Morning Reads
- Drought Saps the Panama Canal, Disrupting Global Trade
- A World Desperate for Sugar Sees It Pile Up in Brazilian Ports
- Oil-Merger Mania Threatens Crude’s Liquidity as Hedgers Vanish
- Jobs, Rib-Eyes and Worries: How Exxon’s Giant Oil Discovery Is Transforming Guyana
- BP Becomes Unique Among Oil Majors With an Analyst Sell Rating
- The Economy Is Great. Why Are Americans in Such a Rotten Mood?
- Fed’s ‘Hawkish Pause’ to Keep Option to Hike
- Republican US Senator Presses Fed Officials on Bond-Buying Policies
- World’s Safest Market Becomes a Magnet for Big Investors
- Druckenmiller Says He Has ‘Massive’ Bullish Bets on 2-Year Notes
- Private Equity’s Slump Propels a Firm That’s Ready to Offer Cash
- How Does the World’s Largest Hedge Fund Really Make Its Money?
- Warnings on Weak Demand Are Piling Up This Earnings Season
- Black Men’s Historic Labor Gains Unravel as Fed Fights Inflation
- They Propelled China’s Rise. Now They Have Nothing to Fall Back On
- WeWork Shares Sink After Report It Plans to File for Bankruptcy
- Chipotle’s Labor Costs Are Rising. Customers Will See It in Pricing
- Real Estate Industry Takes Fresh Hit With Verdict on Commissions
- Harris to Announce Steps to Curb Risks of A.I.
- He Left Boeing. Now He’s the Jet Maker’s Most Important Person
- Orsted Books $4 Billion Impairments, Walks Away From Two US Offshore Projects
- Eurozone Economy Shrinks, While Price Pressures Ease
- Shrinking UK Stock Market Is In a ‘Doom Loop,’ Peel Hunt Says
- U.S. Looks to Allay European Fears of a Subsidy War
- China’s Factory Activity Shrinks, Fueling Calls for More Support
- Yield Curve Control Joins the Living Dead
- BOJ Is Handing Back the Japanese Bond Market to Investors
- Credit Strength Is Baffling Fed Watchers Ahead of Rate Decision
- Workers Keep Getting Big Raises. That’s a Problem for the Fed.
- The Fed Can Wait
- Fed’s Reverse Repo Facility Drawdown Looms Large in Balance Sheet Debate
- Banker Bonuses for ECM Shops Looking Abysmal With Light Issuance
- Biden’s ‘Junk Fee’ Crackdown Comes for Retirement Advice
- Glen Point Fraud Verdict Signals White-Knuckle Trades Are Fading
- Carmakers Weather $2.9 Billion UAW Strike Chaos With Cost Cuts
- America’s Offshore Wind Ambitions Are Coming With Bigger Price Tags
- Why Exxon and Chevron’s Deals Leave Investors Cold
- BP Profit Rose on Higher Refining Margins, Strong Oil Trading
- WeWork Reaches Seven-Day Forbearance Agreement With Bondholders
- Jeep Maker Stellantis Says It Lost $3 Billion of Revenue Due to UAW Strike
- Vodafone to Sell Spanish Unit to Zegona Communications for Around $5.3 Billion
- Ravaged Florida Town Becomes a Magnet for Risk-Taking Homebuyers
- Californian Vineyard Founded by Lebanese Migrants Sells for Up to $1 Billion
- Bankman-Fried’s Risky Defense Strategy Faces Another Big Test
Open Interest Changes
PREMIUM
Prepper
While a refunding announcement from the U.S. Treasury will be closely watched by the market this morning, the latest monetary policy stance at the Federal Reserve is also on the radar this afternoon. The FOMC is widely expected to hold its policy rate at 5.25%-5.50% for the second straight meeting, but is also likely to keep the door open for further tightening if needed. The wait-and-see approach has led many investors to put a strong emphasis on incoming economic data, but there won't be any new economic projections at this meeting, putting a bigger spotlight on Fed Chair Jay Powell's policy statement and press conference.
Snapshot: A U.S. economy that's continuing to exert surprising strength combined with geopolitical risks complicates the Federal Reserve's job of bringing down price pressures. Less than two weeks ago, Powell indicated that persistently strong economic growth could lead to resurging inflation and require further tightening, but he's also aware that the rate hikes the central bank has already implemented haven't achieved their full impact yet. In addition, long-term Treasury yields have surged in recent weeks, doing some of the heavy lifting for the Fed.
Some are also questioning whether and how conventional economic models like growth-fueled inflation still apply. "Holding to the simple historical correlations of what growth and labor market conditions mean for inflation in the face of positive supply developments is a recipe for overshooting and causing an unnecessary downturn," said Chicago Fed President and FOMC member Austan Goolsbee. Another reason why the traditionalist perspective on the current underlying economic environment "may miss the mark is the role of central bank credibility in keeping inflation expectations anchored now versus in past periods of high inflation."
SA commentary: "The only problem with the 'data-dependent' approach is that the data does not support the hold," writes SA analyst Damir Tokic. He cites the GDP growth rate for Q3 Q/Q at 4.9%, full employment, an extremely tight labor market, and widespread labor strikes that are inflationary. Tokic also flags the current core CPI inflation rate at 4.1%, which is double the Fed's 2% inflation target, as well as a host of elevated global tensions. "So, this is not a data-dependent approach, this is really a 'wait-and-see' approach or even better a 'wait-and-hope' approach." (34 comments)
Commission collusion
Digital real estate stocks - including Zillow (Z), Opendoor (OPEN) and Redfin (RDFN) - dove soon after a Missouri jury found powerful realtor groups and brokerages guilty of conspiring to inflate commission rates. Defendants were ordered to pay $1.78B in damages, though a final judgment in the case still needs to be issued before the verdict is finalized. The suit also included Re/Max (RMAX) and Anywhere Real Estate (HOUS) as defendants, whose shares fell on the announcement, though both companies have already reached settlements. It's too early to see how things will play out, but the decision could rewrite the entire real estate model in the U.S. and change the way agents are paid. (12 comments)
Xenotransplantation
The second person to ever receive a pig heart transplant, Lawrence Faucette, has died close to six weeks after the procedure was carried out. United Therapeutics (UTHR), through its xenotransplantation unit Revivicor, provided the genetically-modified pig heart, while Eledon Pharmaceuticals' (ELDN) investigational anti-CD40 antibody tegoprubart was used to prevent the body from rejecting the organ. During the first month after the surgery, Faucette had been engaged in physical therapy, but the transplanted heart started showing signs of rejection in recent days. David Bennett - the first patient to receive a pig heart transplant - died last year, two months after the landmark surgery.
WeBankrupt
WeWork (WE) continues to plunge, down nearly 40% in premarket trade, on reports that the company will file for Chapter 11 bankruptcy as soon as next week. It underscores the flexible office space firm's dramatic reversal of fortunes over the past four years, with a market cap of $47B in 2019, and now worth just $185M. WeWork flagged going concern risks back in August and had been renegotiating leases on almost all of its locations. SA analyst Pacifica Yield also previously warned that WeWork would need "huge concessions" from lenders and landlords to avoid bankruptcy. (6 comments)
Today's Markets
In Asia, Japan +2.4%. Hong Kong -0.1%. China +0.1%. India -0.4%.
In Europe, at midday, London -0.1%. Paris flat. Frankfurt +0.1%.
Futures at 7:00, Dow -0.3%. S&P -0.3%. Nasdaq -0.4%. Crude +1.4% to $82.18. Gold -0.2% to $1,991.40. Bitcoin -0.2% to $34,372.
Ten-year Treasury Yield +3 bps to 4.90%.
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Treasury Refunding Announcement
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:00 Job Openings and Labor Turnover Survey
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:30 PM Chairman Press Conference
Companies reporting earnings today »
What else is happening...
Druckenmiller: Yellen made the worst mistake in Treasury history.
Tesla (TSLA) wins Autopilot case in California involving fatal crash.
AMD (AMD) slips as ongoing gaming weakness hinders guidance.
Gene therapy from CRISPR-Vertex is embraced by FDA panel.
BP (BP) boss dismisses takeover speculation, defends Q3 results.
EV push: Toyota (TM) to invest $8B in U.S. battery plant.
Nvidia's (NVDA) valuation drops below $1T amid China worries.
Bayer (OTCPK:BAYZF) ordered to pay $332M in Roundup cancer trial.
AB InBev (BUD) gains as pricing actions offset lower beer volumes.
Caterpillar (CAT) falls amid investor concerns about future growth.
S&P CoreLogic Case-Shiller: Home prices rise more than expected.