US FINANCIAL MARKET

S&P 500 Up 2% as Yields Tumble After CPI Surprise: Markets Wrap – Bloomberg, 11/14/2023

• Stocks climbed while bond yields sank as an unexpected inflation slowdown bolstered bets the Federal Reserve’s aggressive hiking cycle is now over — and its next move will be a cut in mid-2024.
• More than 95% of the S&P 500 companies rose, with the gauge up 2%.
• The Nasdaq 100 rose 2.2%. The Dow Jones Industrial Average rose 1.5%.
• Tesla led gains in megacaps and Nvidia extended its rally into a 10th straight session.
• Financial shares also saw a big advance, especially regional banks — which climbed 6%.
• The Russell 2000 index of small caps jumped over 4% — the most in a year.
• Treasury two-year yields plunged about 20 basis points to 4.85%.
• The yield on 10-year Treasuries declined 18 basis points to 4.46%.
• The dollar fell 1%.
• Fed swaps priced in 50 basis points of easing in July.
• The so-called core consumer price index, which excludes food and energy costs, increased 0.2% from September, according to government figures.
• Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI.
• That measure was little changed, restrained by cheaper gasoline.
• Traders will also keep an eye on another slew of Fed speakers throughout the day to get their thoughts on the latest data and how that would impact the central bank’s next steps, especially when it comes to the outlook for rate cuts.
• Fed Bank of Richmond President Thomas Barkin said he’s not convinced inflation is on a clear path toward the central bank’s 2% target despite “real progress” curbing price pressures in recent months.
• Elsewhere, Bank of England Chief Economist Huw Pill said interest rates in the UK will need to remain in “restrictive” territory to choke off the risk that inflation persists.
• Home Depot narrowed its guidance for a decline in this year’s profit and revenue as home-improvement demand wanes.
• Glencore will buy a majority stake in Teck Resources Ltd.’s coal business, ending a months-long saga that transfixed the mining industry and setting the stage for the commodity giant to exit the coal business itself.
• The Stoxx Europe 600 rose 1.5%.
• West Texas Intermediate crude rose 1.8% to $79.65 a barrel.
• Spot gold rose 1% to $1,966.98 an ounce.

Home Depot Stock Rises After Sales, Earnings Fall but Top Analyst Estimates – Wall Street Journal, 11/14/2023

• Home Depot reported a decline in third-quarter sales, with consumers pulling back on high-dollar purchases and deferring major home-improvement projects.
• Third-quarter revenue fell 3% to $37.71 billion, topping analyst forecasts, according to FactSet.
• Same-store sales, which adjust for store openings and closings, fell 3.1% during the quarter but didn’t decrease as much as analysts expected.
• The Atlanta-based company logged 2.4% fewer transactions during the quarter, and the average size of those tickets edged lower as well.
• Home Depot posted earnings of $3.81 billion, or $3.81 a share, down from $4.24 a share in the year-ago quarter but above analyst projections.
• Sales are now expected to fall 3% to 4% for 2023, compared with a prior range for a 2% to 5% decline.
• The company now expects earnings to fall 9% to 11% this year, compared with previous guidance for a 7% to 13% decline.

Aramark tops revenue expectations as profit matches, and stock slips – Market Watch, 11/14/2023

• Shares of Aramark slipped in premarket trading Tuesday, after the food and facilities company matched fiscal fourth-quarter profit expectations but beat revenue forecasts.
• Revenue grew 11.6% to $4.90 billion to beat the FactSet consensus of $4.79 billion, as new business and raised priced helped fuel growth.
• Excluding nonrecurring items, adjusted earnings per share of 64 cents matched the FactSet consensus.
• For fiscal 2024, the company expects adjusted EPS growth of 25% to 35% over a post-spinoff fiscal 2023 EPS of $1.16.
• That implies 2024 EPS of $1.45 to $1.57, compared with the current FactSet consensus of $1.62.
• The company, which completed the spinoff of its uniform business on Sept. 30, declared a post-spinoff dividend of 9.5 cents a share, with shareholders of record on Nov. 28 receiving the dividend payment on Dec. 8.

Canadian Solar Profit, Revenue Fall in 3Q on Softer Demand – Market Watch, 11/14/2023

• Canadian Solar on Tuesday reported lower profit and revenue in the third quarter as higher interest rates soften demand for its products.
• Revenue fell to $1.85 billion from $1.93 billion, missing analyst expectations of a slight rise to $2.03 billion.
• In the period Canadian Solar saw a 39% year-over-year increase in solar module shipments to 8.3 gigawatts.
• The New York-listed Canadian solar PV modules manufacturer posted a lower net income of $21.9 million, or 32 cents a share, down from $78.5 million, or $1.12 a share, at this time a year ago.
• Analysts were expecting a decline in the quarter, but less precipitously to 82 cents a share, according to FactSet.
• Meanwhile, the company had a $2.6 billion e-STORAGE contracted backlog as of Nov. 14, of which about half are expected deliveries for next year that are likely to improve cost environment, it said.

Fisker Shares Fall After EV Startup Cuts Production Target – Wall Street Journal, 11/14/2023

• Electric-vehicle startup Fisker delivered a disappointing third quarter, missing analysts’ expectations on revenue and losses and leading the stock to tumble in after-hours trading.
• Revenue for the period was $71.8 million, compared with analysts’ expectation of $143.1 million.
• Fisker, reporting after the market’s close Monday, posted a net loss of $90.9 million for the third quarter, worse than analysts’ expectation of a $69.2 million loss.
• The company revised its target for production to between 13,000 and 17,000 vehicles.
• Fisker had previously set a target of at least 20,000 vehicles by the end of the year.

Stellantis offering buyouts to about half its US salaried employees – Reuters, 11/14/2023

• Chrysler-parent Stellantis said Monday it is offering 6,400 U.S. salaried employees voluntary buyouts as it works to cut costs amid the transition to electric vehicles and agreeing to a new United Auto Workers contract.
• The buyouts would be about half the company’s salaried U.S. employees not represented by a union, which is currently 12,700.
• Another 2,500 Stellantis U.S. salaried workers are unionized and are not being offered the current buyout.
• Salaried employees must have at least five years of experience to be offered a voluntary departure package.
• Employees agreeing to take the incentive would depart before the end of December.

US ECONOMY & POLITICS

US Inflation Broadly Slows, Erasing Bets on More Fed Rate Hikes – Bloomberg, 11/14/2023

• US inflation broadly slowed in October, which markets cheered as a strong indication that the Federal Reserve is done hiking interest rates.
• The so-called core consumer price index, which excludes food and energy costs, increased 0.2% from September, according to government figures.
• Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI.

• That measure was little changed, restrained by cheaper gasoline.
• The Bureau of Labor Statistics figures reflected increases in rent and personal-care products and services, as well as health insurance due to a methodological change in how the government calculates it.
• Meanwhile, airfares and used-car prices declined.
• Shelter prices, which make up about a third of the overall CPI index, climbed 0.3%, half the prior month’s pace.
• Economists see a sustained moderation in this category as key to bring core inflation down to the Fed’s target.
• A key measure of rent as well as hotel stays stepped down.
• Excluding housing and energy, services prices climbed 0.2% from September and 3.7% from a year ago — the lowest in nearly two years — according to Bloomberg calculations.
• So-called core goods prices, which exclude food and energy commodities, fell for a fifth month.
• Grocery prices rose by the most since July, reflecting higher costs for basics like meat, milk and bread.
• Motor-vehicle insurance also rose.

US Inflation Isn’t on Smooth Glide Path to 2%, Fed’s Barkin Says – Bloomberg, 11/14/2023

• Federal Reserve Bank of Richmond President Thomas Barkin said he’s not convinced inflation is on a clear path toward the central bank’s 2% target despite “real progress” curbing price pressures in recent months.
• “I’m just not convinced that inflation is on some smooth glide path down to 2%,” Barkin said at an event in Westminster, South Carolina following the release of data on Tuesday showing inflation broadly slowed in October.
• “The inflation numbers have come down, but much of the drop has been partial reversal of Covid-era price spikes, which were driven by elevated demand and supply shortages,” Barkin said.
• “Shelter and shelter inflation remain higher than historic levels, so does services inflation.”
• The Richmond Fed chief said the central bank is headed in the right direction, but recent data “shows an economy that seems remarkably resilient.”
• Still, “businesses aren’t going to back down from prices until they have to,” which may require slower growth, he said.
• “I do see some sort of slowdown.”

New Speaker Mike Johnson Faces Big Test in Averting Government Shutdown – Wall Street Journal, 11/14/2023

• House Speaker Mike Johnson (R., La.) expressed confidence that he would get broad bipartisan support Tuesday for his proposal to temporarily extend government funding and avoid a partial shutdown this weekend.
• Johnson’s two-step plan is scheduled for a vote later Tuesday that will require a two-thirds supermajority for approval.
• The proposal would extend government funding at current levels for some federal agencies until mid-January and others, including the Defense Department, until early February, while lawmakers continue to work on fiscal full-year funding plans.
• The measure was set to rely on a bipartisan coalition, with some Democrats signaling they were willing to back the legislation to avoid getting the blame for a shutdown just days from Thanksgiving.
• In an interview on CNBC, Johnson said he expected sufficient bipartisan support for the proposal and the measure to pass.
• A handful of Republicans have come out against the measure, saying it lacks border-security provisions or immediate spending cuts they favor.
• House Democrats said they were evaluating the proposal, criticizing its laddered, two-step deadlines but cheering the lack of any partisan provisions they would oppose.

California Startup-Diversity Law May Touch Private-Equity, Growth Investors – Wall Street Journal, 11/14/2023

• California’s new law to make venture-capital firms provide data on the gender and racial makeup of the startups they back could have a far wider reach, legal analysts say.
• Lawyers say other types of money managers need to take notice—even those that aren’t venture investors and aren’t based in California.
• On Oct. 8, California Gov. Gavin Newsom signed the Investing in Equity Act, designed to make venture-capital funds report annually on the race, ethnicity, gender identity and disability status of the founders of their portfolio companies, among other details.
• The bill is the first in the nation to require this type of data from investment firms.
• California plans to publish the information, with some sensitive details omitted, and state authorities may also use it to investigate potential breaches of law.
• State lawmakers’ intentions in writing the measure are clear: to level the playing field so that diverse startup founders get more venture-capital funding.

EUROPE & WORLD

Tencent Music beats revenue estimates despite China gambling hit – Reuters, 11/14/2023

• China’s Tencent Music beat third-quarter revenue estimates on Tuesday, as steady growth in paid subscriptions on its streaming platforms helped offset the impact of Beijing’s ongoing crackdown on online gambling.
• Tencent Music, which operates music streaming platforms such as QQ Music and Kugou Music, said its total revenue fell 10.8% to 6.57 billion yuan ($901 million) in the three-month period to the end of September versus the same period last year.
• As a result, the group’s social entertainment services posted a 48.8%drop in revenue for the quarter.
• Tencent Music had already posted a 24% revenue decline for its social entertainment services in the previous quarter.
• Excluding items, Tencent Music earned 89 yuan per American depository share (ADS), slightly above expectations of 88 yuan.
• Net profit attributable to equity holders rose to 1.71 billion yuan, from 1.06 billion yuan a year earlier.

Sea Swings Back to Loss After New Rivals Take a Toll – Bloomberg, 11/14/2023

• Sea swung back to a loss in the third quarter, hit by flagging consumption and intensifying competition from Alibaba and TikTok on its home turf.
• Southeast Asia’s largest internet firm reported a 4.9% rise in sales from a year earlier to $3.3 billion, versus the average estimate of $3.2 billion.
• The stock fell 13% in early New York trading — the biggest intraday decline in three months — after the company posted a net loss of $149 million, compared with a profit of $322 million the previous quarter.
• Sea’s other big business, the gaming division centered around Garena, has shrunk rapidly in 2023 given a lack of new blockbuster titles.
• But it recently said it would restore its marquee title Free Fire to Indian app stores after a surprise 2022 ban.

iPhone Maker Braces for China’s Ire Over Founder’s Taiwan Presidential Bid – Wall Street Journal, 11/14/2023

• Foxconn Technology, one of Apple’s biggest suppliers, said it has contingency plans in case the company faces repercussions in China over its founder’s bid for the Taiwan presidency.
• Terry Gou, who has stepped down from executive roles at the company but still holds more than 12% of its shares, on Tuesday qualified to run in January’s poll after the election commission said he had obtained more than 900,000 valid voter signatures, three times the number required to become a candidate.
• Gou is planning to run for the presidency as an independent.
• The island’s security chief said this week that a series of investigations into the company by China was political pressure to try to stop Gou from participating and splitting the vote of candidates who are more willing to engage with Beijing.
• Foxconn Chairman Young Liu said Tuesday on a call with investors that the company had to be prepared for all possibilities and has implemented measures as part of its business continuity management.
• “From the management team’s point of view, we will have to be prepared for all the possible cases,” he added.

Huawei and Xiaomi Lead China Phone Market Double-Digit Rebound – Bloomberg, 11/14/2023

• Huawei Technologies and Xiaomi led a resurgence in China’s smartphone market, which shook off oversupply issues and an ailing economy to register double-digit growth in October.
• Phone sales in the world’s biggest mobile market were up 11% in the first four weeks of last month compared to the same period a year ago, according to Counterpoint Research data.
• Huawei improved by 83%, while Beijing-based Xiaomi was up by a third.
• Apple’s latest iPhone has had an unusually muted debut in China this year, and domestic rivals are capitalizing with a wide range of new products.
• Shenzhen-based Huawei accounted for the bulk of the growth with its new Mate 60 series of phones, Counterpoint said.
• Growth has been stellar with its new launch marketing and strong media coverage around its ‘Made in China’ chipset,” said analyst Archie Zhang.
• “Demand continues to be high double-digits and we’re also seeing a halo effect, with other models from the vendor performing well.”

Israel Dominates Battlefield With Technological Advantage Over Hamas – Wall Street Journal, 11/14/2023

• In a cluster of single-story buildings the size of small classrooms, commanders from the Givati Brigade, the main Israeli infantry force in Gaza, watch a bank of screens showing the real-time location of all Israeli and Palestinian forces inside Gaza—information they use to move around troops and weapons and surveillance aircraft like pawns on a chessboard.
• This site, near the Gaza border, is a key node of a sprawling technological nerve center, receiving thousands of battlefield data points from drones, jet fighters, naval ships, tanks and soldiers, that has enabled the Israeli military to carry out a sweeping takeover of a swath of Hamas’s stronghold in Gaza City in less than three weeks with fewer than 50 troop deaths.
• The facility is set to play a more vital role in the weeks ahead as Israel hopes to move the fighting toward a more surgical stage, with troops focused on destroying Hamas’s vast underground network of tunnels and the leaders based there to decimate the group’s military and governing capabilities in Gaza.
• “This whole thing is a decision-making machine,” said a senior Israeli military official from the Givati Brigade at the command and control center.

Glencore-Led Group to Buy Teck’s Coal Business – Wall Street Journal, 11/14/2023

• Canadian miner Teck Resources TECK said it is selling its coal assets to a group led by mining and trading giant Glencore in a deal that would cap a lengthy saga and be one of the biggest in mining this year.
• The transaction would value the business at around $9 billion.
• Under the terms of the deal, Switzerland-based Glencore will pay $6.93 billion for a 77% stake.
• Japan-based steelmaker Nippon will hold a 20% stake after converting existing holdings in some of Teck’s coal operations and paying cash, while South Korean steelmaker Posco will hold a 3% position after converting its holdings.

ICBC Hackers Used Methods Previously Flagged by U.S. Authorities – Wall Street Journal, 11/14/2023

• The hackers who infiltrated the New York arm of the Industrial and Commercial Bank of China and disrupted trading in the U.S. Treasury market appeared to exploit three vulnerabilities that had been flagged by U.S. officials earlier this year.
• In an email sent to financial-services executives and trade groups Monday that was viewed by The Wall Street Journal, Treasury officials said that the ICBC attack stemmed from Lockbit 3.0 ransomware and two tactics that target users of services managed by Citrix, a cloud-computing company.
• In March, the FBI and the Department of Homeland Security had highlighted the risks posed by the Lockbit ransomware.
• And the Cybersecurity and Infrastructure Security Agency had warned companies about the Citrix vulnerabilities in recent weeks.
• The report suggests that ICBC could have anticipated the cyberattacks.
• ICBC is the world’s largest bank. Its ICBC Financial Services unit forms part of the plumbing of the U.S. Treasury market as a member of the government-securities division of the Fixed Income Clearing Corporation, which clears all trades in government bonds among members including Goldman Sachs and JPMorgan Chase, as well as smaller interdealer brokers.
• The unit largely focuses on clearing, ensuring that transactions previously agreed by traders go through, and on lending and borrowing through repurchase agreements—a form of collateralized funding that forms a vital part of the financial system.

Yandex to Fully Divest Russian Assets and Distribute Proceeds – Bloomberg, 11/14/2023

• Yandex plans to sell its entire Russian business, including the nation’s most popular search engine, after its founder’s criticism of the war in Ukraine made potential investors wary of a partnership with the Dutch-domiciled parent company.
• A group of Russian tycoons that’s bidding for the assets wants a full break with the Dutch entity, according to three people familiar with the plans who asked not to be identified because the information isn’t public.
• Talks previously focused on the sale of a majority stake in Yandex’s Russian unit, which generates most of the company’s revenue.
• The board will meet in late November to discuss the new sale terms and a deal could be announced as soon as next month, according to the people.
• Following the sale, the proceeds will be distributed to investors via a buyback or dividends, the people said.

Emirates holds off on Airbus A350 order in engine rift – Reuters, 11/14/2023

• Emirates ruled out an immediate deal to buy Airbus A350-1000 jets on Tuesday, blaming a dispute with engine maker Rolls-Royce over the durability of its engines and leaving the European planemaker without a major showcase order at the Dubai Airshow.
• Speaking a day after placing a $50 billion order for Boeing 777X jets, the president of the Dubai airline, Tim Clark, said the A350-1000’s engine would offer only a quarter of the time between maintenance visits compared to Emirates’ needs.
• He told reporters Emirates would be prepared to order between 35 and 50 of the jets if Rolls-Royce improved both the durability and maintenance costs.

Factmonster – TODAY in HISTORY

• Herman Melville’s novel Moby Dick was published. – 1851
• Nellie Bly set out to beat Jules Verne’s fictional Phileas Fogg’s time of 80 days to travel around the world. She did it in 72. – 1889
• The British Broadcasting Corporation began its domestic radio service. – 1922
• Apollo 12, the second manned lunar expedition, was launched. – 1969
• The U.S. federal government began a partial shut down of government services after the U.S. Congress could not pass a budget. – 1995
• Nancy Pelosi of California became the first woman to lead a party in Congress. – 2002
• The most distant object ever found in our solar system, named Sedna, was discovered by astronomers at the Mount Palomar Observatory. – 2003

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