Morning Reads

Morning Reads

Open Interest Changes



Fiscal health

This week's FOMC announcement on interest rates would typically be the big-name event for investors, but not this time around. While a Fed hike in December is up for debate, no one expects the central bank to raise rates this week, especially given recent economic data, tightening financial conditions, the cautious tone of policymakers and global geopolitical uncertainty. Instead of the FOMC decision, another headline on Wednesday will draw the attention of the market as the U.S. struggles with a big debt problem and climbing yields that continue to make servicing that debt more expensive.

Refunding announcement: To satisfy the federal government's borrowing needs, the U.S. Treasury Department sells many types of bonds that span popular 2-year (US2Y), 10-year (US10Y) and 30-year (US30Y) securities, floating-rate notes, inflation-linked bonds and other types of debt with differing maturities. Every quarter, the Treasury details its menu of debt that it plans on issuing, in what is known as its "quarterly refunding" statement. Investors have recently taken a renewed interest in the announcement, given the volatility in the Treasury market and what it means for other sectors of investment and the broader economy.

Heavy borrowing by the Treasury has been a big factor behind the recent run-up in long-term yields, which last week hit their highest levels since the financial crisis in 2007. Other types of spending and tax-revenue shortfalls have also added to the national debt, which doubled in the fiscal year through September and now stands at nearly $34T. The Fed's most aggressive tightening of monetary policy in decades has prompted further worries over the amount of borrowing, with Fitch stripping the U.S. of its AAA sovereign rating before the last Treasury refunding announcement in August, citing factors like an expected fiscal deterioration and growing debt burden.

Issuance composition: Supply and demand will be in focus during this week's refunding announcement given the recent volatility in the Treasury market. Will longer-term debt sales be ramped up to fund a widening federal deficit, or will there be a greater reliance on short-term bills due to the recent surge in yields? On the demand side, Treasuries remain one of the safest plays on the planet, but the auctions have become increasingly reliant on hedge, pension and mutual funds to scoop up large quantities of bonds, as foreign governments and U.S. banks reduce their purchases (including the Federal Reserve). Take the WSB survey.

Auto mess

After recently ratifying a new three-year labor contract with General Motors (GM) and Ford (F), Canadian labor union Unifor said more than 8,200 workers have gone on strike at Stellantis' (STLA) facilities in Canada as negotiators failed to reach an agreement before Sunday's midnight strike deadline. The walkouts in Canada come close on the heels of Stellantis and the United Auto Workers union in the U.S. reaching a tentative deal to put an end to a strike that began in September. Ford may also see its American labor woes end soon, with local UAW leaders approving its record tentative deal, but GM is still under pressure as the UAW expanded its strike to the firm's Tennessee engine factory, its largest facility in North America.

In the crosshairs

Truist analyst Neal Dingmann has listed three potential oil and gas acquisition targets with "very good" inventory as consolidation continues in the energy sector. His predictions come as ConocoPhillips (COP) is considering a takeover bid for privately-held Permian Basin oil producer CrownRock, while Devon Energy (DVN) is also exploring a similar offer. "You have a host of large independents that potentially would like to get bigger and add more inventory," said Dingmann, highlighting some additional suitors. He also prefers Exxon’s (XOM) deal to buy Pioneer Natural Resources (PXD) over Chevron's (CVX) Hess Corp. (HES) takeover, which he called "kind of odd." (11 comments)

Scary fast

Apple (AAPL) is set to unveil a new version of its Mac computer tonight at its “Scary Fast” event, a nod to Halloween. The segment represents about 10% of Apple’s yearly revenue, and the event will likely see refreshed MacBook Pro laptops and iMac desktops with Apple’s first M3 3-nanometer processors, which are expected to be more powerful than its M2 line. Apple's Macs have been facing increased competition for performance power, in the wake of Qualcomm's (QCOMnew CPU, and Nvidia's (NVDA) Arm (ARM)-based PC chips. Apple will also post Q4 results on Thursday, the first earnings report since the launch of the iPhone 15, which is not faring well commercially. (61 comments)

Today's Markets

In Asia, Japan -1%. Hong Kong flat. China +0.1%. India +0.5%.
In Europe, at midday, London +0.8%. Paris +0.8%. Frankfurt +0.6%.
Futures at 7:00, Dow +0.5%. S&P +0.6%. Nasdaq +0.8%. Crude -1.3% to $84.40. Gold +0.3% to $2,004.60. Bitcoin +1.1% to $34,537.
Ten-year Treasury Yield +4 bps to 4.89%.

Today's Economic Calendar

10:30 Dallas Fed Manufacturing Survey

Companies reporting earnings today »

What else is happening...

Google (GOOGGOOGL) commits $2B to OpenAI rival Anthropic.

HSBC profit more than triples in Q3; $3B stock buyback planned.

Kazakhstan nationalizes ArcelorMittal (MT) unit after fire at mine.

Evergrande (OTC:EGRNQ) gets last chance to avert liquidation.

Citi explores a Disney (DIS) trade-off: ABC and India for Hulu.

Pharma, PBMs spar over rising drug costs amid public scrutiny.

Pfizer (PFE) to shut two North Carolina facilities due to cost cuts.

Boeing (BA) assessing ransomware threat from Lockbit hackers.

Kazakhstan fears weigh on ChevronExxon faces merger skeptics.

Credit card metrics roughly at prepandemic levels - What's ahead?

Correction: Wall Street Breakfast last Friday wrote that "crypto research firms Elliptic and BitOK estimated that Gaza-based terror groups had raised over $130M in crypto since May 2021, including $41M by Hamas and $93M by Palestinian Islamic Jihad." These figures were based on wallets seized by Israel's National Bureau for Counter Terror Financing, but Elliptic noted in a statement that in "no way does this mean that PIJ had 'raised' all of these funds or that they even all belonged to PIJ. It is not known what proportion of the funds received by those wallets are directly attributable to PIJ or other terrorist groups."

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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