Morning Reads

Morning Reads

Open Interest Changes



After choking exports of chipmaking metals gallium and germanium, China is stepping up its efforts to maintain its manufacturing dominance by restricting exports of graphite, a key material used in electric-vehicle batteries. Beijing's move comes just days after Washington unveiled new restrictions on AI chip exports to China.

Dig deeper: Beijing will require special export permits for three grades of graphite starting December 1, the Ministry of Commerce and the General Administration of Customs said. Temporary controls on five less sensitive graphite items used in industries such as steel, metallurgy, and chemicals were dropped. The new curbs are "conducive to ensuring the security and stability of the global supply chain, and conducive to better safeguarding national security and interests," the ministry said. It clarified that it was not targeting any particular country. Top buyers of graphite from China include the U.S., South Korea, Japan, and India.

Bigger picture: The U.S. has been targeting China's access to advanced technologies over national security concerns, with the Biden administration issuing rules in Sept. to regulate U.S. investments in China in semiconductors and microelectronics, quantum information technologies, and AI. Beijing has pushed back by leveraging its dominance over certain materials. To note, China is the world's top graphite producer and exporter. It also refines over 90% of the world's graphite into the anode material used in EV batteries - the largest component by weight in such batteries.

Ivan Lam, senior analyst at Counterpoint Research, does not expect a major impact in the near term, as graphite exports haven't been completely banned. But he said the material's prices will likely increase due to supply and demand imbalances, including Russia - which was once a major graphite supplier. CLSA's Christopher Richter said it would be a "bold" step to cut the world off from graphite, as that would likely bring EVs to a halt everywhere and probably escalate tensions between China, the U.S. and Europe. (2 comments)

Outlook slashed

SolarEdge Technologies (SEDG) plunged 21.2% postmarket on Thursday after slashing its outlook, citing "substantial unexpected cancellations and pushouts of existing backlog from European distributors" due to higher inventory and much slower installation rates. As a result, SolarEdge's Q3 earnings will come in below the low end of its prior guidance, with much lower revenue expected in Q4 amid inventory destocking. The outlook dragged other solar stocks, including Enphase Energy (ENPH) -13.6% and Sunrun (RUN) -6.9%. SA Quant previously flagged the risk of SolarEdge performing badly, while Investing Group Leader JR Research detailed why investors are better off staying on the sidelines. (117 comments)

Net neutrality

The Federal Communications Commission has launched a new pursuit to revise regulation of broadband providers, by advancing a proposed rule that would re-establish "net neutrality." This had been the FCC's approach from early 2015 until 2017, when it was repealed by Trump-era FCC chair Ajit Pai. Now, a Democratic majority at the agency is reversing that approach. Related stocks include Comcast (CMCSA), Charter Communications (CHTR), AT&T (T) and Verizon (VZ). AT&T CEO John Stankey in an earnings call said the firm would participate in the process with the FCC constructively, but warned against taking early-1900s regulation and applying it against the internet. (28 comments)

Shelving phenylephrine

CVS Health (CVS) is pulling over-the-counter cold and cough medicines containing the controversial decongestant phenylephrine after a panel of FDA advisors last month agreed that the drug doesn't work. The move comes as CVS and other OTC drugmakers and retailers face mounting lawsuits related to the drug’s effectiveness. The lawsuits have named companies including CVS, Walgreens Boots (WBA), Kenvue (KVUE), and Walmart (WMT). The FDA has yet to formally order that medicines containing phenylephrine be removed from shelves, though it usually follows the advice of its advisory committees. Nasal sprays containing phenylephrine do not appear to be an issue. (34 comments)

Today's Markets

In Asia, Japan -0.5%. Hong Kong -0.7%. China -0.7%. India -0.4%.
In Europe, at midday, London -0.9%. Paris -1.2%. Frankfurt -1.3%.
Futures at 6:30, Dow -0.3%. S&P -0.3%. Nasdaq -0.3%. Crude +1.2% to $89.40. Gold +0.8% at $1,995.70. Bitcoin +5.3% to $29,916.
Ten-year Treasury Yield -4 bps to 4.95%.

Today's Economic Calendar

9:00 Fed's Harker: Economic Outlook
12:15 PM Fed's Mester's Speech
1:00 PM Baker Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Jerome Powell: Uncertainties complicate Fed's job of reducing inflation.

Toyota (TM) inks deal with Tesla (TSLA) for NACS charging standard.

Crude rises as U.S. forces thwart attacks; purchases for SPR planned.

Longer-term yields power on, US10Y hits 5% for first time in 16 years.

U.S. and Europe still unable to reach steel deal, risking return of tariffs.

Jazz Pharmaceuticals (JAZZ) exploring strategic options, including sale.

Deutsche Bank: U.S. cash outperforms major global fixed income assets.

Moody's: Israel's debt rating on review for downgrade as war escalates.

Seagen (SGEN) ticks higher as EU approves $43B sale to Pfizer (PFE).

Rite Aid investors to get $192.5M as Walgreens (WBA) settles buyout suit.

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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