US FINANCIAL MARKET

Oil Falls 3% as Weekend Jitters Ease; Stocks Rise: Markets Wrap – Bloomberg, 10/30/2023

• Stocks rose around the world, oil fell 3% while Treasuries retreated as Israel’s ground incursion into Gaza appeared less extensive than some investors had feared.
• The S&P 500 traded off session highs, while still halting a three-day slide that drove the gauge to oversold levels. 
• Facebook parent Meta Platforms led gains in the beaten-down megacap space, though Tesla bucked that trend — dropping 3%. 
• Ten-year US yields rose six basis points to 4.90%. The dollar fell against all of its developed-market peers. 
• The yen climbed after a Nikkei report that the Bank of Japan will consider letting 10-year yields exceed 1%.
• Equities are still headed toward their third monthly slide — the longest losing streak since March 2020 — hurt by a surge in bond yields, disappointing earnings from some big techs and geopolitical concerns. 
• Israel’s heightened push into the Gaza Strip had yet to evoke significant, military retaliation from Iran or its proxies, lessening concern that regional crude supplies may be interrupted.
• Blue-chip corporates are lining up to sell US investment-grade debt as companies emerge from earnings blackout periods and before the Federal Reserve meets later this week.
• The Federal Reserve’s policy statement is setting up to be the No. 2 event on Wednesday, with investor focus instead likely to be on the Treasury Department’s new borrowing plan, due hours ahead of the interest-rate decision.
• The so-called quarterly refunding announcement will reveal the extent to which the Treasury will ramp up sales of longer-term debt to fund a widening budget deficit.
• Apple is set to capitalize on a computer market resurgence when the company unveils two new Macs and processors on Monday, during an online event at 5 p.m. California time.
• McDonald’s sales and profits beat expectations in the third quarter thanks to higher prices and movie-inspired ads, but US customer traffic dipped for the first time this year.
• Western Digital will split into two separate, publicly traded companies after talks to merge with Kioxia Holdings fell apart.
• Broadcom and software maker VMware said their $61 billion merger is on track to close before a November deadline, working to reassure investors while China drags out its review of the deal.

McDonald’s Tops Estimates on Higher Prices as US Visits Dip – Bloomberg, 10/30/2023

• McDonald’s sales and profits beat expectations in the third quarter thanks to higher prices and movie-inspired ads, but US customer traffic dipped for the first time this year.
• Comparable sales — which track restaurants open for at least 13 months — rose 8.8% in the period, surpassing the 7.8% average estimate of analysts polled by Bloomberg, according to financial results released on Monday. 
• Comparable sales in international markets, where the company directly owns restaurants, increased 8.3%, just missing the average estimate and decelerating from the prior year. 
• Licensed foreign markets also expanded at a slower clip than the same period in 2022, though faster than analysts expected, as all regions posted strong results.
• In the US, higher prices resulted in bigger check sizes, McDonald’s said. 
• However, Chief Executive Officer Chris Kempczinski said traffic to US locations fell slightly in the third quarter.
• McDonald’s earnings, excluding some items, were $3.19 a share, also beating estimates.
• McDonald’s said restructuring costs hurt earnings by about 2 cents a share, or $26 million, before taxes.

SoFi’s stock pops after earnings as loan volumes surge – Market Watch, 10/30/2023

• SoFi Technologies shares surged in Monday’s premarket action after the financial-technology company posted a large revenue beat for the latest quarter and gave an upbeat outlook.
• Revenue rose to $537 million from $424 million a year before, while analysts were expecting $518 million.
• SoFi also posted earnings before interest, taxes, depreciation and amortization (EBITDA) of $98 million, compared with $44 million on the non-GAAP metric in the year-earlier quarter. The FactSet consensus was for $65 million.
• The company notched a third-quarter net loss of $266.7 million, or 29 cents a share, whereas it posted a loss of $84.4 million, or 9 cents a share, in the year-earlier period. 
• Analysts tracked by FactSet were modeling an 8-cent loss per share.
• The company saw $3.9 billion in personal-loan originations, up 38% from a year before. 
• Home-loan originations were up 64% to $355.7 million, as SoFi “began to benefit from the integration of Wyndham Capital Mortgage with improved fulfillment capacity from our acquisition at the beginning of the second quarter,” according to its release.
• SoFi saw student-loan originations climb to $919.3 million, up 101% from a year prior.

XPO Shares Jump on Strong 3Q Results – Market Watch, 10/30/2023

• Shares of XPO jumped after the company logged third-quarter earnings and revenue that topped analyst forecasts.
• Revenue rose to $1.98 billion from $1.95 billion last year, above analyst projections for $1.93 billion, according to FactSet.
• The transportation company posted adjusted earnings, which exclude one-time items, of 88 cents a share. 
• Analysts polled by FactSet had been expecting 63 cents a share.

Apple Looks to Capitalize on Computer Sales Comeback With New Macs – Bloomberg, 10/30/2023

• Apple is set to capitalize on a computer market resurgence when the company unveils two new Macs and processors on Monday.
• The company will hold an online event at 5 p.m. California time — dubbed “Scary Fast” — where it’s poised to announce a new iMac and updates to its high-end MacBook Pro. 
• Apple also is slated to unveil the next generation of its computer chip, the M3.
• The new models stand to benefit from a broader upswing in the computer business. 
• After a decline this year, industrywide shipments are expected to grow again in 2024 — even if they stay below pandemic highs. 
• Sales of Macs and other computing devices had surged during Covid lockdowns, when consumers spent heavily on home office equipment.
• Mac sales are forecast to climb about 5% in the holiday quarter, with the revenue growing 5.5% in the fiscal year that just started, according to data compiled by Bloomberg.
• Overall PC shipments are expected to climb nearly 4% in 2024, according to IDC. 
• But competition is heating up as well.

GM, UAW Reach Tentative Labor Deal to End Strike – Wall Street Journal, 10/30/2023

• General Motors became the last of the Detroit automakers to reach a new tentative labor deal with the United Auto Workers union Monday to end a strike that has spanned more than six weeks, according to people familiar with the talks.
• This latest accord follows tentative agreements struck last week with Ford Motor and Chrysler-parent Stellantis and is expected to bring the union’s historic walkout that sent more than 45,000 workers to the picket lines at several U.S. factories and dozens of parts distribution centers to a close.
• The UAW plans to announce the tentative agreement Monday, the people said.

Peltz’s Push for Disney Board Seats Boosted by Perlmutter’s Shares – Wall Street Journal, 10/30/2023

• Billionaire and former Marvel executive Isaac “Ike” Perlmutter offered moral and logistical support to his friend Nelson Peltz last year when the activist investor campaigned for big changes at Disney.
• As Peltz prepares a fresh challenge to the company, Perlmutter is proving to be a key financial ally, too.
• Perlmutter said he has entrusted his stake in Disney to Peltz’s Trian Fund Management as it prepares to press the company for multiple board seats. 
• Trian’s holding in the company totals about 33 million shares, including stock that the investment firm controls under an arrangement that gives Peltz’s firm sole voting power over Perlmutter’s shares, according to people familiar with the matter.
• Aided by Perlmutter’s shares, Peltz’s Trian now has nearly four times as many shares to vote than the investment firm had during the first campaign, which means more muscle to press Disney Chief Executive Bob Iger for board seats or other changes. 
• The specter of Peltz’s renewed campaign represents one of several challenges Iger faces as Disney shares trade at their lowest level in nearly a decade.

Broadcom Sees $61 Billion VMWare Deal Closing Despite China Wait – Bloomberg, 10/30/2023

• Broadcom and software maker VMware said their $61 billion merger is on track to close before a November deadline, working to reassure investors while China drags out its review of the deal.
• The companies didn’t say in a joint statement on Monday how close they might be to an approval from Chinese regulators — the last major hurdle to completing the deal. 
• But they said there’s “no legal impediment” to closing under US merger regulations. 
• The agreement between the companies expires on Nov. 26.
• The combination of the US chipmaker and cloud software company, one of the biggest technology mergers ever, could become the latest casualty of an escalating fight between the US and China for tech dominance.
• Broadcom and VMware pointed out in their statement on Monday that the deal has already received legal clearance in other major markets, including the EU, UK, South Korea and Japan.

Ford-UAW Deal Includes 25% Raises, $8 Billion Plant Investments – Bloomberg, 10/30/2023

• Ford Motor’s tentative agreement to end the six-week strike by the United Auto Workers includes $8.1 billion in investments at both internal combustion and electric vehicle plants, as well as record raises.
• In a livestream broadcast Sunday evening, UAW President Shawn Fain called the contract “a huge victory,” and touted its economic improvements, job protections and “pathway” for future EV workers to be able to come under the union’s master agreement.
• “We went to Ford with a goal of not leaving a dime on the table and we accomplished that,” Fain said. 
• Vice President Chuck Browning said that “we have won things we haven’t seen in years.”
• A 25% general raise over the four-year, eight-month contract.
• Immediate pay increase of 11% for top earners. 
• With the end of wage tiers, the lowest-paid workers get an immediate 88% hike.
• Restoration of cost-of-living increases that, when combined with the general wage increase, will lift total pay by more than 30%; top pay will go to $42.60 an hour. Restored COLA will add an estimated $8,800 to pay during the life of the contract.
• $5,000 ratification bonus. $1,500 voucher toward a new vehicle purchase.

Western Digital to Break up, Separating Hard-Drive Business From Flash-Memory Unit – Wall Street Journal, 10/30/2023

• Western Digital plans to break itself up, separating its business making traditional hard drives for computers from its flash-memory business.
• The move will effectively unwind Western Digital’s $19 billion acquisition of SanDisk in 2016, which combined Western Digital’s then-slowing disk drive business with SanDisk’s chip-based flash storage technology.
• Both businesses are now in solid positions and will be able to focus more as separate companies, Western Digital Chief Executive David Goeckeler said.
• The company plans to structure the separation as a spin-off of the flash-memory business.
• Western Digital on Monday also reported results for the fiscal first quarter. 
• Sales dropped 26% from a year ago, weighed down by a nearly 10% drop in flash sales and a 41% drop in disk-drive sales.
• Goeckeler said Western Digital weighed potential deals as it reviewed the business.

US ECONOMY & POLITICS

Biden to Use Emergency Powers to Mitigate AI Risks – Wall Street Journal, 10/30/2023

• The Biden administration plans to invoke emergency federal powers as part of a new executive order aimed at reining in the risks of artificial intelligence, a new technology as powerful as it is potentially disruptive.  
• President Biden will release on Monday an order invoking the Korean War-era Defense Production Act which would compel major AI companies to notify the government when developing any system that poses a “serious risk to national security, national economic security or national public health and safety,” according to fact sheet that White House aides shared over the weekend. 
• The order aims to step into a global regulatory vacuum over a fast-growing technology. 
• It seeks to mitigate risks from privacy to job losses and underscores an effort to address the sometimes slow pace of response to the new technology among those in Congress and other government agencies.
• The president has identified AI regulation as a priority for his administration and held discussions with tech CEOs, civil society leaders and labor unions on how to govern the rapidly-evolving technology without stifling competition.

EUROPE & WORLD

BOJ to tweak policy again to allow 10-year yields to exceed 1% – Nikkei, 10/30/2023

• The Bank of Japan is set to consider a further adjustment to its yield curve control (YCC) framework at Tuesday’s monetary policy meeting, potentially allowing 10-year Japanese government bond yields to rise above 1%, sources close to the matter told Nikkei.
• The long-term interest rate is currently capped at 1%, with the central bank conducting unlimited fixed-rate buying operations to keep yields below that mark. 
• This ceiling was introduced in July to replace the previous cap of 0.5%.
• The BOJ is also likely to more flexibly conduct its JGB purchase operations, the sources said. 
• This, along with a more flexible cap on 10-year yields, is aimed at deterring speculators from targeting the upper limit and sparing the BOJ the need to buy droves of JGBs to keep rates under 1%.
• If the BOJ manages to suppress the rise in long-term rates, more money will flow to the strong dollar, which could risk further yen depreciation. 
• However, were the BOJ to adjust its YCC framework and allow interest rates to rise to a certain degree, it could halt the yen’s fall.
• There are risks to making an adjustment only three months after the last tweak.
•  Long-term rates could rise much more than the BOJ can tolerate, forcing the central bank to buy huge amounts of government bonds to restrict harm on the economy.

Israeli Forces Make Major Advance Toward Gaza City – Wall Street Journal, 10/30/2023

• Israeli tanks and infantry pushed into the outskirts of Gaza City and temporarily blocked one of the main roads connecting the northern part of the Gaza Strip to the south, a major advance that appeared aimed at encircling the enclave’s biggest population center.
• Israeli ground troops entered Gaza late last week, starting a new phase in its war to eradicate Islamist militant group Hamas. 
• The Israeli military has been urging Gaza residents to move south, as the enclave’s north increasingly turns into a battlefield. 
• It has also continued its air bombardment of Gaza and allowed only limited amounts of food, medicine and drinking water to reach the territory’s two million residents.
• Hamas in a statement called the advancement of Israeli armored units a “limited incursion” and said they had targeted two cars carrying civilians before turning back.
• A witness traveling north on Salah-al-Din Road—one of Gaza’s main thoroughfares—said Monday he encountered two Israeli tanks and a bulldozer in an agricultural area southeast of Gaza City called Juhor ad-Dik.
• One of the tanks fired on a taxi that had approached with a white flag on its hood and was trying to turn around, according to the witness and video footage. 
• Residents said the tanks later left the area.
• Maj. Nir Dinar, a spokesman for the Israeli military, said that soldiers have no way of knowing who is a militant or a civilian, and that they all use the same cars.

Meta Pauses Ads for Users Under 18 in Europe as It Rolls Out Subscriptions – Wall Street Journal, 10/30/2023

• Meta Platforms will stop showing ads to European teens as part of a plan announced Monday to launch new subscription-based versions of its social-media products to comply with the continent’s regulations.
• The plan would temporarily suspend showing ads to all users under the age of 18 in the European Union and parts of Europe that follow EU rules.
• Users over 18 will be offered a choice: Agree to let the company use their digital activity to target ads or pay a monthly subscription fee to keep using Meta’s Facebook and Instagram without ads. 
• Signing up on desktop will cost 9.99 euros, equivalent to $10.55, and on mobile devices will cost €12.99 to account for app-store fees from Apple and Alphabet’s Google, the company said. 
• A Meta spokesman said that the company would offer the subscription choice to users in Europe over the coming weeks. 
• The pause on ads for users under 18 starts the week of Nov. 6.
• Both are concessions to new EU laws and stricter interpretations of the bloc’s five-year-old privacy law. 
• One new law that regulates social media and content moderation includes a provision that outlaws showing ads to minors based on online profiling.

Factmonster – TODAY in HISTORY

• The English parliament passed the Act of Supremacy, making King Henry VIII head of the English church. – 1534
• Radio broadcast of The War of the Worlds, starring Orson Welles, caused nationwide panic among listeners. – 1938
• Gen. George C. Marshall won the Nobel Peace Prize for originating the Marshall Plan. – 1953
• Muhammad Ali knocked out George Foreman in the eighth round of a 15-round bout in Kinshasa, Zaire (“rumble in the jungle”) to regain his world heavyweight title. – 1974

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