Morning Reads

Morning Reads

Open Interest Changes



Investors are bringing out their champagne glasses to celebrate the latest CPI report, which was "clearly a shock to the consensus" as the rate of inflation fell more than expected in October. Stocks soared and Treasury yields tumbled after headline inflation flatlined month-on-month, an impressive feat that has so far excluded the start of a recession. Core inflation numbers were also striking, with the figure climbing by a lower-than-expected 4% Y/Y to mark the lowest reading since September 2021.

SA commentary: "I have been preaching for the past year that the rate of inflation would fall as fast as it rose, and this report supports that assertion," Investing Group Leader Lawrence Fuller, author of The Portfolio Architect, wrote to the applause of many subscribers. "Today's report ends the discussion of rate hikes and should also end the discussion about rates staying higher for longer... It looks like the little guy was one step ahead of Wall Street this time around. The professional money management community has been extraordinarily bearish as of late, which means there is plenty of fuel left for our year-end rally."

That couldn't be seen any clearer than in the latest 13F filing from famed "Big Short" investor Michael Burry. While the quarterly filings don't signal exactly when he exited his Q2 stake, or outline precisely what hedge funds are up to, Burry's Scion Asset Management said it no longer held 2M puts on the SPDR S&P 500 ETF (SPY) and 2M puts on the Invesco QQQ Trust (QQQ), which totaled about $1.6B. The bearish bets follow many forecasts by Burry in recent years that predicted "the mother of all crashes," and rhetoric that referred to the current market environment as the "greatest speculative bubble of all time by two orders of magnitude," and "as I said about 2008, it is like watching a plane crash."

What to watch: The market's celebration saw the Nasdaq (COMP.IND) exit correction territory on Tuesday, with the "Magnificent Seven" adding more than $200B to their market caps. But it wasn't just the elite group of tech stocks. Small-caps, which have lagged their large-cap peers in 2023, also played some major catch-up over the session, with the Russell 2000 (IWM) closing up 5.4% and lifting the index into positive territory for the year. Following the enthusiasm, Lawrence Fuller had one more insight to add when sizing up Fedspeak ahead of the last FOMC meeting of the year. "Powell has to keep the hawkish bent for fear that what is happening today continues... a melt up in stocks and collapse in market rates - that can be inflationary." (2 comments)

Kicking the can?

U.S. House lawmakers have passed a temporary spending bill, in a win for the newly-elected Speaker Mike Johnson. The bill will now go to the Senate for a vote, where it is widely expected to pass. Senate Majority Leader Chuck Schumer lauded the measure "that excludes hard-right partisan cuts and poison pills with a strong bipartisan vote," while hardline Republican Representative Mike Garcia said it wasn't ideal, "but a shutdown is a far worse world to be in." The two-part stopgap bill would fund some government operations through Jan. 19 and the rest through Feb. 2, meaning there could be another shutdown deadline on Groundhog Day. (8 comments)

Back to business

All eyes are on California, where President Biden and his Chinese counterpart Xi Jinping will meet on the sidelines of the APEC summit today to help cool escalating tensions between the countries. "It would be naive to expect this meeting to result in breakthrough developments, but I am optimistic this meeting will steer the two countries in the right direction to manage geopolitical risks better," said Investing Group Leader Dilantha De Silva. Catering to multinationals that might boost the Chinese economy, Xi will also meet with a group of high-profile CEOs to shore up investor confidence. Meetings are expected with Tesla's (TSLA) Elon Musk, Microsoft's (MSFT) Satya Nadella, Exxon Mobil's (XOM) Darren Woods, and Citigroup's (C) Jane Fraser, among other executives. (1 comment)

Wall Street South

Noting that Florida has an environment that encourages growth, Ken Griffin, founder of hedge fund Citadel, believes Miami could eventually replace New York as the world's financial center. Major Wall Street firms have been shifting to the Sun Belt in recent years on account of lower taxes, cheaper real estate and labor, and warmer weather compared to New York. Citadel already moved its global headquarters to Miami from Chicago in 2022, close on the heels of hedge funds owned by Carl Icahn and Paul Singer relocating to Florida from New York. The exodus of big money can also have other big implications, like the billions in tax revenues paid to states. (2 comments)

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Today's Markets

In Asia, Japan +2.5%. Hong Kong +3.9%. China +0.6%. India +1.1%.
In Europe, at midday, London +1.1%. Paris +0.7%. Frankfurt +0.8%.
Futures at 7:00, Dow +0.3%. S&P +0.4%. Nasdaq +0.6%. Crude -0.6% to $77.82. Gold +0.5% to $1,976.90. Bitcoin -0.2% to $36,232.
Ten-year Treasury Yield +2 bps to 4.46%.

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
9:30 Fed's Barr: "Oversight of Prudential Regulators"
10:00 Business Inventories
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
3:30 PM Fed's Barkin: "The Housing Challenge"

Companies reporting earnings today »

What else is happening...

Home Depot (HD) beats even as customers opt for smaller projects.

YouTube will require creators to disclose AI-generated videos.

Amazon (AMZN) to run in-app shopping ads on Snapchat (SNAP).

Warren Buffett's Berkshire (BRK.B) exits GM (GM), Activision bets.

Ray Dalio's Bridgewater boosts stake in 3M, exits Apple (AAPL).

Bill Ackman's Pershing Square ups stake in Alphabet (GOOG).

The best-selling sedan in America has gone all-hybrid.

Boeing (BA) trails Airbus (OTCPK:EADSF) in October jet deliveries.

Pfizer’s (PFE) Paxlovid linked to far higher rate of COVID rebound.

Adobe (ADBE) may face EU antitrust warning on $20B Figma deal.

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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