MARKET WRAPS
Watch For:
Construction Spending for August; ISM Report on Business
Manufacturing PMI for September
Opening Call:
Stocks were looking to start October and fourth quarter trading
on a bearish note, as worries lingered that the higher borrowing
costs needed to crush multi-decade high inflation will damage the
economy and hit corporate profits.
Richard Hunter, head of markets at Interactive Investor, said
that recent comments from Federal Reserve officials had reiterated
they intended to keep interest rates higher for longer in order to
push inflation back to the Fed's 2% target. But the latest data
showed price pressures were stubborn.
"The personal consumption index reading release on Friday
underlined that this milestone [peak inflation] has not yet been
reached, with prices excluding food and energy rising by 0.6% in
August after a flat July. On a yearly basis the core number rose by
4.9%, ahead of the expected 4.7%. as such, the Fed is likely to
keep a firm hand on the hiking tiller for the time being," said
Hunter.
Adding to tension on Monday was concern about the health of the
financial sector in Europe as shares in Credit Suisse plunged to
fresh lows, noted Peter Ganry, head of equity strategy at Saxo
Bank.
"S&P 500 futures pushed below the 3,600 level this morning,
which is obviously a major level to watch and indicates that the
equity market is still facing headwinds. The latest risk sources
adding to the negative sentiment are talks about Credit Suisse and
their financial strength," Ganry said.
There was some potentially calming news from the U.K. however,
where a government U-turn on tax policy, that had so roiled equity
and fixed income markets last week, helped push sovereign bond
yields lower. The benchmark 10-year Treasury dipped 2.8 basis
points to 3.803% as the equivalent duration U.K. bond eased 15
basis points to 3.996%.
Economic updates set for release on Monday include the S&P
U.S. manufacturing PMI report for September, due at 9:45 a.m.
Eastern. The ISM manufacturing index for September and the
construction spending report will be published at 10 a.m.
Forex:
The dollar edged lower against a basket of currencies but its
declines are likely to be short-lived given the prospect of another
strong nonfarm payrolls report on Friday, ING said.
"Our team looks for a solid 200,000 increase in jobs and the
unemployment rate staying low at 3.7% [in September]-- both
pointing to another 75 basis points [interest rate] hike from the
Federal Reserve on November 2," ING said.
Foreign exchange interventions by Asian authorities along with
the Bank of England's bond market intervention are potentially
behind the dollar's correction lower but this move will be limited,
ING added.
---
The British pound climbed early Monday as U.K. Prime Minister
Liz Truss scrapped plans to cut taxes for the country's highest
earners.
The policy was part of a package of tax cuts and spending plans,
which sent U.K. financial markets into meltdown at the end of last
month. The pound hit a record low of $1.0349 against the dollar a
week ago.
After the reversal, confirmed by Chancellor Kwasi Kwarteng
Monday, the pound rose above $1.12, close to where it was trading
before the mini budget on Sept. 23.
Kwarteng said the policy of abolishing the 45% tax rate "has
become a distraction." "We get it, and we have listened," he said
in a statement.
MUFG said the boost to sterling is likely to be limited.
The U-turn is "another small step to help restore investor
confidence in the U.K.'s public finances although it is unlikely to
be sufficient on its own," MUFG said.
The measure is only a relatively small element of the recent
mini-budget--costing GBP2 billion versus the total cost of the
tax-cutting package at GBP45 billion--that sent the pound sliding,
MUFG added.
Energy:
Oil prices rose more than 3% in early European trade ahead of
this week's OPEC+ meeting at which the cartel is expected to debate
a one million barrel a day production cut.
If the group goes ahead with the cut it will be the second in as
many meetings, though a one million barrel a day reduction in
output would be ten times as large as its most recent cut. Members
of the group are split, however.
DNB Markets said the cartel is currently missing its output
targets by 3.5 million barrels a day due to tight spare capacity
and poor infrastructure. A one million barrels a day reduction
would likely translate into only a 400,000 barrels a day decline in
actual output.
With most members of the cartel underproducing "the majority of
the group will feel no pain by supporting a production cut," DNB
said.
Read: OPEC+ to Weigh Production Cut to Bolster Oil Prices
Metals:
Metals edged lower in London as growth jitters lingered and with
analysts still mulling what impact an LME ban on Russian metals
would have on European markets.
Goldman Sachs said a ban would make it harder, but not
impossible, for Western buyers to obtain Russian metals, with
aluminum likely to be the most affected by any restrictions.
Trading volumes were muted, with Chinese markets closed for a
weeklong holiday.
Read: LME Ban on Russian Metal Wouldn't Halt Imports
TODAY'S TOP HEADLINES
Credit Suisse Seeks to Calm Market Jitters
Credit Suisse Group AG tried to assuage fears about its health
in a memo to employees and in a round of phone calls to investors
and clients over the weekend, according to people familiar with the
matter.
Credit Suisse shares tumbled 9% early Monday and are down nearly
30% over the past month. Spreads on its credit-default swaps, a
type of insurance against default, rose to their highest level of
the year on Friday. The deteriorated market condition indicates
that Credit Suisse could struggle to raise new shares to pay for a
planned restructuring and that its funding costs could rise
sharply.
ConEd Agrees to Sell Clean Energy Business for $6.8 Billion to
RWE
Consolidated Edison Inc. has agreed to sell its renewable energy
business to German energy company RWE AG for $6.8 billion, the
companies said Saturday.
The deal nearly doubles RWE's renewable energy portfolio in the
U.S. and will make it the second-largest solar operator in the
country, the company said in a statement. ConEd's portfolio
includes more than 10 gigawatts of renewable projects in operation
or under development.
Nike's Inventory Woes Stretch to China as Covid Recovery Remains
a Challenge for Brands
Nike Inc.'s quarterly results highlight how some U.S. brands
have too much inventory at home and in markets like China, where
the companies have placed big financial bets.The sneaker giant on
Thursday said revenue from China in the August quarter fell 16% to
$1.65 billion, citing Covid-19 lockdowns in different cities
hurting store traffic.
The announcement came as the company posted weaker quarterly
profit and soaring inventory levels, two developments that helped
send its shares down about 13% Friday.
Tesla Deliveries Bounce Back to Record, Though Dented by
Distribution Delays
Tesla Inc. vehicle deliveries rebounded to a record in the most
recent quarter, though the figure was short of Wall Street's
forecasts and leaves the company requiring a further increase in
the final three months of 2022 to meet annual growth
objectives.
Tesla on Sunday said it had delivered 343,830 vehicles to
customers in the three-month period ended in September, up from
about 255,000 in the prior quarter that was dented by a temporary
shutdown of its factory in China.
Disney Reaches Deal to Restore Its Channels on Dish Network
TV channels owned by Walt Disney Co. are back on Dish Network
Corp.'s satellite broadcasting and streaming platforms after the
two companies reached a tentative agreement on a new contract.
The accord ends a weekend blackout that saw millions of Dish
customers lose access to several popular Disney networks including
ESPN and ABC. Dish has 10 million subscribers nationwide although
the company declined to say how many were affected by the
blackout.
Defense Contractor L3Harris Near Deal to Buy Part of Viasat's
Government-Systems Unit
Defense contractor L3Harris Technologies Inc. is near a deal to
buy a military-communications business from satellite specialist
Viasat Inc., according to people familiar with the matter.
L3Harris would pay nearly $2 billion in a deal set to be
unveiled Monday, the people said.
Walgreens Turns to Prescription-Filling Robots to Free Up
Pharmacists
Walgreens Boots Alliance Inc. is turning to robots to ease
workloads at drugstores as it grapples with a nationwide shortage
of pharmacists and pharmacist technicians.
Producer Bets Streamers Want the Next 'Judge Judy,' Not 'Game of
Thrones'
When "Judge Judy" Sheindlin's quarter-century run on broadcast
TV came to an end last year, she looked for a second act in the
streaming-video world.
Enter Scott Koondel, a former CBS executive who now runs the
production and distribution firm Sox Entertainment. Mr. Koondel
negotiated a two-year deal on behalf of Ms. Sheindlin with
Amazon.com Inc.'s ad-supported streaming platform Freevee.
FTC Probes Market Power of One of Country's Biggest Anesthesia
Providers
WASHINGTON-The Federal Trade Commission is investigating one of
the country's largest anesthesiology providers, U.S. Anesthesia
Partners, over whether it has amassed too much power in some
regional markets through acquisitions, according to people familiar
with the matter.
USAP has 4,500 anesthesia providers in nine states, including
Texas, Colorado and Florida. The company, founded in 2012 by
private-equity firm Welsh, Carson, Anderson & Stowe, has grown
by acquiring smaller anesthesiology groups and rolling them up into
a consolidated entity that manages hospital contracts, billing,
insurance agreements and other functions.
Dish, Sling Subscribers Lose Access to Disney Networks in
Contract Dispute
Subscribers to Dish Network Corp.'s satellite and streaming
services no longer have access to channels owned by Walt Disney
Co., including ABC and ESPN, amid a contract dispute between the
two companies.
That means college football games on ESPN on Saturday as well as
the NFL's "Monday Night Football" and other big sporting events
will be unavailable to those subscribers if a resolution isn't
reached between the two companies.
Why Lyft Is Eating Uber's Dust
The investment case for Lyft was once a question of
perspective.
Compared with Uber Technologies, and its global reach and
businesses other than rideshare, the purported benefits of a more
localized, focused company certainly made sense. But, as the dust
settles on the pandemic, Lyft is emerging a little dusted itself.
Its distinctions are now looking more like reasons to sell.
Fast Food Chains Raise Millions to Oppose California Wage
Law
McDonald's Corp., Starbucks Corp., Chipotle Mexican Grill Inc.
and other big restaurant chains are joining to spend millions of
dollars to try to overturn a new California law that could set the
state's minimum wage for the fast food industry as high as $22 an
hour next year.
The "Save Local Restaurants" coalition said Friday it has raised
around $12.7 million to fight the law, known as the FAST Recovery
Act. Corporate brands have contributed $9.9 million and individual
franchisees have given $2 million, including owners of KFC and
McDonald's restaurants. Trade associations account for the rest,
the coalition said.
U.K. Government Abandons Plan to Cut Rate of Income Tax for Top
Earners
LONDON-The U.K. government Monday said it won't proceed with the
removal of a 45% top rate of income tax, scrapping a key element of
a plan announced late last month that triggered turmoil in the
country's financial markets and an intervention by the Bank of
England.
The decision to retain the tax rate on high incomes was
announced during the ruling Conservative Party's annual conference,
where a number of lawmakers had expressed their opposition to the
move. But the government was defending the measure as recently as
Sunday.
OPEC+ to Weigh Production Cut to Bolster Oil Prices
OPEC+ is set to consider Wednesday its most drastic reduction of
production since the pandemic in order to help prop up falling oil
prices, a move that could put pressure on global economic
growth.
The Organization of the Petroleum Exporting Countries and
Moscow-led allies, collectively known as OPEC+, is considering a
cut of more than 1 million barrels a day, delegates in the group
said.
Battered Investors Now Find Thrills in T-Bills
James DiCio spent much of the last eight years riding
cryptocurrencies' double-digit gains and losses. Lately, the
24-year-old has found a new hot investment: short-term government
debt.
Weary of big swings in digital currencies, the pilot from
Bohemia, N.Y., sold most of his crypto holdings last year, shifting
his money from one of the most volatile investments to one of the
safest. Now about 20% of his portfolio is in four-week to 13-week
Treasury bills, these days yielding as much as 3.3%, the most since
he was 9.
Central Banks' Higher Rates, Bond Sales Clash With Government
Needs
FRANKFURT-Central banks and governments are on a collision
course.
For 15 years, central bankers around the world worked hand in
glove with elected leaders to bolster economic growth and
inflation.
Inflation Keeps the U.S. From Stepping In to Slow Dollar's Rapid
Rise
WASHINGTON-U.S. policy makers aren't likely to take action to
slow the dollar's rapid rise despite rising risks of global
financial turmoil, analysts say, largely because a strong greenback
helps fight domestic inflation.
The U.S. dollar has soared in value as the Federal Reserve
raises interest rates to fight the highest U.S. inflation in
decades and investors move money into dollar-denominated assets.
The WSJ Dollar Index, which measures the dollar against a basket of
other currencies, is up roughly 16% so far this year.
Cargo Shipowners Cancel Sailings as Global Trade Flips From
Backlogs to Empty Containers
Ocean carriers are canceling dozens of sailings on the world's
busiest routes during what is normally their peak season, the
latest sign of the economic whiplash hitting companies as inflation
weighs on global trade and consumer spending.
The October cancellations are a sharp reversal from just a few
months ago, when scarce shipping space pushed freight rates higher
and carriers' profits to record levels. Last October, companies
like Walmart Inc. and Home Depot Inc. were chartering their own
ships to get around bottlenecks at ports to meet a surge in demand
for imports.
After Punishing Year for Stocks, Investors Aren't Betting on
Post-Midterm Rally
U.S. stocks have a spotless eight-decade record of rising after
midterm elections, but investors and strategists are skeptical over
whether November races will spark a rebound in this year's bruised
markets.
The S&P 500 has moved higher in the one-year period
following every midterm election since 1942, according to Dow Jones
Market Data. The benchmark on average has gained nearly 15% in
post-midterm years since World War II.
China Stocks Near a Bottom, But Recovery Path Unclear -- Talking
Markets
After months of roller coaster trading, Chinese stocks have
dropped back to their lowest levels of the year. A path to full
recovery remains unclear, but stocks with exposure to government
stimulus efforts or defensive earnings could offer opportunities,
analysts say.
The Shanghai Composite and CSI 300 indexes fell 11% and 15%,
respectively, in the third quarter, leaving both benchmarks at
their lowest levels in about five months. Hong Kong's Hang Seng
Index lost 21%.
Crypto Volatility Creates Opportunity for Wall Street
Traders
Wall Street is preparing for the next round of crypto volatility
with tried and true tactics, according to brokers and analysts.
Leverage is building again among crypto investors. The market
for bitcoin and other digital assets has swung wildly in 2022,
pushing prominent crypto firms into bankruptcy. It has also made
for the kind of conditions in which savvy, deep-pocketed traders
can thrive.
Supermarket Discounts Are Harder to Find as Food Prices Rise
In U.S. supermarkets, toilet paper and noodles are back in
stock, but one prepandemic staple has yet to fully return:
discounts.
With food inflation running at the highest rate in more than 40
years, American shoppers are finding less relief from deals like
"buy one, get one free" promotions, or 99-cent two-liter bottles of
soda, according to supermarket executives and analysts.
Britain's Financial Disaster Is a Warning to the World
A toxic mix of politics, inflation and higher interest rates is
threatening the financial system in the U.K., sending a shock wave
through global markets and providing a warning to governments
everywhere of the dangers of the new economic era we are
entering.
A surprise tax cut by the new British government just over a
week ago sparked investor concern about the country's fiscal
credibility and crashed both the pound and the market for U.K.
government bonds, known as gilts.
House Republicans Ask GAO to Probe Foreign Ownership of U.S.
Farmland
WASHINGTON-The top Republicans on the House Agriculture and
Oversight committees have asked the Government Accountability
Office to investigate foreign investment in U.S. farmland,
questioning whether Chinese acquisitions in particular could pose a
national-security threat.
In a letter released Monday, Reps. Glenn Thompson (R., Pa.) and
James Comer (R., Ky.), as well as more than 100 other House
Republicans, asked GAO to conduct a study examining foreign
countries' acquisition of U.S. farmland and its impact on national
security, trade and food security.
Probe Into Nord Stream Pipeline Damage Faces Hurdles at Sea,
Ashore
When Bjorn Lund's team at the Swedish National Seismic Network
first recorded tremors in the Baltic Sea, it didn't initially
notice anything unusual.
The area, off the coasts of Denmark and Sweden, is used for
naval exercises by both countries. The institute, part of Uppsala
University, regularly records the impact of explosive blasts
there.
Ukraine Gains Full Control of Lyman, Days After Putin Claimed
Russia Rules There
KYIV, Ukraine-Ukrainian President Volodymyr Zelensky said the
eastern city of Lyman had been cleared of Russian forces and that
Ukrainian flags were flying again, scoring a symbolic military and
political victory against Moscow on the very territory President
Vladimir Putin said last week Russia would annex.
Russia's Defense Ministry said it was withdrawing troops from
the city following days of advances by Ukrainian forces to surround
them, but Moscow kept several thousand troops there, most likely
encircled until fighting ended.
Ian's Hardest-Hit Areas Rev Up Recovery Efforts
PINE ISLAND, Fla.-Millions of people across the southeast U.S.
are tallying their losses and assessing the damage left by former
Hurricane Ian, a devastating storm that claimed dozens of
lives.
The number of confirmed storm-related deaths in Florida stood at
58, a number the state released late Sunday. The storm also played
a role in the deaths of four people in North Carolina and two in
Cuba.
Lawmakers Go Home to Fight for Control of the House
WASHINGTON-House lawmakers headed back to their districts ready
to campaign in earnest for the next month, with Democrats seeking
to protect their fragile majority and Republicans eager to retake
control of a chamber they lost four years ago.
Democrats currently hold 220 seats and Republicans have 212,
with three vacancies, meaning Republicans need a net gain of a
handful of seats to flip the House in their favor. Nonpartisan
election analysts see Republicans likely to win the majority, even
as Democrats' poll numbers have improved and some candidates have
posted stronger-than-expected results in a handful of special
elections.
Supreme Court Term Opens With New Justice and Weighty Cases
WASHINGTON-The Supreme Court opens its new term Monday with a
new member, Justice Ketanji Brown Jackson, and a docket that could
reshape features of American society ranging from college
admissions to political redistricting.
Monday's first case, Sackett v. Environmental Protection Agency,
could offer an early sign of whether the court's 6-3 conservative
majority will continue the refashioning of federal law they pursued
last term, with opinions that eliminated the constitutional right
to an abortion and expanded religion's place in public education.
The justices will be hearing arguments on whether to curb the
federal government's power to fight water pollution, following last
term's decision limiting the agency's authority to combat
greenhouse-gas emissions.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
None scheduled
Economic Indicators (ET):
0930 Sep Manufacturing PMI
Quebec provincial elections in Canada
Expected Major Events for Monday
00:30/JPN: Sep Japan Manufacturing PMI
05:00/JPN: Sep Auto sales
06:00/RUS: Sep Russian Manufacturing PMI
07:45/ITA: Sep Italy Manufacturing PMI
07:50/FRA: Sep France Manufacturing PMI
07:55/GER: Sep Germany Manufacturing PMI
08:30/UK: Sep S&P Global / CIPS UK Manufacturing PMI
13:30/CAN: Sep Canada Manufacturing PMI
13:45/US: Sep US Manufacturing PMI
14:00/US: Sep ISM Report On Business Manufacturing PMI
14:00/US: Aug Construction Spending - Construction Put in
Place
15:00/US: Sep Global Manufacturing PMI
20:00/US: Sep Domestic Auto Industry Sales
23:30/JPN: Sep CPI (Tokyo), CPI ex-Food (Tokyo)
23:50/JPN: Sep Monetary Base
All times in GMT. Powered by Onclusive and Dow Jones.
Expected Earnings for Monday
Trisura Group Ltd (TSU.T) is expected to report $0.38 for
3Q.
Vinco Ventures Inc (BBIG) is expected to report for 2Q.
Powered by Onclusive and Dow Jones.
ANALYST RATINGS ACTIONS
Bed Bath & Beyond Raised to Hold From Sell by Odeon
Capital
Cboe Global Markets Raised to Neutral From Sell by Goldman
Sachs
Century Aluminum Cut to Underperform From Peer Perform by Wolfe
Research
Charles River Labs Raised to Buy From Hold by Jefferies
JB Hunt Cut to Sector Weight From Overweight by Keybanc
Micron Technology Raised to Buy From Hold by Summit Insights
Group
NOV Raised to Buy From Neutral by B of A Securities
Rithm Capital Raised to Neutral From Underweight by Piper
Sandler
Schneider National Cut to Sector Weight From Overweight by
Keybanc
Solid Biosciences Raised to Neutral From Underweight by JP
Morgan
Voya Financial Raised to Overweight From Neutral by Piper
Sandler
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
October 03, 2022 05:29 ET (09:29 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.