MARKET WRAPS
Watch For:
Factory Orders for August
Opening Call:
Stock futures rose more than 1% on Tuesday and the dollar and
bond yields fell on hopes that central banks may get less
aggressive on rate-hiking plans.
The Federal Reserve, alongside most of its developed-economy
peers, in the past several months has been hiking interest rates
aggressively to combat inflation running at multi-decade highs, and
the consequent surge in bond yields has triggered a bear market
across equity benchmarks.
Now some investors are hoping the peak of this monetary
tightening cycle may be in sight.
"It seems like traders have brushed away concerns about the Fed
increasing the interest rate aggressively and how that will cut
into the economic growth of the [U.S.] economy," said Avatrade.
"I believe that this is an important sign that despite the Fed
officials' strongly hawkish rhetoric, many investors no longer
believe the Fed could continue tightening at the current speed.
That's a good ingredient for a global market rebound," Swissquote
Bank said.
Overseas indexes rallied. Japan's Nikkei 225 jumped 3% while the
pan-continental Stoxx Europe 600 rose 2.1%.
Stocks to Watch:
Cathie Wood's ARK funds said Monday it had snapped up Tesla
stock. It comes after the EV maker's shares tumbled following a
deliveries miss in the third quarter.
Wood's ARK Innovation exchange-traded fund purchased 108,380
Tesla shares, while the ARK Next Generation Internet ETF bought
23,833 shares, according to a trade notification.
It's the ARK Invest CEO's first purchase of Tesla stock since
mid-June, according to data compiled by Bloomberg.
Read more here.
Forex:
The dollar extended its recent correction lower as Treasury
yields declined due to growing expectations that the end may be in
sight for U.S. rate increases.
"The pullback for U.S. yields and dollar appears to reflect in
part that market participants have become more comfortable that the
Federal Reserve is moving closer to the end of their rate hike
cycle," MUFG Bank said.
Market expectations for the Fed's peak rate in 2023 have fallen
to around 4.39% from 4.75%, MUFG said.
---
Sterling extended its advance after the U.K. government reversed
plans to scrap the top rate of income tax, but ING said the
currency remains vulnerable due to a lack of political credibility
and a still-elevated risk of a rating downgrade.
"The pound continues to face very significant downside risks as
the large twin deficit, low market confidence in the new government
and a grim outlook for Europe heading into winter all point to the
unsustainability of 1.10+ levels in GBP/USD," ING said.
Bonds:
The 10-year Treasury yield has probably peaked for now, based on
technical charts, UOB Global Economics & Markets Research
said.
The yield's recent high, together with its sharp drop, led to a
bearish "outside reversal" bar on the charts. On Monday, the yield
broke below support on 2-month-old rising trendline, while the
daily moving average convergence divergence indicator crossed into
negative territory, UOB said.
The yield has ample room to extend its retreat and a downside
break of the 21-day exponential moving average, which is at 3.557%,
and the June high of 3.500% wouldn't be surprising, UOB added.
---
Citi said that following the recent sell-off, 10-year gilts
offer a 96-basis-point pickup over Treasurys for U.S. investors
when FX-hedged for three months, adding that this is the largest
pickup in at least seven years and the best return for U.S.
investors within major developed markets except for eurozone
government bonds.
The yield pickup in the 30-year maturity segment is around
70bps, still relatively attractive, Citi said . However, for
investors over a one-year horizon, the FX-hedging cost associated
with gilts becomes highly punitive for dollar-denominated
investors.
Energy:
Oil prices extended their modest gains in London, as investors
awaited Wednesday's OPEC meeting and likely output cut.
"Emboldened by the thought of a convincing OPEC backstop, a
soggy dollar and a softer rate profile helping growth recover, oil
prices continued to march higher...ahead of tomorrow's anticipated
OPEC production cut," SPI Asset Management said.
Metals:
Base metals pushed higher in early European trading on improving
macroeconomic sentiment across risk assets.
"The macro mood feels better this morning and a few market
indicators are now flashing green," Peak Trading Research said.
Employment data on Friday will further help determine how risk
assets move, Peak added.
Other Comment:
UBS said commodity demand could slow over the coming six months
as consumers in developed markets are squeezed by high energy costs
and rising rates while in China, pandemic-related restrictions are
likely to stifle growth and the property market should remain
weak.
The outlook for commodity supply is more mixed, it said, and
tipped rising production of copper, iron ore and platinum group
metals but expected aluminum, zinc, gas and coal markets to
continue facing disruptions.
For investors, thermal coal and gas should be top picks because
supply disruptions are likely to support prices for two-to-three
years, UBS said.
"We also remain constructive on lithium."
TODAY'S TOP HEADLINES
Samsung Kicks Advanced-Chipmaking Race Into High Gear With Road
Map
Samsung Electronics Co. unveiled targets for making its most
advanced chips, detailing for the first time how its production
road map would compare with that of Taiwan Semiconductor
Manufacturing Co. in their closely watched technology race.
On Monday, Samsung's contract chipmaking unit said it would
start manufacturing chips on the 2-nanometer production process in
2025 and the 1.4-nanometer production process in 2027. That
advances from its current 3-nanometer chip production that began in
June and which the company called an industry first.
Cathie Wood's ARK Snaps Up Tesla After Stock Plunges on
Deliveries Miss
Cathie Wood's ARK funds said Monday it had snapped up Tesla
stock. It comes after the EV maker's shares tumbled following a
deliveries miss in the third quarter.
Wood's ARK Innovation exchange-traded fund (ticker: ARKK)
purchased 108,380 Tesla shares, while the ARK Next Generation
Internet ETF (ARKW) bought 23,833 shares, according to a trade
notification.
Poshmark to Sell Itself for Less Than Half Its IPO Price to
Korea's Naver
Poshmark Inc. has agreed to sell itself in a deal that values
the social shopping marketplace at less than half the price where
it went public in early 2021.
South Korean internet giant Naver Corp. is paying $17.90 a share
in cash for Poshmark, the companies said. Poshmark priced its
initial public offering at $42 a share in January 2021 and the
shares more than doubled on their first day. The stock has slumped
since and closed Monday at $15.57.
Bed Bath & Beyond Creditors Organize Ahead of Bond Talks
Bed Bath & Beyond Inc.'s bondholders are organizing, looking
to protect their investments in the struggling retailer as it looks
for ways to ease its debt during a slump in sales, according to
people with knowledge of the matter.
Financing adviser Perella Weinberg Partners is working with
holders of Bed Bath & Beyond's unsecured notes due in 2024
ahead of debt talks expected to be held with the company, the
people said.
Trump Files Defamation Lawsuit Against CNN, Seeking $475
Million
Former President Donald Trump filed a defamation lawsuit Monday
against CNN, accusing the network of engaging in a smear campaign
against him in the lead-up to the 2024 presidential race.
Mr. Trump's suit, filed in a federal court in southern Florida,
alleged CNN has sought to use its influence with viewers to spread
false claims about him for the purpose of defeating him
politically. He accused CNN of associating him with Adolf Hitler
and portraying him as a Russian lackey and a racist. The network,
he alleged, has been escalating these efforts recently in the
expectation that he may run for president again in 2024.
U.S. Seeks to Further Restrict Cutting-Edge Chip Exports to
China
The Biden administration is preparing new export controls on
semiconductors and the machines to make them, the latest push in
its effort to deny China the ability to make the fastest, most
cutting-edge circuitry possible, according to people familiar with
the situation.
The administration in recent weeks has already placed new
restrictions on some U.S. exports of chips used for
artificial-intelligence calculations and manufacturing equipment
used to make some of the most powerful number-crunching chips.
RBA Slows Pace of Rate Increases as Household Budgets
Tighten
SYDNEY-The Reserve Bank of Australia slowed the pace of recent
interest-rate increases at a policy meeting Tuesday, citing a
deterioration in the global economic outlook and growing concern
about tightening household budgets.
The RBA raised the official cash rate by 25 basis points to
2.60%, surprising most economists who expected a further
50-basis-point increase.
Glynn's Take: RBA Slows Record Pace of Rate Increases as Pain
Grows
SYDNEY-Having delivered a shock and awe campaign of massive
interest rate hikes since May, the Reserve Bank of Australia chose
to slow the pace of policy tightening at its board meeting Tuesday,
in part to ease growing pressure on the country's highly indebted
housing sector.
Interest rates have risen at a record speed since May, and given
the backdrop of a rapid deterioration in the global economic
outlook, the case to go slower was made crystal clear.
Crypto Could Threaten Financial System, Federal Risk Panel
Warns
WASHINGTON-Risks tied to cryptocurrencies could grow rapidly and
eventually threaten the broader financial system, a panel of senior
U.S. officials warned Monday, calling for tougher oversight of
digital assets.
The Financial Stability Oversight Council, chaired by Treasury
Secretary Janet Yellen, said the crypto industry remains small
compared with the overall financial system, but that could change
quickly and exacerbate potential systemic risks.
North Korea Launches Missile Over Japan
SEOUL-North Korea flew a missile over Japan for the first time
since 2017, Seoul and Tokyo officials said, a significant
escalation that led to Japan issuing warnings for citizens to take
shelter.
A single intermediate-range missile was launched at 7:23 a.m.
local time from the North's Chagang Province, bordering China,
South Korea's military said. The missile flew about 2,800 miles,
hitting an altitude of roughly 603 miles, according to Japanese and
South Korean assessments.
Ukraine Pushes South Into Strategic Kherson Region
KHARKIV, Ukraine-Ukrainian forces broke through Russian lines
and made new advances in the southern Kherson region, while
expanding their rapid offensive in the eastern part of the country,
retaking areas that Moscow now claims to be part of Russia.
Pushing some 20 miles south in Kherson, the new Ukrainian
advance secured a corner of the only Russian foothold on the
western bank of the Dnipro River, which bisects the country.
Ukraine has in recent months destroyed all the bridges to that
enclave, which includes the regional capital, Kherson, making it
increasingly difficult for the large Russian military contingent
there to be resupplied with fuel, ammunition and food.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
None scheduled
Economic Indicators:
None scheduled
Expected Major Events for Tuesday
10:00/FRA: Aug OECD CPI
12:55/US: 10/1 Johnson Redbook Retail Sales Index
14:00/US: Aug Manufacturers' Shipments, Inventories & Orders
(M3)
14:00/US: Aug Job Openings & Labor Turnover Survey
20:30/US: 09/30 API Weekly Statistical Bulletin
All times in GMT. Powered by Onclusive and Dow Jones.
Expected Earnings for Tuesday
Acuity Brands (AYI) is expected to report $3.09 for 4Q.
Allied Healthcare (AHPI) is expected to report for 4Q.
FTI Consulting (FCN) is expected to report $2.00 for 4Q.
Ford Motor Company (F) is expected to report.
NovaGold Resources Inc (NG,NG.T) is expected to report $-0.02
for 3Q.
SMART Global Holdings Inc (SGH) is expected to report $0.25 for
4Q.
Saratoga Investment Corp (SAR) is expected to report $0.48 for
2Q.
Schmitt Industries (SMIT) is expected to report for 4Q.
Trilogy Metals Inc (TMQ,TMQ.T) is expected to report for 3Q.
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ANALYST RATINGS ACTIONS
Box Raised to Overweight From Equal-Weight by Morgan Stanley
BRP Group Cut to Neutral From Overweight by JP Morgan
BTRS Holdings Cut to Neutral From Buy by Citigroup
CarMax Cut to Equal-Weight From Overweight by Stephens &
Co.
CF Industries Holdings, Inc. Raised to Outperform From Sector
Perform by RBC Capital
CF Industries Raised to Outperform From Sector Perform by RBC
Capital
Citigroup Cut to Neutral From Buy by Goldman Sachs
DocuSign Cut to Underweight From Equal-Weight by Morgan
Stanley
Enfusion Cut to Neutral From Buy by B of A Securities
Livent Cut to Underperform From Neutral by B of A Securities
Mosaic Cut to Sector Perform From Outperform by RBC Capital
National CineMedia Cut to Hold From Buy by Benchmark
Nike Cut to Hold From Buy by Argus Research
Ryan Specialty Group Cut to Underweight From Neutral by JP
Morgan
Sensei Biotherapeutics Raised to Outperform From Perform by
Oppenheimer
Shift Technologies Cut to Hold From Buy by Truist Securities
SW Energy Raised to Buy From Hold by Truist Securities
The Mosaic Company Cut to Sector Perform From Outperform by RBC
Capital
Thor Industries Cut to Hold From Buy by Argus Research
Wells Fargo Raised to Buy From Neutral by Goldman Sachs
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
October 04, 2022 05:42 ET (09:42 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.