US FINANCIAL MARKET

Nasdaq 100 Up 1% as Wall Street Unfazed by Data: Markets Wrap – Bloomberg, 10/27/2023

• Wall Street took the latest economic figures in stride, with big tech leading a rebound in stocks on Friday after solid earnings from Amazon.com and Intel.
• The S&P 500 rose from its lowest since May. The tech-heavy Nasdaq 100 gained about 1%. 
• Treasury two-year yields, which are more sensitive to imminent policy moves, edged lower. 
• The yield on 10-year Treasuries advanced two basis points to 4.86%.
• The dollar dropped. The Bloomberg Dollar Spot Index fell 0.1%.
• US near-term inflation expectations rose in October to a five-month high as they feared higher prices at the gas pump, reinforcing downbeat views on the economy. 
• The Fed’s preferred measure of underlying inflation accelerated to a four-month high in September and consumer spending picked up, keeping the door open to another interest-rate hike in the months ahead.
• More than two-thirds of stocks for companies in the S&P 500 index are trading below their 200-day moving averages, according to an analysis by Bloomberg Intelligence. 
• That’s a sign of widespread pain for stock prices, after many companies have posted lackluster earnings amid interest rates that are high and bond yields that keep creeping up.
• In geopolitical news, Israel sent troops on a limited raid into Gaza for the second night in a row, as it gears up for a more extensive ground offensive. 
• The nation said it wouldn’t agree to a hostage exchange deal that includes sending fuel to Hamas.
• Ford Motor said it fell short of third-quarter earnings expectations, citing higher costs and lower quality, a day after it won labor peace through a tentative contract with the United Auto Workers.
• JPMorgan Chase Chief Executive Officer Jamie Dimon plans to sell shares currently worth about $141 million, the first such transaction since he took the helm at the Wall Street giant almost 18 years ago.
• Exxon Mobil and Chevron posted disappointing profits amid weak performances by their oil-refining and chemical businesses.
• Chipotle Mexican Grill jumped after the restaurant chain reported third-quarter comparable sales that beat estimates.
• The Stoxx Europe 600 fell 0.9%.
• West Texas Intermediate crude rose 0.6% to $83.71 a barrel.
• Gold futures fell 0.3% to $1,991.90 an ounce.

Amazon’s Profit Triples as Sales Show Resilience Leading Into Holidays – Wall Street Journal, 10/27/2023

• Amazon.com said profit tripled to nearly $10 billion from July to September as strong sales in its cloud-computing, advertising and retail units helped the company continue its rebound from postpandemic lows.
• The company’s revenue increased by 13% to $143.1 billion for its third quarter, beating Wall Street expectations. 
• Sales in Amazon’s cloud business rose 12% to about $23 billion in the third quarter. 
• Revenue in Amazon’s advertising segment, which has become a major business at the company, increased by 26% to about $12 billion, beating expectations.
• Profit was $9.9 billion, more than triple the result from the same period last year. 
• Amazon signaled net sales would be between $160 billion to $167 billion in its fourth quarter. 
• The company has reined in costs across its North America unit, slashing roughly 27,000 corporate jobs and streamlining its operations following a cost-cutting review led by Jassy.
• Chief Executive Andy Jassy said the company would reap tens of billions of dollars in revenue in the next several years as customers turn to generative AI opportunities available within its cloud-computing business, known as Amazon Web Services, or AWS. 
• Business customers are likely to be less cautious with their spending, he said.

Exxon, Chevron Profits Disappoint on Weak Refining, Chemical Results – Bloomberg, 10/27/2023

• Exxon Mobil and Chevron posted disappointing profits amid weak performances by their oil-refining and chemical businesses.
• Exxon fell 9 cents shy of third-quarter expectations, on a per-share basis, while Chevron’s miss was 66 cents. 
• The companies cited an international oversupply of chemicals from new production plants and losses from overseas refining, respectively.
• As for Chevron, the California explorer’s overseas refining division delivered roughly half the net income analysts were expecting. 
• The company’s Permian Basin crude-production business lagged and costs at the mammoth Tengiz project in Kazakhstan increased by roughly 4%.
• Despite the miss, Exxon lifted quarterly investor payouts to 95 cents a share, payable on Dec. 11, a penny higher than the Bloomberg Dividend Forecast. 
• Meanwhile, third-quarter free cash flow more than doubled from the prior period to $11.7 billion, far in excess of the $9.36 billion average estimate.

Ford Retrenches Further on EVs Amid Demand Uncertainty – Wall Street Journal, 10/27/2023

• Ford Motor posted $1.2 billion in net income in the third quarter, swinging from a loss in the prior-year period, but it withdrew its guidance for the year, citing the impact of the United Auto Workers strike.
• The company also said it is pushing out $12 billion in planned investment on electric vehicles, reiterating concerns about consumer demand and pricing pressure from competitors. It plans to delay a second battery plant in the U.S., a facility in Kentucky that is a joint-venture with Korean battery-maker SK On.
• Strong sales of its highly profitable pickup trucks helped boost revenue for the quarter and reverse an $827 million loss in the same year-ago period. 
• That loss was largely driven by a hefty charge related to the shutdown of Ford’s autonomous-driving venture Argo AI.
• Still, company executives said Thursday that they expect the UAW’s six-week walkout to cost it about $1.3 billion in operating profit this year, including $100 million in the third quarter. 
• Revenue rose 11% year-over-year to $43.8 billion.
• In its EV division, Ford lost about $1.3 billion, widening from its roughly $1.1 billion loss last quarter.
• The company’s adjusted earnings per share of 39 cents for the just-ended period missed analysts’ expectations, and it withdrew its pretax profit outlook for 2023 after raising it in July.
• Through the first three quarters of this year, Ford has lost $3.1 billion in operating profit on its electric and software division, already surpassing its earlier projection that it would lose $3 billion this year on the unit.
• Ford’s per-hour labor cost, including benefits, would be around $67 this year and rise to about $88 by the final full year of the contract, in 2027, according to Wells Fargo. 
• That is significantly higher than the labor costs of the foreign automakers, estimated in the mid-$50s an hour, and Tesla at $45 to $50.

Intel Sees Budding PC Recovery, AI Boost Despite Dropping Sales – Wall Street Journal, 10/27/2023

• Intel’s revenue and profits fell in its latest quarter as weak personal-computer and server sales damped the market for its chips.
• The company’s $14.2 billion in third-quarter sales were 8% below the year-earlier period but above Wall Street forecasts in a survey of analysts by FactSet.
• Overall PC shipments fell 7.6% year-over-year in the third quarter, according to the International Data Corporation, which is expecting a return to growth next year. 
• But Intel said sales in the division that houses its PC chips fell 3% in the third quarter to $7.9 billion, faring better than the wider market.
• Sales in the company’s data center and AI division fell 10% in the third quarter to $3.8 billion.
• Net income of $310 million was sharply lower but also above expectations.
• Intel said it was expecting around $14.6 billion to $15.6 billion of sales for the current quarter, ahead of the $14.4 billion forecast by analysts and the $14 billion posted in the year-ago fourth quarter.

Chipotle Diners, Unfazed by Pricier Fare, Drive Outlook Bump – Bloomberg, 10/27/2023

• Chipotle Mexican Grill shares rose after sales beat expectations and the burrito chain forecast an acceleration in the fourth quarter even after raising prices.
• Revenue rose 11% from a year earlier to $2.5 billion.
• Same-store sales — a gauge of how restaurants open for more than year are performing — rose 5% in the third quarter, more than the 4.4% analysts polled by Bloomberg had anticipated. 
• More transactions drove growth in the third quarter, with higher prices also playing a role, the company said in a statement. 
• Earnings, excluding some items, were $11.36 a share, beating Wall Street’s expectations. 
• For the fourth quarter, the company is anticipating a more aggressive expansion clip, guiding to a mid- to high-single-digit range.
• Chipotle raised prices by about 3% starting in mid-October and it isn’t seeing “any resistance so far” to its costlier meals, Chief Financial Officer Jack Hartung said Thursday in an interview.

AutoNation Profit Beats Estimates as New-Car Sales Rebound – Bloomberg, 10/27/2023

• AutoNation, one of the biggest car dealership chains in the US, posted third-quarter profit and revenue that beat expectations on rising new car sales and growth in its aftermarket repair business.
• Revenue rose to $6.9 billion, compared with the $6.68 billion projected by Wall Street.
• “We saw double digit year-over-year growth in new vehicle sales and strong sequential growth in used vehicle volume,” Manley said in a statement.
• Revenue from new-car sales rose 11% to $3.2 billion in the quarter while used vehicle revenue dropped about 10%, the retailer said. 
• Gross profit in both categories declined, while its after-sales repair business saw profit increase 12%.
• On Friday, the company reported adjusted earnings of $5.54 a share for the period, topping the $5.47 average estimate of analysts. 

Capital One Stock Leaps After Earnings Beat Street Estimates – Wall Street Journal, 10/27/2023

• Shares of Capital One jumped Friday after the bank beat Wall Street’s profit estimates for a third quarter in which higher interest rates become a boon for lenders.
• The bank reported net revenue of $9.4 billion, up from $8.8 billion in the same period a year earlier. 
• Purchase volume was up 6% from a year ago, while ending loan balances increased 16% to $19 billion.
• Its net income was $1.8 billion, up from $1.7 billion from a year ago.

L3Harris Technologies beats results estimates on robust weapons demand – Reuters, 10/27/2023

• Defense contractor L3Harris Technologies beat third-quarter earnings estimates on Thursday, on the back of rising global military budgets amid geopolitical tensions.
• Revenue grew 16% to $4.92 billion, beating expectations of $4.76 billion, as per LSEG data.
• The Florida-based company posted an adjusted profit of $3.19 per share, ahead of analysts average estimate of $3.03.
• The defense contractor now projects full-year revenue between $19.2 billion and $19.4 billion on earnings of $12.25 to $12.45 per share, compared with previous guidance of between $18.0 billion and $18.3 billion on earnings of $12.25 to $12.55 per share.

Enphase Energy’s stock tumbles toward a 3-year low after revenue miss, full-year outlook that’s well below forecasts – Market Watch, 10/27/2023

• Shares of Enphase Energy plunged toward a three-year low in after-hours trading Thursday, after the solar and battery systems company missed third-quarter revenue expectations and provided current-quarter outlook that was well below forecasts, amid due a slowing economy in the U.S. and softening demand in Europe. 
• Revenue dropped 13.2% from last year to $551.1 million, below the FactSet consensus of $565.8 million, and was down 22.5% from the second quarter with U.S. revenue down 16% and Europe revenue down 34%. 
• Excluding nonrecurring items, adjusted earnings per share of $1.02 topped the FactSet consensus of $1.01. 
• For the fourth quarter, the company expects revenue of $300 million to $350 million, well below the current FactSet consensus of $579 million.

Phillips 66 Profit Lower in 3Q – Market Watch, 10/27/2023

• Phillips 66’s profit in the third quarter declined year-over-year, though its performance has improved from last quarter.
• Income from Phillips’ refining business fell to $1.71 billion from $2.91 billion last year. 
• Stripping out one-time items, adjusted earnings were $4.63 a share. 
• Analysts polled by FactSet had been expecting $4.82 a share.

Colgate-Palmolive raises prices again and says the consumer is ‘resilient’ – Market Watch, 10/27/2023

• Consumer-goods giant Colgate-Palmolive posted better-than-expected third-quarter earnings early Friday, as it again raised prices by an average of 9.5% globally.
• Sales rose to $4.915 billion from $4.455 billion a year ago, above the $4.814 billion FactSet consensus.
• By geography, sales rose 3.5% in North America, where it raised prices by 7.5%. Volumes fell 4%, however. 
• In Latin America, sales rose 20%, after it raised prices by 9.5%. Volume rose 5.5%.
• In Europe, sales were up 14.5% as it raised prices by 11%. Volumes in Europe fell 4%. 
• In Asia Pacific, sales fell 4% after it raised prices by 5.5%. Volume fell by 7%.
• In Africa/Eurasia, sales fell 7.5% after it raised prices by 11.5%. Volume fell by 4%.
• Sales in the company’s Hill’s division rose 21.5% after it raised prices by 12%. Volume rose 9%.
• Adjusted per-share earnings also came to 86 cents, ahead of the 80 cent FactSet consensus.
• The company said it now expects full-year sales to grow 6% to 8%, compared with prior guidance of 5% to 8%. 
• It expects adjusted EPS growth in the high-single digits, up from prior guidance of the high end of mid-single digits.

JPMorgan CEO Jamie Dimon to Sell One Million Shares – Wall Street Journal, 10/27/2023

• Jamie Dimon plans to sell a portion of his stock in JPMorgan Chase for the first time.
• Dimon, the chief executive, intends to sell one million of his current 8.6 million shares “for financial diversification and tax-planning purposes,” the bank said Friday in a filing. 
• The sales would start in 2024 and be subject to a predetermined trading plan.
• The sale would be worth more than $140 million at Thursday’s closing price. 
• His stake is currently worth $1.2 billion, not including other shares and units he has been awarded for compensation but that haven’t vested. 
• “It’s simply part of his personal financial, tax and estate planning,” the spokesman said.

Student-Loan Payment Processors Draw Probe on Wait Times, Borrower Advice – Wall Street Journal, 10/27/2023

• The federal government is investigating allegations of botched customer service by loan processing companies over their handling of questions about the resumption of student-loan repayments following a three-year pandemic pause.
• Borrowers have said they faced long delays on customer-service lines, with many hanging up after hearing estimates of lengthy wait times, people familiar with the matter said. 
• Borrowers have also complained about the guidance that customer-service representatives or the companies’ automated systems are providing.
• The Consumer Financial Protection Bureau is leading the inquiry, the people said. 
• The probe comes as the federal student-loan system undergoes its biggest changes in decades. 
• The government is rolling out generous repayment programs for subsets of borrowers. 
• The government’s scrutiny is focused on the small group of companies with contracts to process federal student loans: Mohela, Nelnet, Edfinancial and Aidvantage, which are routinely examined by the CFPB. 
• The focus on repayment issues began over the summer after a debt-ceiling deal between President Biden and House Republicans mandated a September resumption of loan payments and interest accrual. Infractions could lead to civil fines.

GM’s Cruise Pauses All Driverless Operations After California Crackdown – Wall Street Journal, 10/27/2023

• Cruise, the self-driving car unit of General Motors, is suspending all of its driverless operations across the U.S., after regulators in California said the vehicles aren’t safe in public and pulled the company’s self-driving permit.
• “The most important thing for us right now is to take steps to rebuild public trust,” Cruise said late Thursday in an online post. 
• “Part of this involves taking a hard look inwards and at how we do work at Cruise.”
• Earlier this week, the California Department of Motor Vehicles said Cruise had misrepresented information related to the safety of the technology of the vehicles and pulled the company’s self-driving permit.
• Outside California, Cruise has been operating driverless fleets in Austin, Texas, Houston and Phoenix as it seeks to scale up the business in other U.S. cities.

US ECONOMY & POLITICS

US Core PCE Prices Jump Most in Four Months as Spending Picks Up – Bloomberg, 10/27/2023

• The Federal Reserve’s preferred measure of underlying inflation accelerated to a four-month high in September and consumer spending picked up, keeping the door open to another interest-rate hike in the months ahead.
• The core personal consumption expenditures price index, which strips out the volatile food and energy components, rose 0.3% in September, according to the Bureau of Economic Analysis report out Friday. 

• Inflation-adjusted consumer spending jumped 0.4% last month.
• One key area of concern for officials is service-sector prices, which rose by 0.5%, the most since January. 
• Excluding housing and energy, services inflation accelerated to 0.4%, from 0.1% in the prior month.
• While wages and salaries rose 0.4%, real disposable income fell for a third straight month. 
• As a result, consumers have been saving less to support their spending.
• The saving rate fell to 3.4%, the lowest this year.

US Near-Term Inflation Views Jump to 4.2%, Highest Since May – Bloomberg, 10/27/2023

• US near-term inflation expectations rose in October to a five-month high as they feared higher prices at the gas pump, reinforcing downbeat views on the economy.
• Consumers expect prices will climb at an annual rate of 4.2% over the next year, up from the 3.2% expected last month, according to the final October reading from the University of Michigan. 
• They see costs rising 3% over the next five to 10 years, data Friday showed.
• Respondents see gas prices in the year ahead rising by the most since June 2022, when inflation reached a 40-year high. 
• Over 80% of consumers said inflation would cause greater hardship than unemployment in the year ahead, the highest share in almost a year, according to the survey. 
• Nearly half blamed high prices for eroding their living standards, the most in 15 months.
• The sentiment index dropped more than four points to 63.8 in October as gauges of both current conditions and future expectations worsened.
• Sentiment particularly declined among higher-income consumers as the value of their stock holdings dropped.

Yellen Sounds Unfazed Over US Budget Deficit Concerns – Bloomberg, 10/27/2023

• Now, it’s bond yields that are surging, driven — many would argue — partly by concern with the US budget deficit, which is swelling even amid a strong economy.
• But Treasury Secretary Janet Yellen waved away that angst in remarks Thursday at a Bloomberg event in Washington.
• Yellen said the main driver here is US economic resilience, something Powell also highlighted last week. 
• That in turn “suggests that interest rates are likely to stay higher for longer,” the Treasury chief said. 
• She added that “we have to put forward fiscal plans that will keep the deficit manageable,” and “the higher the interest-rate path the more that we need to do.”
• “I don’t think much of it is connected to that — this is a global phenomenon in advanced countries. We’re seeing yields go up in most” such economies, she said.
• But it’s still possible yields come down in time, Yellen said. Many of the underlying trends that held them low pre-pandemic are “still in force,” such as demographics, she said.

Central Bank Still Weighing US Digital Dollar, Fed’s Barr Says – Bloomberg, 10/27/2023

• The Federal Reserve’s top bank watchdog said officials continue to study a potential digital dollar, and haven’t yet made a decision whether to recommend that the US central bank launch a virtual currency.
• Barr reiterated Friday that the Fed wouldn’t move forward with a central bank digital currency, or CBDC, without the backing of Congress and the executive branch of the US government. 
• He gave no timeline for a Fed decision on whether to recommend such a move.
• “With this in mind, learning from both domestic and international experimentation can aid decisionmakers in understanding how we can best support responsible innovation that safeguards the safety and efficiency of the US payments system,” Barr said in remarks prepared for a Fed conference on electronic payments.

EUROPE & WORLD

British Airways Sees Business, Long-Haul Recovery Taking Years – Bloomberg, 10/27/2023

• British Airways’ long-haul and business-class flying will take years to return to pre-Covid levels, after the UK’s flagship airline retired some of its biggest jetliners during the pandemic.
• Overall, BA operated at 89.6% of 2019 capacity in the first nine months of the year, IAG said in a statement.
• BA retired all 31 of its 747s jumbo jets during the pandemic, but now faces a long wait for replacement aircraft because the 777X jets on order from Boeing are delayed. 
• BA’s business class capacity is down around 11% this year, Doyle said. 
• BA is also falling behind because corporate travel is taking longer to recover than other segments, Chief Executive Officer Sean Doyle said Friday. 
• The carrier relies on corporate customers to fill planes on transatlantic routes — the most profitable in aviation.
• Historically, business travelers make up a higher percentage of the North Atlantic trade than on routes to the South Atlantic or Asia Pacific regions, Doyle said on a conference call after parent IAG reported third-quarter results. 
• “With BA’s weighting towards that market, I think that probably explains the slower recovery.”

No Evidence New Weight Loss Drugs Cause Thyroid Cancer, EU Agency Finds – Bloomberg, 10/27/2023

• The European Medicines Agency found no evidence that wildly popular new weight-loss and diabetes drugs cause thyroid cancer, reassuring patients about what had been a feared potential side effect of the medicines.
• The agency’s safety committee, PRAC, reviewed published studies as well as the drugmakers’ own data on glucagon-like peptide-1 receptor agonists, or GLP-1, drugs including Novo Nordisk’s Ozempic and Wegovy. 
• The committee said drugmakers should continue to monitor thyroid cancer events closely and report any new evidence.
• Available evidence does not support a causal association between the drugs and thyroid cancer, the agency said in a statement on Friday.

U.S. Strikes Syrian Militias as Israel Makes Fresh Incursion Into Gaza – Wall Street Journal, 10/27/2023

• U.S. military forces struck two bases in Syria in what the Pentagon said was a move to deter Iran-backed militias from broadening the conflict in the Middle East, while Israeli ground forces conducted an incursion into the Gaza Strip for the second consecutive day ahead of a widely-anticipated ground war.
• The overnight U.S. strikes, authorized by President Biden, were the first American response to what Defense Secretary Lloyd Austin said were a number of attacks against U.S. personnel and facilities in Iraq and Syria by Iranian-backed militias over the past two weeks. 
• The Pentagon said the bases hit were used by such militias and described the strikes as self-defense measures separate from its military support for Israel.
• “The United States does not seek conflict and has no intention nor desire to engage in further hostilities, but these Iranian-backed attacks against U.S. forces are unacceptable and must stop,” Austin said.
• In the past 10 days, U.S. forces have come under fire at least 19 times in Iraq and Syria, Pentagon officials said Thursday.

Release of hostages needs ceasefire, Hamas official says – Reuters, 10/27/2023

• An official of the militant Hamas group conditioned the release of hostages in Gaza to a ceasefire in Israel’s bombardment of the Palestinian enclave, launched after a deadly rampage into southern Israel nearly three weeks ago.
• Israel says it is preparing a ground invasion, but has been urged by the U.S. and Arab countries to delay an operation that would multiply the number of civilian casualties in the densely populated coastal strip and might ignite a wider conflict.
• “They seized dozens of people, most of them civilians, and we need time to find them in the Gaza Strip and then release them,” Abu Hamid said.
• He said Hamas, which has freed four hostages so far, had made clear it intended to release “civilian prisoners”.
• But this required a “calm environment”, he said, repeating an assertion that Israeli bombing had killed 50 of those held.
• Israel said its fighter jets had struck three senior Hamas operatives who played significant roles in the Oct. 7 attack, though there was no confirmation by Hamas.

Factmonster – TODAY in HISTORY

• The first of the Federalist Papers, which called for the ratification of the U.S. Constitution, was published. – 1787
• New York City’s first rapid transit subway, the IRT, opened. – 1904
• Du Pont announced that it would name its new synthetic yarn nylon. – 1938
• Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin were named winners of the Nobel Peace Prize for their work toward a Middle East accord. – 1978
• The Dow Jones industrial average fell 554.26 points, forcing the stock market to shut down. – 1997

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