Morning Reads

Morning Reads

Open Interest Changes



Three big Wall Street banks are reporting Q3 earnings today, giving investors a window into how the sector is dealing with elevated interest rates and muted capital markets activity. JPMorgan Chase (JPM) and Wells Fargo (WFC) were the first to report, with both banks notching a quarterly earnings beat. Citigroup (C) is also slated to report its results today. Bank of America (BAC) and Goldman Sachs (GS) will post their earnings on Tuesday, and Morgan Stanley (MS) rounds out the lot on Wednesday.

Market expectations: Morgan Stanley analyst Betsy Graseck noted that investors have been more optimistic about banks since the latest industry conference and that raises the bar for bank earnings, which lenders will likely not clear. "We expect net interest margins to be under pressure for longer, not much expense flex until at least Jan. and weak loan growth," she said. Goldman Sachs' Richard Ramsden said three headwinds will be in focus: the net interest income trajectory in 2024, the impact of the Basel III endgame, and the potential downside from credit and reserve increases.

Net charge-offs are expected to be another weak spot as delinquencies return to higher, and more normal levels, after rates have climbed steeply in the past year. The four biggest U.S. banks are expected to see their net charge-offs - the amount they write down for bad debt - jump to $5.3B in Q3. That's the highest for JPMorgan, Citigroup, Wells Fargo, and BofA, combined, since Q2 2020.

SA commentary: "The common and preferred stocks of too-big-to-fail megabanks are buys, most smaller banks are holds, and banks that have runs or rumors of insolvency are sells," said Seeking Alpha analyst Logan Kane, adding that JPMorgan looks undervalued compared to its long-term prospects. Ian Bezek expects Wells Fargo to fare better than many of its peers on asset quality, while Yiannis Zourmpanos continues to be very bullish on Citigroup considering its strong turnaround progress. (5 comments)

CPI still hot

Retail inflation slowed again in Sept. from the prior month, but came in hotter than expected as rental costs surged, accounting for more than half of the increase. Growth in the Consumer Price Index slowed to 0.4% M/M from a 0.6% increase in Aug. Core CPI, which excludes food and energy, stayed steady at a 0.3% M/M increase. The latest data pushed stock markets lower, while Treasury yields rose. Investing Group Leader David Alton Clark, said the data indicated that rate hikes are "by and large" over, but Boston Federal Reserve President Susan Collins said she wouldn't "take further tightening off the table yet." Note that the Producer Price Index growth had also slowed, but was still stronger than expected. (119 comments)

Last hurdle cleared

Microsoft's (MSFT) revised $69B offer to acquire Activision Blizzard (ATVI) has passed muster with U.K. regulators, clearing the way for the technology sector's biggest-ever acquisition. The U.K.'s Competition and Markets Authority granted consent for the revised deal today, which excludes Activision's cloud streaming rights that will be sold to French firm Ubisoft (OTCPK:UBSFY). The regulator's objections to the mega deal marked the last major global hurdle for the acquisition that has been more than a year and a half in the making. SA analyst DJTF Investments had rated Activision a 'Hold,' given the deal value's limited upside to Activision's shares and uncertainty over the deal's closing date. (11 comments)

Closing loopholes

As chip export controls are being finalized in the U.S., Washington is considering ways to close a loophole that gives Chinese companies access to American AI chips through units abroad. The Biden administration has been cracking down on chip exports to China, with updated rules expected as soon as next month. It is also looking at closing the loophole that allows Chinese parties to access U.S. cloud providers like Amazon Web Services. Nvidia (NVDA) and AMD (AMD) are two of the most notable semiconductor companies that have been impacted by the U.S.'s export controls in recent months, while Dutch chip equipment maker ASML (ASML) has also been in the crosshairs. (2 comments)

Today's Markets

In Asia, Japan -0.6%. Hong Kong -2.3%. China -0.6%. India -0.2%.
In Europe, at midday, London -0.7%. Paris -1%. Frankfurt -1%.
Futures at 6:30, Dow -0.1%. S&P -0.3%. Nasdaq -0.6%. Crude +3.9% to $86.18. Gold +0.9% at $1,900.60. Bitcoin +0.1% to $26,760.
Ten-year Treasury Yield -9 bps to 4.62%.

Today's Economic Calendar

8:30 Import/Export Prices
9:00 Fed's Harker: Economic Outlook
10:00 Consumer Sentiment
1:00 PM Baker Hughes Rig Count

Companies reporting earnings today »

What else is happening...

More than 7M Americans have received updated COVID shots.

Qualcomm (QCOM) plans job cuts in California to slash costs.

Tesla to hike wages for German plant workers amid union dispute.

Cassava (SAVA) falls on probe into Alzheimer's drug data manipulation.

Disney (DIS), Comcast hire banks to arrive at Hulu valuation for sale.

Dollar General (DG) brings back ex-CEO Todd Vasos to take the helm.

China eyes setting up stabilization fund to boost weakening stock market.

California preparing lawsuit to block Kroger (KR)-Albertsons (ACI) deal.

Boeing (BA), Spirit Aerosystems (SPR) expand inspections of 737 Max 8.

GM (GM) EV battery plant could face $270K in fines for safety violations.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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