Archives of “October 2019” month

rss

US stocks close the session higher. Record close for the S&P

  
Analysis, US Market
#  #  #  #  #  #

New record close for the S&P

The US stocks are closing the session higher after the FOMC cut rates by 25 basis points and Fed chair Powell said that rates would not go higher unless inflation goes higher.
  • The S&P index rose 9.88 points or 0.33% at 3046.77
  • The Nasdaq rose 27.125 points or 0.33% at 8303.97
  • The Dow rose 115.27 points or 0.43% at 27186.69.
In after hours, Facebook beat on the revenues and earnings-per-share
  • EPS $2.12 versus $1.91 expected
  • Revenues $17.65 billion versus an estimate $17.35 billion

Facebook shares are up 2.3% in volatile trading after the close.

Sources: Apple mobilizes suppliers to launch first 5G iPhone range

  
  Analysis
#  #  #  #  #  #  #  #

 In a quest to reclaim its crown as the world’s most innovative tech company, Apple is mobilizing suppliers to produce its first ever 5G iPhones next year, with the three flagship models also set to include the most advanced mobile processors available and leading-edge screens, the Nikkei Asian Review has learned.

The upgraded iPhones, which Apple hopes will vault the company over Huawei’s current position as the second-biggest smartphone maker, will also likely accelerate global carriers to roll out 5G telecoms infrastructure — especially outside China, which has already invested heavily in the nascent technology.

Apple has been slow to embrace 5G; its iPhone 11 series this year only features 4G wireless technology. However Apple will push to reclaim its former glory as the maker of the world’s “must-have” smartphone with the major product line overhaul in 2020, sources told Nikkei. The iPhone, first launched in 2007, still accounts for around half of company revenues.

Apple plans to ship at least 80 million of the new 5G phones, one of the sources said. Rivals such as Samsung Electronics, the world’s largest smartphone supplier, China’s Huawei Technologies and second-tier competitors such as Oppo and Xiaomi, have already launched 5G phones.

“It will be the first time Apple introduces 5G iPhones … There will be three of them and the company has set an aggressive sales target,” one of the people familiar with the company’s thinking said.

Apple reports fourth quarter earnings after the U.S. stock market closes on Wednesday. (more…)

The FOMC statement for the October 2019 meeting

  
  Analysis
#  #  #  #  #  #  #  #  #

FOMC statement for the October 2019 meeting…

October 30, 2019

Federal Reserve issues FOMC statement

For release at 2:00 p.m. EDT

Information received since the Federal Open Market Committee met in September indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-1/2 to 1-3/4 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against this action were: Esther L. George and Eric S. Rosengren, who preferred at this meeting to maintain the target range at 1-3/4 percent to 2 percent.

Implementation Note issued October 30, 2019

Federal Reserve lowers interest rates by 25 basis points, as expected

  
  Analysis

Highlights of the Federal Reserve interest rate decision on October 30, 2019:

  • Rates lowered to range of 1.50%-2.00%
  • Markets priced in a 97% chance of a cut before the decision
  • Prior range was 1.75%-2.00%
  • George and Rosengren wanted no change, they were the only dissenters
  • Uncertainties remain, will assess appropriate rate path
  • Change of wording in the statement says it will monitor incoming info “as it assesses the appropriate path” for the target range
  • Sets IOER at 1.55%, as expected
  • Economic activity has been rising at a moderate rate, the same as prior
  • Repeats that job gains have been solid, on average, in recent months, and the unemployment rate has remained low
  • Household spending has been rising at a strong pace vs ‘appears to have picked up’
  • indicators of business fixed investment remains weak vs ‘business fixed investment has been soft’ prior
  • Repeats that core and headline inflation running below 2%
  • Says that market-based measures of inflation remain low vs ‘have declined’
  • Says ‘uncertainties about this outlook remain’ vs ‘uncertainties about the outlook have increased’
Key line:
The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.
vs prior:
the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.
It all comes down to how you read this change. Clearly, the Fed wanted to change it so they didn’t risk it being interpreted that another cut was coming. But they also didn’t want to take a cut off the table if it’s needed.
The market is reading that as hawkish. That’s probably the right call. There is about a 27% chance of a Dec cut priced in and that will have to go to zero unless there is a surprise in the economic data or trade policy. However the moves have been small.
The economic assessments were virtually unchanged.

Elon Musk says Tesla would have gone bankrupt if he didn’t shift production from solar

  
  Analysis
#  #  #  #  #  #  #

That’s quite the admission

Tesla would have gone bankrupt if CEO Elon Musk didn’t shift workers from Solar City to Model 3 production, he said in a deposition that was just made public.
“If I did not take everyone off of solar and focus them on the Model 3 program to the detriment of solar, then Tesla would have gone bankrupt,” Musk said in a June pre-trial deposition made public in state court in Delaware. “So I took everyone from solar, and said: ‘instead of working on solar, you need to work on the Model 3 program.’ And as a result, solar suffered, as you
would expect.”
That’s a pretty serious thing to admit — and not to disclose at the time it was happening.
The deposition was in a lawsuit from pension funds that argue Tesla shouldn’t have spent $2 billion to buy SolarCity when it was struggling itself. The insinuation is that Tesla bailed out Musk’s other project to save face.

China has offered for Trump to meet Xi in Macau as alternative to Chile

  
  Analysis
#  #  #  #  #  #  #

Fox News report

Edward Lawrence from Fox News reports that China has offered that the Trump travel to Macau to sign the Phase One trade deal, rather than the planned meet-up in Santiago, Chile.
Earlier today, Chile cancelled the APEC summit planned for November because of huge protests that have hit the country related to the high cost of living.
Markets wobbled on the initial announcement of the cancellation of the APEC summit but I don’t see it as any true obstacle to a Phase One deal. It’s a logistical problem but no reason to walk away from an agreement that — by all accounts — is very close to completion.

The Fed decision today is all about the communication risks

  
  Analysis

The Fed probably wants to keep the market exactly where it is

The Fed probably wants to keep the market exactly where it is
The market has priced in a near-certainty of a cut today along with a 71% chance they will hold pat at the next meeting on Dec 11.
That pricing is probably where Powell would like to see the market finish the day. In an ideal world, they could cut today and not change guidance at all, leaving everything as it is.
However the statement itself is long and there are a multitude of communication risks. Then Powell will have to navigate a press conference.
Christopher Harvey, head of equity strategy at Wells Fargo Securities argues that Powell is due for a communication mishap.
“The last few times we heard him speak we got the distinct sense that the message he intends to convey is not always received as such by the markets,” Harvey wrote in a client note. “When it comes to commentary, we believe that less is more,” Harvey said. “Obviously, requiring a press conference for every Fed meeting suggests the Chairman holds a much different view. We shall see.”
For me, the biggest risk is that the FOMC wants to push back against the idea of a continued easing cycle. But by doing that, they risk sending a hawkish message that sparks a risk-off trade.
Go to top