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Open Interest Changes



What level will the federal funds target range reach in 2024?

· North of 5% (where it currently stands)
· Around 4% (economy will decelerate)
· Near the 3% level (deflation worries)
· As low as 2% or below (surprise!)

Take the survey here and don't forget to share your thoughts in the WSB comments section.

Need more info? Come back to the survey after reading the top story below.

Rate cuts loom

As markets gear up for major central bank meetings this week, starting with the Federal Reserve on Dec.12-13, all eyes will closely watch for any change in the policymakers' tone to predict when rate cuts will begin and by how much. The European Central Bank, Bank of England, Swiss National Bank and Norges Bank will meet on Thursday.

Market expectations: While the Fed is widely expected to hold its federal funds target range steady at 5.25%-5.5% for the third time, most market participants are betting on rate cuts starting in May. Goldman Sachs expects the Fed to cut rates twice next year, with the first expected in Q3, earlier than its prior outlook of rate cuts starting next December. Bank of America projected that the Fed will start cutting rates in June, and Morgan Stanley sees rate cuts in mid-2024. But Deutsche Bank expects the central bank's dot plot to avoid suggesting cuts in the first half of 2024.

Policy risks: Economists are worried about two major policy risks. One is that the Fed waits too long to ease policy to ensure inflation remains low, meaning higher interest rates would weigh on economic growth, risking a recession. The other risk is that the Fed could cut rates prematurely, while inflation remains above its 2% target. While a stronger-than-expected labor market tempered bets of rate cuts starting in March, the recent disinflationary trend has been encouraging. Retail inflation was unchanged in October, while core PCE - the Fed's preferred inflation gauge - reached this year's lowest level. Markets now await the Consumer Price Inflation report due on Tuesday for disinflation updates.

SA commentary: "The Fed will not want to endorse the market pricing of significant rate cuts until they are confident price pressures are quashed," said ING Economic and Financial Analysis. "The Fed will eventually shift to a more dovish stance, but this may not come until late in Q1 2024." But Investing Group Leader Fear & Greed Trader cautioned, "The good news on interest rates; the short-term trend is down, and the Fed will be cutting rates next year. The BAD news, the longer-term PRIMARY trend is up." (5 comments)

$5.8B buyout

Department store chain Macy's (M) could be taken private, as the company received a $5.8B buyout offer from a private equity group comprised of Arkhouse Management and Brigade Capital, both of whom are shareholders in Macy's. The offer values the retail chain at $21 per share, representing an around 21% premium to its last close, pushing Macy's stock up 19% before the bell on Monday. Arkhouse and Brigade believe Macy's is undervalued and are prepared to raise their offer subject to due diligence. Last month, Investing Group Leader Leo Nelissen remained on the sidelines after Macy's posted its earnings, saying a sustainable consumer recovery was crucial for long-term success. (77 comments)

New base?

Nvidia (NVDA) wants to set up a production base in Vietnam, its CEO Jensen Huang said during a visit to the country, and plans to deepen its partnerships with local tech firms to support AI advancement. Nvidia, which already invested around $250M in Vietnam, will expand its existing AI partnerships with Vietnamese companies FPT, Viettel, and VinGroup. The partnerships were part of the Biden administration deepening ties with Vietnam in September, as the country looks to expand its tech industry. Vietnamese investment minister Nguyen Chi Dung also called on Nvidia to consider establishing a research and development center in the country. (1 comment)

Merger scrapped

Health insurers Cigna (CI) and Humana (HUM) have scrapped plans to merge after being unable to agree on financial terms. Cigna will instead seek out bolt-on acquisitions and conduct a $10B stock buyback. Investors failed to embrace the proposed merger, with Cigna dropping nearly 10% since news on the deal began making rounds. The proposed $60B cash-and-stock deal would've created an entity worth over $140B to better compete against heavyweights CVS Health (CVS) and UnitedHealth (UNH). Experts believed Cigna and Humana would be able to pull off the merger, but Investing Group Leader Daniel Jones said the odds of a deal were quite low, given antitrust concerns. (25 comments)

Today's Markets

In Asia, Japan +1.5%. Hong Kong -0.8%. China +0.7%. India +0.2%.
In Europe, at midday, London -0.6%. Paris +0.2%. Frankfurt flat.
Futures at 7:00, Dow flat. S&P -0.1%. Nasdaq -0.2%. Crude -0.8% to $70.66. Gold -0.4% at $1,994.68. Bitcoin -3.2% to $42,350.
Ten-year Treasury Yield +1 bp to 4.26%.

Today's Economic Calendar

11:30 Results of $50B, 3-Year Note Auction
1:00 PM Results of $37B, 10-Year Note Auction

Companies reporting earnings today »

What else is happening...

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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