Coffee With Greta: What Will the Fed Do?
DJIA Futures: -231 (-0.7%) SPX Futures: -27 (-0.7%) NASDAQ Futures: -79 (-0.7%) Good morning friends! Futures are falling further today as a new week of trade begins focused on the Fed. Let’s get right to it! Fed Week Kicks Off Stocks are set to open lower as the market turns its focus to this week’s Fed meeting. The Central Bank begins its two-day policy meeting on Tuesday and will release the rate hike decision Wednesday at 2:00 p.m. ET. CME Group’s FedWatch Tool shows the market sees an 80% chance of another 75bps hike and a 20% chance of a 100bps hike. The increased expectations come after inflation unexpectedly picked up in August. The Fed Chair has said Americans will have to experience some “economic pain” in order to get inflation under control. Treasury Yields Surge Ahead of Fed Rate Hike Treasury yields are rallying today in anticipation of another large rate hike from the Fed this week. The 2-year yield is up 6 basis points at 3.93% while the 10-year yield is up 4 basis points at 3.5%. The 10-year hit a high of 3.508% earlier this morning, its highest level since 2011, and the 2-year jumped to its highest since 2007 at 3.94%. Yields move inversely to prices, surging higher as traders sell off bonds. Oil Prices Fall as Demand Fears Jump Oil prices are falling today as demand fears take over. West Texas Intermediate crude futures are down 3.4% to $82 bbl while Brent crude futures are down 3% to under $89 bbl. Prices have been under pressure ahead of the Fed’s meeting this week as continued rate hikes are expected to put more pressure on the economy. But the market still has supply concerns hanging over its head with the EU’s sanctions on Russian oil approaching in early December. Housing Market In Focus This will be a big week of data for the U.S. housing market which has slowed dramatically as mortgage rates rise. The National Association of Homebuilders releases its September sentiment index at 10:00 a.m. ET today. Economists expect the index to fall 2 points to 47 after confidence slipped into negative territory for the first time since May 2020 in August. Builders already squeezed by high material costs and supply shortages are now struggling with slower buyer demand due to higher rates. The Census Bureau reports August housing starts and building permits Tuesday morning and the National Association of Realtors existing home sales report will be out on Wednesday. In Case You Missed It The University of Michigan consumer sentiment index rose to 59.5 in September from 58.2 in August. That was lower than economists’ expectations for 60 and down sharply from 72.8 a year ago. The survey showed Americans expect inflation to still be at 4.6% one year from now and 2.8% five years from now. FedEx (FDX) suffered its largest one-day decline on record Friday, plunging 21.4%. The drop came after the shipping giant missed expectations in the latest quarter and withdrew its full-year guidance. FedEx cited weaker global shipping demand for the move with the CEO predicting a “worldwide recession”.
Continue Reading -->Coffee With Greta: FedEx Craters After Ditching Forecast
DJIA Futures: -313 (-1.0%) SPX Futures: -42 (-1.1%) NASDAQ Futures: -136 (-1.1%) Good morning friends! Futures are tumbling as the market heads for big weekly losses. Let’s get right to it! FedEx Tanks After Withdrawing Guidance FedEx (FDX) shares are plummeting 20.3% ahead of the open after missing fiscal Q1 expectations and withdrawing its full-year guidance. Here’s how the shipping giant’s results compared to analysts’ expectations: Adjusted EPS: $3.44 vs $5.14 expected Revenue: $23.2 billion vs $23.59 billion expected FedEx withdrew its full-year forecast as global shipping volumes dropped. The CEO said “Global volumes declined as macroeconomic trends significantly worsened later in the quarter… While this performance is disappointing, we are aggressively accelerating cost reduction efforts.” The company also announced new cost-cutting initiatives which include closing 90 office locations and five corporate office facilities. FedEx will also defer hiring efforts, reduce flights, and cancel some projects. The guidance cut is also weighing on FedEx’s competitors with UPS (UPS) shares down 6.5% and XPO Logistics (XPO) shares falling 5.9% ahead of the open. Uber Gets Hacked Uber (UBER) is investigating a cybersecurity incident after a hacker gained control over the company’s internal systems. In a statement on Twitter, Uber said, “We are currently responding to a cybersecurity incident. We are in touch with law enforcement and will post additional updates here as they become available.” A New York Times report claims the hacker gained access after compromising an employee’s Slack account. The Times says it spoke with the hacker directly. Uber shares are down 4.3% in premarket trade. Oil Prices Steady Oil prices have stabilized this morning but are still on track for weekly losses. West Texas Intermediate crude futures are up 0.3% to $85.30 bbl while Brent crude futures are up 0.7% to $91.50 bbl. The market has been in a back and forth all week between demand fears and supply concerns. This will be the third consecutive weekly loss for both contracts. Both WTI and Brent are down by 20% so far in Q3, the worst quarterly percentage declines since the start of the pandemic. Consumer Sentiment Expected to Improve The University of Michigan reports consumer sentiment for September at 10:00 a.m. ET. That index is expected to rise to 60 from 58.2 in August. But the main focus is on consumers’ 5-year inflation expectations, which stood at 2.9% in August. That outlook is of extra importance ahead of next week’s Fed meeting. Fed Chair Jerome Powell said that surprisingly higher inflation expectations ahead of the June meeting were part of what swayed the bank to approve another 0.75% rate hike instead of pivoting back to 0.5%. CME Group’s FedWatch Tool shows 80% of traders anticipating another 75 bps rate hike while 20% are predicting a 100 bps move. In Case You Missed It Adobe (ADBE) logged its worst day since 2010 on Thursday as the stock plunged 16.8%. The drop came after the company announced a $20 billion cash and stock deal to acquire design software firm Figma. Figma was valued at just $10 billion in its last funding round in 2021. Adobe also announced mixed fiscal Q3 results Thursday morning and issued mixed guidance for fiscal Q4.
Continue Reading -->Coffee With Greta: Are We Buying More or Just Spending More?
DJIA Futures: +36 (+0.1%) SPX Futures: -4 (-0.1%) NASDAQ Futures: -36 (-0.3%) Good morning friends! Futures are flat following the release of strong consumer data. Let’s get right to it! Retail Sales Rise More Than Expected U.S. retail sales rose more than expected in August as Americans spent more on new cars and ate out more. The Census Bureau reported retail sales rose 0.3% in August to $683.3 billion, up 9.1% year over year. That was better than economists’ expectations for sales to be unchanged. Sales rose 2.8% monthly and 6.7% annually at car dealers. Restaurants and bars saw a 1.1% monthly and 10.9% annual increase in spending. Although lower gas prices caused a 4.2% monthly drop in spending at gasoline stations, those sales were still up 29.3% year over year. Excluding autos and gasoline, core retail sales also rose 0.3% monthly and 7.6% annually. The jump largely reflects higher prices and not increased purchases. When adjusted for inflation, spending is basically flat over the past year. But it still shows consumers maintaining strength in the face of soaring inflation. Weekly Jobless Claims Fall for Fifth Straight Week Weekly jobless claims fell unexpectedly last week for the fifth week in a row. The Labor Department reported 213,000 Americans filed initial unemployment claims. That was down 5,000 from the previous week and better than expectations for an increase to 225,000. The data shows no increase in layoffs as the Fed hikes rates. Continuing jobless claims were unchanged at 1.4 million in the week ending September 3. Rail Stocks Rally on Labor Deal to Avoid Strike Rail stocks are up ahead of the open after railroads and labor unions reached a tentative agreement overnight to avoid a massive rail strike. The Association of American Railroads said in a press release that tentative agreements have been reached with the Brotherhood of Locomotive Engineers and Trainmen Division of the International Brotherhood of Teamsters, the International Association of Sheet Metal, Air, Rail and Transportation Workers – Transportation Division, and the Brotherhood of Railroad Signalmen. Union Pacific (UNP) shares are up 3.1% ahead of the open, while CSX (CSX) shares are up 1.7%, and Norfolk Southern (NSC) shares are up 3.1%. Under the new contracts, rail workers will receive a 24% wage increase by 2024, including $11,000 in immediate average payouts. The unions also negotiated an extra paid day off for workers. The deal avoids a nationwide rail strike that threatened to worsen an already struggling supply chain across the U.S. The tentative agreement must now be ratified by union members, which could take at least a week. Adobe Falls on Weak Outlook, New Acquisition Announcement Adobe (ADBE) shares are down 9.8% in premarket trade after reporting mixed fiscal Q3 results and a weak outlook for Q4. The software company reported adjusted earnings of $3.40 per share on $4.43 billion in revenue. That was better than analysts’ expectations for adjusted EPS of $3.35 but sales fell short of estimates for $4.44 billion. For fiscal Q4, Adobe forecast revenue of $4.52 billion vs analysts’ expectations for $4.6 billio. The company said that outlook reflects macroeconomic conditions, foreign-exchange pressures, and the usual “year-end seasonal strength in demand for our offerings.” Adobe sees adjusted earnings of $3.50 per share in fiscal Q4, better than analysts expectations for $3.47. The company also announced it will acquire design software firm Figma in a cash and stock deal worth $20 billion. Adobe’s chairman and CEO said, “The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity.” The company expects that deal to close in 2023. Oil Prices Dip on Demand Fears Oil prices are falling today as demand concerns take over. West Texas Intermediate crude futures are down 1.8% to just under $87 bbl while Brent crude futures are down 1.8% to $92 bbl. The International Energy Agency forecast this week that oil demand growth would fall sharply in Q4. That outlook comes as analysts expect the Fed’s tightening policy to weaken the economy. Meanwhile, the Energy Information Administration reported U.S. crude inventories rose by 2.4 million barrels last week vs expectations for a 1 million barrel increase. Gasoline stockpiles fell by 1.8 million barrels vs analysts’ expectations for a 600,000 barrel drop. In Case You Missed It A Bloomberg report on Wednesday claimed the Biden Administration is looking at plans to start buying more oil soon in an effort to support prices. Sources say those purchases may begin if crude prices fall below $80 a barrel. The purchases would be used to refill the Strategic Petroleum Reserve after the President ordered a historic release from reserves this year. Officials are reportedly looking to reassure oil producers the U.S. won’t let prices collapse as demand slows in the winter.
Continue Reading -->Coffee With Greta: Wholesale Inflation Cools Again
DJIA Futures: +24 (+0.1%) SPX Futures: +7 (+0.2%) NASDAQ Futures: +32 (+0.2%) Good morning friends! Futures are up slightly after the worst day in more than two years on Tuesday. Let’s get right to it! Wholesale Inflation Cools Again Wholesale inflation pressures cooled as expected in August, dropping for the second month in a row. The Bureau of Labor Statistics producer price index fell 0.1% monthly and was up 8.7% year over year. That was in line with economists’ expectations as energy prices dropped 6% month over month. The core PPI – which excludes food, energy, and trade services – rose 0.2% monthly and 5.6% annually. That was a smaller monthly gain than economists had forecast. This data is a leading indicator for consumer prices as producers pass down higher costs. A continued slowdown in wholesale inflation should eventually result in lower prices for consumer goods and services. Treasury Yields Continue March Higher Treasury yields are still pushing higher today as the market gears up for more aggressive Fed rate hikes. The 2-year yield is up 4 basis points to 3.78% while the 10-year yield is up 3 basis points to 3.45%. The 2-year hit a high of 3.805% earlier today, its highest level since November 2007. The hot CPI reading on Tuesday pushed the market to hike its expectations for next week’s Fed meeting. CME Group’s FedWatch Tool shows 66% of traders still anticipating a 75 basis point hike while 34% are predicting a 100 basis point hike. The central bank has not done a full 1% hike since early 1989. Mortgage Demand Continues to Collapse Mortgage demand is collapsing as rates surge past 6% for the first time in 14 years. The Mortgage Bankers Association reported overall demand fell 1.2% last week. Purchase applications rose 0.2% weekly but dropped 29% annually. Refinance applications fell 4% weekly and were down 83% year over year. The average contract rate for 30-year fixed mortgages increased to 6.01% from 5.94% the week before. That’s the first time rates have topped 6% since 2008. Rates have since pushed even higher this week after the release of hot inflation data for August. Mortgage rates track alongside the 10-year Treasury yield. Oil Prices Stabilize Oil prices are flat today after tumbling on demand fears Tuesday. West Texas Intermediate crude futures are just over $87 bbl while Brent crude futures are just above $93 bbl. Prices stabilized after some signs of bullish demand in an International Energy Agency report. Meanwhile, the American Petroleum Institute reported late Tuesday that U.S. crude inventories rose by 6 million barrels last week vs expectations for a 200,000 barrel decrease. Gasoline stockpiles fell by 3.23 million barrels. The Energy Information Administration reports official inventory levels at 10:30 a.m. ET today. In Case You Missed It Twitter (TWTR) shareholders voted in favor of Elon Musk’s takeover bid on Tuesday. A preliminary count showed 98.6% of votes were in favor of the deal. In a statement, Twitter said, “Twitter stands ready and willing to complete the merger with affiliates of Mr. Musk immediately, and in any event, no later than on September 15, 2022, the second business day following the satisfaction of all conditions precedent, which is the timeline required by the merger agreement.” But Musk is still fighting to get out of the deal and the two sides are scheduled to go to trial on October 17. The market got crushed on Tuesday with all 3 major indexes suffering their largest drops since June 2020. The Dow Jones sank 3.94%, while the S&P 500 slid 4.32%, and the Nasdaq dropped 5.16%. The broad-based sell-off came after the release of surprisingly hot inflation data in August.
Continue Reading -->Coffee With Greta: Red Hot Inflation Cools Stock Rally
DJIA Futures: -464 (-1.4%) SPX Futures: -78 (-1.9%) NASDAQ Futures: -307 (-2.4%) Good morning friends! Futures are plunging after the release of unexpectedly hot inflation data. Let’s get right to it! Inflation is Stubbornly High Inflation is still running hot in the U.S. economy. The Bureau of Labor Statistics consumer price index shows headline inflation rose 0.1% in August and 8.3% year over year. Economists were expecting prices to fall 0.1% monthly and be up 8% annually. The increase came despite a 5.9% monthly drop in oil prices and 10.6% monthly drop in gas prices. Other energy prices rose with electricity prices up 1.5% monthly and 15.8% year over year while utility gas prices jumped 3.5% monthly and 33% annually. Grocery prices also rose 0.7% monthly and 13.5% year over year. Shelter prices were up 0.7% monthly and 6.2% annually. The core CPI, which excludes food and energy prices, also accelerated more than expected. Core prices rose 0.6% monthly and 6.3% annually vs economists’ expectations for 0.3% monthly and 6% year over year. Treasury Yields Surge After Hot CPI Treasury yields jumped higher as traders dump bonds after the release of that hot inflation data. The 2-year yield is up 16 basis points to 3.73% while the 10-year yield is up 11 basis points to 3.43%. This was the final release of inflation data before the Fed’s rate hike decision next week. CME Group’s FedWatch Tool shows 82% of traders expecting another 75 basis point hike while 18% are now expecting a full 1% hike. Starbucks Hosts Investor Day Starbucks (SBUX) shares are down 1.6% ahead of the open, following the broader market lower, ahead of the company’s investor day. The coffee giant is expected to unveil a “reinvention” strategy at today’s event. That plan was developed by interim CEO Howard Schultz who will stick around to help the incoming CEO implement it. Schultz previously said the goal is to increase efficiency in U.S. locations as consumer behavior shifts post-pandemic. Starbucks shares are down 24% year-to-date. Twitter Shareholders to Vote on Musk Takeover Twitter (TWTR) shareholders will vote today on whether to approve or reject Tesla (TSLA) CEO Elon Musk’s takeover bid. Musk proposed the $44 billion acquisition in April but has been attempting to get out of the deal since July. TWTR shares are down 1.5% in premarket trade, turning lower after the CPI release. Twitter blew off his latest attempt to terminate the deal over a payment made to a whistleblower. The social media giant said it has not breached any of its obligations and plans to move forward with the acquisition. Even if shareholders approve the deal, the two sides will still go to trial on October 17. Twitter is seeking to force Musk to go through with the purchase while Musk is attempting to prove Twitter has violated the terms of the agreement. More Executive Shakeups At Peloton Peloton (PTON) shares are down 5.4% ahead of the open after announcing two of its co-founders are leaving the company. John Foley, who previously served as CEO, resigned from his position as executive chairman of the board effective immediately on Monday. Former Restoration Hardware president Karen Boone will take over Foley’s position. Hisao Kushi will step down from his role as chief legal officer on October 3. He will be replaced by Uber’s chief deputy general counsel. Peloton’s chief commercial officer Kevin Cornils will leave on September 23 and will be replaced by the current chief strategy officer under a new title of chief emerging business officer. In a letter to employees, CEO Barry McCarthy said, “There wouldn’t be a Peloton without John Foley or Hisao Kushi. Without John’s unwavering commitment to his dream, there wouldn’t be a passionate and devoted community of nearly 7 million Peloton Members. I want to thank John for paving the way.” Oracle Reports Strong Fiscal Q1 Sales Growth Oracle (ORCL) shares are down 0.4% in premarket trade after reporting mixed fiscal Q1 results. Shares were initially higher this morning but dropped with the broader market after the August CPI report. The software company reported adjusted earnings of $1.03 per share on $11.45 billion in revenue. That was shy of analysts’ expectations for adjusted EPS of $1.07 but met revenue estimates. Sales surged 18% year over year, up sharply from 5% growth in the prior quarter. Part of that growth was thanks to Oracle’s recent acquisition of software maker Cerner, which contributed $1.4 billion in sales. Oil Prices Drop After Hot CPI Oil prices have turned lower as demand concerns take over supply worries. West Texas Intermediate crude futures are down 0.6% to $87 bbl while Brent crude futures are down 0.5% to $93.50 bbl. The hot CPI reading has the market predicting a more aggressive Fed to continue slowing consumer demand. Meanwhile, new data from the Department of Energy showed the U.S. Strategic Petroleum Reserve levels fell by 8.4 million barrels last week to 434.1 million barrels. That’s the lowest level since October 1984 as President Biden’s planned release from the SPR continues. The American Petroleum Institute will issue its weekly inventory report at 4:30 p.m. ET today. In Case You Missed It The New York Fed’s latest Survey of Consumer Expectations showed a slowdown in inflation predictions. Respondents to the survey in August said they see inflation at 5.7% a year from now, down from July’s forecast for 6.2%. Median inflation expectations over the next three years fell to 2.8% from 3.2%. The improvement came as predicted price growth for gas, groceries, and rent moderated. Expected home price growth also fell by 1.4 points to 2.1%, the lowest read since June 2020.
Continue Reading -->Coffee With Greta: Inflation on the Brain
DJIA Futures: +63 (+0.2%) SPX Futures: +15 (+0.4%) NASDAQ Futures: +38 (+0.3%) Good morning friends! Futures are up as the market looks ahead to key inflation data this week. Let’s get right to it! Has Inflation Peaked? That’s the big question on traders’ minds this week and they’ll get their answer soon. The August CPI will be out tomorrow morning with the PPI on Wednesday morning. Annual headline inflation pressures are expected to have cooled again to 8% from 8.5% in July as gas prices continued to fall. Economists expect the core CPI to tick up to 6% from 5.9%. This is the final piece of inflation data that will be released before the Fed meeting September 20-21. CME Groups FedWatch Tool shows the market pricing in an 88% chance of another 0.75% rate hike. Crypto Rallies Ahead of Inflation Data Cryptocurrencies are following stocks higher ahead of this week’s inflation data. CoinGecko shows the global crypto market cap is up 1.1% over the past 24 hours to $1.12 trillion. Bitcoin is up 3.2% to over $22,300 and has rallied about 17% after falling to its lowest level since June last Wednesday. But Ethereum is dipping ahead of a major upgrade to its network, called The Merge, this week. The network upgrade will move Ethereum from a proof-of-work to a proof-of-stake model. The change will significantly reduce the amount of energy the network uses. Twitter Dismisses Musk’s Latest Attempt to Ditch Deal Twitter (TWTR) dismissed Elon Musk’s latest effort to show the company has breached the acquisition agreement. In an SEC filing, the social media giant said payments to a whistleblower did not breach any of its obligations under the deal. Musk sent a third letter last week trying to call off the deal. That letter alleged a $7.75 million severance payment to a whistleblower was a breach of the takeover agreement. Twitter said it still intends to enforce the agreement and close the deal. Shareholders will vote on Tuesday whether to approve or reject the takeover. Oil Prices Rise As Supply Worries Mount Oil prices are higher today as uncertainty over supply rises. West Texas Intermediate crude futures are up 1.7% to over $88 bbl while Brent crude futures are up 1.9$ to $94.50 bbl. There’s new uncertainty about the revival of the Iran nuclear deal, which had previously caused hope Iran could fill gaps caused by Russian oil losses. But France, Britain, and Germany said over the weekend they had “serious doubts” about Iran’s intentions to revive the deal. The EU embargo on Russian oil takes effect on December 5.
Continue Reading -->Coffee With Greta: Tesla Backs Away from China
DJIA Futures: +257 (+0.8%) SPX Futures: +37 (+0.9%) NASDAQ Futures: +145 (+1.2%) Good morning friends! Futures are higher as the market looks to snap a 3-week losing streak. Let’s get right to it! Tesla Wants to Build Lithium Refinery for EV Batteries in Texas Tesla (TSLA) shares are up 1.4% in premarket trade after the electric automaker revealed plans to build its own lithium refinery in Texas. In its application with the Texas Comptroller’s Office, Tesla said the plant would be focused on developing “battery-grade lithium hydroxide”. It would be the first plant of its kind in the U.S. Tesla said it would process “raw ore material into a usable state for battery production” at the facility. That lithium hydroxide would then be sent to Tesla battery factories. The move is an effort to reduce costs as the price of lithium has surged 120% this year. It would also reduce Tesla’s reliance on China for its supply of lithium. China currently controls more than half of the world’s lithium processing and refining while the U.S. controls just 1%. DocuSign Rallies on Earnings Beat DocuSign (DOCU) shares are surging 15.1% ahead of the open after better-than-expected fiscal Q2 results and strong guidance. The e-signature company reported adjusted earnings of $0.44 per share on $622 million in revenue. That beat analysts’ expectations for adjusted EPS of $0.42 on $602 million in revenue. The CEO said, “These results reflect the focus and dedication of our team on execution during this transition period, with a stronger foundation in place to deliver in the second half of the year.” The company forecast fiscal Q3 revenue between $624 million and $628 million vs analysts’ expectations for $625 million. DocuSign called for $2.47 billion to $2.482 billion in full-year revenue, in line with its previous outlook. RH Tops Earnings Expectations, Trims Outlook RH (RH) shares are up 1.3% in premarket trade after beating Q2 expectations but trimming its full-year outlook. The luxury furniture and home-goods retailer reported adjusted earnings of $8.08 per share on $992 million in revenue. That was better than analysts’ expectations for adjusted EPS of $6.71 on $969 million in revenue. But RH said it expects fiscal 2022 sales to decline between 3.5% and 5.5% as the housing market slows. The CEO said, “Our expectation is for continued softening in our business trends during the remainder of fiscal 2022 as a result of ongoing weakness in the housing market over the next several quarters and possibly longer due to the Federal Reserve’s anticipated interest-rate increases and the cycling of record COVID-driven sales levels in 2021.” Kroger Tops Q2 Expectations, Hikes Forecast Kroger (KR) shares are up 3.5% ahead of the open after topping Q2 expectations and hiking its full-year outlook. The grocery chain reported adjusted earnings of $0.90 per share on $34.64 billion in revenue. That topped analysts’ expectations for adjusted EPS of $0.82 on $34.46 billion in revenue. Kroger’s same-store sales rose 5.8% year over year vs expectations for a 4.6% increase. The company hiked its full-year adjusted EPS forecast to between $3.95 and $4.05 from the previous forecast for $3.85 to $3.95. Kroger now sees full-year same-store sales growth of 4% to 4.5% from 2.5% to 3.5% previously. Oil Prices Rise Amid Supply Threats Oil prices are higher today as supply concerns take over. West Texas Intermediate crude futures are up 1.9% to $85 bbl while Brent crude futures are up 2% to $91 bbl. Both contracts are still on track for weekly losses of more than 2%, with Brent hitting its lowest level since January. The Energy Information Administration reported a surprise increase in U.S. oil and gas stockpiles Thursday. Crude inventories rose by 8.8 million barrels last week vs expectations for a 1.88 million barrel decrease. Gasoline stockpiles increased by 400,000 barrels vs expectations for a 1.5 million barrel decline. In Case You Missed It Fed Chair Jerome Powell vowed to continue raising rates to fight inflation “until the job is done”. In a Q&A with the Cato Institute, Powell said, “I can assure you that my colleagues and I are strongly committed to this project.” He also highlighted the threat of public perception surrounding high inflation. Powell said, “The longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to raise the costs of getting inflation down.”
Continue Reading -->Coffee With Greta: Will Trump’s SPAC Deal Get Hosed?
DJIA Futures: -35 (-0.1%) SPX Futures: -10 (-0.3%) NASDAQ Futures: -53 (-0.4%) Good morning friends! Futures are slipping after Wednesday’s rebound rally as focus turns back to the Fed and interest rates. Let’s get right to it! Trump’s SPAC Deal At-Risk Digital World Acquisition Corp (DWAC) shares are down 2.4% in premarket trade as the SPAC is up against the clock to extend its deadline to merge with Trump Media and Technology Group. Today is the original deadline for that deal to go through, but the companies need more time. DWAC has reportedly spent the past week working to gain enough shareholder support for an extension of that deadline. The results of the shareholder vote will be announced at noon ET today. Reuters reported earlier this week the company did not have the votes needed. The CEO later adjourned Tuesday’s shareholder meeting to allow more time for voting. DWAC has previously warned that a failure to approve the extension could result in liquidation, which would pay shareholders out at the original price of $10 per share. GameStop Rallies on Smaller Q2 Loss Than Expected GameStop (GME) shares are up 5.2% ahead of the open after reporting a smaller Q2 loss than expected. The video game retailer reported an adjusted loss of $0.35 per share on $1.136 billion in revenue. That was better than analysts’ expectations for an adjusted loss of $0.42 per share but fell short of estimates for $1.27 billion in revenue. It was the company’s sixth consecutive quarterly loss. GameStop separately announced it has entered a partnership with crypto exchange FTX US. That partnership aims to “introduce more GameStop customers to FTX’s community and its marketplaces for digital assets.” GameStop said the companies will collaborate on “new e-commerce and online marketing initiatives,” and it will be FTX’s “preferred retail partner” in the U.S. ECB Approves 75 Basis Point Rate Hike The European Central Bank hiked interest rates by 75 basis points today and said more rate hikes are to come as inflation remains “far too high”. The bank predicted inflation is “likely to stay above target for an extended period.” The decision comes less than two weeks ahead of the Federal Reserve’s next meeting. CME Group’s FedWatch Tool shows the market pricing in an 82% chance of another 0.75% rate hike at that meeting. The market will get a better read on how the bank is feeling about inflation when Fed Chair Jerome Powell speaks at 9:10 a.m. ET today. Weekly Jobless Claims Fall to Lowest Level Since May U.S. weekly jobless claims fell to the lowest level since May last week. The Labor Department reported 222,000 Americans filed initial unemployment claims. That was down 6,000 from the previous week’s revised level and better than expectations for an increase to 235,000. Continuing claims rose by 10,000 to 1.45 million in the week ending August 27. The data shows no increase in layoffs as the Fed works to tackle inflation. Oil Prices Fall Flat as Supply Concerns Rise Oil prices are flat today as the market weighs supply concerns. West Texas Intermediate crude futures are up 0.1% at $82 bbl while Brent crude futures are down 0.1% at $88 bbl. Russian President Vladimir Putin has threatened to halt his country’s oil and gas exports if Europe imposes price caps. And the EU proposed those caps just hours later. Meanwhile, the American Petroleum Institute reported Wednesday that U.S. crude inventories rose by 3.6 million barrels last week while gasoline stockpiles fell by 800,000 barrels. The Energy Information Administration reports official supply levels later today. In Case You Missed It Apple (AAPL) hosted its fall launch event on Wednesday. The tech giant unveiled 4 new iPhones: the iPhone 14, iPhone 14 Plus, iPhone 14 Pro, and iPhone 14 Pro Max. The new phones will be available to order Friday and Apple did not increase prices. The company also revealed a new Apple Watch Ultra, Apple Watch Series 8, and a new Apple Watch SE which are available to order immediately. And the new AirPods Pro will launch on September 23.
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DJIA Futures: -45 (-0.1%) SPX Futures: -5 (-0.1%) NASDAQ Futures: -0.3 (-0.0%) Good morning friends! Futures are mostly lower amid continued fears over higher rates. Let’s get right to it! Fed Officials Hit the Speaking Circuit The market is still laser-focused on expectations the Fed will continue aggressive rate hikes. And traders may get some insight into the upcoming meeting as several Fed officials have speeches scheduled over the next few days. Cleveland Fed President Loretta Mester speaks at 10:00 a.m. ET today with Fed Vice Chair Lael Brainard speaking at 12:35 p.m. ET. The Fed also releases its latest Beige Book at 2:00 p.m. ET. That report is a survey of economic conditions across all 12 Fed districts. CME Group’s FedWatch Tool shows the market pricing in an 82% chance of another 0.75% rate hike later this month. Apple iPhone Event Kicks Off Today Apple (AAPL) shares are up 0.02% ahead of the open as the tech giant is set to hold a launch event today. The company is expected to unveil new iPhone models at that event. The rumored devices include 2 sizes of the iPhone 14 and 2 sizes of the iPhone 14 Pro. Apple is also expected to unveil the Apple Watch Series 8 and a new Pro model of the watch. The event will also see the public release of iOS 16 which Apple has been testing over the summer after announcing it in June. Google CEO Hints About Job Cuts Alphabet (GOOGL) shares are down 0.3% in premarket trade after the CEO said he hopes to make the company 20% more efficient. Speaking at a conference in Los Angeles, Sundar Pichai said, “The more we try to understand the macroeconomic, we feel very uncertain about it. The macroeconomic performance is correlated to ad spend, consumer spend and so on.” He also acknowledged that the company has become “slower” after a boom of hiring. But he didn’t specifically mention any plans for job cuts. Pichai said, “Sometimes there are areas to make progress [where] you have three people making decisions, understanding that and bringing it down to two or one improves efficiency by 20%.” Trade Deficit Tumbles The U.S. trade deficit tumbled 12.6% in July to $70.6 billion. That drop was slightly smaller than economists’ expectations for a decrease to $70.2 billion. The improvement came as imports fell 2.9% to $329.9 billion while exports rose 0.2% to $259.3 billion. The deficit is still up 29% year-over-year as the U.S. economy reopened quicker than our global trading partners. Mortgage Demand Drops as Rates Spike Mortgage demand fell further last week as rates spiked back to summer highs. The Mortgage Bankers Association reported purchase applications fell 1% weekly and dropped 23% year over year. Refinance applications were down 1% weekly and 83% annually. The average contract rate for 30-year fixed rate mortgages with conforming balances jumped to 5.94% from 5.8% the previous week. That jump in rates followed the surge in the 10-year Treasury yield as traders dump bonds in anticipation of more Fed rate hikes. Oil Prices Slips As Market Weighs Demand Fears Oil prices are lower again today as demand fears continue to weigh on the market. West Texas Intermediate crude futures are down 0.8% to $86 bbl while Brent crude futures are down 0.8% to $92 bbl. The American Petroleum Institute will report U.S. oil and gas inventory levels later today followed by the Energy Information Administration on Thursday. In Case You Missed It The U.S. services sector picked up in August for the second month in a row. The Institute for Supply Management Services Index rose to 56.9% from 56.7% in July. That was an unexpected increase as economists were forecasting a decline to 54.9%. The data shows the services sector maintaining strength even as the Fed works to tackle inflation with rate hikes.
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DJIA Futures: +199 (+0.6%) SPX Futures: +25 (+0.6%) NASDAQ Futures: +68 (+0.6%) Good morning friends! Futures are higher as the market looks to break its 3-week losing streak. Let’s get right to it! Traders Brace for Turmoil Stocks are on track to open higher after the major indexes logged three straight weeks of losses. The holiday-shortened week will still be focused on interest rates as several Fed officials are set to speak. CME Group’s FedWatch Tool shows 68% of traders expecting another 0.75% rate hike at the September 21 meeting. Investor Bill Ackman told CNBC this moring, there are signs inflation is calming. Ackman said, “Our biggest fear was inflation, and that’s why I wanted the Fed to raise rates quickly and soon. They’re now doing this, I think they have to [continue].” Treasury Yields Push Higher U.S. Treasury yields are rising today as the market awaits new economic data. The 2-year yield is up 8 basis points to 3.48% while the 10-year yield is up 7 basis points to 3.27%. The Institute for Supply Management and S&P Global are both set to release their August purchase managers’ index for the services sector at 10:00 a.m. ET. The data comes amid continued concerns about an economic slowdown caused by the Fed’s actions against inflation. Bed Bath & Beyond Drops After CFO’s Death Bed Bath & Beyond (BBBY) shares are dropping 14.8% in premarket trade following the death of its CFO over the weekend. Police said Gustavo Arnal died Friday after falling from a building in Manhattan which the medical examiner’s office later ruled a suicide. Bed Bath & Beyond said in a statement that Arnal “was instrumental in guiding the organization throughout the coronavirus pandemic.” His death comes as the struggling company is attempting to turn around its business. Bed Bath announced last week it had secured more than $500 million in new financing and revealed a turnaround strategy. But analysts said that strategy was not sufficient for reviving the business. CVS to Buy Signify Health CVS Health (CVS) shares are up 1.5% ahead of the open after announcing on Monday it has reached a deal to acquire Signify Health (SGFY). CVS will pay $30.50 per share in cash for Signify, valuing the company at about $8 billion. The CVS Health President and CEO said, “This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the health care experience.” The companies expect the acquisition to close in the first half of 2023. SGFY shares are down 0.3% in premarket trade. Oil Prices Drop on Demand Fears Oil prices are lower today as demand fears take over the market once again. West Texas Intermediate crude futures are down 0.3% to $86.50 bbl while Brent crude futures are down 2.9% to under $93 bbl. The demand worries come as new Covid restrictions in China have added to concerns over rate hikes. The European Central Bank is expected to approve a sharp rate hike later this week while the Fed is expected to do the same later this month. The demand fears are overpowering worries about supply after OPEC+ approved its first supply cut since 2020 on Monday. The group voted to cut its October output target by 100,000 barrels per day.
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