Morning Reads
- Recession as Economies Falter
- China Eases Quarantine, Ends Flight Bans in Covid Zero Shift
- US Finds Others Aligned Against It in Saudi-Sparked Oil Row
- After Months of Stubborn Inflation, Glimmers of Hope Emerge
- The Lack Of a ‘Red Wave’ Signals a Better Economy
- Japan Sets Up Advanced Chip Business With Toyota, Sony
- SoftBank Posts Profit of More Than $21 Billion After Selling Alibaba Shares
- Credit Suisse Overhaul Draws Scrutiny From Some Investors, Proxy Adviser Over Governance
- The Crypto Ponzi Scheme Avenger
- The Incredibly Stupid Catastrophe Caused by Sam Bankman-Fried and FTX
- FTX Latest: EU License Under Threat as Asset Freeze Fuels Crisis
- FTX Crypto Exchange Boss Says He Is Trying to Raise More Money
- Two Weeks of Chaos: Inside Elon Musk’s Takeover of Twitter
- Musk Warns Twitter Bankruptcy Possible as Senior Executives Exit
- Amazon, in Broad Cost-Cutting Review, Weighs Changes at Alexa and Other Unprofitable Units
- It’s the New Saying Among Tech CEOs: I Apologize
- Adidas Says It Will Relaunch Kanye West’s Shoe Designs Without the Yeezy Name
Options
Futures
PREMIUM
PREPPER
"Explosive," "shock" and "relief" are some of the adjectives being used to describe the rally on Thursday as stocks recorded their best session since the early days of the pandemic in 2020. When all was said and done, the Dow Jones Industrial Average and S&P 500 closed out the session up 3.7% and 5.5%, respectively, while the tech-heavy Nasdaq Composite Index skyrocketed 7.4%. U.S. government bond yields also recorded their steepest one-day decline in more than a decade, with the rate on the 10-year Treasury falling 32 basis points to 3.82%.
Driving the sentiment: Core and headline consumer inflation were weaker than expected in October, fueled by a decline in used car and truck prices, cheaper airfare and health insurance costs. The U.S. Labor Department reported a 0.3% month-over-month rise in October's core Consumer Price Index, compared to forecasts for 0.5%, marking the softest reading since September 2021 for core CPI (it came in at 6.3% on an annualized basis). The headline CPI figure, which factors in volatile food and energy prices, climbed 7.7% from a year earlier vs. expectations of 8.0% and compared to an 8.2% clip seen in the previous month.
The moderation in prices could give the Fed more breathing room in terms of slowing down the pace of its aggressive rate hikes. Some Fed officials even hinted to a downshift following the data, like Dallas Fed President Lorie Logan, who said "while I believe it may soon be appropriate to slow the pace of rate increases so we can better assess how financial and economic conditions are evolving, I also believe a slower pace should not be taken to represent easier policy." According to the CME's FedWatch Tool, markets are now pricing in an 80.6% probability of a 50-basis-point hike rather than a 75-point one at the central bank's policy meeting next month.
Don't get too excited: "A rally like this is of course very dramatic to say the least, but you have them all the time in a bear market," famed investor Carl Icahn told CNBC in an interview. "We keep our portfolio hedged. I am still very, quite bearish on what is going to happen. I think the Fed has to keep raising and if it doesn't then it's going to be worse in the future anyway." (239 comments)
One of the biggest stories of the week has been the collapse of FTX International, or what some in the market are calling a "Lehman Brothers" moment for the crypto industry. Once valued at $32B and the third-largest crypto exchange by trading volume, FTX is having an insolvency crisis, prompting regulators from the Bahamas to Japan to freeze what's left of its operations. It's a moment of irony for the firm led by Sam Bankman-Fried, which itself served as a white knight this past summer to rescue several crypto players including BlockFi, Voyager Digital and Celsius.
The apology: "I'm sorry. That's the biggest thing," SBF wrote in a thread spanning over 20 tweets. "The full story here is one I'm still fleshing out every detail of, but as a very high level, I f----d up twice [regarding leverage and liquidity]. A poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower. Because, of course, when it rains, it pours. We saw roughly $5B of withdrawals on Sunday - the largest by a huge margin."
Sister trading house Alameda Research is "winding down trading," though SBF noted that the end of his crypto empire does not impact "FTX US, the US-based exchange that accepts Americans." While consumers can get their funds out for now, the crisis is weighing heavily on the sector, with Bitcoin (BTC-USD) falling to the $15,000 level before paring some of those losses. "For a period of time after this, which could be months, investors will be hesitant to come back into the market for fear that there’s another shoe to drop," noted Matthew Hougan, chief investment officer at Bitwise Asset Management.
Course of action: "My #1 priority - by far - is doing right by users. To take responsibility, and do what I can," SBF continued. "So, right now, we're spending the week doing everything we can to raise liquidity. I can't make any promises about that. But I'm going to try. And give anything I have to if that will make it work. There are a number of players who we are in talks with, LOIs, term sheets, etc. We'll see how that ends up. Every penny of that - and of the existing collateral - will go straight to users, unless or until we've done right by them." (17 comments)
Texas District Court Judge Mark Pittman has blocked President Biden's student loan forgiveness plan, which would have provided borrowers the ability to wipe away $10,000 apiece from their outstanding balance. Pell Grant recipients, who display exceptional financial need, would've seen an additional $10,000 in debt forgiven. About 26M eligible undergraduate and graduate borrowers have already signed up to the program, which Biden unveiled back in August after months of deliberations inside the administration.
Bigger picture: The ruling is the latest hiccup in a plan that was intended to roll out and move at "full speed ahead." Last month, the states of Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina sued to overturn the program, prompting the 8th U.S. Circuit Court of Appeals to issue a stay on the matter. Despite things being held up, the White House has encouraged borrowers to continue applying for relief as the order did not prevent the review of applications.
"In this country, we are not ruled by an all-powerful executive with a pen and a phone. Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government," wrote Judge Pittman, adding that the program was an "unconstitutional exercise of Congress's legislative power."
Go deeper: The concept of student debt cancellation, even if it would pass through Congress, has divided the country. Some say it would benefit borrowers at a time of high inflation, while others have flagged it as another potential contributor to higher prices, or an unfair measure for those that chose not to go to college because of the cost, don't have loans or already paid them off. The non-partisan Congressional Budget Office in September pegged the cost of the entire cancellation program at $430B, which would eliminate nearly a quarter of America's $1.6T in outstanding student debt. Related stocks include Sallie Mae (NASDAQ:SLM), Navient (NASDAQ:NAVI) and Nelnet (NYSE:NNI). (8 comments)
Elon Musk didn't rule out that possibility at an emergency all-hands meeting on Thursday. "The economic picture ahead is dire," he told staffers, adding that the company had "net negative cash flow of several billion dollars" (though he didn't specify over which time frame). Musk also clarified that his recent sales of Tesla stock (TSLA), worth nearly $4B, were done in order to "save" Twitter.
Other happenings: The latest bombshell came along with additional resignations of key Twitter leadership. Yoel Roth was among the few executives left on the platform's Trust & Safety team, while VP of Sales Robin Wheeler recently stepped up to manage relations with concerned advertisers. Musk also told staff the days of free food and other perks at the office were over, and ended employees' ability to work remotely unless he personally approved it.
The fresh exits came just a day before Twitter was due to submit a key compliance report to the Federal Trade Commission, which is enforcing a settlement inked back in May. An internal letter from a Twitter lawyer visible to all employees warned that Musk was putting the company at risk for billions of dollars in fines for non-compliance. Given the prior departures of the compliance execs, Twitter's legal department is reportedly asking its engineers to "self-certify" compliance with the FTC's dictates and other privacy laws.
Response: "We are tracking recent developments at Twitter with deep concern," said Douglas Farrar, Director of Public Affairs at the Federal Trade Commission. "No CEO or company is above the law, and companies must follow our consent decrees. Our revised consent order gives us new tools to ensure compliance, and we are prepared to use them." (354 comments)
Today's Markets
In Asia, Japan +3%. Hong Kong +7.7%. China +1.7%. India +2%.
In Europe, at midday, London -0.4%. Paris +0.4%. Frankfurt +0.6%.
Futures at 6:30, Dow +0.4%. S&P +0.5%. Nasdaq +0.7%. Crude +3.4% to $89.42. Gold +0.4% to $1760.50. Bitcoin +5.8% to $17,316.
Ten-year Treasury Yield -1 bps to 3.81%
Today's Economic Calendar
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
Companies reporting earnings today »
What else is happening...
Coinbase (COIN) CEO: Why would investors put money into FTX now?
3M (MMM), DuPont (DD) sued by California over toxic 'forever chemicals.'
Blue Apron (APRN) stock plummets over 30% on dilution fears.
Tattooed Chef (TTCF) sinks amid slashed outlook and inflation pressures.
Juul gets a lifeline to avoid bankruptcy, plans to cut 30% of workforce.
Taiwan Semiconductor (TSM) surges as October sales rise 56%.
Videogame sales fell 5% in Q3, with content and mobile declining.
WeWork (WE) to exit 40 underperforming locations in the U.S.