US FINANCIAL MARKET

US Two-Year Yield Tops 4.9% After Economic Data: Markets Wrap – Bloomberg, 11/22/2023

• Treasury yields rose after data showed a further increase in consumer year-ahead inflation expectations, with traders weighing a raft of economic figures for clues on the outlook for the Federal Reserve’s next steps.
• Two-year US yields topped 4.9%.
• The yield on 10-year Treasuries advanced three basis points to 4.42%.
• The dollar headed toward its biggest gain in almost six weeks. The Bloomberg Dollar Spot Index rose 0.5%.
• The S&P 500 rose 0.4%. The Nasdaq 100 rose 0.5%. The Dow Jones Industrial Average rose 0.3%.
• Apple hovered near its $3 trillion mark.
• Amazon.com rallied ahead of the start of the holiday shopping season.
• Microsoft rose on news Sam Altman will return to lead OpenAI.
• Nvidia dropped after its results.
• In other economic news, applications for US jobless benefits fell last week after a run of increases, a slight reprieve in what otherwise has been a gradually cooling labor market.
• Durable goods orders declined in October by more than expected as commercial aircraft bookings retreated and demand weakened for business equipment.
• Equities have bounced this month as investors bet that the Fed is finally done raising interest rates.
• Minutes of the Fed’s latest meeting showed policymakers united around a strategy to “proceed carefully” on future rate moves and base any tightening on progress toward their inflation goal.
• Elsewhere, oil slumped as the OPEC+ meeting that had been set for the weekend was delayed, dimming traders’ expectations that the cartel will intervene to tighten supplies.
• West Texas Intermediate crude fell 4.5% to $74.27 a barrel.
• Spot gold fell 0.4% to $1,991.29 an ounce.
• Deere forecast smaller-than-expected profit next year, with slowing equipment demand from farmers starting to weigh on the world’s largest tractor maker.
• Nordstrom, a department store chain, reported total revenue that missed estimates.
• Urban Outfitters, a clothing retailer, reported comparable sales for its namesake banner that missed estimates.
• The Stoxx Europe 600 rose 0.3%.

Nvidia Fails to Satisfy Lofty Investor Expectations for AI Boom – Bloomberg, 11/22/2023

• Nvidia investors gave a cool reaction to its latest quarterly report, which blew past average analysts’ estimates but failed to satisfy the loftier expectations of shareholders who have bet heavily on an artificial intelligence boom.
• In the fiscal third quarter, which ended Oct. 29, revenue more than tripled to $18.1 billion, the company said.
• Profit was $4.02 a share, minus certain items.
• Analysts had predicted sales of about $16 billion and earnings of $3.36 a share.
• Nvidia’s data center division, the star performer in its operations, had $14.5 billion of revenue, up 279% from the same period a year earlier.
• The company’s personal computer unit, meanwhile, has rebounded from an industrywide slowdown.
• Its revenue rose 81% to $2.86 billion.
• Revenue in the current period will be about $20 billion, the world’s most valuable chipmaker said Tuesday in a statement.
• Though that topped the average Wall Street prediction of $17.9 billion, some projections reached as high as $21 billion.

Nordstrom Sales Miss in Sign of Challenges Ahead of Black Friday, Holidays – Bloomberg, 11/22/2023

• Nordstrom beat Wall Street’s profit estimates on lower markdowns and better inventory management, but revenue fell short — highlighting the challenges the upscale department-store operator faces heading into Black Friday and the holiday season.
• Sales at the company’s namesake banner stores fell 9.4% in the three months ended Oct. 28 and missed market expectations.
• At the off-price Nordstrom Rack stores, revenue dipped a more modest 1.8%, in line with estimates from analysts surveyed by Bloomberg.
• The off-price chain represents only about a third of total revenue, so progress is needed at the Nordstrom brand, where sales of $2.05 billion were short of the average estimate by roughly $100 million.
• Earnings per share and gross margin came in ahead of estimates.
• The company cited “lower markdowns, increased inventory productivity and lower buying and occupancy costs.”
• Inventory fell nearly 9% versus a year earlier.

HP Sales Miss Estimates as Businesses Hold Off Buying PCs – Bloomberg, 11/22/2023

• HP reported quarterly sales just shy of analysts’ estimates as the predicted uptick in the personal computer market hasn’t yet materialized.
• Revenue fell 6.5% to $13.8 billion in the period ended Oct. 31, the Palo Alto, California-based company said Tuesday in a statement.
• HP’s sales of computers to businesses slipped 11% from a year earlier to $6.21 billion, under-performing expectations.
• Fiscal fourth-quarter revenue from consumer PCs ticked down 1% to about $3.19 billion.
• Printing unit revenue generated $4.4 billion, in line with estimates. Fiscal fourth-quarter adjusted profit was 90 cents a share.
• In the current period ending in January, HP said profit, excluding some items, will be 76 cents to 86 cents a share, compared with analysts’ average estimate of 85 cents.
• The company affirmed its full-year profit guidance of $3.25 to $3.65 per share delivered last month.

Urban Outfitters Shares Fall 6.8% As Inventory Woes Hit Namesake Brand – Market Watch, 11/22/2023

• Shares of Urban Outfitters fell Tuesday after the company reported a sharp drop in comparable sales at its namesake brand.
• The Philadelphia-based retail company saw same-store retail sales fall 14.2% year-on-year at Urban Outfitters, continuing a trend so far this year of a sagging topline in the segment.
• The company’s overall retail segment comparable sales rose 5.6%.
• Chief Operating Officer Frank Conforti said on a call with analysts that weaker sales in Urban Outfitters, as well as forecasts for the final quarter of the fiscal year, mean that the company is facing higher-than-expected inventory at the brand.
• The company says it will implement more markdowns than anticipated during the holiday season for its Urban Outfitters brand.

Autodesk Stock Falls as Wall Street Notes ‘Complicated’ Guidance – Barron’s, 11/22/2023

• Shares of Autodesk, a provider of software for computer-assisted design, were off 4.9% to $207.02.
• For its fiscal third quarter, the company posted better-than-expected revenue and earnings.
• When the company posted fiscal third-quarter results on Tuesday, it said it expects fourth-quarter revenue between $1.42 billion to $1.44 billion, while Wall Street called for $1.43 billion.
• Adjusted earnings are forecast between $1.91 and $1.97, below analysts’ estimate of $2.01.
• The company lifted its outlook for fiscal year 2024—which ends Jan. 31—on revenue, adjusted earnings, and free cash flow.
• Management said it expects fiscal 2025 revenue to increase about 9% or more, roughly in line with the year prior and below consensus.

Deere’s stock dives after outlook for earnings, sales disappoint – Market Watch, 11/22/2023

• Shares of Deere dropped to the lowest levels seen in months Wednesday, after the maker of agricultural, construction and turf equipment earnings and sales outlook for next year was well below Wall Street forecasts.
• For the fiscal fourth quarter to Oct. 29, net income rose to $2.37 billion, or $8.26 a share, from $2.25 billion, or $7.44 a share, in the same period a year ago.
• The FactSet consensus for earnings per share was $7.46.
• Sales slipped 0.8% to $15.41 billion, but was well above the FactSet consensus of $13.64 billion.
• Production and precision agriculture sales fell 6.3% to $6.97 billion, above the FactSet consensus of $6.6 billion; small agriculture and turf sales declined 12.7% to $3.09 billion, below forecasts of $3.17 billion; and construction and forestry sales grew 10.9% to $3.74 billion to top expectations of $3.70 billion.
• For fiscal 2024, the company expects net income of $7.75 billion to $8.25 billion, below the current FactSet consensus of $9.31 billion, “as volumes return to mid-cycle levels.”
• Looking ahead, the company expects fiscal 2024 sales for production and precision ag and small ag and turf sales to be 10% to 15% and construction and forestry sales to be down about 10%.
• That compares with the FactSet consensus for production and precision ag sales to fall 5.6%, for small ag and turf sales to decline 6.0% and for construction and forestry sales to increase 2.1%.

Sam Altman Returns as OpenAI CEO in Chaotic Win for Microsoft – Bloomberg, 11/22/2023

• Sam Altman will return to lead OpenAI less than five days after he was pushed out of one of the world’s most valuable startups, setting off a shock back-and-forth drama that transfixed Silicon Valley and the global AI industry.
• Altman is returning as chief executive officer and the initial board will be led by Bret Taylor, a former co-CEO of Salesforce.
• The other directors are Larry Summers, the former US Treasury Secretary, and existing member Adam D’Angelo, the co-founder and CEO of Quora.
• OpenAI is now working “to figure out the details,” the company said in a post on X, formerly Twitter.

Binance Pleads Guilty, Loses CZ, Pays Fines to End Legal Woes – Bloomberg, 11/22/2023

• Binance Holdings and its Chief Executive Officer Changpeng Zhao pleaded guilty to anti-money laundering and US sanctions violations under a sweeping settlement with the US that allows the cryptocurrency exchange to continue operating.
• Binance will pay $4.3 billion in one of the largest corporate agreements in US history.
• Zhao will pay a $50 million fine under a deal that requires him to step down as CEO.
• Zhao pleaded guilty Tuesday to violating the Bank Secrecy Act in federal court in Seattle.
• Binance, which admitted that it allowed transactions with Hamas and other terrorist groups on the platform, was charged with three counts, including anti-money laundering, operating an unlicensed money transmitting business and violating US sanctions.
• The exchange is paying a criminal fine of $1.8 billion and forfeiting $2.5 billion, according to court filings unsealed Tuesday.
• Zhao faces as many as 10 years in prison but is expected to get no more than 18 months under a plea deal that appears to have saved him from the harsh penalties that other prominent crypto criminals have faced.
• Binance’s violations included failure to prevent and report suspicious transactions with terrorists, including Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda, and the Islamic State of Iraq and Syria, according to the Treasury Department.
• Binance also allowed at least 1.1 million transactions, worth more than $898 million, on its platform between customers in US and Iran, according to the court filing.

United Airlines Weighs Using Passenger Data to Sell Targeted Ads – Wall Street Journal, 11/22/2023

• United Airlines is considering using its passenger information to help brands serve targeted ads to its customers, joining a growing number of companies trying to tap their troves of user data for advertising purposes.
• Some of these targeted ads could appear on its in-flight entertainment system or on the app that people use to book tickets and check-in, people familiar with the matter said.
• Airlines have long taken advantage of the captive nature of their customer base to show them plenty of ads, including commercials on seatback screens, glossy spreads inside in-flight shopping catalogs or, for some, advertisements adorning cabin walls.
• Offering personalized advertising would greatly expand United’s advertising business, some of the people said.
• More companies for which advertising isn’t a core business have recently started putting their customer data to work to sell personalized ads.

US ECONOMY & POLITICS

Initial Unemployment Claims in US Decline by Most Since June – Bloomberg, 11/22/2023

• Applications for initial US jobless benefits fell by the most since June, suggesting employers are still holding on to workers in a gradually cooling labor market.
• Initial claims plunged by 24,000 to 209,000 in the week ending Nov. 18, according to Labor Department data out Wednesday.
• That was below all estimates in a Bloomberg survey of economists.
• Continuing claims, a proxy for the number of people continuously receiving unemployment benefits, eased to 1.84 million in the week ended Nov. 11.
• The four-week moving average of initial claims, which smooths out some of that volatility, ticked down to 220,000.
• On an unadjusted basis, initial claims climbed to the highest since July, led by California, Oregon and Kentucky.
• Unadjusted continuing claims rose by the most in four months.

U.S. Durable Goods Orders Dipped More Than Expected in October – Barron’s, 11/22/2023

• Orders for longer-lasting goods in the U.S. sank in October by more than expected, flipping the rise in the prior month, suggesting industrial activity remains on an uncertain footing.
• New orders for products meant to last at least three years, including appliances, computers, cars and other manufactured goods, fell 5.4% on month in October on a seasonally adjusted basis, to $279.4 billion, the Commerce Department said Wednesday.
• It compares with a 4.0% rise in September, which was downwardly revised from an originally published 4.7%.
• Orders had previously dropped 0.1% in August and a large 5.6% in July.
• Economists survey by The Wall Street Journal expected a 3.4% decrease in October.
• Orders for transportation equipment drove the drop, diving 14.8% on month, swinging from an 11.6% rise in September, the Commerce Department said.
• Excluding defense categories, new orders dipped 6.7%.
• Stripping out transportation, new orders were up flat, it said.
• New orders for nondefense capital goods excluding aircraft, a closely watched proxy for business investment, fell 0.1% on month to $73.79 billion, according to the data.

Senators Call for Investigation of Health Insurers’ Role in Driving Up Drug Costs – Wall Street Journal, 11/22/2023

• A pair of U.S. senators called on the federal government to investigate health insurers that are paying high prices for generic drugs for serious diseases like cancer and multiple sclerosis.
• Sen. Elizabeth Warren (D., Mass.) and Sen. Mike Braun (R., Ind.) sent a letter on Wednesday to the U.S. Department of Health and Human Services’ Office of Inspector General requesting an investigation into the high drug prices and any role played by health insurers’ shared ownership with the pharmacies that often fill the prescriptions.
• The letter cites a recent article in The Wall Street Journal that reported that big health insurers Cigna Group, CVS Health and UnitedHealth Group are paying multiples more for drugs such as cancer therapy Gleevec and multiple-sclerosis treatment Tecfidera than what manufacturers charge for generic versions.
• “These findings are alarming,” the senators said of the Journal article in its letter to HHS Inspector General Christi Grimm.
• “This anticompetitive behavior raises costs, hurts independent pharmacies, and undercuts Congress’ ability to rein in excessive profits of insurance companies.”
• Generics are supposed to help health plans keep a lid on drug spending.

US Consumer Year-Ahead Inflation Expectations Increase – Bloomberg, 11/22/2023

• US short-term inflation expectations climbed to a seven-month high in November and longer-run price views remained at levels not seen since 2011.
• Americans expect prices will climb at an annual rate of 4.5% over the next year, up from the 4.4% expected earlier in the month, according to the final November reading from the University of Michigan.
• They see costs rising 3.2% over the next five to 10 years, data Wednesday showed.
• The University of Michigan’s consumer sentiment index improved from the previously reported figure, to 61.3 on brighter views of their finances.
• The median estimate in a Bloomberg survey of economists called for a reading of 61.
• Buying conditions for durable goods improved from earlier in the month, likely reflecting some discounting of merchandise for the holiday-shopping season.
• Consumers’ perception of their current and future financial situation increased from earlier in the month.

EUROPE & WORLD

Israel and Hamas Agree to Short Truce for Hostage Release – Bloomberg, 11/22/2023

• Hamas agreed to free 50 hostages from Gaza in return for a four-day cease-fire with Israel and the release of 150 Palestinian prisoners.
• Hamas said there would be a “cessation of all military operations” in Gaza during the four days.
• Israel will halt airstrikes throughout the Gaza Strip, and stop flying intelligence drones over the northern part of the territory, where most of its ground forces are, for six hours a day.
• In addition, more aid will move into Gaza from Egypt, which Palestinian officials and the United Nations say is needed to ease a humanitarian disaster.
• The pause, pushed for by the US and its allies, is expected to begin on Thursday morning, after the Israeli public has had an opportunity to appeal in the courts against the prisoners being released.
• Israel’s cabinet has already approved the deal and it’s not expected to be stalled by legal disputes.
• Hamas, designated a terrorist organization by the US and European Union, will initially free 50 women and children held in Gaza.
• In turn, Israel will release 150 women and Palestinians under the age of 19 from Israeli jails.
• US officials said three Americans would be among the hostages leaving Gaza.
• A second stage could see the halt in fighting extended by one day for the release of every 10 additional hostages, Netanyahu’s office said.
• The government has released a list of 300 Palestinians that could be freed overall, most of them people arrested since the war began on Oct. 7.

OPEC+ Meeting Delayed as Oil Production Talks Hit Turbulence – Bloomberg, 11/22/2023

• The OPEC+ meeting scheduled for this weekend has been delayed as talks ran into trouble amid Saudi dissatisfaction with other members’ oil production levels.
• Ministerial meetings will now take place on Nov. 30, OPEC said on its website, without giving a reason for the delay.
• Saudi Arabia, which has been making an additional 1 million barrel-a-day output cut since July, was in difficult talks with other members about their production levels, delegates said, asking not to be named because the discussions are private.
• The Organization of Petroleum Exporting Countries and its allies face an increasingly fragile picture for oil prices.
• Crude is down about 18% from its September peak, defying expectations that production cuts would cause a rapid tightening in markets.
• The outlook for next year looks even weaker, with potential for a renewed surplus in the first half.
• The African countries secured the right to a review of their production capacity by external consultants, and Nigeria at least has shown recently it can surpass its new limits.
• It pumped 1.416 million barrels a day last month, or 36,000 barrels a day above the target for 2024.

Shippers Spend $235 Million in Bid to Bypass Panama Canal Congestion – Bloomberg, 11/22/2023

• Shipping companies have paid a total of $235 million so far this year to jump ahead of a backlog of congestion at the Panama Canal, according to data from shipping agency Waypoint Port Services.
• That’s 20% higher than the fees paid for all of last year.
• Faced with severe drought caused by El Niño, the Panama Canal Authority plans to reduce access through February 2024 to conserve water for the country, further driving up competition for shippers desperate to speed through the waterway.
• Transport companies have already been paying record-high fees to jump the queue, with fees to expedite passage paid via auction held by the canal agency.
• The auction fees already generated this year are enough to cover a projected revenue shortfall of $200 million that the canal would lose from reduced slots, based on estimates by financial services firm ING Groep.
• Auction fees are paid on top of usual tolls to cross the canal.

U.K. Budget Deficit Will Be Smaller Than Previously Expected, Treasury Chief Says – Wall Street Journal, 11/22/2023

• The U.K. economy will grow much more slowly over the coming two years than previously forecast, although the government’s budget deficits will be slightly smaller than anticipated, Treasury Chief Jeremy Hunt told lawmakers Wednesday.
• The independent Office for Budget Responsibility expects the U.K. economy to grow by 0.6% this year, having previously forecast a contraction of 0.2%.
• But it lowered its growth estimate for next year to 0.7% from 1.8% previously, and its forecast for 2025 to 1.4% from 2.5%.
• However, the budget watchdog said new government borrowing as a share of economic output will be slightly lower than previously forecast in the fiscal years ending March 2025 and March 2026 at 3% of gross domestic product and 2.7% of GDP, respectively.
• The OBR also forecast that the government’s debt will be lower over coming years than previously forecast, and decline to 92.8% of GDP in fiscal 2028 and fiscal 2029, from 93.2% of GDP in fiscal 2027.
• As a result, the OBR said the government will meet its self-imposed fiscal targets of having a budget deficit smaller than 3% of GDP, and debt falling relative to the size of the economy in five years’ time.
• “This is the largest business tax cut in modern British history,” Hunt told lawmakers, estimating it would cost the government 11 billion pounds ($13.79 billion) a year in foregone revenue.
• In another costly measure, Hunt also lowered the rate of a tax on incomes known as National Insurance to 10% from 12%.

Factmonster – TODAY in HISTORY

• Portuguese explorer Vasco de Gama became the first navigator to sail around the Cape of Good Hope in his search for a sea route to India. – 1497
• Mount St. Helens in Washington state erupted. Ash fallout reached as far as 48 mi away. – 1842
• “S-O-S” was adopted as a distress signal at the International Radio Telegraphic Convention in Berlin. – 1906
• President Franklin Roosevelt, British prime minister Winston Churchill, and Chinese leader Chiang Kai-shek met in Cairo to discuss measures for defeating Japan. – 1943
• President John F. Kennedy was assassinated while riding in a motorcade in Dallas. – 1963
• Margaret Thatcher announced her resignation as prime minister of the United Kingdom. – 1990

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