ReportWire

Tag: Prices

  • CNBC Daily Open: Oil deals ahead of Big Tech earnings

    CNBC Daily Open: Oil deals ahead of Big Tech earnings

    [ad_1]

    Omar Marques | Lightrocket | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Markets attempt comeback
    The Nasdaq Composite snapped a     four-day losing streak on Monday as Treasury yields retreated from their highs. Investors awaited the release of corporate earnings from tech giants including Alphabet and Microsoft. Asia-Pacific markets were higher in midday trading as investors assessed private surveys of business activity from Japan and Australia.

    Another oil mega-merger
    Chevron on Monday said it agreed to buy Hess for $53 billion in stock. It’s the second proposed mega merger among the biggest U.S. oil players after Exxon Mobil bid $60 billion for Pioneer Natural Resources earlier this month. The proposed deal also raises the competition between Chevron and Exxon to develop drilling in nascent producer Guyana.

    Nvidia’s latest blow to Intel
    Nvidia is working on building personal computer chips which would use technology from Arm Holdings, Reuters reported on Monday. The plans mean the chipmaker would challenge Intel in its longtime stronghold of personal computers. Advanced Micro Devices also reportedly plans to make chips for PCs with Arm technology.

    Bitcoin breaches $34,000 to highest since May 2022
    The price of bitcoin breached the $34,000 level to hit its highest since May last year, bolstered by positive sentiment about a bitcoin exchange-traded fund. The world’s largest cryptocurrency was trading 4.97% higher at $34,596.40 on Tuesday, according to data from Coin Metrics.

    [PRO] Portfolio manager names the new growth stocks
    Markets may be facing an “unusual amount” of uncertainty, but there still are very good opportunities right, according to one portfolio manager, who tells CNBC Pro about three new growth areas he likes: obesity drugs, reshoring and artificial intelligence.

    The bottom line

    Markets had an eventful start to the week, with just enough optimism ahead of Big Tech earnings reports to help the Nasdaq close higher for the first time in five sessions. Deal making was also at play on Monday as Chevron bet big on buying Hess to compete with larger rival Exxon Mobil.

    Stocks have been feeling the pressure from multiyear highs in Treasury yields and worries about how that stands to affect the American economy. Some analysts think the benchmark 10-year yield could still have further room to run.

    The rapid rise in yields “should accelerate an already weakening economic picture that is masked by higher rates,” said Canaccord Genuity chief market strategist Tony Dwyer.

    Microsoft, which is slated to report earnings after the close Tuesday, is seen by UBS as a potential hedge against a recession next year. Unlike more focused software companies, Microsoft “has full geographic coverage across all industry verticals,” UBS analyst Karl Keirstead said, and that makes Microsoft less susceptible to downturns in any one sector or region. Alphabet is also set to report quarterly results Tuesday afternoon.

    Wall Street analysts also made fresh calls on what is quickly becoming one of this year’s hottest segments in pharmaceuticals – weight loss drugs.

    Most analysts predict the sales of weight loss drugs such as Wegovy and Mounjaro could easily exceed $100 billion. Citi most recently raised its sales estimates for such drugs to $71 billion by 2035, up from its prior estimate of $55 billion. Still, that’s conservative compared to Guggenheim’s expectations of $150 billion to $200 billion in sales.

    Europe’s most valuable publicly listed company, Novo Nordisk makes Wegovy, which is also sold under the brand name Ozempic. U.S. drugmaker Eli Lilly makes Mounjaro. 

    Investors were also closely watching the crypto industry as bitcoin touched its highest level in over a year on Tuesday, on hopes of a bitcoin exchange-traded fund. A bitcoin ETF would give investors a way to gain exposure to bitcoin’s price movements without owning the volatile cryptocurrency directly.

    [ad_2]
    Source link

  • CNBC Daily Open: Oil deals and awaiting tech earnings

    CNBC Daily Open: Oil deals and awaiting tech earnings

    [ad_1]

    Traders work on the floor of the New York Stock Exchange on April 26, 2023 in New York City. 

    Michael M. Santiago | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Markets attempt comeback
    The Nasdaq Composite snapped a     four-day losing streak on Monday as Treasury yields retreated from their highs. Investors awaited the release of corporate earnings from tech giants including Alphabet and Microsoft. Europe’s Stoxx 600 index ended slightly lower amid geopolitical uncertainty and ahead of the European Central Bank’s monetary policy decision later this week.

    Another oil mega-merger  
    Chevron on Monday said it agreed to buy Hess for $53 billion in stock. It’s the second proposed mega merger among the biggest U.S. oil players after Exxon Mobil bid $60 billion for Pioneer Natural Resources earlier this month. The proposed deal also raises the competition between Chevron and Exxon to develop drilling in nascent producer Guyana.

    Nvidia’s latest blow to Intel  
    Nvidia is working on building personal computer chips which would use technology from Arm Holdings, Reuters reported on Monday. The plans mean the chipmaker would challenge Intel in its longtime stronghold of personal computers. Advanced Micro Devices also reportedly plans to make chips for PCs with Arm technology.

    Tesla discloses DOJ probes
    Tesla disclosed that the U.S. Department of Justice has been investigating, and in some cases issued subpoenas, to Elon Musk’s automaker. In a third-quarter financial filing out Monday, Tesla said the department is looking into its driver assistance systems marketed as Autopilot and Full Self-Driving, or FSD, options; the range of the company’s electric vehicles; as well as “personal benefits, related parties,” and “personnel decisions” at the company.

    [PRO] Goldman’s guide to 5% 10-year yield
    Bond yields have been surging lately as the Federal Reserve signaled higher rates for longer in its inflation fight. The benchmark 10-year rate briefly topped the key 5% threshold Monday. Investors should focus on stocks with strong balance sheets as these companies tend to be more resilient against high interest rates, according to Goldman Sachs.

    The bottom line

    Markets had an eventful start to the week, with just enough optimism ahead of Big Tech earnings reports to help the Nasdaq close higher for the first time in five sessions. Deal making was also at play on Monday as Chevron bet big on buying Hess to compete with larger rival Exxon Mobil.

    Stocks have been feeling the pressure from multiyear highs in Treasury yields and worries about how that stands to affect the American economy. Some analysts think the benchmark 10-year yield could still have further room to run.

    The rapid rise in yields “should accelerate an already weakening economic picture that is masked by higher rates,” said Canaccord Genuity chief market strategist Tony Dwyer.

    Microsoft, which is slated to report earnings after the close Tuesday, is seen by UBS as a potential hedge against a recession next year. Unlike more focused software companies, Microsoft “has full geographic coverage across all industry verticals,” UBS analyst Karl Keirstead said, and that makes Microsoft less susceptible to downturns in any one sector or region. Alphabet is also set to report quarterly results Tuesday afternoon.

    Wall Street analysts also made fresh calls on what is quickly becoming one of this year’s hottest segments in pharmaceuticals – weight loss drugs.

    Most analysts predict the sales of weight loss drugs such as Wegovy and Mounjaro could easily exceed $100 billion. Citi most recently raised its sales estimates for such drugs to $71 billion by 2035, up from its prior estimate of $55 billion. Still, that’s conservative compared to Guggenheim’s expectations of $150 billion to $200 billion in sales.

    Europe’s most valuable publicly listed company, Novo Nordisk makes Wegovy, which is also sold under the brand name Ozempic. U.S. drugmaker Eli Lilly makes Mounjaro. 

    [ad_2]
    Source link

  • CNBC Daily Open: Feeling of uncertainty is hard to shrug off for investors

    CNBC Daily Open: Feeling of uncertainty is hard to shrug off for investors

    [ad_1]

    Gold bars of different sizes lie in a safe on a table at the precious metals dealer Pro Aurum.

    Sven Hoppe | Picture Alliance | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Markets tumble
    The     Dow Jones Industrial Average closed nearly 300 points lower on Friday after a surge in the benchmark U.S. 10-year Treasury yield prompted broader concerns about the economy. Asia-Pacific markets started the week lower ahead of inflation readings from across the region, while gold hit a three-month high and gained for the second straight week amid fears of heightening conflict in the Middle East.

    Tesla clocks worst week of the year
    Tesla shares dropped more than 15% last week to close at $211.99 on Friday, marking the worst weekly performance for the stock this year as CEO Elon Musk sounded pessimistic about macroeconomic issues on a recent earnings call. Shares of the electric automaker are still up 96% year-to-date.

    Big earnings week
    Investors will be watching out for an action-packed week of earnings as companies including Microsoft, Meta Platforms, Amazon, Alphabet, General Motors and Ford among others gear up to post their quarterly results. The carmakers will be under the radar this week amid ongoing strikes and contract negotiations with the United Auto Workers union.

    X to launch new subscription tiers
    Owner Elon Musk said X, the social media service formerly known as Twitter, will launch two new tiers of subscriptions for users. One tier will be “lower cost with all features, but no reduction in ads,” while the other is “more expensive, but has no ads,” Musk said. 

    [PRO] The U.S. is trying to tighten the screws on Chinese AI
    The artificial intelligence behind ChatGPT-like products and autonomous driving is driving enormous demand for Nvidia’s chips in China. In the past week, however, analysts cut their Nvidia price targets after news the U.S. plans to ban the sale of more high-end semiconductors to China. Here’s what that means for stocks.

    The bottom line

    Rising Treasury yields, looming interest rate hikes to fight inflation and the heightening conflict in the Middle East drove investors away from risky assets last week.

    The yield on the benchmark 10-year Treasury crossed 5% for the first time since 2007 on Thursday, a level perceived by markets as a potential drag on the U.S. economy as it could translate to higher rates on mortgages, credit cards, auto loans and more.

    A move into safe-haven gold seemed like a sensible bet, given the worsening crisis in the Middle East. Gold was up 2.5% last week, recording its second consecutive weekly rise after adding 5.22% in the prior week.

    Investors are now bracing for a heavy week of earnings as Big Tech companies including Alphabet, Amazon, Meta and Microsoft will take centerstage.

    “We’re hopefully going to see some continued positive strength there on the economy and what they see going forward,” said Ryan Detrick, chief market strategist at Carson Group. “The headlines are scary, for sure. But the fundamentals to us are pretty strong. We’re still seeing earnings season that’s going to come in better than expected.”

    This will arrive after a mixed batch of earnings from behemoths like Tesla and Netflix last week. Tesla marked its biggest weekly decline after Elon Musk shared his pessimistic view on the macroeconomic landscape, while Netflix shares soared as markets cheered its new ad-tier subscription plan.

    Given the huge role advertisers and subscriptions play for the bottom lines of such firms, it was no surprise that Musk turned his attention to improving the usability of social media platform X, formerly known as Twitter.

    Musk said. X is gearing up to launch two new tiers of subscriptions for users, in hopes that it could improve the company’s finances and open new revenue streams. Musk’s sweeping changes across the company, including firing most of its employees and reinstating previously banned accounts, scared advertisers away.

    [ad_2]
    Source link

  • CNBC Daily Open: Investors can’t shake off the feeling of uncertainty

    CNBC Daily Open: Investors can’t shake off the feeling of uncertainty

    [ad_1]

    Traffic_analyzer | Istock | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Markets tumble
    The     Dow Jones Industrial Average closed nearly 300 points lower on Friday after a surge in the benchmark U.S. 10-year Treasury yield prompted broader concerns about the economy. Europe’s Stoxx 600 index ended at its lowest level since the start of the year, while gold hit a three-month high and gained for the second straight week amid fears of heightening conflict in the Middle East.

    Tesla clocks worst week of the year
    Tesla shares dropped more than 15% last week to close at $211.99 on Friday, marking the worst weekly performance for the stock this year as CEO Elon Musk sounded pessimistic about macroeconomic issues on a recent earnings call. Shares of the electric automaker are still up 96% year-to-date.

    Big earnings week
    Investors will be watching out for an action-packed week of earnings as companies including Microsoft, Meta Platforms, Amazon, Alphabet, General Motors and Ford among others gear up to post their quarterly results. The carmakers will be under the radar this week amid ongoing strikes and contract negotiations with the United Auto Workers union.

    X to launch new subscription tiers
    Owner Elon Musk said X, the social media service formerly known as Twitter, will launch two new tiers of subscriptions for users. One tier will be “lower cost with all features, but no reduction in ads,” while the other is “more expensive, but has no ads,” Musk said. 

    [PRO] Earnings playbook
    Big Tech takes center stage in what could be a make-or-break week for S&P 500 earnings. About 150 S&P 500 companies are slated to report, including Microsoft, Meta Platforms, Amazon and Alphabet. Those results come during a tough time for Wall Street, as higher rates and conflict in the Middle East rattle investor sentiment. Here’s how to trade a busy week of earnings.

    The bottom line

    Rising Treasury yields, looming interest rate hikes to fight inflation and the heightening conflict in the Middle East drove investors away from risky assets last week.

    The yield on the benchmark 10-year Treasury crossed 5% for the first time since 2007 on Thursday, a level perceived by markets as a potential drag on the U.S. economy as it could translate to higher rates on mortgages, credit cards, auto loans and more.

    A move into safe-haven gold seemed like a sensible bet, given the worsening crisis in the Middle East. Gold was up 2.5% last week, recording its second consecutive weekly rise after adding 5.22% in the prior week.

    Investors are now bracing for a heavy week of earnings as Big Tech companies including Alphabet, Amazon, Meta and Microsoft will take centerstage.

    “We’re hopefully going to see some continued positive strength there on the economy and what they see going forward,” said Ryan Detrick, chief market strategist at Carson Group. “The headlines are scary, for sure. But the fundamentals to us are pretty strong. We’re still seeing earnings season that’s going to come in better than expected.”

    This will arrive after a mixed batch of earnings from behemoths like Tesla and Netflix last week. Tesla marked its biggest weekly decline after Elon Musk shared his pessimistic view on the macroeconomic landscape, while Netflix shares soared as markets cheered its new ad-tier subscription plan.

    Given the huge role advertisers and subscriptions play for the bottom lines of such firms, it was no surprise that Musk turned his attention to improving the usability of social media platform X, formerly known as Twitter.

    Musk said. X is gearing up to launch two new tiers of subscriptions for users, in hopes that it could improve the company’s finances and open new revenue streams. Musk’s sweeping changes across the company, including firing most of its employees and reinstating previously banned accounts, scared advertisers away.

    [ad_2]
    Source link

  • Here’s what the Israel-Hamas war has done to U.S. gasoline and diesel prices

    Here’s what the Israel-Hamas war has done to U.S. gasoline and diesel prices

    [ad_1]

    Fuel prices, with the cost of gasoline and diesel at the pump both down from a month ago, don’t appear to be fazed by the escalating risks to oil supplies in the Middle East from the Israel-Hamas war, but they are.

    The decline in fuel prices seen nationally is actually a “bit above what would be ‘normal’ for this time of year,” said Patrick De Haan, head of petroleum analysis at GasBuddy. However, he believes “prices won’t fall as far as they would have had the attacks on Israel not happened.”

    On Friday, the average retail price for a gallon of regular gasoline stood at $3.528, down 5.7 cents from a week ago, while the average retail diesel price was at $4.465 a gallon on Friday, down 7.8 cents from Sept. 30, according to data from GasBuddy.

    U.S. retail gasoline prices have fallen so far this month.


    GasBuddy

    “Geopolitical risk is now heightened, changing the calculus” for the fuel market, said Brian Milne, product manager, editor and analyst at DTN.

    ‘Seasonal component’

    In considering retail gasoline prices during the fourth quarter, the “seasonal component is less pronounced than in years past,” said Milne. Demand for gasoline tends to fall following the summer travel season. Combined with a “strong slate of refinery maintenance,” which led to less fuel supply on the market, the rise in crude oil prices has slowed the decline in fuel prices, said Milne.

    If not for the heightened geopolitical risk in the Middle East, he said he might have expected to see gasoline prices decline by another 30 cents to 40 cents per gallon into late December because of lower demand.

    Retail gas prices may fall another 20 cents a gallon or more, depending on the location within the U.S., if we avoid broader hostilities in the Middle East, said Milne.

    However, if a conflict breaks out beyond Israel and the Gaza Strip, gasoline prices are likely to move sharply higher because of a spike in crude costs, he said.

    For its part, oil has seen volatile trading following the Hamas attack on Israel on Oct. 7, with futures prices for U.S. benchmark West Texas Intermediate crude
    CLZ23,
    -0.42%

    CL.1,
    -0.39%
    higher for the week, but lower for the month.

    California prices ‘plummet’

    For now, California, which typically is among the states that pays the most per-gallon for gasoline partly due to taxes on the fuel, is seeing prices “plummet” — down nearly 60 cents in the last three weeks, said GasBuddy’s De Haan.

    “The West Coast is certainly seeing a much larger decline than is ‘normal’ and it’s due to the refinery situation now improving drastically,” as well as California’s RVP waiver, he said.

    The California Air Resources Board allowed gasoline sold or supplied for use in California that exceeds the RVP, or Reid Vapor Pressure, limits through the end of Oct. 31, marking an early transition for the state from the lower RVP gas used in the summer to help cut gasoline emissions to the higher RVP gas used in the winter.

    On Friday, the average price for a gallon of regular gasoline in California sold for $5.476, GasBuddy data show. That’s down 16.7 cents in just the last week.

    Gas price outlook

    De Haan said he does not expect to see a spike in gas prices nationally at this point, and there’s still room for prices to fall — just not as much following the Hamas attack on Israel.

    “If we get to November and Iran gets involved in the situation, then we certainly could see gas prices impacted in some way as the current drops will likely be fully passed on by then, giving stations no ‘room’ to absorb higher prices reflected by a potential rise in oil,” said De Haan.

    Still, falling demand, as well as “seasonality in general,” are what are pushing prices down, “enhanced by refinery improvements in areas” that saw price surges, he said.

    Prices may even fall further after refinery maintenance season wraps up in mid-November, and refiners have to find places to put even more gasoline output, said De Haan.

    He’s comfortable with the gasoline price forecasts GasBuddy issued in December of last year, which predicted a monthly national average for the fuel of $3.53 for October — matching the current price. The forecast also called for an average of $3.36 a gallon for November and $3.17 for December.

    GasBuddy doesn’t have a forecast for 2024 yet, but prices may look similar to this year, as long as the situation in the Middle East doesn’t further crumble,” said De Haan.

    View on diesel

    Diesel, however, is another story.

    Price for that fuel have dropped by 85.5 cents a gallon from a year ago to Friday’s $4.465 level, GasBuddy data show.

    U.S. retail diesel prices are sharply lower than a year ago.


    GasBuddy

    While down from a year ago, diesel prices are currently at a “very high level historically” because global supply is low, said DTN’s Milne.

    At this time in 2022 diesel fuel inventory was even tighter than it is now, and Europe was heading into winter without Russian natural gas after it was cutoff following the invasion of Ukraine, he said.

    That led to a spike in natural-gas prices and prices for gasoil, a European heating oil, also surged, lifting heating oil and diesel prices globally, explained Milne.

    Like gasoline, diesel prices could move “sharply higher if the war in Israel expands, and oil flow is put at greater risk,” he said.

    De Haan, meanwhile, said diesel prices could climb closer to $5 a gallon if there’s a “squeeze,” with relief then [coming] in the spring/summer” seasons.

    [ad_2]

    Source link

  • A bullish trade on tech stocks using options that could cost nothing, if it moves in right direction

    A bullish trade on tech stocks using options that could cost nothing, if it moves in right direction

    [ad_1]

    [ad_2]

    Source link

  • CNBC Daily Open: Fed says inflation too high, U.S. Treasurys in spotlight

    CNBC Daily Open: Fed says inflation too high, U.S. Treasurys in spotlight

    [ad_1]

    Federal Reserve Chairman Jerome Powell speaks during a meeting of the Economic Club of New York in New York City, U.S., October 19, 2023. 

    Brendan Mcdermid | Reuters

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Powell says inflation is too high
    Federal Reserve Chair     Jerome Powell said the central bank would be “resolute” in its commitment to its 2% mandate, despite acknowledging recent signs of cooling inflation. Still, Powell didn’t commit to a specific policy path and gave no indication that he was leaning toward a push higher for interest rates.  

    Shaky markets
    Stocks slid on Thursday, with the Dow down over 250 points after Powell’s speech. The benchmark 10-year U.S. Treasury yield crossed the key level of 5% for the first time since 2007. Asia-Pacific markets were all lower on Friday, with South Korean stocks leading declines.

    Disneyland or Disney World?
    Disney highlighted in a filing just how strong its theme park business is for its bottom line. The theme parks segment had more than $24 billion in revenue for the nine months ended July 1. That’s 17% higher than the comparable year ago period. Admissions alone accounted for nearly $8 billion of 2023′s nine-month total, up 21% from last year.

    Las Vegas Sands’ Asia bet
    The world’s largest casino company’s recovery from the Covid-19 pandemic is gaining steam, and Asia is a big reason why. Las Vegas Sands announced it pulled in $1.12 billion in third-quarter adjusted property EBITDA, an important gauge of profitability in the gambling industry. That’s nearing pre-pandemic levels, off just 6% from the same period in 2019.

    [PRO] Should you lock in those high yields right now?
    A bond bear market has dominated this year. But with 10-year Treasury yields surging to 5% — a 16-year high, many investors might now be tempted to lock in those high yields and buy into bonds. Volatility in the bond market may, however, cause some hesitation among investors. Wall Street weighs in on the right moves to make.

    The bottom line

    Stock markets have had a rough run this week as fears of inflation and high Treasury yields linger. There’s no two ways about where the Federal Reserve stands on its battle against rising prices as Chair Jerome Powell firmly backed the central bank’s 2% target, adding that he doesn’t think rates are too high now.

    “Does it feel like policy is too tight right now? I would have to say no,” he said.

    Recent data has shown that while U.S. inflation remains well above the target rate, the pace of monthly increases has decelerated, but evidently not fast enough by Fed standards.

    To top it all off, the yield on the 10-year Treasury bond notched above 5% as it rose for the fourth day in a row, pressuring equity markets further.

    High bond yields pressure equity markets because stocks are traditionally looked at as riskier assets that can sometimes provide higher returns, while bonds stand to provide a steady, less-risky source of regular income.

    These high interest rates have also pressured some of the largest and most profitable banks in the United States as big Wall Street lenders have quietly been laying off workers all year — and some of the deepest cuts have yet to come.

    “Banks are cutting costs where they can because things are really uncertain next year,” Chris Marinac, research director at Janney Montgomery Scott, said. “They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad.”

    In the same vein, Tesla CEO Elon Musk expressed concerns about the high interest rate environment and said it makes it harder for consumers to buy cars, sending shares of the EV maker down over 9% on Thursday.

    Netflix on the other hand, surged 16% on Thursday following an encouraging quarterly earnings report and several victories, including a 70% jump in its new ad-supported subscription tier.

    Investors will now look for results from companies including Comerica, Regions Financial and American Express. Oilfield services company SLB is also on deck to report.

    [ad_2]
    Source link

  • CNBC Daily Open: When inflation is too high and so are yields

    CNBC Daily Open: When inflation is too high and so are yields

    [ad_1]

    Federal Reserve Chairman Jerome Powell speaks during a meeting of the Economic Club of New York in New York City, U.S., October 19, 2023. 

    Brendan Mcdermid | Reuters

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Powell says inflation is too high
    Federal Reserve Chair     Jerome Powell said the central bank would be “resolute” in its commitment to its 2% mandate, despite acknowledging recent signs of cooling inflation. Still, Powell didn’t commit to a specific policy path and gave no indication that he was leaning toward a push higher for interest rates.  

    Shaky markets
    Stocks slid on Thursday, with the Dow down over 250 points after Powell’s speech and as the benchmark 10-year U.S. Treasury yield inched closer to the key level of 5%. Europe’s Stoxx 600 closed at seven-month lows, falling for a third straight session.

    Disneyland or Disney World?
    Disney highlighted in a filing just how strong its theme park business is for its bottom line. The theme parks segment had more than $24 billion in revenue for the nine months ended July 1. That’s 17% higher than the comparable year ago period. Admissions alone accounted for nearly $8 billion of 2023′s nine-month total, up 21% from last year.

    Las Vegas Sands’ Asia bet
    The world’s largest casino company’s recovery from the Covid-19 pandemic is gaining steam, and Asia is a big reason why. Las Vegas Sands announced it pulled in $1.12 billion in third-quarter adjusted property EBITDA, an important gauge of profitability in the gambling industry. That’s nearing pre-pandemic levels, off just 6% from the same period in 2019.

    [PRO] How to take advantage of the near 5% yield
    Investors were handed an income opportunity they haven’t seen in more than a decade when the 10-year Treasury yield climbed near 5% on Thursday. A move above 5% will lead more investors to scoop up the assets and can also make sense for those worried about the economy and a potential recession, predicted some analysts.

    The bottom line

    Stock markets have had a rough run this week as fears of inflation and high Treasury yields linger. There’s no two ways about where the Federal Reserve stands on its battle against rising prices as Chair Jerome Powell firmly backed the central bank’s 2% target, adding that he doesn’t think rates are too high now.

    “Does it feel like policy is too tight right now? I would have to say no,” he said.

    Recent data has shown that while U.S. inflation remains well above the target rate, the pace of monthly increases has decelerated, but evidently not fast enough by Fed standards.

    And the worries don’t end there, the yield on the 10-year Treasury hit a high of 4.996%, trading at levels last seen in 2007, which begs the question – why put your money in risky stocks?

    These high interest rates have also pressured some of the largest and most profitable banks in the United States as big Wall Street lenders have quietly been laying off workers all year — and some of the deepest cuts have yet to come.

    “Banks are cutting costs where they can because things are really uncertain next year,” Chris Marinac, research director at Janney Montgomery Scott, said. “They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad.”

    Investors will now look for results from more financial companies including Comerica, Regions Financial and American Express. Oilfield services company SLB is also on deck to report.

    And the good news is — it’s Friday!

    [ad_2]
    Source link

  • CNBC Daily Open: Earnings in full swing, Treasury yields hit new highs

    CNBC Daily Open: Earnings in full swing, Treasury yields hit new highs

    [ad_1]

    The Tesla Inc. Model Y electric vehicle during the launch in Kuala Lumpur, Malaysia, July 20, 2023.

    Samsul Said | Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Markets slide
    U.S. stock markets slid on Wednesday as earnings season picked up steam and Treasury yields touched multi-year highs — breaking above 4.9% for the first time since 2007. Asia markets started the day on the back foot, with stocks in Japan, South Korea and Hong Kong seeing falls of about 2% each by midday trading. Hong Kong-listed shares of Chinese EV makers also plunged Thursday morning after Tesla CEO Elon Musk delivered grim news on Tesla’s outlook overnight.

    Tesla misses on earnings  
    Tesla reported third-quarter results that missed expectations on both earnings and revenue for the first time since the second quarter of 2019. The electric vehicle maker reported adjusted earnings of 66 cents per share vs. 73 cents per share expected and revenue of $23.35 billion per share vs. $24.1 billion expected. Tesla’s total operating margin also came in significantly lower at 7.6%, from the year-ago quarter’s 17.2%.

    Netflix profit tops expectations
    Netflix’s password-sharing crackdown and its new ad-supported tier boosted subscriber growth in the third quarter. The streaming giant added 8.76 million global subscribers during the quarter, higher than expectations of 5.49 million and the most it’s added since the second quarter of 2020 – when Covid restrictions kept people at home. Its earnings came in at $3.73 per share, better than the $3.49 per share expected.

    iPhone 15 sales off to a slow start in China  
    A month after Apple’s iPhone 15 came out, analysts and investors are starting to see signs of slow demand in China versus last year. Sales of iPhone 15 models are down 4.5% for the first 17 days in Apple’s third largest market compared to last year, according to an estimate from Counterpoint Research.  

    [PRO] JPMorgan warns of rate cut impact on stocks
    JPMorgan Asset Management says cut in interest rates by the Federal Reserve next year would likely be bad news for U.S. equity investors. Stocks have typically rallied on multiple occasions over the past two years on any dovish signal from central bankers but JPMorgan believes Fed cuts in 2024 would likely coincide with declining corporate earnings, creating headwinds for stocks. Find out here where to invest.

    The bottom line

    U.S. stock markets closed out Wednesday with sweeping declines. The yield on the benchmark 10-year Treasury hit 4.908%, rising above 4.9% for the first time since 2007 as investors scoured economic data for clues on the Federal Reserve’s interest rate trajectory.

    Housing starts rose in September, but at a slower-than-expected rate, according to data released Wednesday. Building permits fell last month, but less than economists anticipated. This arrives a day after consumers showed surprising strength in September, boosting retail sales well above expectations.

    Traders are still expecting an over 85% chance that the Fed will hold its rates steady when it announces its next monetary decision on Nov. 1, but the retail sales figure has given way to some bets of another hike in December.

    Markets seemingly have no dearth of catalysts this week as earnings season gathers steam. Tesla missed third-quarter expectations on both profit and revenue. Netflix’s password-sharing crackdown efforts along with interest in its new ad-supported tier set its quarter up for success.  

    Netflix’s results also showed that the streaming giant is back on track. Just in April 2022, it had reported a loss of 200,000 subscribers. Turns out, a cheaper advertising tier — a product Netflix hoped would appeal to those who had shared passwords — helped the company add more subscribers. Of course, not as much as it did during the throes of the Covid-19 lockdowns but a step in the right direction.

    More lies ahead for investors who will focus on Federal Reserve Chair Jerome Powell’s speech at noon ET. “Powell is always tacking back to whatever helps feed the narrative that they need to stay vigilant, and for understandable reasons,” said Luke Tilley, chief economist at Wilmington Trust.

    He is expected to assure markets the central bank is committed to its fight against inflation, but maybe this time with a little less force.

    [ad_2]
    Source link

  • CNBC Daily Open: Earnings season in full swing, Treasury yields at multi-year highs

    CNBC Daily Open: Earnings season in full swing, Treasury yields at multi-year highs

    [ad_1]

    People walk near the New York Stock Exchange on July 18, 2023 in New York City

    View Press | Corbis News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Markets slide
    U.S. stock markets slid on Wednesday as earnings season picked up steam and Treasury yields touched multi-year highs — the 10-year U.S. Treasury yield broke above 4.9% for the first time since 2007. The pan-European Stoxx 600 index closed 1% lower, with much of the attention on UK inflation data. U.K. inflation came in at 6.7% in September, slightly ahead of expectations and unchanged from the previous month.

    Tesla misses on earnings  
    Tesla reported third-quarter results that missed expectations on both earnings and revenue for the first time since the second quarter of 2019. The electric vehicle maker reported adjusted earnings of 66 cents per share vs. 73 cents per share expected and revenue of $23.35 billion per share vs. $24.1 billion expected. Tesla’s total operating margin also came in significantly lower at 7.6%, from the year-ago quarter’s 17.2%.

    Netflix profit tops expectations
    Netflix’s password-sharing crackdown and its new ad-supported tier boosted subscriber growth in the third quarter. The streaming giant added 8.76 million global subscribers during the quarter, higher than expectations of 5.49 million and the most it’s added since the second quarter of 2020 – when Covid restrictions kept people at home. Its earnings came in at $3.73 per share, better than the $3.49 per share expected.

    iPhone 15 sales off to a slow start in China  
    A month after Apple’s iPhone 15 came out, analysts and investors are starting to see signs of slow demand in China versus last year. Sales of iPhone 15 models are down 4.5% for the first 17 days in Apple’s third largest market compared to last year, according to an estimate from Counterpoint Research.  

    [PRO] Morgan Stanley’s top China video game stock  
    Morgan Stanley is calling this China stock a global video game “powerhouse” with a 40% upside. In the past decade, the company has increased its game revenue tenfold and tripled its market share in China from 8% to 9% in 2013 to 2014, to 24% by the end of 2023.

    The bottom line

    U.S. stock markets closed out Wednesday with sweeping declines. The yield on the benchmark 10-year Treasury hit 4.908%, rising above 4.9% for the first time since 2007 as investors scoured economic data for clues on the Federal Reserve’s interest rate trajectory.

    Housing starts rose in September, but at a slower-than-expected rate, according to data released Wednesday. Building permits fell last month, but less than economists anticipated. This arrives a day after consumers showed surprising strength in September, boosting retail sales well above expectations.

    Traders are still expecting an over 85% chance that the Fed will hold its rates steady when it announces its next monetary decision on Nov. 1, but the retail sales figure has given way to some bets of another hike in December.

    Markets seemingly have no dearth of catalysts this week as earnings season gathers steam. Tesla missed third-quarter expectations on both profit and revenue. Netflix’s password-sharing crackdown efforts along with interest in its new ad-supported tier set its quarter up for success.  

    Netflix’s results also showed that the streaming giant is back on track. Just in April 2022, it had reported a loss of 200,000 subscribers. Turns out, a cheaper advertising tier — a product Netflix hoped would appeal to those who had shared passwords — helped the company add more subscribers. Of course, not as much as it did during the throes of the Covid-19 lockdowns but a step in the right direction.

    More lies ahead for investors who will focus on Federal Reserve Chair Jerome Powell’s speech at noon ET. “Powell is always tacking back to whatever helps feed the narrative that they need to stay vigilant, and for understandable reasons,” said Luke Tilley, chief economist at Wilmington Trust.

    He is expected to assure markets the central bank is committed to its fight against inflation, but maybe this time with a little less force.

    [ad_2]
    Source link

  • Fed Chair Powell to deliver key speech Thursday: Here’s what to expect

    Fed Chair Powell to deliver key speech Thursday: Here’s what to expect

    [ad_1]

    U.S. Federal Reserve Chairman Jerome Powell holds a press conference after the release of the Fed policy decision to leave interest rates unchanged, at the Federal Reserve in Washington, U.S, September 20, 2023. 

    Evelyn Hockstein | Reuters

    Federal Reserve Chair Jerome Powell is set to deliver what could be a key policy address Thursday, in which he will be tasked with convincing markets the central bank is committed to keep hammering away at inflation, but perhaps now needs a little less force.

    The top monetary policymaker will speak at noon ET to the Economic Club of New York at a critical time for the U.S. economy.

    Inflation numbers have been improving lately, but Treasury yields have been surging, sending conflicting messages about where monetary policy might be headed. Markets largely expect the Fed to stay on hold with rates, but they will be looking to Powell for confirmation and clarification on how officials view both current conditions and longer-term trends.

    “Powell is always tacking back to whatever helps feed the narrative that they need to stay vigilant, and for understandable reasons,” said Luke Tilley, chief economist at Wilmington Trust. “I just expect him to keep talking about the strength of the economy and the surprising strength of the consumer in the third quarter as a risk for inflation. That is enough ammunition to keep talking about staying vigilant.”

    Essentially, Tilley expects the Powell message to break into three parts: The Fed needed to get rates high quickly, which it did; that it had to find a peak level, which is part of the current debate; and that it needs to figure out how long rates need to stay this high to get inflation back to its 2% target.

    “Really, their ultimate goal is to keep financial conditions tight so inflation comes down,” he said. “He’s going to use that framework, even if he’s dovish about Nov. 1 [the next Fed rate decision] or December to shift the hawkishness to that third question of how long to keep them this high.”

    “Higher for longer” has become an unofficial mantra in recent days, with Philadelphia Fed President Patrick Harker earlier this week mentioning the term specifically for how he feels about policy.

    Harker was one of several Fed officials, including governors Philip Jefferson, who spoke earlier this month, and Christopher Waller, who spoke Wednesday, to advocate holding off on rate hikes at least in the immediate future while they weigh the impact of incoming data. Waller said the Fed can “wait, watch and see” before it moves on rates.

    Powell is expected to join the chorus Thursday, even if his message is filled with caveats about not becoming complacent in the fight against inflation.

    “Powell has to present himself to investors as the dispassionate neutral leader and allow [others] to be more aggressive,” said Jeffrey Roach, chief economist for LPL Financial. “They’re not going to declare victory, and that is one reason why Powell is going to continue to talk somewhat hawkish.”

    To that point, New York Fed President John Williams on Wednesday moved some of the way there, when he repeated another familiar mantra, that the Fed will have to keep the “restrictive stance of policy in place for some time” to deal with inflation, according to a Reuters report.

    Like the other speakers, Powell likely will reiterate a data-dependent focus for the Fed after a much more aggressive path in which it has raised its benchmark borrowing rate 11 times for a total of 5.25 percentage points, its highest level in 22 years. The Fed opted not to hike in September.

    He also, though, will be looked to for some guidance as to how he feels about rising yields, in light of the 10-year Treasury having inched closer to 5% — its highest point in 16 years.

    The chair “will stick to the message … that the data has been coming in stronger than expected, but there has also been a big move in yields, which has tightened financial conditions, so no urgency for a policy response in November and the Fed can adopt a wait-and-see approach,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a client note.

    Guha said that a Fed on hold now will only be a “down payment” on “extra cuts” in rates for 2024 as inflation and economic growth both weaken.

    [ad_2]

    Source link

  • 10-year Treasury yield breaks above 4.9% for the first time since 2007

    10-year Treasury yield breaks above 4.9% for the first time since 2007

    [ad_1]

    U.S. Treasury yields rose on Wednesday with the 10-year hitting a fresh multiyear high as investors digested the latest economic data and considered the outlook for Federal Reserve interest rates.

    The 10-year Treasury yield gained nearly 7 basis points to 4.911%, putting it above 4.9% for the first time since 2007. Meanwhile, the 2-year Treasury yield was trading almost 2 basis points up at 5.231%, around levels last seen in 2006.

    Also notably, the 5-year Treasury moved as high as 4.937%, its top level since 2007.

    Yields and prices move in opposite directions and one basis point equals 0.01%.

    Investors considered fresh economic data as uncertainty about the path ahead for Fed monetary policy grew in recent weeks.

    Housing starts accelerated in September, but rose as a slower-than-expected rate, according to data released Wednesday. Building permits fell in the month, but lost less than economists anticipated.

    Retail sales figures for September, which were published Tuesday, increased by 0.7% for the month. That’s far higher than the 0.3% anticipated by economists surveyed by Dow Jones, and indicates resilience from consumers in light of higher interest rates and other economic pressures.

    The data brought up renewed concerns over the outlook for interest rates, with some investors viewing it as an indication that rates may be hiked further or at least kept elevated for longer.

    Markets are still pricing in a 90% chance that rates will remain unchanged when the Fed announces its next monetary decision on Nov. 1, but the probability of a December rate increase rose after Tuesday’s data, according to the CME Group’s FedWatch tool.

    In recent days and weeks, various Fed officials have indicated that the central bank may be done hiking, especially as higher Treasury yields are contributing to tighter economic conditions. Further comments from policymakers are expected this week, including by Fed Chairman Jerome Powell, and investors are looking to their comments for hints about their policy expectations.

    Upcoming economic data may also influence opinion among both investors and Fed officials.

    [ad_2]

    Source link

  • This currency is now the world’s top performer, after rebounding from record lows

    This currency is now the world’s top performer, after rebounding from record lows

    [ad_1]

    A roadside money changer handling Pakistani rupee coins in Karachi, Pakistan.

    Bloomberg | Bloomberg | Getty Images

    The Pakistani rupee has rebounded from an all-time low to become the world’s top performing currency — and there’s still room to strengthen, analysts say.

    The currency plummeted to a record low of 307 rupees against the greenback in early September, according to data from LSEG.

    It has since gained over 8% to trade at 275 against the dollar, marking the strongest bounce among other currencies and outpacing them to become the best performer last month. 

    This was largely owed to a government clampdown on a widespread illicit dollar trade. 

    “Pakistan’s rupee was the top performer globally this month as a government crackdown on the illegal dollar trade helped reverse its fortunes,” HDFC securities said in a recent report.

    The PKR currency is expected to strengthen further, given the continuation of the crackdown and enforcement of the state policy.

    Tahir Abbas

    Arif Habib Limited

    “A remarkable feat as most currencies including the Thai baht and South Korean won tumbled against the dollar on speculation US interest-rates will stay elevated for longer,” the report added.

    According to local media, Pakistan’s Federal Investigation Agency embarked on a country-wide raid on exchange companies involved in illegal dollar transactions, which involved the buying and selling of dollars through informal channels without documentation. 

    “Pakistan rupee remained the world’s best performing currency in the month of September 2023,” Tahir Abbas, head of research at securities brokerage firm Arif Habib Limited, told CNBC via email. 

    “The PKR currency is expected to strengthen further, given the continuation of the crackdown and enforcement of the state policy,” he predicted.

    Abbas said the government should focus on promoting exports and attracting foreign direct investments (FDI) into the country. An increase in foreign direct investment increases the demand for the recipient country’s currency, and boosts its exchange rate. 

    The Pakistani rupee last traded at 276.19 against the greenback.

    Does the rally have legs?

    Given the backdrop of Pakistan’s embattled economy, how much of this strengthening is owed to fundamentals?

    “The question is whether the rupee rally has been a dead-cat bounce or an indication that its fundamentals are favorable,” said said Steve Hanke, professor of applied economics at the Johns Hopkins University. He noted that geopolitical and internal factors have weighed heavily on the rupee.

    Pakistan’s ailing economy has been plagued by crippling debt and depleting foreign reserves. The World Bank estimates that Pakistan’s real GDP for the fiscal year ending 2023 will contract by 0.6%, a reversal as well as a sharp fall from last year’s 6.1% expansion.

    Additionally, the country has been grappling with high inflation.

    Pakistan’s average headline inflation rose to a multi-decade high of 29.2% year-on-year in FY23, up from 12.2% the previous year, according to the World Bank. The lofty figure was largely owed to the weakness of Pakistan’s currency, reduced domestic fuel and electricity subsidies, and supply chain disruptions, the report said.

    Pakistan’s weak currency has, in part, contributed to and fueled inflation. [But] it’s clear that a stronger rupee would dampen inflationary pressures.

    Steve Hanke

    professor at Johns Hopkins University

    Pakistan’s inflation for September jumped to 31.4% year-on-year on the back of high energy and fuel prices, official government data showed.

    “Almost 43% of Pakistan’s inflation (CPI) basket is directly related to Pakistan rupee-U.S. dollar parity,” said Abbas from Arif Habib.

    Inflation is closely associated with a currency’s value as rising costs reduce the buying power of the currency.

    But with the rupee strengthening now, he expects the South Asian nation’s CPI to “ease off a bit but with some lag.” 

    Hanke echoed the same sentiments.

    “Pakistan’s weak currency has, in part, contributed to and fueled inflation. [But] it’s clear that a stronger rupee would dampen inflationary pressures,” he said.

    According to data from Arif Habib, the Mauritiun rupee was the second best performing currency in the world, strengthening by 0.7% against the greenback in September, while the Hong Kong dollar took third place, stronger by 0.2% that same month.

    [ad_2]

    Source link

  • Mortgage bankers expect the 30-year rate to drop to 6.1% by the end of 2024

    Mortgage bankers expect the 30-year rate to drop to 6.1% by the end of 2024

    [ad_1]

    PHILADELPHIA — High mortgage rates are hammering home buyers, but expect rates to fall over the next year, one industry group says.

    Mortgage rates are over 7.5% as of mid-October, but expect rates to fall to 6.1% by the end of 2024, according to a forecast by the Mortgage Bankers Association. The group also expects the 30-year mortgage rate to fall to 5.5% by the end of 2025.

    A big driver pushing down rates will be a slowing U.S. economy, Mike Fratantoni, chief economist and senior vice president at the MBA, said during the group’s annual convention in Philadelphia on Sunday.

    Not only is the group expecting a recession in the first half of 2024, but the MBA also forecasts unemployment to rise and inflation to slow, which are signs of a weakening U.S. economy. That will, in turn, push rates down, as the market will expect the Fed to back off on hiking interest rates, they said.

     “The Fed’s hiking cycle is likely nearing an end, but while Fed officials have indicated that additional rate hikes might not be needed, rate cuts may not come as soon or proceed as rapidly as previously expected,” Fratantoni said.

    Consequently, mortgage lenders could see origination volume to increase 19% in 2024, to $1.95 trillion from the $1.64 trillion expected this year. Purchase originations are expected to rise by 11%, the MBA said. 

    The pandemic years were boom times for the mortgage industry. 2021 was a record year, when $4.4 trillion in mortgages were originated.

    But after the Fed began hiking interest rates in the middle of 2022, surging rates have put a damper on home-buying activity. Homes are far more expensive to purchase due to high rates, with the median principal and interest payment rising to $2,170 in August, compared to $1,284 in August 2021, according to MBA data.

    Fratantoni on Sunday said that he believed the “Fed is done” with rate hikes. There are two Fed meetings left this year. The MBA said it does not expect the Fed to hike interest rates in November, and to potentially hold off in December, depending on the data.

    But for now, lenders should brace for “a little bit more pain” for the next few months, which is generally a slower season for home sales, until a turnaround at the end of spring in 2024, Marina Walsh, vice president of industry analysis at the MBA, said during a presentation.

    Home prices will still continue to rise over the next three years, the MBA added, due to the persistence of tight inventory.

    Millennials are entering their prime home-buying years, said Joel Kan, deputy chief economist at the MBA, which will keep prices from falling.

    “The forecast is for low single-digit growth over the next few years supported by [low] inventory,” he said. “We’re not expecting national declines yet.”

    [ad_2]

    Source link

  • CNBC Daily Open: Inflation reports take center stage

    CNBC Daily Open: Inflation reports take center stage

    [ad_1]

    A pedestrian passes a Wall Street subway station near the New York Stock Exchange (NYSE) in New York, U.S., on Monday, June 27, 2022. Money managers betting on a sustained global rebound will be left sorely disappointed in the second half of this crushing year as a protracted bear market looms, even if inflation cools. Photographer: Michael Nagle/Bloomberg via Getty Images

    Bloomberg | Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Consumer prices higher than expected
    The     U.S. consumer price index, a closely followed inflation gauge, increased 0.4% on the month in September and 3.7% from a year ago. That’s more than the expected 0.3% and 3.6% rise, respectively. Core CPI, which excludes volatile food and energy prices, increased 0.3% on the month and 4.1% on a 12-month basis, both in line with expectations.

    U.S. markets lower, Asia’s gloomy start
    The three main U.S. stocks gauges fell Thursday, pressured by rising Treasury yields as data showing persistent U.S. inflation sparked worries of interest rates remaining higher for longer. Asia-Pacific markets fell as investors digested China’s trade and inflation data. The benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks fell more than 1%.

    Bank earnings kick off
    American banks are closing out another quarter in which interest rates surged, reviving concerns about shrinking margins and rising loan losses — though some analysts see a silver lining to the industry’s woes. Earnings season kicks off Friday with reports from JPMorgan Chase, Citigroup and Wells Fargo.

    China trade and inflation
    China reported a smaller-than-expected drop in exports in September compared to a year ago, customs data released Friday showed. Imports missed economist’s expectations. Consumer prices were flat in the same month, while the producer price index saw annual declines slow for a third month — pointing to an uneven post-Covid recovery that may require more policy support.

    [PRO] Under-the-radar AI stock
    Artificial intelligence-related stocks have rallied this year, as investors pile into favorites such as Nvidia and Microsoft. Still, Deepwater Asset Management says there’s one under-the-radar AI stock that will be essential for the long-term infrastructure rollout of the technology.

    The bottom line

    Investors digested a hotter-than-expected consumer prices report on Thursday but as the needle on the clock ticks ahead, focus today will squarely be on earnings season, soon to be kicked off by some of the biggest Wall Street lenders.

    Data from the Labor Department showed September consumer price index rising 0.4% month-on-month and 3.7% from a year ago, above respective forecasts for 0.3% and 3.6%. They were mainly driven by higher rents. This pushed U.S. markets lower, renewing fears of what lies next for the Federal Reserve, which has stuck to its goal of 2% inflation.

    In theory, it doesn’t look difficult to achieve, but in practice it could be harder. “You need a recession,” said Steven Blitz, chief U.S. economist at GlobalData TS Lombard. “You’re not going to magically get down to 2%.”

    China’s economic data released Friday highlighted its lackluster post-pandemic recovery. The next question is whether fiscal support is enough to shore up the world’s second largest economy.

    “The recovery of domestic demand is not strong, without a significant boost from fiscal support,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. “The damage from the property sector slowdown on consumer confidence continue[s] to weigh on household demand.”

    But the next catalyst for markets will obviously be the third quarter earnings season, with banks including JPMorgan Chase, Citigroup and Wells Fargo slated to report quarterly results later in the day. Bank stocks have been intertwined closely with the path of borrowing costs this year and higher rates are expected to increase losses on banks’ bond portfolios and contribute to funding pressure.

    Investors may now want to take a deep breath to brace themselves before the barrage of earnings reports take markets by storm. And who could forget about another Federal Reserve meeting by the end of the month?

    [ad_2]
    Source link

  • China consumer prices were unexpectedly flat, as economic recovery remains fragile

    China consumer prices were unexpectedly flat, as economic recovery remains fragile

    [ad_1]

    An undated editorial photo of Chinese yuan cash bills and the flag of the People’s Republic of China.

    Javier Ghersi | Moment | Getty Images

    China’s consumer prices were flat in September, while factory gate prices saw annual declines slow for a third month — pointing to the uneven post-Covid recovery in the world’s second-largest economy that may require further policy support.

    Consumer price index for September was flat on an annual basis, the National Bureau of Statistics reported Friday, below than the median estimate for a 0.2% increase in a Reuters poll. CPI inched up 0.1% in August for the first year-on-year increase in three months.

    Core inflation — excluding energy and food prices — however, climbed 0.8% in September from a year earlier, the bureau said in a separate statement. This rate of increase was similar to the one recorded in August.

    China’s producer price index fell 2.5% from a year earlier, weaker than expectations for a 2.4% decline, after a 3% drop in August. The drop in factory prices, though, was the smallest in seven months.

    Tepid prices underscore what China’s top leaders labeled as a “tortuous” economic recovery after the country emerged from its draconian zero Covid curbs toward the end of last year. China stands as a stark outlier among the world’s major economies that are mostly still battling stubbornly high inflation after the Covid-19 pandemic peaked.

    The recovery of domestic demand is not strong, without a significant boost from fiscal support.

    Zhiwei Zhang

    Pinpoint Asset Management

    Friday’s inflation print may reignite fears that China is tethering on the verge of deflation. Despite narrowing producer prices in September, the decline is still its 12th straight monthly drop on an annualized basis.

    “CPI inflation at zero indicates the deflationary pressure in China is still a real risk to the economy,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.

    “The recovery of domestic demand is not strong, without a significant boost from fiscal support. The damage from the property sector slowdown on consumer confidence continue[s] to weigh on household demand,” he added.

    Beijing has been rather targeted in its policy support even as rafts of economic data suggested growth remains sluggish. An ongoing debt crisis in two of China’s largest real estate developers has further dented consumer confidence.

    Weaker food prices

    Weaker food prices were a big drag on September’s consumer prices, though China’s National Bureau of Statistics said this was due to high food prices last year.

    On Friday, official data showed China food prices collectively fell 3.2% in September from a year earlier.

    In particular, the price of pork — a key staple meat in Chinese diets — tumbled 22% last month from a year ago. That’s as the price of livestock and meat collectively dropped 12.8% and the price of fresh vegetables fell 6.4%.

    Services inflation was at a 19-month high of 1.3%, Capital Economics said.

    “This suggests that China’s low inflation rate is not primarily due to domestic weakness,” the firm’s Zichun Huang said in a note. “Instead, it appears to be related to excess capacity in industry as the pandemic boom in global goods demand has reversed.

    Core goods inflation remained subdued at 0.3% year-on-year, Huang noted.

    Month-on-month, consumer prices edged up 0.2% in September, with food prices increasing 0.3% — representing a decrease of 0.2 percentage points from August’s print compared to the previous month.

    “The market supply is relatively sufficient before the Mid-Autumn Festival and National Day this year, and the food price increase is slightly lower than the historical average for the same period,” said Dong Lijuan, chief statistician of the Urban Department of the National Bureau of Statistics, in a statement.

    China’s Mid-Autumn Festival and National Day were in early October this year.

    [ad_2]

    Source link

  • CNBC Daily Open: Investors spooked by hot inflation report

    CNBC Daily Open: Investors spooked by hot inflation report

    [ad_1]

    People walk outside of the New York Stock Exchange (NYSE) on September 05, 2023 in New York City.

    Spencer Platt | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Consumer prices rose more than expected
    The     U.S. consumer price index, a closely followed inflation gauge, increased 0.4% on the month in September and 3.7% from a year ago. That’s more than the expected 0.3% and 3.6% rise, respectively. Core CPI, which excludes volatile food and energy prices, increased 0.3% on the month and 4.1% on a 12-month basis, both in line with expectations.

    U.S. markets end lower, Europe stays afloat
    The three main U.S. stocks gauges fell Thursday, pressured by rising Treasury yields as data showing persistent U.S. inflation sparked worries of interest rates remaining higher for longer. European stock markets closed higher, with the Stoxx 600 index up 0.1%.

    Bank earnings kick off
    American banks are closing out another quarter in which interest rates surged, reviving concerns about shrinking margins and rising loan losses — though some analysts see a silver lining to the industry’s woes. Earnings season kicks off Friday with reports from JPMorgan Chase, Citigroup and Wells Fargo.

    Google is opening a cafe
    Google is opening a sliver of its main campus to the general public starting this week. The company opened its doors to what it’s calling its “Visitor Experience” center to the public Thursday, following a ceremony where Google executives and local leaders gathered at its headquarters in Mountain View, California.

    [PRO] Wall Street’s favorite bank stocks
    Investors aren’t holding their breaths as banks kick off the third-quarter earnings season in earnest Friday. However, analysts expect some names in the space to shine. The new CNBC Pro stock screener tool searched for stocks that could emerge as the winners this quarter.

    The bottom line

    Investors digested a hotter-than-expected consumer prices report on Thursday but as the needle on the clock ticks ahead, focus today will squarely be on earnings season, soon to be kicked off by some of the biggest Wall Street lenders.

    Data from the Labor Department showed September consumer price index rising 0.4% month-on-month and 3.7% from a year ago, above respective forecasts for 0.3% and 3.6%. They were mainly driven by higher rents. This pushed U.S. markets lower, renewing fears of what lies next for the Federal Reserve, which has stuck to its goal of 2% inflation.

    In theory, it doesn’t look difficult to achieve, but in practice it could be harder. “You need a recession,” said Steven Blitz, chief U.S. economist at GlobalData TS Lombard. “You’re not going to magically get down to 2%.”

    But the next catalyst for markets will obviously be the third quarter earnings season, with banks including JPMorgan Chase, Citigroup and Wells Fargo slated to report quarterly results later in the day. Bank stocks have been intertwined closely with the path of borrowing costs this year.

    Just as they did during the March regional banking crisis, higher rates are expected to lead to a jump in losses on banks’ bond portfolios and contribute to funding pressures as institutions are forced to pay higher rates for deposits.

    Investors may now want to take a deep breath to brace themselves before the barrage of earnings reports take markets by storm. And who could forget about another Federal Reserve meeting by the end of the month?

    [ad_2]
    Source link

  • Getting to 2% inflation won’t be easy. This is what will need to happen, and it might not be pretty

    Getting to 2% inflation won’t be easy. This is what will need to happen, and it might not be pretty

    [ad_1]

    A construction in a multifamily and single family residential housing complex is shown in the Rancho Penasquitos neighborhood, in San Diego, California, September 19, 2023.

    Mike Blake | Reuters

    In theory, getting inflation closer to the Federal Reserve’s 2% target doesn’t sound terribly difficult.

    The main culprits are related to services and shelter costs, with many of the other components showing noticeable signs of easing. So targeting just two areas of the economy doesn’t seem like a gargantuan task compared to, say, the summer of 2022 when basically everything was going up.

    In practice, though, it could be harder than it looks.

    Prices in those two pivotal components have proven to be stickier than food and gas or even used and new cars, all of which tend to be cyclical as they rise and fall with the ebbs and flows of the broader economy.

    Instead, getting better control of rents, medical care services and the like could take … well, you might not want to know.

    “You need a recession,” said Steven Blitz, chief U.S. economist at GlobalData TS Lombard. “You’re not going to magically get down to 2%.”

    Annual inflation as measured by the consumer price index fell to 3.7% in September, or 4.1% if you kick out volatile food and energy costs, the latter of which has been rising steadily of late. While both numbers are still well ahead of the Fed’s goal, they represent progress from the days when headline inflation was running north of 9%.

    The CPI components, though, told of uneven progress, helped along by an easing in items such as used-vehicle prices and medical care services but hampered by sharp increases in shelter (7.2%) and services (5.7% excluding energy services).

    Drilling down further, rent of shelter also rose 7.2%, rent of primary residence was up 7.4%, and owners’ equivalent rent, pivotal figures in the CPI computation that indicates what homeowners think they could get for their properties, increased 7.1%, including a 0.6% gain in September.

    Without progress on those fronts, there’s little chance of the Fed achieving its goal anytime soon.

    Uncertainty ahead

    “The forces that are driving the disinflation among the various bits and micro pieces of the index eventually give way to the broader macro force, which is rising, which is above-trend growth and low unemployment,” Blitz said. “Eventually that will prevail until a recession comes in, and that’s it, there’s nothing really much more to say than that.”

    On the bright side, Blitz is among those in the consensus view that see any recession being fairly shallow and short. And on the even brighter side, many Wall Street economists, Goldman Sachs among them, are coming around to the view that the much-anticipated recession may not even happen.

    In the interim, though, uncertainty reigns.

    “Sticky-price” inflation, a measure of things such as rents, various services and insurance costs, ran at a 5.1% pace in September, down a full percentage point from May, according to the Cleveland Fed. Flexible CPI, including food, energy, vehicle costs and apparel, ran at just a 1% rate. Both represent progress, but still not a goal achieved.

    Markets are puzzling over what the central bank’s next step will be: Do policymakers slap on another rate hike for good measure before year-end, or do they simply stick to the relatively new higher-for-longer script as they watch the inflation dynamics unfold?

    “Inflation that is stuck at 3.7%, coupled with the strong September employment report, could be enough to prompt the Fed to indeed go for one more rate hike this year,” said Lisa Sturtevant, chief economist for Bright MLS, a Maryland-based real estate services firm. “Housing is the key driver of the elevated inflation numbers.”

    Higher interest rates’ biggest impact has been on the housing market in terms of sales and financing costs. Yet prices are still elevated, with concern that the high rates will deter construction of new apartments and keep supply constrained.

    Those factors “will only lead to higher rental prices and worsening affordability conditions in the long run,” wrote Christopher Bruen, senior director of research at the National Multifamily Housing Council. “Rising rates threaten the strength of the broader job market and economy, which has not yet fully digested the rate hikes already enacted.”

    Longer-run concerns

    The notion that rate increases totaling 5.25 percentage points have yet to wind their way through the economy is one factor that could keep the Fed on hold.

    That, however, goes back to the idea that the economy still needs to cool before the central bank can complete the final mile of its race to bring down inflation to the 2% target.

    One positive in the Fed’s favor is that pandemic-related factors largely have washed out of the economy. But other factors linger.

    “Pandemic-era effects have a natural gravitational pull and we’ve seen that take place over the course of the year,” said Marta Norton, chief investment officer for the Americas at Morningstar Wealth. “However, bringing inflation the remainder of the distance to the 2% target requires economic cooling, no easy feat, given fiscal easing, the strength of the consumer and the general financial health in the corporate sector.”

    Fed officials expect the economy to slow this year, though they have backed off an earlier call for a mild recession.

    Policymakers have been banking on the notion that when existing rental leases expire, they will be renegotiated at lower prices, bringing down shelter inflation. However, the rising shelter and owners’ equivalent rent numbers are running counter to that thinking even though so-called asking rent inflation is easing, said Stephen Juneau, U.S. economist at Bank of America.

    “Therefore, we must wait for more data to see if this is just a blip or if there is something more fundamental driving the increase such as higher rent increases in larger cities offsetting softer increases in smaller cities,” Juneau said in a note to clients Thursday. He added that the CPI report “is a reminder that we do not have good historic examples to lean on” for long-term patterns in rent inflation.

    Core service numbers show inflation is still relatively elevated, says Nationwide's Kathy Bostjancic

    [ad_2]

    Source link

  • Is India still a bright spot? IMF upgrades growth, but economists say it will be a bumpy ride

    Is India still a bright spot? IMF upgrades growth, but economists say it will be a bumpy ride

    [ad_1]

    Pedestrians walk towards the Chhatrapati Shivaji Terminus train station at dusk in Mumbai, India, on Wednesday, Oct. 4, 2023.

    Bloomberg | Bloomberg | Getty Images

    The International Monetary Fund has raised its growth forecast for India, saying the country’s growth will remain strong in 2023 and 2024 — but analysts warn there will be headwinds ahead.

    According to the IMF’s October update of its World Economic Outlook., India’s economy will grow 6.3% in 2023, an increase from an earlier forecast of 6.1%. 

    Economists who spoke to CNBC are also bullish about India’s growth, attributing the economy’s growth to an increase in consumption, infrastructure spending, and more businesses being set up — but they say geopolitical risks and inflation concerns will be challenging.

    “India will continue to be a bright spot in the global economic picture,” Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis said.

    The country “has been favored by foreign investors in recent years, reflecting its promising long-term outlook helped by a youthful demographics and a fast-expanding middle class. We expect such a trend to continue,” she told CNBC.

    Consumer spending remains one of the biggest growth drivers in the world’s most populous nation, she added.

    India’s consumer market is set to become the world’s third largest by 2027 as the number of middle to high-income households rise, according to a report by BMI, a Fitch Solutions research unit.

    “India is on the map. There is a lot of pent-up demand and sentiment is very positive. There is a sense that India is back on the frontline and the propaganda in the media helps consumption too,” she added. 

    India’s government has “taken several steps to improve businesses and this is attracting global and local investors,” said Nilesh Shah, managing director at Kotak Mahindra Asset Management.

    “The China-plus-one strategy is also pushing relocation of global supply chains and India will be a beneficiary,” he added.

    India is on the map. There is a lot of pent-up demand and sentiment is very positive.

    Alicia Garcia-Herrero

    chief economist for Asia Pacific, Natixis

    The optimism in India’s growth story is partly because more Indians are choosing to work or set up businesses in the country rather than “moving to the Western world in search for better opportunities,” Shah said. 

    “The West is less appealing than it used to be,” Garcia-Herrero said. “And India is more appealing than it used to be — at least for very talented people.”

    Headwinds remain

    While the IMF maintained it’s 2024 projection of 6.3% growth in India, economists are expecting the country to face a slew of headwinds.

    “Widening current account deficit, resurging inflation and heightened geopolitical tensions would be the major headwinds for India,” Garcia-Herrero warned. 

    Although India’s “pre-election environment is quite conducive to growth,” the Reserve Bank of India’s loose monetary policy will be “creating future problems,” the economist said.

    “India is not increasing productivity as much as needed to make their growth sustainable over time. But this will only become a problem in the next two decades, it’s not an immediate issue.”

    People walk across a damaged road following flash floods in the Faqir Gujri area, on the outskirts of Srinagar on July 23, 2023.

    Future Publishing | Future Publishing | Getty Images

    Extreme weather events will also impact India’s growth.

    Heatwaves and droughts have caused water levels in southern Indian reservoirs to fall below 10 years average, causing an adverse effect on agriculture and rural recovery, Kotak’s Shah pointed out. 

    Geopolitical tensions have intensified from rising tensions between India and Canada, as well as the attack on Israel by Palestinian militant group Hamas which caused oil prices to spike by more than 4% on Monday. 

    “India imports more than 80% of its oil consumption, so higher prices will impact India’s trade and fiscal deficit, inflation and growth adversely,” Shah said. 

    Although economists remain optimistic about India’s growth, Garcia-Herrero emphasized the importance of foreign investments to keep the economy going. 

    “In India’s position as the leader of the global south competing with China, India needs more foreign investments to create more manufacturing jobs,” she said.

    Global growth slows

    In the report published Tuesday, the IMF said the global economy will continue to recover at a slow pace as a consequence of the Ukraine war, high inflation and the aftermath of the pandemic.

    Its projections show that global growth will slow from 3.5% in 2022 to 3% this year, before falling further to 2.9% in 2024.

    India's population will overtake China's – what does that mean for the world?

    “Growth remains slow and uneven, with growing global divergences. The global economy is limping along, not sprinting,” the fund said.

    The IMF also raised its 2023 U.S. growth projections by 0.3 percentage points from its July report to 2.1%, and hiked next year’s forecast by 0.5 percentage points to 1.5%.

    [ad_2]

    Source link

  • Housing industry urges Powell to stop raising interest rates or risk an economic hard landing

    Housing industry urges Powell to stop raising interest rates or risk an economic hard landing

    [ad_1]

    New homes under construction in Miami, Florida, Sept. 22, 2023.

    Joe Raedle | Getty Images

    Top real estate and banking officials are calling on the Federal Reserve to stop raising interest rates as the industry suffers through surging housing costs and a “historic shortage” of available homes for sale.

    In a letter Monday addressed to the Fed Board of Governors and Chair Jerome Powell, the officials voiced their worries about the direction of monetary policy and the impact it is having on the beleaguered real estate market.

    The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors said they wrote the letter “to convey profound concern shared
    among our collective memberships that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.”

    The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities at least until the housing market has stabilized.

    “We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the group said.

    The letter comes as the Fed is weighing how it should proceed with monetary policy after raising its key borrowing rate 11 times since March 2022.

    In recent days, several officials have noted that the central bank could be in a position to hold off on further increases as it assesses the impact the previous ones have had on various parts of the economy. However, there appears to be little appetite for easing, with the benchmark fed funds rate now pegged in a range between 5.25%-5.5%, its highest in some 22 years.

    At the same time, the housing market is suffering through constrained inventory levels, prices that have jumped nearly 30% since the early days of the Covid pandemic and sales volumes that are off more than 15% from a year ago.

    The letter notes that the rate hikes have “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume. These market challenges occur amidst a historic shortage of attainable housing.”

    At recent meetings, Powell has acknowledged dislocations in the housing market. During his July news conference, the chair noted “this will take some time to work through. Hopefully, more supply comes on line.”

    The average 30-year mortgage rate is now just shy of 8%, according to Bankrate, while the average home price has climbed to $407,100, with available inventory at the equivalent of 3.3 months. NAR officials estimate that inventory would need to double to bring down prices.

    “The speed and magnitude of these rate increases, and resulting dislocation in our industry, is painful and unprecedented in the absence of larger economic turmoil,” the letter said.

    The groups also point out that spreads between the 30-year mortgage rate and the 10-year Treasury yield are at historically high levels, while shelter costs are a principal driver for increases in the consumer price index inflation gauge.

    As part of an effort to reduce its bond holdings, the Fed has reduced its mortgage holdings by nearly $230 billion since June 2022. However, it has done so through passively allowing maturing bonds to roll off its balance sheet, rather than reinvesting. There has been some concern that the Fed might get more aggressive and start actively selling its mortgage-backed securities holdings into the market, though no plans to do so have been announced.

    The Fed doesn't have to keep threatening hikes, says Fundstrat Co-Founder Tom Lee

    [ad_2]

    Source link