Archive for October, 2023

• CWS Market Review – October 31, 2023
  Eddy Elfenbein, October 31st, 2023 at 7:41 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  Expect the Fed to Pause Again

  The Federal Reserve is meeting today and tomorrow. The central bank’s policy statement will be released tomorrow afternoon at 2 pm.

  I’ll ruin the suspense for you. The Fed won’t make any changes to interest rates. The FOMC will keep its target for Fed funds rates at 5.25% to 5.50%. The good news is that inflation has faded from its highest levels. The bad news is that the battle isn’t over. Not yet, at least.

  For tomorrow, traders currently think there’s a 0% chance that the Fed will hike rates and a 2.9% chance that it will lower rates. In my opinion, they’re right on the odds for a rate hike, and roughly 2.89999% too high on the odds for a rate cut.

  Here’s a look at the Fed funds rate:

  

  This chart shows you how dramatic the Fed’s policy has been.

  The real news from this meeting will be any signal from the Fed about where rates are headed and when. This is where things get interesting because the Fed has said that it expects to raise rates once more time before the end of the year. After this week’s meeting, there’s only one more meeting scheduled for 2023, and that’s on December 13.

  Still, traders are betting against a December hike as well. According to the futures prices, traders think there’s a 29% chance that the Fed will hike rates in December. That’s unusual that the market is so doubtful of what the Fed has said publicly. As a general rule, whenever there’s a disagreement between government officials and the market, I go with what the market has to say. After all, market participants suffer if they’re wrong.

  The U.S. economy is still in a positive mood, but there are ominous clouds in the distance. Let’s start with some good news. Last week, the government said that the economy grew in real, annualized terms of 4.9% for Q3.

  That’s quite good and it topped Wall Street’s forecast for growth of 4.7%. That’s the highest growth rate since Q4 of 2021. During Q2 of this year, the economy grew by 2.1%. The Q3 report will be updated again in November and then again in December.

  Consumer Spending Is Powering the Economy

  What’s driving the buoyent economy? That’s simple. It’s been the consumer. Despite higher interest rates, folks are still heading to the malls and buying stuff. The economy was also helped by higher inventories, exports and government spending.

  Personal consumption expenditures, which is a fancy name for consumer spending, rose by 5% in Q3. That’s up from 0.8% in Q2. Consumer spending was roughly evenly divided between goods and services.

  These good numbers aren’t a surprise to anyone who’s been following the bond market. In less than six months, the yield on the 10-year Treasury has jumped by 150 basis points. That’s a very large move for such a short period of time.

  

  It’s not just GDP. We also had good news in last Thursday’s report on durable goods. For September, orders for durable goods rose by 4.7%. Wall Street had been expecting an increase of just 2%. In August, durable goods orders were up by just 0.1%. For now, there’s no recession in sight, but that may change soon.

  Now let’s look at some of the bad news. One area of concern has been the stock market. On Friday, the S&P 500 fell for the eighth time in nine sessions. The index closed at its lowest level since May 24.

  This is another area where higher interest rates are taking their toll. Higher rates may not be scaring off consumers just yet, but they do have an impact on the financial markets. There are plenty of investors who are fine with sitting out this market and taking a 5.44% risk-free profit for the next twelve months. It’s not how I feel, but I certainly understand the temptation.

  The important fact for investors to understand is that higher interest rates are like Kryptonite for stocks. Even the perception of higher rates can scare off stock investors.

  Measuring from its recent peak on July 31, the stock market lost slightly more than 10%. Share prices rebounded a bit yesterday and today. Still, October was the third down month in a row for the S&P 500.

  

  For now, the interest-rate outlook is unfavorable, but that could change very soon. It’s very possible that the Fed may start cutting rates sometime in 2024. That could help spark a nice rally for stocks.

  Put it this way. The NBA season just got started. It’s possible that the Fed may start cutting rates before the playoffs are over in June of next year.

  The next big test for the market comes on Friday when the government releases the October jobs report. The labor market has been remarkably resilient. It’s as if people have been waiting in desperation for cracks to show in hiring. They haven’t appeared.

  Last week’s report on initial claims was quite good. The Labor Department said that jobless claims rose by 10,000 to reach 210,000 for the week ending on October 21.

  For this Friday, the consensus on Wall Street is for a gain of 170,000 net new jobs. A big miss could have a dramatic impact on the stock market.

  The Long Run at Clorox

  Consumer staples stocks have not performed well this year. That’s a reflection of the market shying away from conservative, stable stocks, and its willingness to take on more risk.

  One of my favorite consumer staples stocks is Clorox (CLX). The stock has been an outstanding performer for several decades. That’s why I take notice when the shares have been weak. Yesterday, Clorox made a new 52-week low.

  People often assume that Clorox is owned by someone else. Nope. It’s owned by Clorox. The company also owns Pine-Sol and Liquid-Plumr.

  The stock got a nice bump early on during the pandemic, for obvious reasons, but it’s been sluggish ever since.

  

  As it turns out, Clorox is due to report its fiscal-Q1 earnings tomorrow. The company’s fiscal year ends in June.

  Clorox is going through a rough stretch which includes a recent cyberattack. For Q1, Clorox is expecting to report between a loss of 40 cents per share and flat earnings. Wall Street expects Clorox to report a loss of 22 cents per share.

  One of the easiest strategies on Wall Street is to wait for a good company to drive off the road into a ditch. It happens to everybody. The difference is that the high-quality companies can right themselves.

  For now, I’m steering clear of Clorox, but I’m keeping a close eye on it. If the problems are fixable, this could be a potential turnaround play. Bear in mind what a solid company this has been. Clorox has increased its dividend every year for the last 21 years in a row.

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

  P.S. If you want more info on our ETF, you can check out the ETF’s website.

• Morning News: October 31, 2023
  Eddy Elfenbein, October 31st, 2023 at 7:03 am

  Eurozone Economy Shrinks, While Price Pressures Ease

  Shrinking UK Stock Market Is In a ‘Doom Loop,’ Peel Hunt Says

  U.S. Looks to Allay European Fears of a Subsidy War

  China’s Factory Activity Shrinks, Fueling Calls for More Support

  Yield Curve Control Joins the Living Dead

  BOJ Is Handing Back the Japanese Bond Market to Investors

  Credit Strength Is Baffling Fed Watchers Ahead of Rate Decision

  Workers Keep Getting Big Raises. That’s a Problem for the Fed.

  The Fed Can Wait

  Fed’s Reverse Repo Facility Drawdown Looms Large in Balance Sheet Debate

  Banker Bonuses for ECM Shops Looking Abysmal With Light Issuance

  Biden’s ‘Junk Fee’ Crackdown Comes for Retirement Advice

  Glen Point Fraud Verdict Signals White-Knuckle Trades Are Fading

  Carmakers Weather $2.9 Billion UAW Strike Chaos With Cost Cuts

  America’s Offshore Wind Ambitions Are Coming With Bigger Price Tags

  Why Exxon and Chevron’s Deals Leave Investors Cold

  BP Profit Rose on Higher Refining Margins, Strong Oil Trading

  WeWork Reaches Seven-Day Forbearance Agreement With Bondholders

  Jeep Maker Stellantis Says It Lost $3 Billion of Revenue Due to UAW Strike

  Vodafone to Sell Spanish Unit to Zegona Communications for Around $5.3 Billion

  Ravaged Florida Town Becomes a Magnet for Risk-Taking Homebuyers

  Californian Vineyard Founded by Lebanese Migrants Sells for Up to $1 Billion

  Bankman-Fried’s Risky Defense Strategy Faces Another Big Test

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• Morning News: October 30, 2023
  Eddy Elfenbein, October 30th, 2023 at 7:06 am

  Israel-Hamas War Escalation Puts Qatar’s Clout to the Test

  Russia Shuts Airport After Mob Encircles Flight From Israel

  ECB Keeping up Pressure on Banks to Loosen Ties with Russia

  Russia to Simplify Inward Investment for ‘Friendly’ Countries -Prime Minister

  Traders and Banks Strike Deals in Russian Metals as Taboo Fades

  UAE’s Biggest Chemicals Maker Says Prices Have Bottomed Out

  Hedge Funds Pile Into Uranium Stocks Set for ‘Dramatic’ Rise

  Higher Bond Yields Could End the Fed’s Historic Rate Rises

  The Big Bond Market Event Wednesday Is at Treasury, Not the Fed

  Three Years After DirectBooks, US Bond Market Still Phoning It In

  McDonald’s Sales Top Estimates With Help From Pricier Burgers

  Halloween Candy Costs Are Surging This Year

  Halloween Shoppers Not Spooked as Economic Slowdown Remains Elusive

  Americans Can’t Stop Spending. Five Reasons Why.

  Healthpeak Properties, Physicians Realty Trust to Merge in $21B Deal

  HSBC Plans $3 Billion Buyback, CEO Touts Capital Strength

  Canadian Auto Workers Walk Out on Stellantis

  Ford-UAW Deal Includes 25% Raises, $8 Billion Plant Investments

  Biden to Issue First Regulations on Artificial Intelligence Systems

  Apple Looks to Capitalize on Computer Sales Comeback With New Macs

  Shipping Contributes Heavily to Climate Change. Are Green Ships the Solution?

  Extreme Heat Set to Increase Heart Attack, Stroke Deaths in US

  Biden Alaska Oil Plan Seen as Major Threat to Future Drilling

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• Morning News: October 27, 2023
  Eddy Elfenbein, October 27th, 2023 at 7:03 am

  China’s Ex-Premier Leaves an Unfinished Reform Legacy

  Russia Hikes Key Rate to 15% In Bigger-than-Expected Rise

  Yellen Says Yield Surge Is Due to Strong Economy, Not Deficits

  Tighter Credit, Lending Conditions Build Case for Fed Policy Hold

  Short Sellers Quit Emerging Markets With ETF Bets at 17-Year Low

  Dimon Plans to Sell $141 Million Worth of JPMorgan Shares

  Morgan Stanley’s Post-Gorman Era Begins

  Rithm Wins Dan Och’s Support for Sculptor Bid at $720 Million

  Floating Tankers Line Up Off South Africa to Ensure Diesel Power

  Siemens Energy’s Faulty Wind Turbines Become Germany’s Problem

  Exxon, Chevron Profits Surged Ahead of Megadeals

  Exxon Sees More Cost Cuts After Reaching $9 Billion Target Early

  Microsoft’s Cloud Recovery Is Outshining Rivals Amazon, Google

  Ford’s Cost Problem Isn’t Just About EVs

  GM’s Cruise Pauses All Driverless Operations After California Crackdown

  AbbVie Lifts Profit Outlook as Newer Biologics Help Buffer Dwindling Humira Sales

  ‘Disappointed Again’: Ad Companies Suffer as Tech Firms Clip Spending

  Rise in Sugar and Cocoa Costs Makes Halloween Candy Pricier

  Taylor Swift Vaults Into Billionaire Ranks with Blockbuster ERAs Tour

  Inside Kanye West’s Fraught Relationship With Adidas: 7 Takeaways

  As Users Abandon X, Sports Twitter Endures

  The Snow Business Won’t Become the No Business

  Lululemon Founder Wilson Said He Was Dishonest With the SEC, Then Backtracked

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• Morning News: October 26, 2023
  Eddy Elfenbein, October 26th, 2023 at 5:55 am

  Vietnam’s Real Estate Woes: How Much Worse Can They Get?

  US-China Ties Quietly Improving Even as Global Turmoil Surges

  Russia’s Frozen Cash Earns €3 Billion as EU Haggles Over How to Tap It

  Bank of Canada Holds Rates Steady on Tepid Consumption

  Israel Latest: Army Briefly Raids Gaza as War Fears Jolt Markets

  What Is Going On in Britain’s Economy? The Picture Is Foggy.

  GDP Data to Show Temporary Boost from Summer-Spending Frenzy

  What’s Going On in the Bond Market?

  What Happened Inside Morgan Stanley After Ted Pick Was Named CEO

  Meta Posts 23% Growth as Ads Rebound, With Profit More Than Doubling

  Big Tech’s Disappointing Earnings Erase $200 Billion in Value

  Long on Hype, A.I. Is No Guarantee for Profits

  Net Neutrality Resurfaces To Join The Bidenomics Regulatory Costberg

  Sam Bankman-Fried Takes Stand in Reminder of Crypto’s Epic Fall

  Chasing Big Mergers, Oil Executives Dismiss Peak Oil Concerns

  Ford Agrees to 25% Wage Hike in Tentative Deal to End UAW Strike

  Why the U.A.W.’s President Has Taken a Hard Line

  Why Toyota CEO Sees EVs as ‘Missing Piece’ for World’s Top Carmaker

  Tesla’s Cybertruck Will Test America’s Great Political Divide

  UPS To Buy Reverse Logistics Specialist Happy Returns from PayPal

  Mattel’s ‘Barbie’ Movie Boosts Toy Sales

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• Morning News: October 25, 2023
  Eddy Elfenbein, October 25th, 2023 at 7:04 am

  China Stimulus Signals Zero Tolerance For Sharp Economic Slowdown

  Hong Kong Cuts Stock, Housing Taxes to Revive Role as Hub

  Deutsche Bank Vows More Payouts as Sewing Targets Share Price

  Deutsche Bank Chief Says More Job Cuts Coming

  An Economic Warning Sign That Preceded Two Past Recessions Is Flashing Ominously Red Again

  Biden Officials Set $3 Billion Bank Deposit, Procurement Goals to Boost Minority Firms

  Strongest US Economic Growth Since 2021 Puts Fed in Tough Spot

  What Can the Fed Do About the Deficit? Nothing

  US Fed Set to Revise Debit Card Fee Caps Pitting Banks Against Retailers

  Private Equity Wants a Piece of Your Retirement Savings

  Moody’s Quarterly Profit Beats Estimates on Robust Demand

  Debt and Scandal Throw Billionaire Drahi’s Empire Into Turmoil

  Europe’s ESG Funds Suffer More Outflows

  Is E.S.G. Falling Out of Favor?

  Aramco Plans to Produce Synthetic Fuels by 2025 at Test Plants

  Exxon, Chevron Invest in the West as Global Conflicts Increase

  Boeing Cuts Annual Delivery Target for 737 Jet on Quality Lapses

  General Motors Finds Itself in a Jam

  Apple to Revamp TV App in Step Toward Simplifying Video Services

  The Race to Create the ‘Amazon of Real Estate’ Could Change Home Buying Forever

  What the U.S. Has Argued in the Google Antitrust Trial

  Bud Light Replaces Rival Modelo in UFC Sponsorship Deal

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• Morning News: October 24, 2023
  Eddy Elfenbein, October 24th, 2023 at 7:03 am

  War With Hamas Hits Israel’s Economy, Central Bank Says

  France’s Diesel Demand Plunge Signals Economic Woes

  Germany to Pass Japan as Third-Largest Economy, Helped by Weak Yen

  China’s Property Crisis Is Upending Tens of Thousands of Lives

  Xi Makes Unprecedented Central Bank Visit in Sign of Focus on Economy

  How Far Is China’s Slowdown Spreading? Ask a Dairy Farmer 6,000 Miles Away

  Energy Agency Sees Peaks in Global Oil, Coal and Gas Demand By 2030

  Gavin Newsom Wants to Export California’s Climate Laws to the World

  Jamie Dimon Criticizes Central Banks for ‘Dead Wrong’ Forecasts

  Deficit Doubling as US Economy Grows Shows Why Yields Are at 5%

  How the Highest Bond Yields in 16 Years Could Chill the Hot U.S. Economy

  New Normal or No Normal? How Economists Got It Wrong for 3 Years

  Money Managers With $100 Trillion Confront End of the Bull Market

  EU Lawmakers Back Easing Securities Rules to Attract More Listings

  London’s Latest New Listing Debacle Drops 75% on Profit Warning

  GM Removes Guidance After UAW Strike Muddies Profit Outlook

  3M Says Business Is Improving, Boosts Earnings Guidance

  KKR’s Chip Play Will Win Big in Japan

  Blackstone Chief Schwarzman Says Remote Workers Don’t Grind as Hard

  How Columbia Sportswear Is Loosening Its Ties to Asia

  The Stratospheric Rise of Lionel Messi’s Pink Jersey

  LeBron James, Peyton Manning and Obamas Plan Basketball Series for Netflix

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• S&P 500 Drops to Lowest Level Since June 1
  Eddy Elfenbein, October 23rd, 2023 at 11:07 am

  On Friday, the S&P 500 closed at 4,224.16 which was its lowest level since June 1. The index also closed below its 200-day moving average for the first time since March.

  I notice that 3M (MMM) is at a 10-year low. The dividend currently yields almost 7%.

  I’ve written about Mueller Industries (MLI) before. The stock just announced a 2-for-1 stock split. The stock is down more than 20% since its high this summer.

  Chevron (CVX) said it’s buying Hess (HES) for $53 billion. This is the second big oil deal in recent weeks. Exxon Mobil (XOM) said it’s looking to buy Pioneer Natural Resources (PXD).

  The proposed deal raises the competition between Chevron, the No. 2 U.S. oil and gas producer behind Exxon, putting it in direct competition with its bigger rival to develop drilling in nascent producer Guyana.

  The deal also signals Chevron’s plans to continue boosting investments in fossil fuels as oil demand remains strong and big producers use acquisitions to replenish their inventory after years of under-investment.

  Chevron has offered 1.025 of its shares for each Hess share held, or $171 per share, implying a premium of about 4.9% to the stock’s last close. The total deal value is $60 billion, including debt.

  The U.S. government recently wrapped up its fiscal year. Some people thought the deficit would exceed $2 trillion. The good news is that we were only $1.7 trillion in the red. That’s up about $320 billion over the year before.

  For the year, revenues fell by $457 billion, and expenses fell by $137 billion. Outlays for the year were $6.1 trillion. The total debt now stands at $33.6 trillion. That’s up $10 trillion since Covid struck.

  On Thursday, the government will release its first look at Q3 GDP growth. The consensus on Wall Street is for growth of 4.5%. If that’s correct, then it would be one of our best quarters in years.

• Morning News: October 23, 2023
  Eddy Elfenbein, October 23rd, 2023 at 5:45 am

  China Plans to Buy More Cobalt For Reserves After Prices Plunge

  China Rattles Foreign Firms Again With Arrests, Foxconn Probe

  Ten, No More? Five Questions for the ECB

  As U.S. Debt Surges, Europe Brings Its Own Under Control

  Abrdn’s Head of Equities Says Invest Anywhere, ‘Just Not the US’

  Ten-Year Treasury Yield Tops 5% for First Time Since 2007, Keeping Traders Wary

  A Shrinking $1.3 Trillion Securities Market Is Bad News for the Economy

  The Economy Was Supposed to Slow by Now. Instead It’s Revving Up

  How High Interest Rates Sting Bakers, Farmers and Consumers

  There’s Never Been a Worse Time to Buy Instead of Rent

  Americans Have Never Been Wealthier & No One is Happy

  Money Managers With $100 Trillion Confront End of the Bull Market

  Billionaires Are Next Up in Crosshairs of Global Tax Architects

  Chevron to Buy Hess for $53 Billion in Latest Oil Megadeal

  Roche to Buy Irritable Bowel Drugmaker Telavant for $7.1 Billion

  Big Shipping-Container Firm Strikes Deal

  Why Olive Oil Is So Expensive Right Now

  Ozempic and Wegovy Don’t Cost What You Think They Do

  War Leaves Saudi Prince’s Dream of a New Mideast in Tatters

  Israel-Hamas War Sows Division Within Entertainment Industry

  How Much Influence Should Universities Give Their Donors?

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• Morning News: October 20, 2023
  Eddy Elfenbein, October 20th, 2023 at 7:03 am

  The Potential Fallout of a Widening Israel-Hamas War

  Prospect of Prolonged Israel-Gaza War Adds Economic Havoc to Human Toll

  Inflation Raging at 130% Is Pushing Argentina Down a Radical Path

  Americans are Worried About Paying Their Bills. That’s Helping Trump in Swing States

  The Federal Deficit Is Growing. This Is Why

  Economists Boost US Growth Projections, Reduce Recession Odds

  Philadelphia Fed President Patrick Harker Discusses the Economic Outlook

  How a Vegas Whale, and Many More, Tap Billions Meant for US Housing

  AmEx’s Third-Quarter Profit Beats Estimates on Buoyant Spending

  China, World’s Top Graphite Producer, To Curb Exports of Key Battery Material

  Exxon Makes Up for Lost Time With $60 Billion Shale Deal

  SLB Sees Growth Pivoting Overseas Amid Lower North America Sales

  CMA CGM’s Saadé Urges Calm as Ocean Carrier Profits Plummet

  Union Pacific Profit Falls on Weaker Freight Demand

  Silicon Valley Ditches News, Shaking an Unstable Industry

  Drug Companies Are Exploring Weight-Loss Shots for Kids as Young as Six

  Want to Buy Commercial Aircraft? A Clunker May Be the Safer Bet

  Crypto Influencers and ‘Degenerates’ Flock to Sam Bankman-Fried’s Trial

  ‘Oof’: Sam Bankman-Fried’s Trial Reveals Inside Details of How FTX Died

  Paulson’s $1 Billion Caribbean Empire Faces Crisis and Betrayal

  Halloween Is for Kids. ‘Kidults’ Too

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