With US GDP growing a better-than-expected +4.9% y/y in 3Q23 due to consumer spending, the market digests its interest rate outlook for a higher-for-longer path, which equities (especially long-duration equities) don’t like. Per Reuters and the FT, it’s the fastest economic growth in almost 2 years. Interestingly, the short-end (via 2-yr UST yields more sensitive to policy moves) are down slightly. Core PCE price index rose +2.4%, a level lower than expected. But all eyes are on growth…because that can keep inflation high.
In line with the GDP print, Mastercard’s print also showed that the consumer keeps spending. Rev was in-line, and EPS was higher than expected because of a lower tax rate. People have jobs, and when they have jobs, they spend (at least here in the US). The stock is down because they forecasted lower growth for the rest of the year. UPS, an economic barometer, cut its profit target. So, we’re getting some mixed signals overall. Maybe the best is behind us?
Meta is down because mgmt. warned about economic uncertainty through 2024, per Bloomberg, bringing down ad spend expectations and maintaining high spend expectations for AI and VR.. Just looking at the 7 tech companies responsible for this year’s gains—they are posting disappointing earnings, with $200bn of market cap shaved off so far. $MSFT was the bright spot. $GOOG and $TSLA disappointed. Today we’ll get $AMZN after the close. As you can imagine, investors are jittery. Options suggest an 8%+ move in either direction on the print, equating to roughly $100bn in market value on that earnings print alone.
Lilly is trying to figure out if the combo of 2 drugs is better than 1. Mounjaro, the popular weight loss….I mean diabetes…drug helps people lose weight, but it reduces muscle mass and bone—not just fat. So, they’re looking to see if they sell you 2 drugs, whether you can lose weight and not as much muscle. On ave, people lost about 15 pounds of lean muscle and 23 pounds of fat during a 68 week trial.
Scott Bok of Greenhill is used to being in the power seat, but now he’s in the hot seat as Board Chair of Penn alongside Prez Liz Magill. A group of alumni and students are demanding their exit stage left because of their handling of a series of decisions, from holding a 3-day Palestine Writes Lit Festival with controversial speakers to a slow response to the Hamas/Israel war to a change in response once donors put pressure on the school.
Ford struck a tentative deal with the UAW, per Reuters. So, eyes are now on you—Stellantis and GM. Ford agreed to a record +25% hourly wage increase over the life of the contract. The highest pay will reach $40/hr. As an investor, I’d look at robotics companies, as the auto industry may cut a deal today with labor, but surely they’re looking at managing costs going forward.
Just want to say thank you to my kids who never wanted to visit Disney anything and preferred outdoor/sports-oriented vacations. BBG is out with a story. A week-long trip for a family of four costs $5-20k on ave, and as much as $40k for a top end experience. And you still turned out amazing.
The ECB held interest rates (unchanged) for the 1st time in more than a year, noting that higher levels alone will bring down inflation. This compares to Turkey—they raised rates by 500bps to 35% to fight inflation. Just sit on that. Imagine 35% rate levels here?
Global oil inventories are down to 3.31mm barrels, the lowest since 2017. OPEC+ is limiting production. China decided to curb imports.
Israel made a limited ground raid into northern Gaza. Don’t get lulled into complacency on risk management.