US FINANCIAL MARKET

Stocks Stuck in Tight Range Before Key Data Point: Markets Wrap – Bloomberg, 10/5/2023

• US stocks edged lower after the latest data showed weekly unemployment claims holding near historical lows.
• The S&P 500 and the tech-heavy Nasdaq 100 both slid less than 0.5% as traders hesitated to make big bets ahead of Friday’s key monthly non-farm payrolls report. 
• Treasuries were mixed. The yield on 10-year Treasuries declined two basis points to 4.71%.
• Oil extended a retreat, with WTI crude reaching below $83 per barrel for the first time since late-August. 
• The dollar edged lower against a basket of Group-of-Ten currencies. The Bloomberg Dollar Spot Index fell 0.1%.
• Traders have been searching for data signaling the labor market is cooling enough for the Federal Reserve to forestall another interest rate increase next month.
• Thursday’s report which sets the stage for NFP data, showed a slight rise in the number of people filing for unemployment benefits compared with the previous week. 
• Claims ticked up to 207,000 in the week ending Sept. 30, according to Labor Department data.
• While markets have stabilized from a recent rout, investor sentiment remains fragile. 
• The wild moves across markets were driven by US bond yields soaring to multi-year highs. Investors are keen to see if Friday’s labor data cements bets on a November interest hike from the Federal Reserve. 
• Currently, swaps are pricing a one-in-four chance of a Fed move next month.
• In the monthly US employment report, economists surveyed by Bloomberg predict the US economy added 170,000 workers in September, slightly less than the previous month.
• The Stoxx Europe 600 rose 0.7%.
• Gold futures fell 0.2% to $1,832 an ounce.

Constellation Brands beats on earnings as Modelo-fueled beer momentum continues – CNBC, 10/5/2023

• Constellation Brands reported earnings and revenue that topped analysts’ expectations for its fiscal second quarter of 2024.
• Revenue: $2.84 billion vs. $2.82 billion expected.
• Constellation’s beer portfolio posted 12% sales growth, boosted by 8.7% growth in shipments. 
• The Modelo brand family was a particular bright spot: Modelo Especial grew nearly 9%, while Modelo Chelada brands posted growth of more than 40%.
• The company’s wine and spirits brands, however, underperformed year over year. 
• The category posted a 14% decrease in sales and a nearly 8% decrease in depletions, an industry term for the number of cases sold to retailers by a distributor.
• EPS: $3.70 adjusted vs. $3.36 expected.
• The company raised its fiscal 2024 earnings per share outlook to a range of $9.60 to $9.80, up from a prior range of $9.35 to $9.65.

Lamb Weston’s stock jumps after frozen-French-fry producer beats profit estimates – Market Watch, 10/5/2023

• Shares of Lamb Weston Holdings powered higher Thursday, after the frozen-potato seller’s fiscal first-quarter profit more than doubled and beat expectations by a wide margin, as a big jump in prices boosted the bottom line.
• Sales grew 47.9% to $1.67 billion, above the FactSet consensus of $1.62 billion, as a 23% spike in price and mix offset an 8% decline in volume. 
• Geographically, North America sales increased 19% to $1.14 billion, as a 24% jump in price/mix offset a 5% volume decline, while international sales more than tripled (up 212%) to $529.9 million, as price/mix rose 18% and volume soared 194%.
• Gross margin improved to 30.0% from 24.2%, as the cost of sales rose less than sales, up 36.8% to $1.17 billion.
• Excluding nonrecurring items, such as unrealized gains from derivatives last year, adjusted earnings per share rose 109%, to $1.63 from 78 cents, well above the FactSet consensus of $1.08.
• For fiscal 2024, the company raised its guidance ranges for adjusted EPS to $5.50 to $5.95 from $4.95 to $5.40, and for sales to $6.8 billion to $7.0 billion from $6.7 billion to $6.9 billion.

Uber Introduces Package Return Service – Wall Street Journal, 10/5/2023

• Uber Technologies wants its drivers to pick up return packages from your doorstep.
• The ride-hailing and delivery company began offering the service Wednesday to help people who find it annoying or time-consuming to ship return items, it said. 
• The company is aiming to carve a space in the growing package-return market.
• Uber said returns will cost $5 or less. 
• The company already has a ride-share driver fleet it wants to use to ferry packages to the post office or a UPS or FedEx store.
• DoorDash said Wednesday that it began doing package-return pickups in January. 
• Retail giant Walmart said it rolled out at-home return pickup for subscribers to its Walmart+ membership program.

UAW Strikes Spare Automakers From Financial Pain—for Now – Wall Street Journal, 10/5/2023

• Three weeks in, the United Auto Workers strike against Detroit’s carmakers has nearly all the hallmarks of a dug-in labor battle: euphoric worker walkouts, rushed contingency plans, wall-to-wall media coverage and fiery rhetoric.
• The one thing missing—at least so far—is much financial pain, on either side.
• About 25,000 workers are now picketing at General Motors, Ford Motor and Chrysler-parent Stellantis facilities across the Midwest, or about 17% of the companies’ unionized workers. 
• UAW President Shawn Fain is expected to disclose whether there are plans for additional walkouts Friday, in what is becoming a weekly ritual of widening strike actions.
• The union’s gradually unfolding pop-up strikes—which resemble tactics deployed by the Association of Flight Attendants in the 1990s—are meant to keep the companies off balance through the element of surprise. 
• Union members have gathered while on the job to watch Fain’s livestreams to find out if their facility is next to walk out. 
• The union is applying pressure unevenly across the automakers, sparing one company in a given week while turning up the heat on the other two, a tactic intended to pit the companies against one another and reward progress at the bargaining table. 
• Another advantage: It has kept a sizable majority of UAW members on the job, conserving the fund used to compensate striking workers.

Rivian Sinks After EV Maker Plans Convertible Note Offering – Bloomberg, 10/5/2023

• Rivian Automotive sank after the electric-vehicle maker announced plans to issue $1.5 billion in convertible debt and reported preliminary third-quarter revenue.
• The Irvine, California-based company said in a securities filing Wednesday that it plans to offer green convertible senior notes due in 2030 as a private offering to qualified institutional buyers. 
• It granted the purchasers an option to buy an additional $225 million.
• Rivian also said it expects revenue for the three months ended Sept. 30 in a range of $1.29 billion to $1.33 billion, compared with a $1.3 billion average estimate from analysts surveyed by Bloomberg.
• Rivian estimated its cash, cash equivalents and short-term investments totaled $9.1 billion as of quarter-end, down from $10.2 billion in the second quarter.

Bill Gates-Backed Startup Launches AI Chatbot for Personalized Movie, Book Picks – Wall Street Journal, 10/5/2023

• Billionaire entrepreneur Bill Gates declared in March that “the Age of AI has begun.” 
• Likewise, an early-stage startup backed by Gates’s private office, is launching a chatbot Thursday that offers users personalized recommendations for books, movies, TV shows and podcasts. 
• The chatbot, called Pix, runs on OpenAI’s natural-language processing technology and will learn users’ preferences over time. 
• It will be free to users.
• The Gates-backed startup plans to use its 600 million consumer data points to distinguish its media-recommendation platform from the one-size-fits-all chatbots that are already available. 
• Unlike the recommendation software available within streaming services, Pix will suggest content across platforms to users who text, email or ask it questions via its app.
• “That personal agent aspect is going to be a big part of what we see people doing in the next couple years,” said Ian Morris, chief executive of Likewise. 
• “That’s something we’re looking to really define.”

DOJ Offers More Incentives to Self-Report Wrongdoing in M&A Transactions – Wall Street Journal, 10/5/2023

• Companies can face more lenient treatment if they report to prosecutors potential criminal misconduct uncovered during the merger and acquisition process, a senior official at the Justice Department said. 
• Under a new policy announced Wednesday, an acquiring company that discloses potential wrongdoing at a company being acquired within six months of the deal closing date—and fully cooperates and fixes the underlying problems within a year of closing—can presume it won’t be prosecuted by the Justice Department.
• “Our goal is simple: Good companies—those that invest in strong compliance programs—will not be penalized for lawfully acquiring companies when they do their due diligence and discover and self-disclose misconduct,” Deputy Attorney General Lisa Monaco said in remarks delivered remotely at the Society of Corporate Compliance and Ethics conference in Chicago on Wednesday. 
• The policy would be implemented in all divisions of the Justice Department but would only apply to “criminal conduct discovered in bona fide, arm’s-length M&A transactions,” Monaco said. This policy won’t affect civil merger enforcement, she added. 
• Each division of the Justice Department will tailor the policy to its specific enforcement regime and consider how it should be implemented in practice, Monaco said.

US ECONOMY & POLITICS

US Jobless Claims Tick Up Slightly, Remain Historically Low – Bloomberg, 10/5/2023

• Applications for US unemployment benefits remained historically low last week, highlighting ongoing strength in the labor market.
• Initial jobless claims ticked up slightly to 207,000 in the week ending Sept. 30, according to Labor Department data out Thursday. 
• The median estimate in a Bloomberg survey of economists called for an increase to 210,000.
• Continuing claims, a proxy for the number of people receiving unemployment benefits, were also little changed at 1.7 million in the week through Sept. 23.
• The four-week moving average of initial claims, which smooths out some of the volatility, edged down to 208,750, the lowest since February.
• On an unadjusted basis, claims declined to the lowest level in a year. 
• Applications fell the most in Ohio and Alabama, while they rose in California.

US Trade Deficit Shrinks to $58.3 Billion, Smallest Since 2020 – Bloomberg, 10/5/2023

• The US trade deficit shrank to an almost three-year low in August, reflecting a pullback in American demand for foreign merchandise and a pickup in goods shipments overseas.
• The shortfall in goods and services trade narrowed 9.9% from the prior month to $58.3 billion, Commerce Department data showed Thursday. 
• The value of imports declined 0.7%, while exports increased 1.6%.
• The figures suggest softer domestic demand for both consumer goods and capital equipment.
• The report showed declines in imports for capital goods, including semiconductors, as well as decreases in cell phones and other consumer goods. 
• Exports were boosted by a rise in shipments of capital and consumer goods. 
• Motor vehicles exports, meanwhile, fell.
• Exports in August were boosted by an increase in the value of petroleum shipments.
• Travel exports — or spending by visitors to the US — increased to the highest level since December 2019.
• Travel imports — a measure of Americans traveling abroad — rose slightly.
• The US merchandise-trade deficit with China narrowed about $1.3 billion to a five-month low of $22.7 billion.
• China’s share of US goods imports fell to the lowest level since 2005 in the 12 months through August, averaging 14.2% over that period.

McCarthy’s Ouster Raises Likelihood of a Government Shutdown – Bloomberg, 10/5/2023

• A mid-November US government shutdown, already a serious risk, is increasingly likely following the toppling of Speaker Kevin McCarthy and worsening of an intra-party Republican conflict in the House.
• Hardline Republican Matt Gaetz of Florida and other conservative critics presented McCarthy’s support for temporary funding to prevent an Oct. 1 shutdown as a central grievance in their successful campaign to oust him.
• That is a powerful deterrent for McCarthy’s successor to consider before backing another round of temporary financing to keep the government open after the next deadline, on Nov. 17. 
• At the same time, the vacuum opened in Republican leadership delays progress on spending negotiations adding to the shutdown threat.
• Interim Speaker Patrick McHenry’s position is unprecedented and his authority unclear but House aides generally interpret his duties as limited to presiding over a speaker election, not legislative business.

Biden Administration to Resume Border Wall Construction in Policy Reversal – Wall Street Journal, 10/5/2023

• When he was campaigning for president, Joe Biden pledged that “not another foot” of border wall would be built on his watch. 
• But this week, his administration announced plans to do just that.
• In a public notice posted Wednesday, the Department of Homeland Security outlined its intent to build up to 20 new miles of Trump administration-era border barriers in the Rio Grande Valley of Texas, one of the busiest crossing spots for migrants attempting to enter the U.S. 
• The decision comes as Republicans nearly shut down the federal government over new border-security measures, including resuming construction of former President Donald Trump’s wall project.
• “There is presently an acute and immediate need to construct physical barriers and roads in the vicinity of the border of the United States in order to prevent unlawful entries into the United States in the project areas,” the notice reads. 
• It added that the administration will waive federal, state and local laws that protect water, air and endangered species to speed up the construction. 
• The about-face by the administration—which halted all border-wall construction on the first day of Biden’s presidency—shows its increasing desperation to tamp down illegal border crossings, which have surpassed two million for each of the last two years.

Top Republicans Jump Into Speaker Race After McCarthy Ouster – Bloomberg, 10/5/2023

• Several prominent Republicans jumped into the race for House speaker and pledged to unite their splintered party, a day after Kevin McCarthy was ousted in a vote orchestrated by hard-line conservatives, setting up a crowded race for the gavel.
• House Majority Leader Steve Scalise, the No. 2 House Republican, announced his candidacy, as did Ohio Rep. Jim Jordan, chairman of the House Judiciary Committee and a founding member of the conservative House Freedom Caucus. 
• A third member, Oklahoma Rep. Kevin Hern, told the Texas delegation that he planned to run as well as he laid the groundwork for a campaign.
• In a letter to colleagues asking for support, Scalise said he has been able to bring together different viewpoints to “build consensus where others thought it impossible,” a nod to the heated divisions in the conference. 
• Scalise enjoys relationships across the conference but wasn’t close with McCarthy, who leaned on other members in fights over the debt ceiling and spending. 
• He is currently being treated for blood cancer, donning a mask when he comes to the Capitol, but has said he feels healthy.
• Jordan runs in a different lane. 
• A close ally of former President Donald Trump, he could win the support of many conservatives, but it isn’t clear that he could get the backing of the party’s more moderate members, many of whom represent swing districts.

Chicago Fed’s Austan Goolsbee Sees ‘Puzzle’ In Recent Rate Spike – Bloomberg, 10/5/2023

• In the two weeks since the Federal Reserve’s September policy meeting, yields on 10-year US Treasuries have climbed more than 50 basis points, topping out at nearly 4.9%. 
• Chicago Fed President Austan Goolsbee, in a new episode of the Odd Lots podcast, says the timing of the selloff is something of a “puzzle.”
• The quarterly Summary of Economic Projections the Fed released after the meeting “was a little different than the previous SEP, but was it so different that it would lead to a material change in a three-week period? That part’s still a puzzle,” he said.
• “I think the puzzle that people are trying to put together is, well, why did it happen in the last three weeks?” he said. 
• “But if you take a six-month perspective, in a way, I don’t think it’s that much of a puzzle — it’s clear that the long rates coming up is what you’d expect.”
• “We absolutely monitor that and are thinking about that, and that could be a blow to either the financial or the real economy,” Goolsbee said. 
• “If there is a credit crunch — if those things materially deteriorate in a way that we haven’t seen, but feared seeing, over the last six months — we will adjust, and we’ve got to think about it. By law, we have a dual mandate.”
• “We’ve been making quite substantial progress on getting the inflation rate back down to where we want it,” Goolsbee said. 
• “And for all of the attention and heat about whether inflation would stall out at 3.5% or 3%, I would just point out: If you take the three-month performance of inflation, we already blew through 3%. We’re already getting it down more.”

EUROPE & WORLD

Hyundai, Kia to adopt Tesla EV-charging standard from 2024 in US – Reuters, 10/5/223

• Hyundai Motor and Kia said on Thursday that they had decided to adopt Tesla’ electric vehicle charging technology in the United States.
• Joining their global peers, including Ford Motor, General Motors and Nissan in adopting Tesla’s North American Charging Standard (NACS), Hyundai’s and Kia’s moves take the Elon Musk-led company’s superchargers closer to becoming the industry standard at the expense of the rival Combined Charging System (CCS).
• Hyundai and Kia’s new EVs will come with a NACS port, starting in the fourth quarter of 2024 in the United States, the companies said.
• However, in Canada, Hyundai EVs equipped with the NACS port would be available in the first half of 2025, while Kia’s EVs with the technology by the end of 2024.
• The move gives Hyundai and Kia EVs with NACS ports access to more than 12,000 Tesla Superchargers across the United States, Canada, and Mexico, the companies said.
• The South Korean automakers also said that they would offer adapters to owners of existing and future Hyundai and Kia EVs with the current CCS giving them access to Tesla’s Supercharging Network in the first quarter of 2025.

Zelenskiy Says 47 Dead in Missile Strike Against East Ukraine – Bloomberg, 10/5/2023

• At least 47 people were killed in a Russian missile strike on the eastern Kharkiv region on Thursday, Ukrainian President Volodymyr Zelenskiy said on Telegram.
• The attack on a grocery store in the Kupyanskiy District was “a completely deliberate act of terrorism,” he said.

U.S. Sends Seized Iranian Ammunition to Ukraine – Wall Street Journal, 10/5/2023

• The U.S. sent Ukraine more than a million rounds of seized small-arms ammunition that Iran had sought to ship to fighters it supports in Yemen, the U.S. Central Command said on Wednesday. 
• The shipment of the 1.1 million 7.62mm rounds took place on Monday and comes as doubts have grown about the U.S.’s ability to continue long-term security assistance for Kyiv. 
• The Wall Street Journal reported in February that the ammunition had been intercepted as Iran was trying to smuggle it to Houthi rebels in Yemen and that the Biden administration was looking at the legal question of how to transfer it to Ukraine. 
• The ammunition is fired by the AK-47 assault rifle, a Soviet-designed system that is widely used in Eastern Europe. 
• Though obtaining ATACMS long-range missiles and F-16s have been a priority for Kyiv, the ammunition could still help, military experts said.

Russia Withdraws Black Sea Fleet Vessels From Crimea Base After Ukrainian Attacks – Wall Street Journal, 10/5/2023

• Russia has withdrawn the bulk of its Black Sea Fleet from its main base in occupied Crimea, a potent acknowledgment of how Ukrainian missile and drone strikes are challenging Moscow’s hold on the peninsula.
• Russia has moved powerful vessels including three attack submarines and two frigates from Sevastopol to other ports in Russia and Crimea that offer better protection, according to Western officials and satellite images verified by naval experts. 
• The move represents a remarkable setback for Russian President Vladimir Putin, whose military seizure of Crimea in 2014 marked the opening shots in his attempt to take control of Ukraine. 
• The withdrawal from Sevastopol follows a series of strikes by Ukraine in recent weeks that have severely damaged Russian vessels and the fleet’s headquarters.
• The immediate military effects of the move are limited, as the ships will still be able to fire cruise missiles on civilian infrastructure such as ports and power grids, naval experts said. 
• Ukraine’s strikes had already broken the fleet’s blockade of Ukrainian ports, denying Russian access to parts of the Black Sea and opening a new corridor for Ukraine to dispatch economically vital grain shipments.

Iraq Asked for $1 Billion in Cash. This Time, Washington Said No. – Wall Street Journal, 10/5/2023

• Iraq is seeking a special shipment of $1 billion in cash from the Federal Reserve Bank of New York, but U.S. officials have withheld approval, saying the request runs counter to their efforts to rein in Baghdad’s use of dollars and halt illicit cash flows to Iran.
• Since the U.S. invasion of Iraq two decades ago, the U.S. has supplied $10 billion or more a year to Baghdad on semimonthly cargo flights carrying massive pallets of cash, drawn from Iraqi oil sales proceeds deposited at the Fed. 
• In Iraqi hands, the bank notes have become a lucrative source of illicit dollars for powerful militias and corrupt politicians, as well as for Iran, U.S. officials say.
• In making a request for an extra shipment of $1 billion, Iraq says it needs the cash to help prop up its stumbling currency. 
• After the U.S. denied Iraq’s initial appeal last month, the Central Bank of Iraq last week submitted a formal request, which the Treasury is still considering, a senior Iraqi official said.
• Treasury officials told the Iraqi central bankers that sending a large extra shipment is contrary to Washington’s goal of reducing Iraq’s use of U.S. bank notes in favor of more easily traceable electronic transactions, Iraqi officials said

Factmonster – TODAY in HISTORY

• Chief Joseph surrendered to the U.S. Army. – 1877
• King Manuel II was over thrown in a revolution and Portugal became a republic. – 1910
• In the first televised White House address, President Truman urged Americans to refrain from eating meat on Tuesdays and poultry on Sundays to help starving people in other countries. – 1947
• Earl Warren was sworn in as the 14th Chief Justice of the U.S. Supreme Court. – 1953
• The Beatles released their first hit, “Love Me Do,” in Britain. – 1962

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