US FINANCIAL MARKET
Wall Street Brushes Off Hot PPI as Stocks Advance: Markets Wrap – Bloomberg, 10/11/2023
- Stocks rose as traders shrugged off a hotter-than-estimated inflation reading to focus on less hawkish comments from Federal Reserve speakers. Oil fell after an early-week surge.
- The S&P 500 gained for a fourth straight session, rebounding from technically oversold levels.
- The S&P 500 was little changed. The Nasdaq 100 rose 0.3%. The Dow Jones Industrial Average rose 0.1%.
- Tech megacaps outperformed, while Exxon Mobil led losses in energy shares after agreeing to buy Pioneer Natural Resources for $59.5 billion.
- Treasury 10-year yields declined five basis points to 4.60%.
- The dollar headed toward its longest losing streak since March.
- The producer price index (PPI) rose by more than forecast in September, bolstered by higher energy costs that continue to wrinkle the path toward sustainably lower inflation.
- Policymakers will also see the latest consumer price index report, out Thursday, before their meeting that concludes Nov. 1.
- Fed Bank of San Francisco President Mary Daly said the neutral interest-rate could be higher now than before the pandemic, though borrowing costs would not stay as high as they are now indefinitely.
- Meantime, Governor Michelle Bowman noted rates may need to rise further and stay higher for longer than previously expected.
- Yet her remarks sounded somewhat less hawkish than her comments on Oct. 2.
- JPMorgan Chase, Citigroup and Wells Fargo will kick off the earnings season Friday, with the biggest US banks poised to write off more bad loans than they have since the early days of the pandemic as higher-for-longer interest rates and a potential economic downturn put borrowers in a bind.
- The Stoxx Europe 600 rose 0.2%.
- The Bloomberg Dollar Spot Index fell 0.1%.
- The yield on 10-year Treasuries declined five basis points to 4.60%.
- West Texas Intermediate crude fell 1.8% to $84.42 a barrel.
- Gold futures rose 0.4% to $1,883 an ounce.
Exxon to Buy Pioneer in $60 Billion Deal to Create Shale Giant – Wall Street Journal, 10/11/2023
- Exxon Mobil struck a nearly $60 billion agreement Wednesday to buy Pioneer Natural Resources in the largest oil-and-gas deal in two decades, tying the energy giant’s future to fossil fuels.
- The deal, at $253 a share, values Pioneer at an almost 7% premium to its closing value of about $55.4 billion Tuesday.
- It cements Exxon’s status as the dominant player in the American fracking industry, now centered in West Texas, where Pioneer has more places to drill than almost all of its rivals.
- The companies said the combined entity would have an estimated 16 billion barrels of oil equivalent in the Permian, and that the complementary acreage would allow horizontal drilling up to 4 miles, resulting in fewer wells and a smaller surface footprint.
- They said the transaction would allow Exxon’s Permian production to double to more than 1.3 million barrels of oil equivalent a day.
- They said they expect the transaction to close in the first half of 2024.
Disney Raises Prices at Its Theme Parks – Wall Street Journal, 10/11/2023
- Disney is raising prices at its theme parks as the entertainment conglomerate looks to get more out of its parks divisions amid softness in its linear TV business and challenges in its shift to streaming.
- At the company’s Disneyland park in California, prices for the lowest-tier single-day ticket remains $104.
- On the most popular days, though, Disneyland is raising prices by more than 8% to $194.
- For a five-day ticket, Disneyland raised prices by nearly 16% to $480.
- The park also raised the price of various add-ons.
- Disneyland’s Genie+ product, which gives customers access to shorter lines, will now cost $30 a person, up by $5.
- For five-day tickets, the price for Park Hopper, which lets customers go between Disneyland and Disney California Adventure Park on the same day, also rose by 25% to $75.
- Disneyland also raised the price for parking and other products, including its Magic Key annual passes.
- Walt Disney World in Florida separately raised the price of parking and annual passes, though the price for date-based passes hasn’t changed.
Amazon Wants You to ‘Buy Again’ – Wall Street Journal, 10/11/2023
- Amazon.com has tested a new feature on its app meant to coax users into more repeat purchases, one of several steps the tech giant is taking to squeeze more revenue out of its existing customers.
- The company has tested a “Buy Again” feed and featured it in a tab on the most prized real estate on the home page of its app.
- The tab uses a customer’s order history to make recommendations, including in categories such as groceries or electronics.
- “Buy Again” has been used in recent weeks on a variety of accounts tracked by market-intelligence firm Watchful Technologies.
- Amazon, which has seen less growth in its Prime memberships in recent years and less spending from its users, is seeking to drive customers toward more regular purchases or steer them toward subscription-based ordering through a feature called “Subscribe & Save.”
- It is unclear if Amazon will make the tab available to all customers, or how it may change it before launching.
- The company said that customers “have many options for where they shop every day, and that is why we are always innovating to help make their lives easier.”
- The company this week is hosting its “Prime Big Deal Days,” a large sales event following its “Prime Day” sales event during the summer.
Plug Power’s stock rises as it projects big revenue jump by 2027 – MarketWatch, 10/11/2023
- Plug Power stock was up 4.3% in premarket trades on Wednesday after the hydrogen fuel cell specialist said it expects to generate $6 billion in revenue by 2027 and $20 billion in revenue by 2030, as part of presentation by the company.
- Plug Power expects to generate about $1.2 billion in 2023, compared to the FactSet consensus estimate of $1.28 billion.
- The company is projecting a compound annual growth rate in revenue of about 50% and a 5% gross margin by 2030 as its ramps up production.
ChargePoint shares fall after EV charging operator announces $232 million raise – CNBC, 10/11/2023
- Shares of EV charging network operator ChargePoint Holdings were trading lower on Wednesday after the company said it’s raising $232 million via stock sales.
- ChargePoint said in a statement that a group of institutional investors has agreed to purchase $175 million in newly issued stock.
- The company also disclosed that it has raised $57 million during the current fiscal quarter via its existing “at-the-market” stock offering facility, for a total of $232 million in new funds.
- CFO Rex Jackson said in a statement that the new funds, together with a recently secured credit line, will support the company into early 2025.
- “These raises and our recently announced $150M revolving credit facility are consistent with our announced capital strategy to bolster our balance sheet,” Jackson said, adding that the company has no further plans to offer stock via its at-the-market facility.
- ChargePoint also disclosed that it has altered the terms of a prior $300 million convertible notes deal to give the company another year to pay back the funding but straps it with higher interest payments.
US ECONOMY & POLITICS
US Producer Prices Rise by More Than Forecast on Gasoline, Food – Bloomberg, 10/11/2023
- Prices paid to US producers rose by more than forecast in September, bolstered by higher energy costs that continue to wrinkle the path toward sustainably lower inflation.
- The producer price index for final demand advanced 0.5% from a month earlier, marking the third-straight increase, according to the Bureau of Labor Statistics.
- The cost of gasoline increased 5.4%.
- Excluding food and energy, the PPI climbed 0.3%.
- From a year ago, the overall measure advanced 2.2%.
- The prices of goods rose firmly on the back of energy and the strongest advance in food costs in nearly a year.
- However, excluding those components, they edged up 0.1%.
- Services costs increased 0.3%, led by a type of financial services.
- Stripping out food, energy and trade services, which is a less-volatile PPI measure, prices rose 0.2% for a second month.
- Excluding food and energy, processed goods for intermediate demand were little changed.
US Mortgage Rate Climbs to Fresh Multi-Decade High of 7.67% – Bloomberg, 10/11/2023
- US mortgage rates advanced last week to the highest level since 2000, keeping a lid on home-buying activity.
- The contract rate on a 30-year fixed mortgage rose by 14 basis points to 7.67% in the week ended Oct. 6, according to Mortgage Bankers Association data out Wednesday.
- The index of home-purchase applications inched up, though remains near the lowest level in almost three decades.
- The overall measure of mortgage applications, which includes refinancing activity, also edged higher.
Higher Rates May Be Needed to Curb Inflation, Fed’s Bowman Says – Bloomberg, 10/11/2023
- Federal Reserve Governor Michelle Bowman said interest rates may need to rise further and stay higher for longer than previously expected to get inflation down to the central bank’s goal.
- Despite recent improvements, “inflation remains well above the FOMC’s 2% target. Domestic spending has continued at a strong pace, and the labor market remains tight,” Bowman said Wednesday in remarks prepared for an event in Marrakech, Morocco, on the sidelines of the World Bank/International Monetary Fund annual meetings.
- “This suggests that the policy rate may need to rise further and stay restrictive for some time to return inflation to the FOMC’s goal.”
- “Financial market conditions have certainly tightened,” she said.
- “That allows us a little bit of patience; that we can continue to watch as economic conditions and financial conditions continue to evolve.”
- “We still are a long way from 2% for inflation and it’s important that we identify a path, or are continuing on a path, that will allow us to reach 2% inflation in a sustainable and timely way,” Bowman added.
- “It is important to monitor these evolving risks, and if necessary, take action to minimize the possible spillover effects on the wider banking and financial system,” she said in her remarks, which focused on financial stability risks.
- She said changes to the bank regulatory framework could have unintended consequences and pose broader risks to the financial system, and said policymakers should carefully consider whether higher capital requirements currently under consideration are “efficient and appropriately targeted.”
EUROPE & WORLD
LVMH Sales Growth Slows as Global Luxury Demand Cools – Bloomberg, 10/11/2023
- LVMH shares tumbled after the world’s largest luxury group reported softer sales growth in the third quarter — more evidence the post-pandemic boom in high-end goods is losing steam.
- Overall, LVMH posted 9% organic revenue growth, below estimates.
- Organic revenue growth in the US was only 2% in the period.
- Organic revenue at the crucial fashion and leather goods unit, which includes Louis Vuitton and Christian Dior, rose 9%, the company said Tuesday, below analysts’ expectations and half the pace of the first six months.
- Sales at the wines and spirits unit tumbled 14%, much worse than estimates.
- LVMH’s sales in Asia, excluding Japan, grew 11% — well short of estimates in the third quarter and a sign that China may be weaker than expected.
- The only unit that recorded sales ahead of analysts’ expectations was selective retailing, which includes cosmetics chain Sephora.
- “After three roaring years and outstanding years, growth is converging toward numbers that are more in line with the historical average,” LVMH Chief Financial Officer Jean-Jacques Guiony said during the quarterly presentation.
Israel Forms Emergency Government for War Against Hamas – Wall Street Journal, 10/11/2023
- Israel formed a rare emergency government with some opposition members on Wednesday to see the country through its war with Hamas.
- A “war management cabinet” will be established with three members, according to Prime Minister Benjamin Netanyahu’s office.
- They are Netanyahu, Defense Minister Yoav Gallant and ex-Defense Minister Benny Gantz, who now heads an opposition party.
- Ron Dermer, who’s strategic affairs minister, and Gadi Eizenkot, a former chief of staff of the Israel Defense Forces, will be observers.
- During the war period, no bills or government decisions will be promoted that do not concern the conduct of the war.
- All senior appointments will be automatically extended during the war period.
Satellite images show the scale of destruction in Gaza as Israel responds to surprise Hamas attack – CNBC, 10/11/2023
- Satellite images depict the scale of the devastation in Gaza following a barrage of Israeli airstrikes in response to Hamas’ unprecedented assault.
- U.S. space technology firm Maxar Technologies on Tuesday published a fresh batch of satellite images that show the aftermath of recent airstrikes in and around the enclosed Palestinian territory of Gaza.
- The update comes as Israel’s military says it is amassing hundreds of thousands of troops near the Gaza border “to execute the mission we have been given” from Prime Minister Benjamin Netanyahu’s government.
- Israel is expected to launch a ground offensive on the Gaza Strip in an attempt “to make sure Hamas won’t have any military capabilities.
- As a result of the ongoing Israeli-Hamas war, at least 1,200 Israelis have been killed, with more than 2,700 injured, while roughly 950 people in Gaza have been killed, with 5,000 injured.
Stockholm Bans Diesel, Petrol Cars in City Center From 2025 – Bloomberg, 10/11/2023
- Stockholm plans to ban petrol and diesel cars in part of the city starting in 2025 in a bid to crack down on pollution.
- An area of about 20 blocks that straddles the Swedish capital’s finance area and main shopping drags will only allow electric cars, some hybrid trucks and fuel cell vehicles, according to rules to be presented on Wednesday, SVT reported on its website.
- An expansion of the zone could be decided in the first half of 2025.
- Stockholm could be the first major capital to introduce such a wide prohibition and goes further than plans by Paris, Athens and Madrid to ban diesel cars.
- Other cities, including London, have introduced low-emission zones where drivers pay daily fees to enter the city center with older combustion engine vehicles.
U.S. Considers Dropping Sanctions Against Israeli Billionaire in Push for EV Metals – Wall Street Journal, 10/11/2023
- As part of its quest to gain access to minerals critical to the energy transition, the U.S. has recently considered a plan to drop sanctions against an Israeli mining magnate accused of corruption, according to people familiar with the matter.
- The plan involves the U.S. lifting sanctions on businessman Dan Gertler, whom it accused nearly six years ago of corruption, to allow him to take part in mining deals with Saudi Arabia, the people said.
- Those mines, in turn, would ultimately deliver metals to American companies, the people said. Saudi Arabia, the U.S. and Gertler have held early-stage talks about potential deals that could benefit all three parties, they added.
- The talks were active as recently as earlier this month.
- Under one multibillion-dollar proposal that was being discussed, the Saudis would buy stakes in cobalt and copper mines in the Democratic Republic of Congo that are currently paying royalties to Gertler.
- The U.S. would get some of the rights to production from those mines.
- Because Gertler is sanctioned by the Treasury Department and barred from doing business that has a U.S. nexus, the government is working on ways to remove him, the people said.
- A deal isn’t guaranteed, and the talks could fall apart, the people cautioned.
U.S. Announces New Military Aid for Ukraine as Obstacles Mount – Wall Street Journal, 10/11/2023
- The Pentagon announced a new batch of weaponry and other materiel for Ukraine’s effort to fight off Russia’s invasion, amid rising obstacles in Washington to future military and financial support.
- The package, valued at about $200 million, was announced by Secretary of Defense Lloyd Austin ahead of a meeting with allies here Wednesday.
- Longer-term decisions over military support for Ukraine are on hold in Washington, where the House is without a speaker and Republicans are split over extending funding.
- On the battlefield, meanwhile, Ukraine’s counteroffensive is making slow progress in its efforts to bisect Russian forces that occupy nearly one-fifth of the country.
- Ukraine is pressing its assault as time runs out before rains and cold weather make fighting more difficult.
- On Wednesday, Ukrainian President Volodymyr Zelensky made a surprise visit to a meeting of North Atlantic Treaty Organization defense ministers in Brussels to plead for continued support for his country’s efforts to expel Russian forces.
Stellantis, Samsung SDI to build $3.2 billion EV battery plant in Indiana – CNBC, 10/11/2023
- Samsung SDI and automaker Stellantis plan to invest more than $3.2 billion in a new electric vehicle battery plant in Kokomo, Indiana.
- The facility — Stellantis’ sixth battery plant announced globally — was largely expected, but the location and timing are notable.
- The announcement Wednesday was made during contentious U.S. labor strikes and contract negotiations between Stellantis and the United Auto Workers union, led by UAW President Shawn Fain, who is from Kokomo.
- Battery plants have become a main issue in the labor talks, as the UAW views EV battery jobs as crucial to its long-term viability. General Motors last week agreed to include workers at its EV battery plant in the company’s national contract with the union, which Fain called a “transformative win.”
- Fain said the union expects Stellantis and Ford Motor to follow suit, including battery plant workers in eventual contract agreements.
- “The plan was to draw down engine and transmission plants and permanently replace them with low-wage battery jobs,” Fain said Friday.
- “We had a different plan, and our plan is winning at GM. And we expect it to win at Ford and Stellantis as well.”
- The Boer War began in South Africa. – 1899
- A letter from Albert Einstein was delivered to President Franklin D. Roosevelt concerning the possibility of atomic weapons. – 1939
- The first session of Vatican II was convened by Pope John XXIII. – 1962
- The first staffed Apollo mission, Apollo 7, was launched with astronauts Wally Schirra, Donn Fulton Eisele, and R. Walter Cunningham aboard. – 1968
- Space shuttle Challenger astronaut, Kathryn Sullivan, became the first American woman to walk in space. – 1984