19 Oct 2022

Last night, the three major U.S. stock indexes fluctuated lower. As of the close, the Dow rose 1.12%, the Nasdaq rose 0.9%, and the S&P rose 1.14%. The yield on the 10-year U.S. Treasury bond fell 0.1% to close at 4.011%, a difference of about -42 basis points compared with the yield on the two-year Treasury bond. The fear index VIX fell 2.77%. Brent crude closed down 1.3%. Spot gold closed up 0.04% at $1,651.43 an ounce. The dollar index remained high, closing at 112.05.

Fitch on Tuesday lowered its U.S. economic growth forecast for this year and next, expecting U.S. GDP to grow by just 0.5% next year, down from the firm's June forecast of 1.5%. JPMorgan's U.S. Treasury client longs rose 4%, turning neutral, while shorts were flat. The net-short ratio was the lowest since June 27. The Fed released the minutes of the August-September discount rate meeting, and some Fed governors tended to slightly or significantly increase the discount rate. Japan, the largest holder of U.S. Treasury bonds, reduced its holdings of U.S. Treasuries by $34.5 billion in August, bringing the total to $1.2 trillion, the lowest level since 2019.

The OPEC secretary-general said that oil requires $12.1 trillion in investment over the long term, and if investment is not met, there could be severe shortages and volatility. The European Commission has proposed a package of emergency energy measures. The EU proposes to launch rules for joint gas purchases between EU countries, requiring countries to give the European Commission the mandate to propose a temporary "amendment mechanism" to set a maximum price for Dutch TTF gas transactions. The White House will make a statement tomorrow on lowering gasoline prices. Russia's Lukoil is considering splitting its trading unit to sell its refinery in Italy. The Ukrainian foreign minister submitted a proposal to the Ukrainian president to sever diplomatic ties with Iran.

The Fed's Kashkari said that so far, core inflation has not shown signs of "peaking", and the supply-side issue has decided to make a hard landing. If more help can be obtained from the supply side, there is no need to do anything on interest rates. So many jobs; don't think the US is in a recession, and once convinced that inflation has peaked, would be comfortable pausing rate hikes, guessing that after this rate hike cycle, a return to low inflation will follow.

Apple rose 0.94%. The new iPad Pro with M2 chip will be released on October 18 local time; it will launch a foldable iPad in 2024, not a foldable iPhone.

Microsoft rose 0.41%, confirming that it will lay off nearly 1,000 jobs, involving divisions such as Xbox and Edge.

Amazon rose 2.26% as Amazon Cloud Services (AWS) will build an infrastructure area in Thailand and plans to invest more than $5 billion in the country over the next 15 years.

Tesla rose 0.38%, the production capacity of Tesla's Berlin plant doubled, and sales in Germany rose significantly; Tesla's German 4680 battery production line was blocked and will move back to the United States, intended for subsidies from the Biden government.

Twitter rose 2.05% after people familiar with the matter said it froze employees' equity award accounts as the deadline for a deal with Musk loomed.

Meta fell 0.93%, pressured by British regulators, Meta agreed to abandon the acquisition of GIF image search engine Giphy.

Goldman Sachs rose 2.33%, and Q3 profit fell 43.94% year-on-year, but higher than market expectations. Lockheed Martin rose 8.69%, Q3 revenue missed expectations but EPS beat expectations, and announced an additional $14 billion in share repurchase authorization.

Intel fell 2.08%, considering sharply lowering the IPO valuation of its Mobileye business to less than $20 billion, with an IPO price of $18-20 per share.

Netflix rose by more than 13% after the market, and Q3 revenue and EPS exceeded expectations. Starting from the fourth quarter earnings report in January 2023, it will not provide paid membership guidance for the next quarter.

Sources from: Investing.com; Reuters.com

Louis Yap

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