Good morning. Happy Friday.
The Asian/Pacific markets leaned down. India and the Philippines did well; Japan, China, New Zealand, Indonesia and Singapore were weak. Europe, Africa and the Middle East are mixed and little changed. Poland, Portugal and Norway are up; Finland, Israel and the Czech Republic are down. Futures in the States point toward an unchanged open for the cash market.
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The dollar is down. Oil is up; copper is down. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Spheres of influence
A lot is riding on the G20 summit this year, especially with notable absences that include China’s Xi Jinping and Russia’s Vladimir Putin. President Biden will have an opportunity to make fresh inroads with many countries in the group (that account for more than 80% of global GDP) and reestablish the U.S. as the undisputed leader of the international system. Ahead of the conference, Congress has been asked for permission to lend $21B to IMF trust funds, with the U.S. still enjoying its special position there and at the World Bank, and keeping its hold on the institutions. See what happened at last year’s G20 summit
Backdrop: The alternative to the G7, known as the BRICS (Brazil, Russia, India, China and South Africa), has been looking to expand its axis of power by recently inviting more nations to join the group. Countries being courted, such as Argentina and Saudi Arabia (and possibly Indonesia), are members of the G20 as well, setting up some interesting and unusual dynamics at this weekend’s summit. The BRICS are also hoping to get many middle- to lower-income countries on board for membership, offering an alternative to the dominant Western economic model that has powered the globe since the end of WWII.
Biden’s biggest objective at the G20 will be to boost the funding and reach of the World Bank and other development banks as a counterweight to emerging economies that have sought lending from Beijing. China’s Belt and Road Initiative uses state-backed money for infrastructure projects all over the globe, giving it a presence and leverage in many new countries that are now tied to Chinese debt. The U.S. also plans to push for funding for new infrastructure projects and other partnerships after the BRICS declared their ultimate goal of “advancing the agenda of the Global South.” Check out ‘Rising Use Of Local Currencies In Cross-Border Payments’ by SA analyst Otaviano Canuto
Tug of war: The bigger fear for the U.S. is should the BRICS be successful in creating a separate economic and financial system, the effects of sanctions will wane with the dollar no longer controlling the majority of transactions in international trade. Diplomacy has been conducted at the highest levels in 2023 to extend American power, including Janet Yellen’s 10-day trip to Africa and re-engagement with Saudi Arabia after promises to make the kingdom a pariah. Immediately following his departure from the G20, President Biden is also set to travel to non-aligned Vietnam, which is quickly turning into a manufacturing powerhouse for American goods and an alternative to China.
Treading carefully
Apple (AAPL) is the latest pawn in the U.S.-China cold economic war, amid mounting fears that its Chinese business will be hit by a ban on iPhone use by government workers and homegrown competition. Apple lost nearly $200B in market cap since Beijing announced the ban – a move seen as retaliatory as the U.S. government had banned the use of certain Chinese products by government agencies, including TikTok and Huawei. The ban comes just days ahead of the iPhone 15 launch. However, Wedbush thinks the issue is way overblown, given the relatively small impact on the tech behemoth’s sales. Another cause for concern is Huawei’s new flagship smartphone, which Bank of America believes could help the Chinese firm regain market share and potentially pose downside risk to iPhone sales in the region – a view echoed by SA analyst Bill Maurer. (222 comments)
Strike in sight
The United Auto Workers said an offer by General Motors (GM) fell far short of its demands, as labor talks heated up with a strike deadline just one week away. UAW President Shawn Fain called the offer “insulting” and did not back down from the union’s strike threat. GM’s wage offer is slightly better than Ford’s (F) – which was rejected by the union – but it relied on lump sum payments, instead of the annual pay hikes being demanded. The union is expected to make another offer in response to Ford’s proposal, while Stellantis (STLA) will make a counterproposal by the end of the week. Wedbush said this is a potential nightmare situation for GM and Ford, although Investing Group Leader Envision Research believes the issue is only temporary. (59 comments)
More Fedspeak
Federal Reserve officials are signaling that the central bank will likely maintain interest rates at its meeting this month, although they all agree that more needs to be done in the fight against inflation. “The significantly lower inflation in recent months is encouraging,” said Dallas Fed President Lorie Logan, but warned that this may not be low enough. New York Fed President John Williams agreed, saying the Fed will closely watch data to assess whether policy is restrictive enough. While the headline inflation rate has been at ~2.5% over the past couple of months, other measures that strip out volatile food and energy prices are still high. Other officials have also called for a patient, data-dependent approach, including Boston Fed’s Susan Collins and Fed Governor Christopher Waller. (42 comments)
Today’s Economic Calendar
10:00 Wholesale Inventories (Preliminary)
1:00 PM Baker Hughes Rig Count
3:00 PM Consumer Credit
What else is happening…
Citi analyst believes Intel’s (INTC) foundry customer may be a ‘whale.’
SEC investigating Ryan Cohen’s Bed Bath (OTCPK:BBBYQ) stake sale.
British American Tobacco (BTI) inks deal for exit from Russia, Belarus.
Hudson Pacific (HPP) suspends dividend, blames Hollywood strike.
These analysts see Disney (DIS) conceding demand in Charter spat.
Boeing (BA) says 737 deliveries will be at the low end of yearly goal.
Honda Motor (HMC) adopts Tesla’s (TSLA) EV charging standard.
Carl Icahn says new Illumina (ILMN) CEO has his ‘full support’.
DocuSign (DOCU) rises as Q2 results, guidance top estimates.
Fresh round of job cuts coming for Goldman (GS) underperformers.
Bulls vs. Bears: SA analysts weigh in on S&P 500 (SP500) outlook.
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Good morning. Happy Thursday.
The Asian/Pacific markets were very weak. India did well, but Japan, China, Hong Kong, South Korea, Taiwan, Australia, Indonesia and the Philippines posted big losses. Europe, Africa and the Middle East are mostly down. Turkey, the UAE and Hungary are up; Poland, Russia, Greece, South Africa, Finland, the Netherlands, Israel, Austria, Sweden and Saudi Arabia are down. Futures in the States point toward a moderate down open for the cash market.
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The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Ready for kickoff
The NFL season will begin tonight with the defending Super Bowl champion Kansas City Chiefs playing the Detroit Lions at 8:20 PM ET. It will be front and center for the sports betting industry, which will continue to watch pro football matchups until the Super Bowl in Las Vegas on February 11, 2024. Ahead of the first kickoff, an annual survey released by the American Gaming Association forecast a major increase in the number of people making bets during the 2023 NFL season, with 73.5M U.S. adults placing wagers this fall and winter vs. 27M adults in 2022.
The league: The new season begins with FanDuel (OTCPK:PDYPY) and DraftKings (DKNG) holding the top spots in the sports betting market, with their shares up 25% and 175% YTD, respectively. BetMGM (OTCPK:GMVHF) (MGM), Caesars Entertainment (CZR), and Bet365 are still scrapping to nab market share, while players like FuboTV (FUBO), MaximBet, and the online sports betting arm of Churchill Downs (CHDN) have ceased operations or cut down dramatically on their reach. PointsBet (OTCQX:PBTHF) has also agreed to sell its U.S. business to Fanatics (FANA), with betting operators focused on profitability at all costs. Compare some of the stocks here.
The biggest wildcard to watch could be Disney’s (DIS) ESPN Bet entering the sports betting scene through a deal with Penn Entertainment (PENN). ESPN Bet is not expected to launch until the middle of the season, but will get an immediate push from ESPN’s broad football coverage across different platforms. “Since ESPN has to promote the ESPN Bet concept via odds attributions, digital product integrations and such, the deal is basically a marketing agreement for the sports brand,” notes SA Investing Group Leader Stone Fox Capital.
Other picks: If the launch of ESPN Bet leads to a jump in promotional activity in the sector, Gambling.com (GAMB) has been called out as a stock that could benefit. Looking at the broader sector, Genius Sports (GENI) has been mentioned as a supplier of mission-critical data, as well as sports betting provider Flutter Entertainment (OTCPK:PDYPY). The Roundhill Sports Betting and iGaming ETF (BETZ) is also up nearly 20% on a year-to-date basis, with DraftKings (DKNG) and Penn Entertainment (PENN) listed as the two top holdings in the fund. (8 comments)
AI disclaimers
Google (GOOG, GOOGL) has introduced a new policy that will mandate political advertisers to “prominently” disclose when their ads contain AI-generated material, in an effort to increase transparency and curb the spread of inauthentic content. The mandate will go into effect in mid-November, a year ahead of the U.S. presidential and congressional elections. The move comes a week before top tech executives are scheduled to meet Senate Majority Leader Chuck Schumer in Washington to discuss AI regulation, including Alphabet CEO Sundar Pichai and Meta (META) CEO Mark Zuckerberg. On the other side of the pond, Europe has already called on online platforms to label AI-generated content, which is also a step backed by the majority of WSB subscribers. (1 comment)
WeNegotiate
Shares of WeWork (WE) jumped as much as 18% on Wednesday – before erasing all the gains and then some – after the company said it was renegotiating almost all of its leases to fix its “inflexible and high-cost lease portfolio.” Even after taking actions to improve its real estate footprint, WeWork’s current lease liabilities – which make up more than two-thirds of its Q2 operating costs – “still remain too high,” said CEO David Tolley. After sounding the alarm on going concern risks, the cash-strapped coworking space provider began talks with three asset managers about its restructuring plans, including exploring a Chapter 11 bankruptcy filing. WeWork wants to avoid bankruptcy, but it’ll depend on whether the company can end or renegotiate most of its leases and reduce its rental costs. (3 comments)
That’s a riot
Riot Platforms (RIOT), which has been losing money due to less-profitable mining and soaring energy prices, is now relying on credits earned by curtailing its power consumption during peak demand in Texas. With a scorching heatwave enveloping the state, the second largest bitcoin (BTC-USD) miner earned $31.7M in credits from power grid operator ERCOT in August alone, surpassing the total credits received in 2022. The credits, which significantly lowered Riot’s cost to mine, equated to ~1,136 BTC – much higher than its bitcoin production in August. Riot CEO Jason Les believes its power strategy is a “key competitive advantage” at a time when bitcoin mining has become increasingly less profitable.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
3:30 PM Fed’s Williams Speech
3:45 PM Fed’s Bostic: Economic Outlook
4:30 PM Fed Balance Sheet
7:00 PM Fed’s Bostic: “Economic Mobility”
What else is happening…
Meet the Big Tech ‘gatekeepers’ list of the European Commission.
AMC (AMC) sees largest drop since 2021 on proposed stock offering.
GameStop (GME) gains after posting narrower-than-expected Q2 loss.
Biden administration to cancel drilling leases in Alaska wildlife refuge.
Roku (ROKU) pops on job cut plans, Q3 revenue guidance boost.
Apple (AAPL) slips as China orders gov’t agencies to stop using iPhones.
Pentagon said to plan massive AI fleet to counter China, other foes.
Comcast (CMCSA) says Hulu sale process will start September 30.
Shares of C3.ai (AI) tumble as path to profitability expected to be longer.
VMware/Broadcom deal spread narrows amid reports on China review.
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Good morning. Happy Wednesday.
The Asian/Pacific markets were mixed. Japan and Malaysia did well; South Korea and Australia did poorly. Europe, Africa and the Middle East are down big. The UK, Poland, France, Turkey, Germany, Russia, South Africa, Spain, Italy, Portugal, Austria and Saudi Arabia are down the most. Futures in the States point toward a down open for the cash market.
————— Online Course: Mini Masterclass in Trading —————
The dollar is down. Oil and copper are down. Gold and silver are down. Bonds are up.
Stories/News from Seeking Alpha…
Balancing act
How will higher oil prices factor into the economy and can they be sustained? Those are some of the questions traders are now asking as they look to position their portfolios for the rest of 2023 and beyond. Remaining below $80 per barrel for most of the year, WTI crude futures (CL1:COM) broke above that price level in the summer, and jumped to as high as $88/bbl on Tuesday (Brent traded above $90) after Saudi Arabia and Russia said they would extend their voluntary production cuts through the end of the year.
Inflation risk: Many had thought the OPEC+ leaders would lengthen their cuts into October, but the three-month extension came as a surprise. Equities also saw some knee-jerk losses, with the likelihood of higher prices leading to more monetary tightening. The latest cuts by the Saudis (1M barrels per day) and Russians (300K bpd) are on top of the April cut agreed by several OPEC+ producers (1.66M bpd) – which extends to the end of 2024 – while both countries stated they could even consider deepening their cuts further depending on market conditions.
Following the announcement, U.S. National Security Advisor Jake Sullivan said that President Biden is “doing everything within his toolkit to be able to get lower prices for consumers at the gas pump.” The national average price of a gallon of regular gasoline now stands at $3.811 a gallon, according to data from AAA, marking the highest seasonal level since 2012. Higher energy costs could also dent hopes and forecasts for a “soft landing,” which has gained renewed momentum following a recent spate of economic data (see below).
What to watch: Expensive energy could curtail growth across the globe, especially in China, whose economy is under pressure due to the nation’s stop-and-go pandemic rebound, property troubles and debt problems. The Saudis and Russians need to be careful about this, and pull off somewhat of a balancing act, because if things get worse for China as oil prices stay high, their recent cuts may end up backfiring and reduce demand for the commodity. Interestingly, the G7 – along with the EU and Australia – also appear to have deferred regular reviews on their $60 Russian oil price cap scheme despite Urals-grade crude trading at $74/bbl on average in August.
Data dependent
Federal Reserve Governor Christopher Waller said last week’s strong economic data will buy the central bank some time as it mulls whether further interest rate hikes are needed. “That was a hell of a good week of data we got last week, and it’s going to allow us to proceed carefully,” he said, referring to the nonfarm payrolls report, PCE inflation data and the JOLTS report. While the progress so far has been encouraging, Waller said the Fed can afford to keep rates higher for longer and it is key to “see whether this low inflation is a trend or if just an outlier.” Markets are widely expecting the Fed to maintain rates this month, although there is uncertainty over its rate path in the meetings thereafter. (1 comment)
Arm and a leg?
British chip design firm Arm Holdings (ARM) has updated its IPO filing, saying it expects to price 95.5M shares between $47 and $51 apiece. That would value the company at as much as $54B, which is lower than the $64B valuation at which SoftBank (OTCPK:SFTBY) had previously bought a 25% stake it didn’t already own in Arm. The chip designer also confirmed that several major tech companies – including Apple (AAPL), Google (GOOG, GOOGL) and Nvidia (NVDA) – will become investors in the offering. While the hype surrounding Arm has been growing, Wall Street analysts have warned that this may not be warranted. Investing Group Leader Jonathan Weber also raised concerns over Arm’s high valuation, even if its underlying business growth is attractive. (27 comments)
Energy mix
Enbridge (ENB) fell 7% in extended trading on Tuesday after announcing three deals with Dominion Energy (D). It will buy East Ohio Gas Co., Questar Gas and Public Service Company of North Carolina for a combined value of $14B, creating the biggest natural gas utility in North America. Enbridge also announced a C$4B equity issuance, a portion of which will be used for acquiring the utilities. The deal comes 10 months after Dominion said it would review its business to improve results. Moody’s revised its outlook on Enbridge to negative from stable, saying the deals would add pressure to the company’s already weak financial profile. (113 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 International Trade in Goods and Services
8:30 Fed’s Collins Speech
9:45 PMI Composite Final
10:00 ISM Service Index
2:00 PM Fed’s Beige Book
What else is happening…
Strike! Warner Bros. Discovery (WBD) lowers adjusted EBITDA outlook.
Zoom (ZM) calls on FTC to look into Microsoft’s (MSFT) Teams bundling.
Meta (META) to end news tab on Facebook in U.K., France and Germany.
Kroger (KR) in talks to sell grocery stores to C&S amid antitrust concerns.
FTC expected to file antitrust lawsuit against Amazon (AMZN) this month.
United Airlines (UAL) drops after departure pause; ground stop since lifted.
UBS (UBS) looks to renegotiate securitized products deal with Apollo.
ASML (ASML) says first pilot EUV chipmaking tool to launch this year.
Illumina (ILMN) ropes in Agilent (A) executive Thaysen as new CEO.
GameStop (GME) earnings preview: What could be the latest cost cuts?
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Good morning. Happy Tuesday. Hope you had a good weekend.
The Asian/Pacific markets did poorly. China, Hong Kong, New Zealand and Malaysia were weak. Europe, Africa and the Middle East are currently mixed. Turkey, Greece, Israel, Austria and Sweden are up; the UAE, Russia, South Africa and Portugal are down. Futures in the States point toward a down open for the cash market.
————— VIDEO: Using Technical Indicators to Pick Tops —————
The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Against the grain
There continues to be some uncertainty surrounding global grain prices as Russia and Turkey wrapped up talks discussing a resumption of the Black Sea Grain Initiative. On shaky ground since first signed in July 2022, the U.N.-backed agreement sought to guarantee the safety of the food supply chain despite attacks on grain export facilities, slow ship inspections and uncertain renewal deadlines. It’s a big deal, as Ukraine is one of the world’s largest suppliers of wheat and corn, and produces about half of the globe’s sunflower oil.
Snapshot: The war contributed to an extremely volatile environment for global grain prices in 2022, with crises and shortages popping up in regions across Asia, Africa, the Middle East and Latin America. At their latest meeting, Vladimir Putin told Recep Tayyip Erdogan that he wouldn’t revive the grain deal unless restrictions on Russia’s agricultural exports were removed – including on food and fertilizer – that have been hampered by sanctions on financing and shipping. “We are ready to immediately return to it as soon as the promises made to us are fulfilled,” Putin declared at a joint press conference.
It’s also a matter of leverage. The scrapping of the Black Sea Grain Initiative hasn’t stopped Russia from exporting record volumes of wheat, while its fertilizer exports are also recovering to pre-war levels. Moscow also just inked a deal to send 1M tons of grain to African nations via Turkey (which has offered to process them into flour), and many state grain buyers like Egypt are inking private transactions instead of traditional tenders. Ukrainian grain can also make it to market without a new deal, but higher transport costs weigh on profit margins and could lead to fewer plantings and supplies in the long term.
More diplomacy: The White House National Security Council expects Putin to hold talks with North Korea’s Kim Jong Un later this month as the two countries seek closer military ties. Under discussion is the exchange of artillery shells and anti-tank missiles for advanced technology for satellites and nuclear-powered submarines, according to several reports. Russia’s Defense Minister Sergei Shoigu also confirmed that Moscow is considering joint naval exercises with China and North Korea, in what would be a first for the regime in Pyongyang.
Hosts scramble
Airbnb (ABNB) hosts in New York are bracing for a new regulation that goes into effect today, effectively banning short-term rentals. The city argues that short-term rentals take away much-needed affordable housing stock, and hotels are surely no big fans. This may not have a material adverse effect on Airbnb’s results, but many hosts fear that the stringent rules could set a precedent that destroys the benefits of its sharing economy. Note that analysts widely expect Airbnb’s revenue growth to slow further, but Investing Group Leader JR Research said the stock’s pending addition to the S&P 500 has strengthened the market’s confidence in its growth story. (83 comments)
Sitting tight
A lack of U.S. homes for sale has pushed up home prices to the highest level since October, according to real estate brokerage Redfin (RDFN), as homeowners don’t want to give up their relatively low mortgage rates. “Another reason for the big year-over-year price increase is that prices came down rapidly at this time last year, with rising mortgage rates sidelining buyers.” The inventory shortage is causing competition for desirable homes, with the median home-sale price climbing 5% Y/Y to $380K during the four weeks that ended August 27. Miami, Florida, saw the most significant Y/Y increase in home prices among the 50 most populous metropolitan areas, with the city’s median home-sale price jumping 17% from a year ago. (143 comments)
AI budget
Artificial intelligence is making waves across Wall Street, leading to sky-high valuations in chipmakers. Even biopharma firms with AI connections have benefited, including Recursion Pharmaceuticals (RXRX). As AI adoption increases across industries, Morgan Stanley projected that the healthcare sector’s 2024 budgetary allocation for the technology will nearly double from 2022. It said the potential use of AI could be transformational for the healthcare sector, advising investors to focus on four key areas. Investing Group leader Lyn Alden Schwartzer also delved into certain AI themes, including how the technology can lower the costs of developing new drugs. (51 comments)
Today’s Economic Calendar
Auto Sales
10:00 Factory Orders
12:30 PM Investor Movement Index
What else is happening…
Rare Stock Picks In August 2023 – From 34 Discerning Analysts.
Alibaba (BABA), other Chinese tech firms seek deepfake approval.
Magellan Midstream (MMP) CEO urges holders to vote for Oneok deal.
Arm (ARM) is set to go public soon. Is the hype warranted?
Why is big pharma unmoved despite Medicare pricing threat?
Carvana, CarMax should be in driver’s seat amid used car shortage.
Albemarle (ALB) raises Liontown Resources takeover bid to $4.3B.
Biden said to approve sending depleted-uranium ammo to Ukraine.
Country Garden debt deal brings relief for China’s property sector.
Consumers are looking for value offerings – these names may benefit.
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