M hit for the company), Gap (GPS) removed Yeezy products from store shelves. TJX Companies (TJX) and Foot Locker (FL) have also severed ties with Ye, while luxury fashion house Balenciaga (OTCPK:PPRUY) ended their relationship. Elsewhere, Spotify (SPOT) said it will still keep streaming his music unless his record label requested it be removed, though Peloton (PTON) has pulled his tunes from their platform.

Looking elsewhere? Skechers USA (SKX) said its executives escorted Ye out of a Los Angeles corporate office on Wednesday after he “showed up unannounced and uninvited.” Ye arrived with his own camera crew and demanded to meet with executives, but the footwear maker confirmed that it “has no intention of working with West.” “We condemn his recent divisive remarks and do not tolerate antisemitism or any other form of hate speech,” Skechers said in a statement. (6 comments)


European market spillover, as well as the euro itself, will come into focus this morning, as the ECB gets ready to lift its main interest rate to the highest level since 2009. Policymakers are expected to follow in the footsteps of the Fed, which has raised rates by 75 basis points at its past three meetings, by pushing the ECB’s deposit rate to 1.5%. Inflation across the bloc has already soared to 10%, and an energy crisis this winter – triggered by Russia’s war in Ukraine – could exacerbate the economic situation.

Commentary: “Falling natural gas prices give the ECB some justification for slowing the pace of tightening [later this year], and the bank would rather go big now to prove it’s serious about inflation,” noted Luca Paolini, chief strategist at Pictet Asset Management. “By December the main worry will not be inflation, but the decline in economic activity.”

Rate hikes are not the only thing on the table at the ECB’s October meeting. The central bank is expected to discuss ways to start shrinking its balance sheet, or a process known as quantitative tightening. Assets have more than quadrupled over the past eight years to a total of €8.8T, a figure that is comparable to 70% of eurozone gross domestic product.

Outlook: Another thing to watch is lending conditions, and if the environment will change for European banks. The ECB may make some announcements surrounding Targeted Longer-Term Refinancing Operations, otherwise known as TLTROs, which encourage banks to lend to businesses and consumers in the eurozone. Pay attention to remuneration, cost, timing, and a possible system of tiering linked to reserves.

Today’s Economic Calendar
8:30 Durable Goods
8:30 GDP Q3
8:30 Initial Jobless Claims
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $35B, 7-Year Note Auction
4:30 PM Fed Balance Sheet

What else is happening…

Twitter (TWTR) delisting effective Friday after Musk completes deal.

Intel’s (INTC) Mobileye (MBLY) gains 38% in IPO market debut.

Boeing (BA) falls most in five months after reporting big Q3 loss.

Ford (F) earnings eroded by Argo autonomous driving investments.

Housing slowdown: Zillow (ZG) confirms layoffs amid tech pivot.

Harley-Davidson (HOG) revs up on higher shipments, strong pricing.

Oil major Shell (SHEL) plans to boost dividend and share buybacks.


Good morning. Happy Wednesday.

The Asian/Pacific markets did well. Japan, China, Hong Kong, South Korea, New Zealand, Malaysia, Singaore and the Philippines posted solid gains. Europe, Africa and the Middle East are currently mixed. Poland, South Africa, Norway and the Czech Republic are up; the UK, Switzerland, the Netherlands, Sweden and Saudi Arabia are down. Futures in the States point towards a moderate gap down open for the cash market.

————— VIDEO: Trading Ideas Going Forward —————

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

Stories/News from Seeking Alpha…

Tech trouble

Tech worries resurfaced after the bell on Tuesday after quarterly results from Alphabet and Microsoft dented the recent rally on Wall Street. Futures linked to the Nasdaq (COMP.IND) tumbled as much as 2.4% in overnight trading, while contracts tied to the S&P 500 (SP500) declined over 1%, challenging some who had already wagered that this year’s massive stock selloff had hit a bottom. Further volatility is inevitable as sentiment remains extremely fragile, while the wild market moves are making trading conditions all the more difficult.

Commentary: “The global economy is at a tipping point,” noted Jessica Amir, market strategist at Saxo Capital. “The stronger dollar will continue to hurt businesses’ forward earnings, at a time when consumer demand is likely to fall with the reverse wealth effect expected to grip markets. Pressure remains on riskier asset classes such as tech.”

Alphabet: Shares of the Google parent (GOOG, GOOGL) slumped 6.6% AH following results that missed expectations on both the top and bottom lines. Slowing sales growth continued as YouTube was whacked by the sharp global downturn in online advertising, with the division’s ad revenue falling for the first time since the company began reporting its financial performance in 2020. “Times like this are clarifying,” CEO Sundar Pichai declared, adding that Google is pushing to become more efficient “by realigning resources to invest in our biggest growth opportunities” and that “Q4 [employee] headcount additions will be significantly lower than Q3.”

Microsoft: The company behind Windows saw its stock tumble 6.7% AH following a mixed bag of results that was stained by tech rival Alphabet. Revenue from Intelligent cloud computing, including Microsoft’s (MSFT) Azure and other cloud services, was the biggest piece of the company’s revenue puzzle, and totaled $20.3B, up 20% from last year’s quarter. However, a decline in PC sales and the dollar’s strength continued to weigh on profits and growth, while the C-suite said that some rough weather could be coming in the months ahead.

Emergency reserves

Saudi Arabia has fired off a warning shot aimed at the U.S. as a high-level standoff over crude oil and supply agreements goes public. Prince Abdulaziz bin Salman, the Kingdom’s oil minister, accused unnamed countries of using their emergency oil reserves to “manipulate markets rather than helping with shortages of supply.” The remarks come after the Biden administration authorized the release of another 15M barrels of crude from the U.S. Strategic Petroleum Reserve as it tries to curb elevated gasoline prices in the wake of production cuts from OPEC+.

Quote: “We, as Saudi Arabia, decided to be the maturer guys,” he told the Future Investment Initiative Forum, otherwise known as Davos in the Desert. “It is my profound duty to make it clear to the world that losing emergency stock may become painful in the months to come. Running out of capacity has a much dearer cost than what people can imagine.”

Following some rushed diplomacy ahead of his summer trip to the Middle East, President Biden finally met with Saudi Crown Prince Mohammed bin Salman after previously pledging to make a “pariah” out of the Kingdom over the killing of U.S.-based columnist Jamal Khashoggi. There was an apparent understanding that the summit and a notable fist bump would lead to additional Saudi crude production, but things seem to be going the other way despite reported assurances. Riyadh first scrapped a paltry bump to OPEC+ production of 100K bpd on Sept. 5, and a month later deepened its cuts by a whopping 2M barrels per day, or about 2% of global supply.

Where things stand: The Saudis say the cuts are an attempt at balancing the market, which is not lacking any more crude, but is rather suffering from a lack of refining capacity, a crisis in the natural gas market and too rapid of a transition to renewables that weighs on current hydrocarbon investment. The American side is still in the middle of formulating a clear policy stance, though Biden has said “there will be consequences” for U.S.-Saudi relations. The administration is particularly concerned about the Kingdom’s growing ties with Russia and China, as well as market volatility that is expected once a European oil embargo goes into effect on Dec. 5. (18 comments)

Mobileye goes public

Investor pessimism has seen the IPO market dry up in 2022 after a record year of more than 1,000 offerings in 2021. Some companies are still taking a stab at going public, like Intel (INTC), which is spinning off its Mobileye division today (trading under ticker symbol “MBLY”). The unit develops autonomous driving technologies, as well as advanced driver-assistance systems containing cameras, computer chips and software.

Backdrop: Intel scooped up Mobileye for $15.3B in 2017, marking the biggest-ever acquisition of an Israeli tech company. At the time, Intel was reportedly aiming for a market cap of as high as $50B when it re-listed the firm, but much has changed since then. Pricing the IPO at $21 per share, the offering will exceed a targeted range of $18 to $20, but would only end up raising $16.7B, a far cry from its original targeted valuation.

“For the IPO market to come back with any strength, uncertainty needs to come down, whether that means inflation coming down, rate rises stopping, or at least having a better understanding of where we’re at,” said Kyle Stanford, venture capital analyst at PitchBook. “I think there’s still a lot of chips to fall on this downturn so it could be a while.”

By the numbers: Intel will sell at least 41M shares of Mobileye (about 5% of shares outstanding) to raise $861M, and also agreed to a $100M private placement with General Atlantic, taking the total raised to at least $961M. Two dozen underwriters, led by Goldman Sachs and Morgan Stanley, have a 30-day option to purchase up to an additional 6.15M of MBLY common shares, which could push the amount raised to more than $1B. Only two offerings this year have raised over $1B, including private-equity firm TPG (TPG) and AIG spinoff Corebridge Financial (CRBG). (6 comments)

Prepare for closing

It seems like it’s happening. Reports suggest that Elon Musk told a video conference of his bankers (funding some $13B in debt financing) that he would close a deal for Twitter (TWTR) by Friday, bringing an end to the drama-filled acquisition process. The Tesla (TSLA) CEO is even prepared to help market the debt once the deal is completed, while Musk’s lawyers have submitted paperwork to equity investors in preparation for closing the $44B take-private transaction.

Market confirmation? Twitter shares rose 2.5% to $52.78 on Tuesday, notching their highest level since Musk agreed to pay $54.20/share to buy the social media platform in April.

If the deal doesn’t close by 5 p.m. ET on Friday, litigation between the two sides will resume. Chancellor Kathaleen McCormick, the judge presiding over the case in Delaware, has previously rebuffed efforts by Musk to delay the trial and fast-tracked it at Twitter’s request. If Musk dilly-dallies again, and tries to close the deal a few days later, he would need separate permission from the judge to put another stay on legal action.

Is Twitter dying? Internal research shows the company is struggling to keep its most active users engaged, according to Reuters, pointing to another challenge for presumptive buyer Elon Musk. The news service cited an internal Twitter research document titled “Where did the Tweeters Go?” suggesting that “heavy tweeters” – those who log in 6-7 days per week and tweet about 3-4 times a week – have been in “absolute decline” since the start of the COVID pandemic. Those heavy users make up less than 10% of the overall number of users, but generate 90% of all tweets and half of Twitter’s global revenue. (45 comments)

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 International Trade in Goods (Advance)
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
10:00 New Home Sales
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
11:30 Results of $24B, 2-Year FRN Auction
1:00 PM Results of $43B, 5-Year Note Auction

What else is happening…

General Electric (GE) misses EPS estimate, outlines restructuring plan.

3M (MMM) beats expectations, but stronger dollar dampens sales.

JetBlue (JBLU) posts first quarterly profit since the pandemic.

Ahead of EV launch, GM (GM) dazzles analysts with strong quarter.

UPS (UPS) posts mixed earnings report, holds full-year guidance.

Chipotle (CMG) rallies after comparable sales and margins impress.

Strong drilling activity sends shares of Halliburton (HAL) higher.

Energy Transfer (ET) raises dividend by 15% amid energy boom.

Low margins surface again as a concern at Spotify (SPOT).

Volumes up: Coca-Cola (KO) smashes organic sales expectations.


Good morning. Happy Tuesday.

The Asian/Pacific markets leaned up. Japan, New Zealand and the Philippines did well; Taiwan was weak. Europe, Africa and the Middle East are currently mixed. Denmark, Turkey, Russia, Switzerland and Hungary are up; Germany, Norway and Saudi Arabia are own. Futures in the States point towards a moderate down open for the cash market.

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

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

Stories/News from Seeking Alpha…

In need of energy

The world is “truly in the middle of the first global energy crisis,” according to Fatih Birol, head of the International Energy Agency. The dire warning comes as LNG markets tighten due to Russia’s war in Ukraine, as well as OPEC’s recent decision to cut supply by 2M barrels per day (or about 2% of global supply). “[It is] especially risky as several economies around the world are on the brink of a recession, if that we are talking about the global recession… I found this decision really unfortunate.”

What it means: “It is not the United States that will suffer most under high energy prices,” continued Birol. “It is mainly emerging and developing countries because their import fees go up and they have a weaker currency [compared to the dollar] that will cause a lot of hardship. It is countries in Africa, Asia and Latin America – mainly oil and energy importing countries.”

The deepening crisis is still being felt all over the world, and across many industries, as it grows in “depth and complexity.” Prior to Feb. 24, Russia was the No.1 food to fuel exporter of the world, including oil, gas and coal. As long as a peaceful resolution to the conflict remains out of reach, volatility will stay entrenched in oil and gas markets globally. Oil consumption is expected to grow by a further 1.7M bpd in 2023, so the world will still need Russian oil to meet demand.

Go deeper: Birol noted that turning to other sources of energy and renewables will not only help the world achieve climate goals, but that energy security should be the number one driver of the energy transition. In fact, additional low-carbon sources would have helped ease the current crunch, and a quicker transition is the best way to stave off the global energy crisis. (17 comments)

Third time the charm?

Rishi Sunak was elected Tory party leader by fellow Conservative lawmakers on Monday, and will formally become the U.K.’s third prime minister in two months following a meeting today with King Charles III. The revolving door at 10 Downing Street comes after Liz Truss rocked financial markets with an economic plan to cut taxes and increase spending, which prompted a selloff in the British pound and U.K. gilts. Sunak had spent a previous leadership battle warning of the economic consequences if she were chosen for the top job, and is now on hook to restore market order and head off a recession.

Quote: “The United Kingdom is a great country, but we face a profound economic crisis. That’s why I am standing to be leader of the Conservative party and our next prime minister. I want to fix our economy, unite our party and deliver for our country.”

In terms of economic policy, Sunak will have a wide range of issues to contend with from spending and reducing the deficit to immigration and the U.K.’s relationship with the EU. Based on his resume, he’s likely to prioritize fiscal conservatism and trim spending where possible, even if that entails deep cuts. He also backed Brexit in the 2016 referendum, but wasn’t a hardliner, and will face pressure to solve a dispute related to the Northern Ireland Protocol.

Some history: Before entering politics, Sunak worked as an analyst at Goldman Sachs and was a partner at hedge funds like the Children’s Investment Fund Management and Theleme Partners. He was first elected as a Conservative MP for a constituency in North Yorkshire in 2015, but then worked his way up inside the party. Sunak served as Chief Secretary to the Treasury from 2019 to 2020 and as Chancellor of the Exchequer from 2020 to 2022 under former Prime Minister Boris Johnson.

Hot topic

How many times has the word “inflation” been mentioned by company executives this earnings season? On around 2 out of 3 conference calls, according to a transcript analysis by FactSet. The pressures have been on full display on both the producer and consumer sides of the equation, showing that companies have a lot more to think about when determining pricing and products. The latest CPI data from September came in at an elevated 8.2%, while the most recent PPI wholesale figures showed an 8.5% year-over-year expansion.

Quote: “Clearly, we have some caution in terms of what’s going to develop in the marketplace,” Dover (DOV) CEO Richard Tobin said last Thursday. “I fundamentally disagree with what the Fed is doing now.”

There’s also been some dispute on how long inflation will last, or if and how it will ease in some categories before others. “Inflation remains persistent and elevated, and we anticipate this to continue well into 2023 with some moderation in the back half of 2023,” Tractor Supply (TSCO) CEO Harry Lawton declared. “Inflation continues to be a stubborn force globally,” related Abbott (ABT) CEO Robert Ford, “though we’ve started to see some moderating impacts in certain areas of our businesses compared to earlier in the year.”

Outlook: So far, around 20% of companies in the S&P 500 have reported Q3 results in the first two weeks of earnings season. Another 165 firms, representing around a third of the benchmark index, will issue their quarterly report cards this week. They include the megacap tech names, like Google parent Alphabet (GOOG, GOOGL) and Microsoft (MSFT), which will report earnings later today.

Beyond Steak

Investors on Monday failed to give Beyond Meat (BYND) some much-needed love after the company announced the launch of Beyond Steak. Historically, new products have boosted sales, though the stock dipped another 1.4% during the session and is down over 80% YTD. The steak alternative will be available at Kroger (KR), Walmart (WMT) and other stores nationwide, with a 10-ounce package going for $7.99.

Snapshot: The company described Beyond Steak as “seared to perfection” and chopped into bite-sized pieces for meat lovers and flexitarians alike. Featuring a faba bean base, it contains 21 grams of protein per serving, while offering other nutritional benefits. Beyond Meat says it has a lower saturated fat content than beef steak, with 0 mg of cholesterol and no added antibiotics or hormones.

The launch follows a challenging period for the company that is also behind the Beyond Burger, Beyond Beef, Beyond Sausage and Beyond Meatballs. Chief Operating Officer Doug Ramsey was arrested in September after allegedly biting a man’s nose in an Arkansas parking garage, which ultimately led to his departure from the firm. Beyond Meat also intends to lay off 19% of its workforce, or about 200 of its total employees worldwide, after axing 4% of its global workforce in August.

Commentary: “Though we appreciate the opportunity for BYND to improve margins via newly-announced efficiencies, we may struggle to locate a bottom in the shares until we see evidence that demand is growing for the company’s products,” wrote J.P. Morgan equity analyst Ken Goldman. He reiterated a Sell-equivalent rating and withdrew a price target on the stock, while reducing revenue estimates for the foreseeable future. “Our EBITDA estimates increase to account for cost savings; however, we still model EBITDA well below zero for each of the next few years.” (8 comments)

Today’s Economic Calendar
9:00 S&P CoreLogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 Consumer Confidence
10:00 Richmond Fed Mfg.
1:00 PM Results of $42B, 2-Year Note Auction
1:00 PM Money Supply

What else is happening…

For the first time: Apple (AAPL) hikes U.S. prices for Music and TV+.

Oil producers skeptical of Biden plan to refill U.S. reserves – WSJ.

China bloodbath as Alibaba (BABA), Pinduoduo (PDD), (JD) sell off.

SEC charges Cronos (CRON) and its former exec with accounting fraud.

Medtronic (MDT) to spin off patient monitoring, respiratory units.

California climate lawsuit to return to state court after judge’s ruling.

Tesla (TSLA) cuts prices in China by up to 9% amid softening demand.

Investor Gerstner calls on Meta Platforms (META) to slim down and refocus.

WhatsApp (META) suffers overnight outage, but issue is quickly fixed.

Adidas (OTCQX:ADDYY) severs ties with Kanye West after antisemitic remarks.


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

The Asian/Pacific markets were mixed. South Korea, India, Australia and the Philippines did well, but China was weak and Hong Kong fell 6%. Europe, Africa and the Middle East are currently doing well. Denmark, Poland, France, Turkey, Germany, Greece, Finland, Switzerland, Spain, Italy and Sweden are up more than 1%; South Africa and Hungary are down. Futures in the States point towards a moderate gap up open for the cash market.

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

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

Stories/News from Seeking Alpha…

Earnings, earnings, earnings

The stakes this week couldn’t be higher as Big Tech gets ready to dominate earnings season. While third quarter reports will pour in from every corner of the market, results from Microsoft (MSFT), Alphabet (GOOGL), Meta (META), Apple (AAPL) and Amazon (AMZN) are likely to define investing direction for many a trader. Combined revenue growth of the newly found FAANG family, now called MAMAA by Mad Money’s Jim Cramer, is expected to have slowed to just under 10%, compared to a 29% increase in 2021 that took sales to $1.4T.

Bigger picture: Earnings from Snap (SNAP) already set a somber tone heading into the big parade, especially following the end of the pandemic digital boom that was compounded by soaring inflation. Fearful about a coming recession, many Big Tech companies have imposed hiring freezes, though some feel that the heavyweights have diversified their businesses enough to shield themselves from any advertising slowdown. A miss on estimates could still trigger panic, with outsized gains and losses becoming a trademark of this volatile market.

“The bar was set really low going into earnings season,” noted Gene Goldman, chief investment officer at Cetera Investment Management. “We were hoping for easier beats because everything had been revised lower, but the earnings releases we’re seeing now have not been that great.”

Market movement: According to FactSet, S&P 500 companies that have missed expectations this earnings season have fallen 4.7% on average in the two days before their report through the two days after, compared with the five-year average of 2.2%.

Cementing power

Stocks in Hong Kong and Shanghai closed out Monday’s session down 6.4% and 2%, respectively, amid a slew of concerns over the country’s economy. While third-quarter GDP growth beat expectations at 3.9%, the figure was way below China’s official full-year target of 5.5%, which is already its lowest goal in three decades. A large-scale property crisis and strict zero-COVID strategy have weighed on consumer spending, and there are additional economic fears as President Xi Jinping tightens his grip on power.

Quote: “This is panic selling,” said Dickie Wong, executive director of research at Kingston Securities. “Quite obviously investors are simply not confident about the future of the Chinese economy.”

During China’s 20th Party Congress, Xi was awarded with a third five-year term as leader of the ruling Communist Party, while the new Politburo Standing Committee was stacked with allies, loyalists and protégés. Xi also reaffirmed his Common Prosperity drive by pledging to “standardize wealth accumulation mechanisms” and by promoting “Chinese-style modernization.” Meanwhile, the Communist Party’s constitution was amended with strengthening “fighting spirit and ability,” while deterring separatists seeking independence in Taiwan.

Commentary: “Foreign investors and businesses have desperately searched for signs that liberals or ‘reformers’ will play a role in shaping the economy or bringing back an old economic order that prioritized foreign investment and liberalization of the economy,” said Drew Thompson, a visiting senior research fellow at the National University of Singapore. “It is clear from the outcome of the 20th Party Congress that national security and the party’s political security will take precedence over economic growth.” (24 comments)

Booster updates

The Biden administration is ramping up efforts to get more people in the U.S. boosted for COVID-19 after the program for bivalent jabs (targeting Omicron and the original strain) rolled out on Sept. 2. Warnings about a possible surge have been issued in recent weeks, with more people heading indoors before the holiday season. In fact, President Biden is set to get his updated shot tomorrow, following a three-month gap (referred to by the CDC) from when he last contracted COVID in July.

By the numbers: Uptake of the bivalent shot (the second booster approved following double dose vaccination) has been modest, with only about 20M Americans having received the jab. That’s despite all groups over 6 months of age being approved to receive the bivalent booster, and recommendations from the CDC to get inoculated if one is over 5 years old. The hesitancy comes as COVID weighs less on public life, questions surface about the vaccine’s level of effectiveness and worries abound over a never-ending cycle of boosters.

As the pandemic transitions to an endemic phase, London-based data analytics firm Airfinity expects a duopoly to dominate the COVID vaccine industry. “Pfizer/BioNTech (PFE, BNTX) and Moderna (MRNA) are continuing to benefit from first to market advantage and will continue to dominate the market for the foreseeable future,” Director Dr. Matt Linley wrote in a note. Skepticism still surrounds the financial prospects of COVID-19 vaccine markers, given a supply glut and uncertainty in demand. Revenue is predicted to decline by about 20% to $47B in 2023 after generating an estimated $60B in global sales this year (in line with 2021).

Cue the price hikes: Pfizer intends to raise the price of its COVID-19 vaccine around fourfold – to a range of $110-$130 per dose – when U.S. government-led procurements end next year. Moderna has also said it expected to charge $100 per dose for its vaccine, which was initially priced at $16.50. Stay on the lookout for updated price data from AstraZeneca (AZN), Johnson & Johnson (JNJ), and Novavax (NVAX), which were previously expected to charge $5-$16 for their COVID shots, according to Airfinity Analytics. (11 comments)

Davos in the Desert

The White House may be at odds with Saudi Arabia, but American CEOs are signaling that things are business as usual. Top executives from JPMorgan (JPM) and Goldman Sachs (GS), as well as CEOs from Blackstone (BX) and Moelis (MC), are gathering for the Future Investment Initiative – popularly known as “Davos in the Desert.” The annual summit, which runs from Tuesday to Thursday, seeks to project the Kingdom as a dynamic investment destination, and draws 6,000 people and 500 speakers to Riyadh.

Tapping oil wealth: With much of the world concerned about the risks of inflation and recession, Saudi Arabia is standing out as a place that should warrant some extra attention. It’s swimming in its first crude boom in over a decade, and is even predicted to record GDP growth of over 8% this year as many developed economies struggle to stay positive.

“The savvy of Wall Street know their history well and know the difference between the short-term and political versus the long-term and strategic,” said Talal Malik, CEO of Alpha1Strategy. “With this kind of liquidity, it makes sense for U.S. investment firms to ramp up their attendance.”

Case in point: JPMorgan plans to expand its 100-strong team in the country with 20 new employees by the end of 2022, which more than doubles its size from 2016. Other U.S. financial firms are also setting up operations there, like Franklin Templeton, as the Kingdom raises pressure on multinationals to relocate their Middle East hubs to Saudi Arabia.

Today’s Economic Calendar
8:30 Chicago Fed National Activity Index
9:45 PMI Composite Final

What else is happening…

U.S. might set price cap for Russian oil above $60/bbl – Bloomberg.

Sunak set to become next U.K. PM as Johnson pulls out of race.

Vale (VALE) will seek to spin off copper and nickel business.

Saudi wealth fund weighs big plane order for around 80 jetliners.

Apple (AAPL) hardware design chief Evans Hankey is leaving.

Wells Fargo: You’ll know the market has hit bottom when this happens.


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