US FINANCIAL MARKET
Treasury 10-Year Yield Retreats After Hitting 5%: Markets Wrap – Bloomberg, 10/23/2023
- A renewed bout of volatility in the bond market impacted stock trading on Monday, with investors also awaiting earnings from a handful of big tech companies.
- Oil and gold retreated as Israel appeared to hold off on a broader ground invasion in Gaza.
- The S&P 500 swung between gains and losses after briefly breaching its key 4,200 mark — which represents a 50% retracement of the rally off the lows seen in the banking turmoil in March.
- The Nasdaq 100 was little changed. The Dow Jones Industrial Average fell 0.2%.
- Wall Street’s so-called fear gauge — the VIX — fell from a seven-month high.
- Treasury 10-year yields dropped after touching 5% for the first time since 2007.
- The yield on 10-year Treasuries declined two basis points to 4.89%
- The dollar wavered. The Bloomberg Dollar Spot Index fell 0.2%.
- With about a fifth of the S&P 500 members having reported, shares of companies that lagged analysts’ estimates on the earnings-per-share metric have seen their stock underperform the benchmark index by a median of 3.7% on the day of results, the figures show.
- That’s the worst performance in the data’s history going back to the second quarter of 2019.
- Chevron agreed to buy Hess for $53 billion, a deal aimed at boosting production growth as the US oil industry bets on an enduring future for fossil fuels.
- Reliance Industries, controlled by Asia’s richest tycoon Mukesh Ambani, is nearing a cash and stock deal to buy Walt Disney ’s India operations, according to people familiar with the matter.
- EngageSmart, a business-to-business software company, has agreed to be acquired by Vista Equity Partners in an all-cash deal valued at about $4 billion.
- The Stoxx Europe 600 fell 0.3%.
- West Texas Intermediate crude fell 0.8% to $87.38 a barrel.
- Gold futures fell 0.3% to $1,987.70 an ounce.
Treasury 10-Year Yield Breaches 5% for First Time Since 2007 – Bloomberg, 10/23/2023
- The 10-year Treasury yield crossed 5% for the first time in 16 years, propelled by expectations the Federal Reserve will maintain elevated interest rates and that the government will further boost bond sales to cover widening deficits.
- The yield rose as much as 11 basis points to 5.02%, the highest since 2007.
- The rout has dragged yields in Europe higher too.
- The yield on German and UK 10-year bonds jumped 8 basis points Monday, back toward multi-year highs.
UAW Hits Ram Pickup-Truck Plant in Latest Strike Expansion Against Detroit Carmakers – Wall Street Journal, 10/23/2023
- The United Auto Workers on Monday expanded its continuing strike against Detroit’s car companies by shutting down a pickup-truck plant, a surprise action that hit Chrysler-parent Stellantis’s largest factory.
- The 6,800-worker plant, located in Sterling Heights, Mich., in suburban Detroit, makes the Ram 1500 pickup truck, among the automaker’s most profitable vehicles.
- The walkout brings the total number of UAW-represented on strike at the Detroit automakers, including Ford Motor and General Motors, to more than 40,000, the UAW said.
Chevron to Buy Hess for $53 Billion – Wall Street Journal, 10/23/2023
- Chevron said it would buy Hess in an all-stock deal worth $53 billion, the second major oil tie-up this month following Exxon Mobil’s deal to buy Pioneer Natural Resources.
- Chevron also highlighted the attraction of Hess’s assets in the Gulf of Mexico and its natural-gas business in Southeast Asia.
- The deal values Hess at $171 a share based on Chevron’s closing price on Friday, with Hess shareholders receiving 1.025 shares of Chevron for each Hess share.
- The price represents a premium of 4.9% from Hess’s closing share price Friday and 10.3% when compared with the stock’s 20-day average price.
- The biggest prize for Chevron is Hess’s position holding nearly one-third of the estimated 11 billion barrels of oil and gas found off Guyana.
- Exxon and its partners, Hess and China’s Cnooc, have revved up Guyana’s oil production from nothing in 2019 to 400,000 barrels a day.
- The partners expect to be pumping 1.2 million barrels a day by 2027, making it one of the world’s fastest-ever oil developments.
- By then, the former British colony will be the source of $180 billion in market value for the consortium, some analysts have said.
Vista Equity Partners Agrees to $4 Billion Buyout of EngageSmart – Wall Street Journal, 10/23/2023
- Vista Equity Partners struck a $4 billion deal Monday to acquire business-software company EngageSmart, a sizable buyout at a time when many private-equity firms are sitting on the sidelines.
- Vista is offering shareholders in the customer engagement and payments software specialist $23 a share.
- Based in Braintree, Mass., EngageSmart develops cloud-based software used by clinicians to manage their practices.
- It also offers electronic-invoice technology that helps governments, utilities and financial-services firms bill clients more efficiently.
- Nonprofits and other organizations that rely on donations, meanwhile, use the company’s products to bolster their fundraising efforts, its website says.
Israel-Hamas War Revives Interest in U.S. Production of Iron Dome Missiles – Wall Street Journal, 10/23/2023
- Israel’s war with Hamas has revived dormant U.S. interest in producing munitions for Israel’s Iron Dome missile defense system, U.S. Army and industry officials said, a development that would help a U.S. regional ally resupply for future conflicts.
- Any U.S. manufacturer of Tamir interceptors would take months to get moving.
- But with Hamas and Hezbollah firing hundreds of rockets at Israeli military sites and cities every day, Israel’s stockpile of interceptor missiles is dwindling.
- The new interest in production of Tamir interceptor missiles for the Iron Dome system comes two years after the Army passed over the Israeli hardware in favor of a U.S.-made system it deemed better suited for conflict in the Pacific.
- To help out, the U.S. Army is now sending back to Israel two Iron Dome units it acquired three years ago, alongside more than 200 Tamir missiles the U.S. had stored in its arsenal.
- RTX already makes around 70% of the Tamir, according to the companies, and has been investing heavily in expanding its missile facilities around Tucson, Ariz., which analysts said was one possible site for a Tamir line.
Exclusive: Lockheed exits US Air Force tanker competition; lifting Boeing’s KC-46 – Reuters, 10/23/2023
- Lockheed Martin has withdrawn from the U.S. Air Force’s competition to build at least 75 refueling tankers, the company said, giving Boeing’s KC-46 Pegasus a boost in the closely watched multi-billion dollar Air Force contract.
- Airbus had teamed up with Lockheed in 2018 to offer its A330 multi-role tanker transport, but the French aerospace giant now must decide if it will pursue the competition without Lockheed.
- The Air Force has sought to replace hundreds of Eisenhower-era KC-135 tankers in three lots.
- The first tranche was awarded to the Boeing-made KC-46 Pegasus, which has been plagued by performance challenges, including defects with an on-board video system and with the boom that connects the tanker to aircraft seeking refueling.
US ECONOMY & POLITICS
Republican Hopefuls Crowd Into Speaker Race After Jordan’s Exit – Wall Street Journal, 10/23/2023
- Out of many, House Republicans are hoping for one.
- GOP lawmakers heading into another week without a speaker will try to overcome deep divisions long enough to unify behind a new candidate, after colleagues soured on conservative firebrand Rep. Jim Jordan (R., Ohio) following a string of unsuccessful floor votes.
- With the race now rebooted, nine Republican lawmakers are angling for the speaker job, jumping into the race before a Sunday deadline.
- Rep. Tom Emmer (R., Minn.), who serves as the House’s majority whip, has announced a run.
- He already locked up an endorsement from former Speaker Kevin McCarthy (R., Calif.), who remains a popular and influential party member despite his sudden ejection from the speakership on Oct. 3.
- Other candidates include Kevin Hern of Oklahoma, who leads the conservative Republican Study Committee group, Byron Donalds of Florida, a political newcomer with ties to former President Donald Trump, and longtime lawmaker Pete Sessions of Texas.
- Rep. Mike Flood of Nebraska is circulating a unity pledge, which lawmakers can sign saying that they promise to back the party’s speaker designee in a House floor vote.
H-1B Visa Program Changes Aimed at Stopping Applicants From Gaming Lottery – Wall Street Journal, 10/23/2023
- The Biden administration is proposing major changes to the H-1B visa program for high-skilled foreign professionals, after the government found earlier this year that companies had colluded to try to increase their chances of winning a coveted visa.
- The proposal, which is being published by the Department of Homeland Security in the Federal Register on Monday, would revise how the H-1B visa lottery is run.
- Right now, applicants who have an eligible job offer in the U.S. but need a visa to start working can submit an entry into the lottery, and at the end of that entry window, roughly 85,000 visa recipients are selected at random.
- Under the proposed new process, each person applying for a visa will be weighed equally, no matter how many entries they submit.
- Apart from the lottery changes, the Biden administration is also proposing, for the first time, to allow entrepreneurs to sponsor themselves for an H-1B visa.
- Until now, with narrow exceptions, professionals on these visas were required to be employees rather than owners of a company.
- The proposal also codifies a practice known as “prior deference,” which means visa officers should approve an H-1B renewal if the applicant has previously been approved to work on a visa for the same job.
EUROPE & WORLD
Philips raises full-year outlook as third-quarter profit jumps – CNBC, 10/23/2023
- Dutch health technology company Philips on Monday raised its full-year outlook as it beat analysts’ expectations for third-quarter core profit and comparable sales.
- Core profit more than doubled to 457 million euros ($483.3 million), while comparable sales were up 11% at 4.5 billion euros as demand for its medical scanners, patient monitoring equipment and personal health devices increased.
- Analysts in a company-compiled poll had predicted adjusted July-September earnings before interest, taxes and amortization would rise to 389 million euros from 209 million euros a year before, on 8% comparable sales growth.
- New orders, however, were down 9% from last year, as demand from China continued to cool from a pre-pandemic boom and supply chain problems persisted.
- Despite the drop in orders, Philips said it now expected 6% to 7% comparable sales growth over 2023, with a profit margin (adjusted EBITA) of 10%-11%.
Israel Steps Up Gaza Bombing as Biden Urges It to Protect Civilians – Wall Street Journal, 10/23/2023
- Israel intensified its aerial bombing campaign on the Gaza Strip, striking more than 320 targets in the enclave over the past day, as President Biden and other Western leaders expressed support for Israel while urging it to protect civilians.
- The Israeli airstrikes, aimed at Hamas militants and their operational infrastructure following their Oct. 7 attack on southern Israel, have mostly focused on northern Gaza ahead of a planned Israeli ground offensive.
- As the Israeli military stepped up its bombing campaign there, it again called on civilians to leave, warning that residents who remain could be considered allies of Hamas.
- Already roughly 1.4 million people—more than half of Gaza’s population—have fled their homes since the fighting started and are displaced within the enclave, according to the United Nations.
- By Monday, 34 trucks had crossed into Gaza from Egypt, but no fuel had been included in the convoys.
- Biden and the other Western leaders said they were coordinating closely to support their citizens in the region, especially those wishing to leave Gaza.
China Rattles Foreign Firms Again With Arrests, Foxconn Probe – Bloomberg, 10/23/2023
- Chinese authorities are again shaking the confidence of foreign companies in the country with a series of arrests across industries and an investigation into Foxconn Technology Group, Apple’s most important partner and one of the largest employers in China.
- Over the weekend, state media said that regulators are conducting tax audits and reviewing land use by Foxconn, the Taiwanese company that makes the vast majority of iPhones at factories in China.
- Hon Hai Precision Industry, Foxconn’s public arm, said it will collaborate with authorities.
- Meanwhile, an executive and two former employees of WPP, one of the world’s biggest advertising companies, have been arrested in China, people familiar with the matter said.
- The government detained a local employee of a Japanese metals trading company in March, the Nikkei newspaper reported Sunday.
- And this month, a court formally charged an Astellas Pharma executive on suspicion of espionage.
- China often does not explain the actions taken by its regulators publicly, leaving companies with operations in the country guessing at the ultimate goals of the government.
Ex-ASML Staff Accused of Theft Went to Work for Huawei, NRC Says – Bloomberg, 10/23/2023
- A former ASML Holding employee accused of stealing data from the maker of the world’s most advanced chipmaking machines went to work for Huawei Technologies, according to Dutch newspaper NRC.
- ASML said in February that a former employee in China stole data about its technology, without disclosing further details.
- The ex-worker stole data from a software system that the corporation uses to store technical information about its machinery, Bloomberg reported earlier this year.
- The move comes as the US seeks to prevent China from accessing semiconductor technology that could give it a military edge.
- The former employee last year worked for some time at Huawei after his abrupt departure from ASML, according to NRC which cited unidentified sources.
- It’s unclear whether the person is still working for Huawei.
- The individual, who was based in China, was identified as having potential ties to a Chinese state-sponsored entity and stealing the data on its behalf, people familiar with the company’s probe had told Bloomberg.
Disney Said to Near Multibillion-Dollar Deal With Reliance – Bloomberg, 10/23/2023
- Reliance Industries, controlled by Asia’s richest tycoon Mukesh Ambani, is nearing a cash and stock deal to buy Walt Disney’s India operations, according to people familiar with the matter.
- The US entertainment giant may sell a controlling stake in the Disney Star business, which it values at around $10 billion, as opposed to piecemeal transactions weighed earlier, the people said, asking not to be named because the discussions are private.
- Reliance views the assets at between $7 billion to $8 billion, some of the people said.
- The acquisition could be announced as early as next month with some of Reliance’s media units merged into Disney Star, the people said, without providing further details.
- Under the proposal, Disney will likely continue to hold on to a minority stake in the Indian company after any cash and stock swap transaction is completed, the people said.
- No final decision has been made on the deal or the valuation, and Disney could still decide to hold onto the assets for a bit longer, they added.
SpaceX Signs Deal to Launch Key European Satellites – Wall Street Journal, 10/23/2023
- SpaceX has signed a deal to launch up to four of Europe’s flagship navigation satellites into orbit, reinforcing the Elon Musk-led company’s growing foothold in the region as local rivals struggle to get rockets off the ground.
- SpaceX and the European Space Agency recently signed an agreement for two launches next year, each carrying two Galileo satellites, said Javier Benedicto, the agency’s director of navigation.
- The European Commission, the European Union’s executive arm, along with EU member states, must still give final approval for the deal.
- That is likely to happen before the end of the year, officials said.
- The agreement calls for the satellites to be launched on SpaceX’s Falcon 9 rocket from the U.S., Benedicto said.
- A spokesman for the European Commission said it is “taking all necessary steps to ensure that the Galileo constellation continues to provide outstanding services in the coming months and years.”
- 25,000 women marched in New York City, demanding the right to vote. – 1915
- The United Nations General Assembly convened in New York for the first time. – 1946
- President Richard Nixon agreed to turn White House tape recordings requested by the Watergate special prosecutor over to Judge John J. Sirica. – 1973
- A suicide truck-bombing at Beirut International airport in Lebanon killed 241 U.S. Marines and sailors. – 1983
- Chechen rebels seized a crowded Moscow theater, taking hundreds hostage. Russian forces stormed the building the next day. – 2002