Market Update
Movers: Ally, Baker Hughes, Generac, Interactive Brokers, Intuitive Surg, Netflix, P&G, Winnebago
Scott Peters
19 Oct, 2022
New York City
Ally Financial Inc declined 8.7% to $26.31 after the financial services company said total net revenues in the third quarter increased 2% to $2.02 billion from $1.99 billion a year ago.
Net income in the period plunged 60% to $272 million from $683 million and diluted earnings per share dropped to 88 cents from $1.89 a year ago.
Retail customer base increased to 2.6 million and retail deposit base increased $2.7 billion to $133.9 billion.
Provision for credit losses jumped by $362 million to $438 million, reflecting losses "which are normalizing in-line with expectations."
Baker Hughes Co increased 6.6% to $25.65 after the oil services company reported third quarter revenues increased 5% to $5.4 billion from $5.1 billion a year ago.
The company swung to a net loss of $17 million from a profit of $8 million and diluted loss was 2 cents from earnings of 1 cent a year ago.
"Despite these economic challenges, we remain positive on the outlook for oil and gas.
We believe the fundamentals remain supportive of a multi-year upturn in global upstream spending, and that elevated natural gas and LNG pricing remains constructive for future FIDs," said said chief executive Lorenzo Simonelli.
Housing Starts Declined In September
Brian Turner
19 Oct, 2022
New York City
Housing starts fell 8.1% to an annualized rate of 1.439 million in September, lower than the revised 1.566 million rate in August, U.S. Census Bureau reported Wednesday.
Home sales have been on the decline after the sustained rise in home prices and a surge in mortgage rate.
Mortgage rates have risen from near 2.2% to above 7.2% in less than a year.
Single-family home starts declined 4.7% to 892,000 rate, the lowest since May 2020. Multi-family housing starts dropped 13.1% to 530,000.
European Markets Halt 4-day Advances, Natural Gas at 4-month Low
Bridgette Randall
19 Oct, 2022
Frankfurt
European markets traded lower snapping a four-day winning streak after stocks in construction and financial services led the decliners.
Bond yields were on the rise in Europe after the consumer price inflation in the UK rose to 10.1% in September from 9.9% in August, the Office for National Statistics reported today.
The UK inflation rebounded to the level last seen in July stoking the fears of another large-size rate hike.
The eurozone inflation rate was revised lower to 9.9% in September from the previous estimate of 10.0%, Eurostat said in its final report on Wednesday.
Despite the slight downward revision, the inflation rate was record high since the comparable record keeping began in 1991, driven by a 40.7% surge in energy price following a 38.6% rise in August.
Major averages declined in Europe and bond yields rose.
The DAX index decreased 0.17%or 22.15 to 12,743.72, the CAC-40 index edged up 0.07% or 4.69 to 6,069.43 and the FTSE 100 index fell 0.07% or 5.43 to 6,931.31.
The yield on 10-year German bunds rose to 2.37%, French bonds increased to 2.95%, UK Gilts edged down to 3.88% and Italian bonds rose to 4.77%.
The euro edged down to 97.82 U.S. cents and the British pound turned lower to $1.124.
Brent crude oil edged up $1.30 to $91.39 a barrel and TTF natural gas futures rose 2% to 115.50 euros MWh.
Stocks Lack Direction and Bond Yields Resume Advance
Barry Adams
19 Oct, 2022
New York City
Stocks struggled for direction in early trading and investors worried that looming recession and elevated inflation may accelerate earnings shortfall.
The S&P 500 index fell 0.2% to 3,712.35 and the Nasdaq Composite index declined 0.3% to 10,743.57.
United Airlines jumped more than 7% after the international airline said resilient travel demand is likely to lift annual earnings.
Procter & Gamble jumped 2.2% after the consumer goods maker reported better-than-expected earnings.
Netflix Inc soared 13.8% after the streaming service provider reported strong subscriber growth and revenue and earnings rose in the third quarter.
Crude oil rose $1.42 to $84.12 a barrel and natural gas fell 16 cents to $5.56 a thermal unit.
The yield on 2-year Treasury notes edged up to 4.53%, 10-year Treasury notes increased to 4.10% and 30-year bonds edged higher to 4.09%.
September Housing Starts Fell
Housing starts fell 8.1% to an annualized rate of 1.439 million in September, lower than the revised 1.566 million rate in August, U.S. Census Bureau reported Wednesday.
Home sales have been on the decline after the sustained rise in home prices and a surge in mortgage rate.
Mortgage rates have risen from near 2.2% to above 7.2% in less than a year.
Single-family home starts declined 4.7% to 892,000 rate, the lowest since May 2020. Multi-family housing starts dropped 13.1% to 530,000.
Bond Yields Advance In Europe, Euro Eases
European markets traded lower snapping a four-day winning streak after stocks in construction and financial services led the decliners.
Bond yields were on the rise in Europe after the consumer price inflation in the UK rose to 10.1% in September from 9.9% in August, the Office for National Statistics reported today.
The UK inflation rebounded to the level last seen in July stoking the fears of another large-size rate hike.
The eurozone inflation rate was revised lower to 9.9% in September from the previous estimate of 10.0%, Eurostat said in its final report on Wednesday.
Despite the slight downward revision, the inflation rate was record high since the comparable record keeping began in 1991, driven by a 40.7% surge in energy price following a 38.6% rise in August.
Major averages declined in Europe and bond yields rose.
The DAX index decreased 0.17%or 22.15 to 12,743.72, the CAC-40 index edged up 0.07% or 4.69 to 6,069.43 and the FTSE 100 index fell 0.07% or 5.43 to 6,931.31.
The yield on 10-year German bunds rose to 2.37%, French bonds increased to 2.95%, UK Gilts edged down to 3.88% and Italian bonds rose to 4.77%.
The euro edged down to 97.82 U.S. cents and the British pound turned lower to $1.124.
Brent crude oil edged up $1.30 to $91.39 a barrel and TTF natural gas futures rose 2% to 115.50 euros MWh.
Asian Markets Close Mixed
Asian markets closed mixed and bond yields rose across the region.
The Nikkei 225 average rose 0.4% to 27,257.38, the Hang Seng index dropped 2.4% to 16,511.28 and the Sensex index added 0.3% to 59,107.19.
The yen traded at a new 32-year low of 149.75 and the Indian rupee dropped to a new record low of 82.94 against the U.S. dollar.
The renminbi declined to 7.28 and the Korean won dropped to 1,434.67.
Goldman Q3 Earnings Falls on Weak Investment Banking Offset by Higher Bond Trading Fees
Scott Peters
18 Oct, 2022
New York City
Goldman Sachs Group Inc increased 3.2% to $316.38 after the financial services provider reported lower but better-than-expected earnings supported by bond trading activities.
Net revenues in the quarter declined to $11.975 billion from $13.608 billion a year ago.
Net income declined to $3.06 billion from $5.4 billion a year ago and diluted earnings per share fell to $8.25 from $14.93.
Segment Breakdown
Global markets trading in bonds and equities dominated financial company's quarterly results.
Global markets, which includes commodities and currencies, increased 11% from a year ago but declined 4% from the previous quarter to $6.2 billion.
Net revenue in bonds, currencies and commodities increased 41% to $3.53 billion, primarily reflecting significantly higher net revenues in intermediation or brokerage fees, driven by significantly higher net revenues in interest rate products and currencies, and higher net revenues in commodities and credit products, partially offset by significantly lower net revenues in mortgages.
Revenues in the equities brokerage business declined 14% to $2.68 billion.
Net revenue in asset management unit declined 20% from a year ago and jumped 68% from the previous quarter to $1.82 billion, primarily reflecting lower net revenues in equity and debt products offset by higher management fees.
Weak market environment also impacted investment banking unit fees.
Investment banking revenues plunged 57% from a year ago and 26% lower than in the previous quarter to $1.58 billion, reflecting weak advisory and underwriting fees.
Consumer and wealth management fees increased 18% from a year ago and 9% from the previous quarter to $2.38 billion.
Net revenues in wealth management was nearly unchanged at $1.63 billion and consumer banking revenues nearly doubled to $744 million reflecting higher credit card balances and higher deposit spreads.
Provision for credit losses increased to $515 million from $175 million a year ago but fell from $667 million in the second quarter.
The allowance for credit losses was $5.59 billion as of September 30, 2022.
Geographic Breakdown
Americas revenues accounted for 63%, Europe and Middle East 26% and Asia accounted for 11% of total revenues in the third quarter.
Book Value
Book value per common share increased 2.1% during the quarter and 8.4% during the first nine months of 2022 to $308.22.
Movers: Carnival Corp, Goldman Sachs, Hasbro, Lockheed, Microsoft, Salesforce, XPO Logistics
Scott Peters
18 Oct, 2022
New York City
Goldman Sachs Group Inc increased 3.2% to $316.38 after the financial services provider reported lower but better-than-expected earnings supported by bond trading activities.
Salesforce Inc jumped 5.2% to $154.52 after activist investor Starboard took a position in the company.
Colgate Palmolive Company increased 0.8% to $72.71 after activist investor Dan Loeb controlled Third Point acquired a stake in the company.
The activist investor investments were reported by CNBC without citing sources.
Microsoft Corporation increased 0.7% to $239.01 and erased morning gains of 2.7% after the company confirmed it cut about 1,000 jobs as revenue growth slows. The news was first reported by Axios and independently verified by ticker.com.
Semiconductor stocks also declined on the worries that the current slowdown in personal computing devices may last longer than anticipated.
Intel Corporation declined 2.1% to $25.90, Advanced Micro Devices, Inc inched up 0.1% to $58.03, Nvidia edged up 1% to $120.02 and Taiwan Semiconductor dropped 1.7% to $63.74.
Home builders were in focus after the industry sentiment extended its recent plunge to a 12-year low, excluding a brief period during the start of the coronavirus pandemic in March 2020.
The National Association of Home Builders/Wells Fargo Housing Market Index declined 8 points to 38 in October from the previous month.
Any reading below 50 indicates negative sentiment.
Despite the weak reading on the sentiment, home builder stocks advanced.
Lennar Corp added 3.2% to $76.86, PulteGroup Inc jumped 3.1% to $39.48 and Toll Brothers increased 1.9% to $42.86.
Carnival Corp jumped 11.5% to $8.11 after the cruise company's subsidiary launched an offering of $1.25 billion senior priority notes due in 2028.
The notes will be backed by 12 unencumbered vessels with an aggregate net book value of approximately $8.2 billion and proceeds will be used to repay principal on 1.875% senior notes due in 2022.
XPO Logistics declined 2.1% to $47.48 after the freight transportation company issued an earnings alert ahead of its scheduled earnings report on October 31.
The company said third quarter revenue is estimated at $3.04 billion and operating earnings between $181 million and $185 million.
North American less-than-truckload segment revenue per hundredweight, excluding fuel, is expected to increase 7% in the third quarter.
Lockheed Martin Corporation soared 8.7% to $431.93 after the defense contractor reported third quarter net sales increased $16.6 billion from $16.0 billion a year ago.
Net income jumped to $1.8 billion or $6.71 per share compared to $614 million or $2.21 a year ago.
Hasbro, Inc declined 1.8% to $66.47 after the toy maker reported third quarter revenue declined 15% to $1.6 billion from a year ago.
"As expected, the third quarter is our most difficult comparison and was further impacted by increasing price sensitivity for the average consumer," said Chris Cocks, Hasbro chief executive officer.
Net income in the quarter plunged 49% to $129.2 million from $252.2 million a year ago and diluted earnings per share dropped to 93 cents from $1.83.
Stocks Extend Rally, Oil Under Pressure, Home Builders Sentiment Drops
Barry Adams
18 Oct, 2022
New York City
Major averages on Wall Street advanced on earnings optimism but bond yields remained near 14-year highs.
Goldman Sachs reported lower but better-than-expected earnings supported by bond trading activities.
Salesforce was also in focus after activist investor Starboard took a position in the company.
Colgate Palmolive added more than 2% after activist investor Dan Loeb controlled Third Point acquired a stake in the company.
The activist investor investments were reported by CNBC without citing sources.
Microsoft erased morning gains of 2.7% after the company confirmed it cut about 1,000 jobs as revenue growth slows. The news was first reported by Axios and independently verified by ticker.com.
Semiconductor stocks also declined on the worries that the current slowdown in personal computing devices may last longer than anticipated.
Home builders were in focus after the industry sentiment extended its recent plunge to a 12-year low, excluding a brief period during the start of the coronavirus pandemic in March 2020.
The National Association of Home Builders/Wells Fargo Housing Market Index declined 8 points to 38 in October from the previous month.
Any reading below 50 indicates negative sentiment.
The S&P 500 index jumped 0.9%or 32.53 to 3,710.81 and the Nasdaq Composite index increased 0.8% or 81.17 to 10,756.32.
Crude oil fell $2.93 to $82.43 a barrel and natural gas dropped 6 cents to $5.93 a thermal unit.
The yield on 2-year Treasury notes edged down to 4.42%, 10-year Treasury notes eased to 3.99% and FTSE 100 index dropped to 4.03%.
European Markets Advance, Natural Gas Drops to 4-month Low
European markets extended gains as natural gas price dropped to a 4-month low.
Natural gas declined for the fourth day in a row on milder than usual weather conditions across Europe and a large stockpile eased shortage worries.
Germany ordered two nuclear power plants to continue operating till mid-2023 and Spain's national gas grid operator Enagas said it may reject the next shipment of LNG on the account of lack of storage capacity.
Italy's trade account swung to a deficit in August and Spain's trade deficit widened in the month.
German business sentiment improved in October by 2.7 points to -59.2, from the previous month's 14-year low of 61.9, the Center for Economic Research said Tuesday.
Brent crude fell $2.66 to $88.94 a barrel and natural gas TTF futures dropped 11.7% to 113.11 euros MWh.
The DAX index jumped 1.75% or 221.99 to 12,869.00, the CAC-40 index increased 1.06% or 63.82 to 6,104.48.
The euro edged down to 98.28 U.S. cents and the British pound inched lower to $1.129.
The yield on 10-year German Bunds declined to 2.23%, French bonds edged lower to 2.817%, British Gilt to 3.92% and Italian bonds to 4.61%.
Asian Markets Extend Rally On Earnings Optimism
Stocks in Asia closed higher as investors focused on domestic earnings and the Hang Seng index soared.
BYD, the maker of electric vehicles, reported third quarter earnings soared more than three-fold.
The People's Bank of China pumped 500 billion renminbi or $70 billion of liquidity into the financial system on Monday.
The new medium term lending facility offered loans at 2.75%, the key rate that acts as a base for the prime lending rate.
The PoB is set to announce its rate decision on October 20 and rates are expected to be left unchanged.
The Nikkei 225 average rose 1.4% or 382.35 to 27,156.14, the Hang Seng index increased 1.8% or 301.68 to 16,914.58 and the Sensex index rose 0.9% or 549.62 to 58,960.60.
The Kospi gained 1.4% to close at 2,249.95 ahead of earnings from Hyundai Motor and several other large conglomerates.
Hyundai Motor added 0.6% and SK Telecom increased 2.5%.
Stocks in Mumbai advanced after the Reserve Bank of India highlighted resilient economic activities.
L&T Tech Services said fiscal second quarter revenue increased 24% and net income jumped 23% from a year ago.
Adani Defence & Aerospace agreed to acquire the largest independent air services contractor Air Works for 400 crore rupees or $50 million.
The yield on 10-year Japanese bonds held firm at 0.25%, Chinese bonds at 2.70% and Indian bonds at 7.42%.
The yen traded near a 32-year low of 149.11 against a dollar, the Indian rupee at 82.20 and Chinese yuan at 7.22.
European Markets Near One-month High, Naturas Gas Drops to 4-month Low
Bridgette Randall
18 Oct, 2022
Frankfurt
European markets extended gains as natural gas price dropped to a 4-month low.
Natural gas declined for the fourth day in a row on milder than usual weather conditions across Europe and a large stockpile eased shortage worries.
Germany ordered two nuclear power plants to continue operating till mid-2023 and Spain's national gas grid operator Enagas said it may reject the next shipment of LNG on the account of lack of storage capacity.
Italy's trade account swung to a deficit in August and Spain's trade deficit widened in the month.
German business sentiment improved in October by 2.7 points to -59.2, from the previous month's 14-year low of 61.9, the Center for Economic Research said Tuesday.
Brent crude fell $2.66 to $88.94 a barrel and natural gas TTF futures dropped 11.7% to 113.11 euros MWh.
The DAX index jumped 1.75% or 221.99 to 12,869.00, the CAC-40 index increased 1.06% or 63.82 to 6,104.48.
The euro edged down to 98.28 U.S. cents and the British pound inched lower to $1.129.
The yield on 10-year German Bunds declined to 2.23%, French bonds edged lower to 2.817%, British Gilt to 3.92% and Italian bonds to 4.61%.
Asian Markets Extend Rally On Earnings Optimism
Arjun Pandit
18 Oct, 2022
Mumbai
Stocks in Asia closed higher as investors focused on domestic earnings and the Hang Seng index soared.
BYD, the maker of electric vehicles, reported third quarter earnings soared more than three-fold.
The People's Bank of China pumped 500 billion renminbi or $70 billion of liquidity into the financial system on Monday.
The new medium term lending facility offered loans at 2.75%, the key rate that acts as a base for the prime lending rate.
The PoB is set to announce its rate decision on October 20 and rates are expected to be left unchanged.
The Nikkei 225 average rose 1.4% or 382.35 to 27,156.14, the Hang Seng index increased 1.8% or 301.68 to 16,914.58 and the Sensex index rose 0.9% or 549.62 to 58,960.60.
The Kospi gained 1.4% to close at 2,249.95 ahead of earnings from Hyundai Motor and several other large conglomerates.
Hyundai Motor added 0.6% and SK Telecom increased 2.5%.
Stocks in Mumbai advanced after the Reserve Bank of India highlighted resilient economic activities.
L&T Tech Services said fiscal second quarter revenue increased 24% and net income jumped 23% from a year ago.
Adani Defence & Aerospace agreed to acquire the largest independent air services contractor Air Works for 400 crore rupees or $50 million.
The yield on 10-year Japanese bonds held firm at 0.25%, Chinese bonds at 2.70% and Indian bonds at 7.42%.
The yen traded near a 32-year low of 149.11 against a dollar, the Indian rupee at 82.20 and Chinese yuan at 7.22.
Volatile S&P 500 and Nasdaq Soar 3% Following BofA Earnings
Barry Adams
17 Oct, 2022
New York City
Stocks on Wall Street jumped after Bank of America reported better-than-expected earnings and bond yields rose.
After a week of wild swings the S&P 500 declined 1.5% and the Nasdaq Composite dropped 3.1% and bond yields hovered above 4%.
In Monday's trading, major averages advanced and the yield on Treasuries rose as investors digested better-than-expected earnings from Bank of America.
The S&P 500 index jumped 2.65% or 94.88 to 3,677.95 and the Nasdaq Composite index soared 3.4% or 354.41 to 10,675.80.
Natural gas futures fell to a three-month low and below $6 on falling demand and rising supply, according to the Energy Information Agency report.
U.S. utilities increased natural gas storage by 125 billion cubic feet, an increase over 100 billion cubic feet for the fourth week in a row.
The natural gas price fell after the demand for power decreased following Hurricane Ian and a decline in LNG exports.
Crude oil fell 17 cents to $85.48 and natural gas declined 49 cents to $5.95 a thermal unit.
The Yield on 2-year Treasury notes increased to 4.45%, 10-year bonds edged higher to 4,01% and the 30-year bonds rose to 4.03%.
U.S. Movers
Bank of America Corp jumped 6.5% to $33.76 after the bank reported better-than-expected third quarter sales and earnings.
Revenue, net of interest income, in the third quarter increased 8% to $24.5 billion from $22.8 billion a year ago.
Net income soared to $7.1 billion or 81 cents from $6.2 billion or 73 cents a share.
"Our U.S. consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts," said chief executive officer Brian Moynihan.
Continental Resources, Inc gained 8.6% to $74.08 after founder and chairman Harold Hamm and his family agreed to acquire the remaining shares in the oil producer for $74.28 a share.
Credit Suisse increased4.5% to $4.57 after the company settled a lawsuit for $475 million stemming from the sale of mortgage backed securities dating as back as 2008 with New Jersey State.
The company is also looking to sell a stake to a group of investors according to reports on the weekend.
Dish Network Corp jumped 7.7% to $13.95 and rebounded from a loss of more than 7% last week after Conx Corp was in talks to acquire Boost Mobile from the company.
Fox Corp declined 9.4% to $28.58 and News Corp gained 3.8% to $16.20 after founder Rupert Murdoch formed a special committee to merge the two companies together.
Roblox Corp soared 20.7% to $42.88 after the online gaming company said average daily active users in September jumped 23% to 57.8 million
Estimated booking increased between 11% and 15% to between $212 million and $219 million from a year ago and estimated revenues increased between -2% and +3% to between $171 million and $180 million.
Splunk Inc increased 5.8% to $74.25 after the activist investor Starboard Value is said to hold approximately 5% stake in the company with a plan to boost shareholder value.
Europe Stock Movers
Credit Suisse AG gained 2.6% to 4.53 Swiss francs and the troubled investment bank reached a financial settlement with the New Jersey State regulator related to residential mortgage securities dating back to 2008.
ASOS Plc plunged 8.4% to 485 pence after the U.K.-based online fashion retailer confirmed that the company is in negotiations with lenders in revising credit facility terms.
Energy complex companies rose after crude oil prices rose more than 1% and the dollar edged down.
BP Plc, Eni SpA, Repsol SA, TotalEnergies SE and Shell Plc increased between 1% and 2.5%.
Hargreaves Lansdown plunged as much as 8% before recovering to close down 3.5% to 787.95 pence and the investment platform is facing multi-million pound lawsuits from thousands of investors over the fallen equity income fund managed by Neil Woodford.
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Movers: BofA, Continental Resources, Credit Suisse, Dish Network, Fox Corp, Roblox, Splunk
Scott Peters
17 Oct, 2022
New York City
Bank of America Corp jumped 6.5% to $33.76 after the bank reported better-than-expected third quarter sales and earnings.
Revenue, net of interest income, in the third quarter increased 8% to $24.5 billion from $22.8 billion a year ago.
Net income soared to $7.1 billion or 81 cents from $6.2 billion or 73 cents a share.
"Our U.S. consumer clients remained resilient with strong, although slower growing, spending levels and still maintained elevated deposit amounts," said chief executive officer Brian Moynihan.
Continental Resources, Inc gained 8.6% to $74.08 after founder and chairman Harold Hamm and his family agreed to acquire the remaining shares in the oil producer for $74.28 a share.
Credit Suisse increased4.5% to $4.57 after the company settled a lawsuit for $475 million stemming from the sale of mortgage backed securities dating as back as 2008 with New Jersey State.
The company is also looking to sell a stake to a group of investors according to reports on the weekend.
Dish Network Corp jumped 7.7% to $13.95 and rebounded from a loss of more than 7% last week after Conx Corp was in talks to acquire Boost Mobile from the company.
Fox Corp declined 9.4% to $28.58 and News Corp gained 3.8% to $16.20 after founder Rupert Murdoch formed a special committee to merge the two companies together.
Roblox Corp soared 20.7% to $42.88 after the online gaming company said average daily active users in September jumped 23% to 57.8 million
Estimated booking increased between 11% and 15% to between $212 million and $219 million from a year ago and estimated revenues increased between -2% and +3% to between $171 million and $180 million.
Splunk Inc increased 5.8% to $74.25 after the activist investor Starboard Value is said to hold approximately 5% stake in the company with a plan to boost shareholder value.
European Markets Jump 1.7%, UK Reverses Budget Proposals
Bridgette Randall
17 Oct, 2022
Frankfurt
European market indexes soared and bond yields declined after the UK finance minister reversed unfunded tax measures proposed in the mini-budget just a few weeks ago.
The DAX index increased 1.7% or 211.22 to 12,649.03, the CAC-40 index advanced 1.8%or 108.73 to 6,040.66 and the FTSE 100 index added 0.9% or 60.18 to 6,920.25.
The euro was nearly unchanged at 97.81 U.S. cents and the British pound increased 1.4% to $1.13.
The yield on 10-year German bunds declined to 2.22%, French bonds fell to 2.82%, the British Gilts to 3.96%, Swiss bonds eased to 1.2% and Italian bonds to 4.64%.
Brent crude edged up 84 cents to $92.45 and the TTF natural gas fell 8.1% to 130.34 euros a megawatt hour.
UK Reverses Tax Proposals, gilt Yields Drop, Pound Rises
The U.K. bond yields rose after the recently appointed finance minister Jeremy Hunt reversed all tax proposals released in the mini-budget ahead of parliamentary approval.
The Pound rebounded and the Gilt yields dropped the most in decades after the government reversal but the longevity and credibility of the British government in doubt.
The Liz Truss government is not likely to survive the remaining term ahead of the required general election in 2024.
The yields fell 40 basis points for the 20-year and the 30-year Gilts and the pound edged slightly higher but investors are concerned about how long the current government will survive.
The growing political chaos and the Conservative Party infighting may force the UK general election earlier than the required date in early 2024.
Europe Stock Movers
Credit Suisse AG gained 2.6% to 4.53 Swiss francs and the troubled investment bank reached a financial settlement with the New Jersey State regulator related to residential mortgage securities dating back to 2008.
ASOS Plc plunged 8.4% to 485 pence after the U.K.-based online fashion retailer confirmed that the company is in negotiations with lenders in revising credit facility terms.
Energy complex companies rose after crude oil prices rose more than 1% and the dollar edged down.
BP Plc, Eni SpA, Repsol SA, TotalEnergies SE and Shell Plc increased between 1% and 2.5%.
Hargreaves Lansdown plunged as much as 8% before recovering to close down 3.5% to 787.95 pence and the investment platform is facing multi-million pound lawsuits from thousands of investors over the fallen equity income fund managed by Neil Woodford.
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Stocks Trade Higher, Focus Shifts to Earnings
Barry Adams
17 Oct, 2022
New York City
Stocks on Wall Street opened higher and investors shifted focus to a parade of earnings after a wild week of trading.
After a week of wild swings the S&P 500 declined 1.5% and the Nasdaq Composite dropped 3.1% and bond yields hovered above 4%.
In Monday's trading, major averages advanced and the yield on Treasuries edged lower as investors shifted focus to earnings releases.
The S&P 500 index jumped 2.72% or 97.31 to 3,680.25 and the Nasdaq Composite index soared 3.21% or 331.26 to 10,652.31.
Crude oil rose 87 cents to $86.43 and natural gas declined 43 cents to $6.03 a thermal unit.
The Yield on 2-year Treasury notes eased to 4.41%, 10-year bonds edged lower to 3,911% and the 30-year bonds fell to 3.93%.
Investors await corporate results as the earnings season picks up pace and Goldman Sachs, IBM, Tesla, AT&T, Netflix and Johnson & Johnson are among the companies scheduled to release results this week.
Bank of America jumped 5.5% to $33.46 after the company reported better-than-expected revenues and earnings in the third quarter.
European Markets Trade Higher, Euro Stable
European market indexes traded higher and bond yields declined after the UK finance minister reversed unfunded tax measures proposed in the mini-budget just a few weeks ago.
The DAX index increased 1.4% or 172.65 to 12,609.42, the CAC-40 index advanced 1.2%or 71.57 to 6,002.63 and the FTSE 100 index added 0.9% or 60.18 to 6,918.95.
The euro was nearly unchanged at 97.81 U.S. cents and the British pound increased 1.4% to $1.13.
The yield on 10-year German bunds declined to 2.22%, French bonds fell to 2.82%, the British Gilts to 3.96%, Swiss bonds eased to 1.2% and Italian bonds to 4.64%.
Brent crude edged up 84 cents to $92.45 and the TTF natural gas fell 8.1% to 130.34 euros a megawatt hour.
UK Reverses Tax Proposals, gilt Yields Drop, Pound Rises
The U.K. bond yields rose after the recently appointed finance minister Jeremy Hunt reversed all tax proposals released in the mini-budget ahead of parliamentary approval.
The Pound rebounded and the Gilt yields dropped the most in decades after the government reversal but the longevity and credibility of the British government in doubts.
The Liz Truss government is not likely to survive the remaining term ahead of the required general election in 2024.
The yields fell 40 basis points for the 20-year and the 30-year Gilts and the pound edged slightly higher but investors are concerned about how long the current government will survive.
The growing political chaos and the Conservative Party infighting may force the UK general election earlier than the required date in early 2024.
China Communist Party Congress In Focus
Asian markets generally traded higher after the Chinese government proposed to increase government spending and support economic growth.
China abruptly delayed the release of GDP and other economic data indefinitely without giving a reason.
The weeklong gathering of Communist Party is set to appoint premier Xi Jinping for the third consecutive five-year term.
Chinese officials continued to crack down social mobility following the strict zero-Covid policy. Zhengzhou city in Henan province shut down parts of city to tame the spread of virus.
Foxconn factory located in the city with about 300,000 workers is responsible for the production of about half the iPhones production.
The Nikkei 225 average fell 1.16% or 314.97 to 26,775.79, the Hang Seng index increased 0.15% or 25.21 to 16,612.90 and the Sensex index added 0.85% or 491.01 to 58,410.98.
The yields on Japanese bonds held steady at 0.25%, Chinese bonds traded down to 2.71% and Indian bonds edged down to 7.4%.
Yen Drop Extends Yearly Loss to 30%
The Japanese yen dropped to a 32-year low to 149 against a dollar prompting fears of intervention from the Bank of Japan.
The yen has dropped nearly 30% against the U.S. dollar and the Bank of Japan conducted its largest currency market intervention and spent 2.84 trillion yen in shoring the currency with temporary success.
Kroger and Albertsons Merger Plan to Face Scrutiny
Anand Sheth
14 Oct, 2022
New York City
Albertsons Companies declined 7.4% to $26.50 on news that the company has agreed to be acquired by Kroger for $24.6 billion or $34.10 a share.
Albertsons owns and operates 2,200 stores in 34 states and Washington D.C. with 290,000 employees.
Albertsons store network spans 22 brands including Acme, Safeway and Tom Thumb.
Kroger Co declined 7.7% to $43.99.
Kroger owns and operates 2,800 stores in 35 states with 420,000 employees.
Kroger operates a portfolio of 25 store brands including West Coast-based Ralphs and Fred Meyer.
The acquisition is most likely to draw antitrust scrutiny from regulators as Kroger looks to expand its network and strengthen its position in a market dominated by Walmart and Amazon.
Indexes Sink Deeper After a Wild Week, Bond Yields Rise Above 4%
Barry Adams
14 Oct, 2022
New York City
Stocks on Wall Street struggled a day after posting a sharp advance as investors digested the implication of a slight decline in consumer price inflation.
In Thursday's trading, the latest inflation reports sparked two diverging reactions from stock and bond markets.
Stock investors hoped that the slight cooling of consumer inflation may be followed by weaker inflation data in the months ahead while bond investors focused on the elevated inflation rate above 8% and surmised that the Fed will continue its aggressive rate hike campaign.
In Friday's trading, stocks accelerated declines after retail sales in September were flat from August, U.S. Census Bureau reported Friday.
Retail sales in the month were unchanged from the previous month, below the expectations of at least 0.2% rise, as retail sales for motor vehicles and parts, building materials and electronics and gasoline stores fell.
Groceries stores sales were up, only supported by a rise in prices.
The retail sales data are not adjusted for inflation, indicating that consumer spending declined across most categories of goods.
The yield on Treasuries extended gains to new 14-year highs while major stock averages erased most of Thursday's gains and sank deeper in the year so far.
The S&P 500 index fell 2.4% to 3,583.08 and the Nasdaq Composite index dropped 3.08% to 10,321.39.
For the week, the S&P 500 declined 1.5% and the Nasdaq Composite index dropped 3.1%.
Crude oil fell $3.35 to $85.72 a barrel and natural gas dropped 28 cents to $6.45 a thermal unit.
The yield on 2-year Treasury notes inched higher to 4.50%, 10-year Treasury notes to 4.02% and 30-year bonds to 3.99%.
U.S. Stock Movers
Albertsons Companies declined 7.4% to $26.50 on news that the company has agreed to be acquired by Kroger for $24.6 billion or $34.10 a share.
Albertsons owns and operates 2,200 stores in 34 states and Washington D.C. with 290,000 employees.
Albertsons store network spans 22 brands including Acme, Safeway and Tom Thumb.
Kroger Co declined 7.7% to $43.99.
Kroger owns and operates 2,800 stores in 35 states with 420,000 employees.
Kroger operates a portfolio of 25 store brands including West Coast-based Ralphs and Fred Meyer.
The acquisition is most likely to draw antitrust scrutiny from regulators as Kroger looks to expand its network and strengthen its position in a market dominated by Walmart and Amazon.
Beyond Meat Inc dropped 7.8% to $13.64 after the company said it plans to reduce its workforce by 200 employees or 19% of its workforce and take one-time charge of $4 million in the fourth quarter of 2022.
The company also guided its third quarter sales to decline 23% to $82 million and fourth quarter sales are estimated to fall between $400 million and $425 million, a decrease between 9% and 14%.
The food company had previously guided full-year 2022 net revenues in the range of $470 million to $520 million.
Citigroup Inc added 0.8% to $43.30 after the global bank said revenues rose in rising interest rates but earnings fell 25% on weak investment banking revenues and the company increased credit loss provisions.
Revenues increased 6% to $18.5 billion from $17.4 billion a year ago, primarily on the gain in sale of its consumer business in the Philippines.
Without the transaction, revenue declined 1% as higher interest income was more than offset by non-interest income decline.
Net income fell 25% to $3.5 billion from $4.6 billion and earnings per share declined to $1.63 from $2.15 a year ago.
JPMorgan Chase & Co increased 2.4% to $111.79 after the company said net revenue in the third quarter rose 10% to $32.7 billion.
Net income plunged 17% to $9.7 billion from $11.7 billion and diluted earnings per share dropped to $3.12 from $3.74 a year ago.
Net income declined as the bank took credit loss provisions ahead of the expected economic slowdown.
Net income decline was driven by a net credit reserve build of $808 million compared to a net reserve release of $2.1 billion in the prior year.
The current quarter included net investment securities losses of $959 million resulting in a decrease of $729 million in after-tax net income.
Morgan Stanley fell 5.3% to $75.08 after the investment bank reported third quarter revenues declined to $13 billion from $14.8 billion a year ago.
Net income in the period fell to $2.6 billion from $3.7 billion and diluted earnings per share dropped to $1.47 from $1.98 a year ago.
Investment banking revenues in the quarter plunged 55% to $1.27 billion from $2.85 billion a year ago.
Fee-based asset inflow in its wealth management unit declined to $16.7 billion from $70.6 billion and fee-based client assets declined to $1.3 trillion from $1.75 trillion a year ago.
European Markets Log Weekly Advance, Hungary Hikes Rates to 25%
European indexes trimmed morning gains following the market weakness in New York.
The elevated U.S. inflation report on Thursday sparked a rally in New York and Europe but stocks turned lower after the U.S. consumer spending was flat in September.
Retail sales in the month were unchanged from the previous month, below the expectations of at least 0.2% rise, as retail sales for motor vehicles and parts, building materials and electronics and gasoline stores fell.
Groceries stores sales were up, only supported by a rise in prices.
The retail sales data are not adjusted for inflation, indicating that consumer spending declined across most categories of goods.
The FTSE index increased 0.6% to 6,893.77, the DAX index jumped 0.7% to 12,437.81 and CAC-40 index advanced 0.90% to 5,931.93.
For the week, the FTSE 100 index decreased 1.9%, the DAX gained 1.3% and the CAC-40 index added 1.0%.
UK Pound Weakens On Government U Turn and Minister Change
UK Prime Minister Liz Truss fired finance minister Kwasi Kwarteng and reversed corporate tax cuts announced in the mini-budget last month.
Truss doubled down on her growth policies but said corporate tax cut will remain at 29% and reversed the earlier proposal to lower it to 19%.
The U-turn on the unfunded tax reduction proposal is expected to calm volatile Gilt market but questions remain how the government will fund its energy subsidies to households and other measures that are expected to cost the treasury 45 billion pounds.
Truss announced the appointment of Jeremy Hunt replacing finance minister Kwasi Kwarteng only after five weeks in office.
The Bank of England is set to end its long-term bond purchase program today, an emergency measure in support of the orderly functioning of the bond market and provide a rare rebalancing opportunity to pension fund managers.
The euro fell 0.5% to 97.24 U.S. cents and the British pound dropped 1% to $1.118.
The yield on 10-year UK bonds increased to 4.21%, German bunds rose to 2.308%, French bonds to 2.908% and Italian bonds to 4.74%.
Big Rate Hike in Hungary
The Hungarian Forint advanced more than 2% and traded near 429 against the dollar after the National Bank of Hungary lifted its overnight collateral lending rate by 950 basis points to 25% in an emergency meeting on Friday.
The central bank lifted rates by a large amount in support of the falling forint and said that the bank will provide foreign currency for energy imports from its reserves.
Hungary, like many countries in Europe, is battling sky-high energy price driven inflation. Consumer price inflation in September surged above 20.0% for the first time since 1996.
The NBH has lifted rates at every policy meeting since June to combat high inflation above its target range between 2% and 4%.
Europe Stock Movers
TomTom NV dropped 11.7% to