Morning News: May 29, 2023
Posted by Eddy Elfenbein on May 29th, 2023 at 7:14 am

How BRICS Became a Real Club and Why Others Want In

Seize, Not Just Freeze, Russian Assets? Why That’s Hard

China Rejects US Claim That It’s ‘De-Risking’ Not ‘Decoupling’

A Chinese Alternative to Bloomberg Terminals Quietly Limits Information Overseas

Bear Market Looms for Chinese Equities as Investors Lose Faith

Turkish Lira Falls After Erdogan Wins Another Five Years in Power

It’s Not Even ‘Deflation’ In the False Way That Monetarists Define It

Yellen’s Debt Limit Warnings Went Unheeded, Leaving Her to Face Fallout

Debt Deal Adds Brake on US Economy Already at Risk of Recession

Why Spending Cuts Likely Won’t Shake the Economy

The AI Boom Runs on Chips, but It Can’t Get Enough

The CEO of YouTube Has a Favorite Video and a Plan to Win Over Anyone Watching TV

Volkswagen Bets an Old SUV Can Help It Win Over Americans

Why Americans Are Having Fewer Babies

Why Do Almost Half of Americans Leave Paid Time Off on the Table?

It’s ‘More Expensive to Live,’ and Workers Are Tapping 401(k)s for Help

Why You’re Losing More to Casinos on the Las Vegas Strip

The Jersey Shore—Yes, That Jersey Shore—Is Now a Luxury Destination

Salt Life Is Coming to a Beach Near You

Alo Yoga Is Beating Lululemon at Its Own Game

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Morning News: May 26, 2023
Posted by Eddy Elfenbein on May 26th, 2023 at 7:04 am

Europe’s Economic Engine Is Breaking Down

How a Trade Loophole May Be Letting in Chinese Imports Made With Forced Labor

Chip Companies, Wary of Break With China, Seek Looser Limits on Federal Cash

Emerging Debt Deal Would Raise Limit, Cap Spending for Two Years

Popular Hedge-Fund Trade Draws Fresh Scrutiny as Debt Battle Rages On

Credit Suisse Loses Case Against Georgian Tycoon

BofA Warns of Equity Stress as 2023 Flows Turn Flat

Rolex Cave Watch and Patek Lead Declines in Subdial Index

The Complete Guide to Haggling in This Economy

States Are Not Entitled to Windfalls in Tax Disputes, Supreme Court Rules

Gasoline Prices, a Source of Pain Last Year, Have Come Way Down

How a Pandemic-Era Program Became a Magnet for Fraud

Entry to Middle Class or False Promise? Franchises Face Scrutiny

How AI Is Catapulting Nvidia Toward the $1 Trillion Club

Nvidia’s $184 Billion Jump in Five Charts

Cathie Wood’s ARKK Dumped Nvidia Stock Before $560 Billion Surge

Hyundai and LG Plan $4.3 Billion Battery Plant in Georgia

Inside Disney and Comcast’s Fight Over the Future of Hulu

Companies Find Ambitious Logistics Strategies Haven’t Delivered

Elon Musk’s Neuralink Says It Has FDA Approval for Study of Brain Implants in Humans

Record $279 Million Whistleblower Award Went to a Tipster on Ericsson

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Morning News: May 25, 2023
Posted by Eddy Elfenbein on May 25th, 2023 at 7:05 am

Companies Are Finding It’s Not So Simple To Leave Russia. Others Are Quietly Staying Put

Once a Symbol of China’s Growth, Now a Sign of a Housing Crisis

China Warnings Flash Across Global Markets

It Just Had an Energy Crisis, Now Europe Faces a Food Shock

Germany Enters Recession in Blow to Europe’s Economy

US Credit Rating at Risk of Fitch Cut on Debt-Limit Impasse

The Way Out of the Debt Crisis Could Lead Back Through the Civil War

Carl Icahn’s Battle with Illumina Comes to a Head

Bill Ackman Says Icahn ‘Somewhat’ Like Archegos as Stock Plunges Anew

Nvidia Poised for Record Sales as AI Demand Kicks In

A Hiring Law Blazes a Path for A.I. Regulation

Reid Hoffman Is on a Mission: To Show A.I. Can Improve Humanity

Best Buy Tops Profit Estimates Despite Continuing Sales Slump

Sergey Brin Has a Secret Plan to Put Airships Back in the Skies

Adidas After Yeezy

How Retailers Should Start Catering to Hybrid-Working Customers

Target Lands in Culture-War Crosshairs Over Pride Month

Strikes in Europe: How to Plan Around Them

Half-Empty a Year Ago, Cruises Are Now Packed Like Sardines

Taylor Swift’s Tour Is Wreaking Havoc on Ticket Reselling

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Morning News: May 24, 2023
Posted by Eddy Elfenbein on May 24th, 2023 at 7:04 am

Export Controls Emerge as a Favored US Tool Targeting Russia and China

Lula Lashes Out and Sends Warning to Central Bankers Everywhere

EU Sets Out Plans to Cut the Price of Financial Products

UBS to Have ‘Incredibly High Bar’ on Credit Suisse Staff It Takes On

UK Inflation Sinks Below 10% for the First Time Since August

Debt-Limit Doomsday Clock: What June Looks Like for US Treasury

Default on U.S. Debt Risks ‘Permanently’ Denting Nation’s Credit Rating

Debt-Ceiling Fight Sends Investors Hunting for New Havens

Top Jupiter Fund Manager Says Markets Are Wrong on Fed

After Nearly Collapsing, Indian Billionaire’s Stock Is Back on the Rise

Chinese Stocks Wipe Out 2023 Gains as Headwinds Intensify

German Bosses Defy Scholz’s Plea to Shift Away From China

Almost 200,000 Job Cuts in Tech Pushes New Grads to Wall Street

Apple Strikes Multibillion-Dollar Supply Deal With Broadcom

Netflix Cracks Down on Password Sharing

Toyota, Ford and GM Fight for Midsize Truck Dominance

Canada’s Homebuyers Need Help From ‘Bank of Mom and Dad’

Why Tipping Prompts Are Suddenly Everywhere

Kohl’s Shares Spike as Retailer Reports a Surprise Profit

Baby-Formula Makers Face FTC Investigation for Collusion

Target Removing Some LGBTQ Merchandise Following Customer Backlash

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CWS Market Review – May 23, 2023
Posted by Eddy Elfenbein on May 23rd, 2023 at 7:21 pm

(This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

The S&P 500 Briefly Breaks Above 4,200

Wall Street continues to be surprisingly serene. Despite some scary headlines such as the endless debt ceiling debate or a looming recession, stock prices are holding up fairly well.

Last Thursday, the S&P 500 closed at a nine-month high. The index got above that level during the day on Friday and again on Monday but wasn’t able to close at another new high. Today, the market lost a little over 1%.

In this week’s issue, I want to focus on one of the non-traditional ways of looking at the economy which is through corporate earnings reports.

Last week, we discussed Home Depot and its less-than-stellar outlook. This week, we’re going to look at Lowe’s and what that means for the economy. Incidentally, Lowe’s and Home Depot aren’t the only retailers who are offering reduced guidance. Target and Walmart have also cautioned investors over what to expect later this year.

First, though, let’s take a step back and look at the larger picture. The rally that began in October appears to still be going. Measuring for the October low, the S&P 500 is up nearly 20%. That’s a nice run for a few months; however, the index is still far from its all-time high from early last year.

Last year, we talked a lot about bear market rallies. This latest run appears to be something different from the string of head-fakes we got in 2022.

I haven’t written much on the debt ceiling debate because there’s not much to add. I prefer to steer clear of politics, and this is political theater at its most theatrical. Everyone wants to appear tough, principled and uncompromising, but at some point, sensible heads will prevail. There’s too much at risk.

This week, Treasury Secretary Janet Yellen said the U.S. government could default as early as next week. Around Washington, this is being called X-Day. Before, Yellen had said that it’s likely the U.S. government will run out of money. Now she says it’s “highly likely.”

Technically, the government hit the debt limit in January, but it’s been using “extraordinary” measures to keep things going. Secretary Yellen said that due to the volatile nature of tax payments, it’s hard to determine a precise date when we’ll run out of money. The Bipartisan Policy Center said that if Congress doesn’t act, Uncle Sam will go bust sometime between June 2 and June 13. We’ll see.

But what about the stock market? As I said before, the market’s been pretty serene lately. You’d think that if we really were in trouble, the market would be telling us. Another explanation is that the market well understands that this is all for show.

One area where you can see the impact of the debt ceiling debate is on the very short-term yields of the U.S. Treasury market. The yield on the one-month Treasury is currently around 5.7% which is comfortably above the Federal Reserve’s target rate of 5% to 5.25%. This suggests a small risk premium for lenders, especially if you have to miss a debt payment.

The two-month Treasury is much better behaved as its yield is more than 30 basis points less than the one-month Treasury. Again, perhaps the market sees all this quickly passing.

Here’s a chart which really shows you how unusual the short-term Treasury market is right now. This is the spread between the two-month and one-month Treasury bill yields. It looks like a really bad EKG:

You’ll notice that in 2020 and 2021, there was barely any reading on the spread between the two-month and one-month bills. Once the Fed started talking about hiking rates, the spread started to widen.

That makes perfect sense as the spread is like a shorthand way to bet on the Fed raising rates. Still, in 2022, the spread never got very high.

Lately, however, everything’s gotten completely chaotic. The one-month/two-month spread has jumped from negative 100 basis points to positive 150 basis points. This has happened over the course of a few days.

Even if the Fed has to delay a debt payment, I don’t see that lasting very long. That means many Americans won’t be getting paid on their fixed-income investments. That’s a voting block I would not want to upset.

For now, don’t be worried about the debt ceiling debate. The stock market isn’t worried – neither should you be.

Lowe’s Lowers Guidance

Last week, I told you about the problems at Home Depot (HD). The company posted its worst sales miss in 20 years. As I said, the Home Depot earnings report probably tells us more about the true state of the U.S. than several government reports do.

The same can be said for Lowe’s (LOW), and today we got their earnings report. For its fiscal Q1 (ending in early May), Lowe’s said that it made $3.67 per share. That was above Wall Street’s estimate of $3.44 per share. LOW’s revenue was $22.35 billion which topped estimates by $750 million. Same-store sales fell by 4.3%. That was below Wall Street’s forecast for a decline of 3.4%.

The good news is that shares of LOW closed higher today. This is a good example of a stock closing higher not because of good results but simply because Wall Street was expecting something a lot worse. As always, investing is a game of expectations.

The big takeaway is that Lowe’s lowered its guidance for the rest of this year. The company now sees sales coming in between $87 billion and $89 billion. That’s down from the previous range of $88 billion to $90 billion. Lowe’s sees same-store sales falling by 2% to 4%. The previous forecast was flat to down 2%.

Lowe’s also said that full-year earnings will range between $13.20 and $13.60 per share. That’s down from the previous forecast of $13.60 to $14.00 per share.

That means that Lowe’s is going for about 15.2 to 15.7 times this year’s earnings estimate. That’s not bad, but I would hold off from Lowe’s just yet. Earnings warnings are like cockroaches — for every one you see, there are always a few more hiding.

As an investor, I’m happy to be a little late to a good story. There’s no need in trying to be a hero by investing at the precise low. I don’t mind holding off on picking up a stock like Lowe’s until interest rates start to fall or the company raises guidance. I want to see better news from Lowe’s before I would build a position.

I should add that we got one piece of encouraging news from the housing sector today. The report on new homes sales was better-than-expected. New homes were up 4.1% in April and up 11.8% over the last year. Right now, the inventory of homes is very low.

Update on Previous Stocks

Last month, we looked at Whirlpool (WHR). This is an interesting case because conventionally, Whirlpool appears to be an inexpensive stock. Looks, however, can be deceiving.

Shortly after we profiled Whirlpool, the company released a very strong earnings report. For Q1, Wall Street had been expecting $2.28 per share. Instead, WHR earned $2.66 per share. The company also reaffirmed its guidance for earnings this year of $16 to $18 per share.

Traders hated the report. In two days, WHR lost over 8%.

The story here is that Whirlpool is working to change its entire business. The company has divested its businesses in Africa and the Middle East, but it’s not leaving Europe. Instead, Whirlpool plans to work with Arcelik, a Turkish company, to make a company that’s focused on the European market.

Whirlpool recently closed on a $3 billion acquisition of Emerson Electric’s InSinkErator business. Whirlpool has also been cutting costs. The company expects to save between $800 million and $900 million this year.

Like Lowe’s, Whirpool appears to be cheap. The dividend yield is over 5%, but it all depends on how well the company can transition itself. I’m going to continue to watch Whirpool, but, like Lowe’s, I want to see hard evidence first.

One recent winner, in addition to United States Lime & Minerals (USLM) is Hingham Institution for Savings (HIFS). On May 2, I said it was my favorite regional bank and the stock is up over 10% since then.

This has been a slow period on Wall Street but that may soon change. The Fed minutes are due out tomorrow. On Thursday, we’ll get an update on the Q1 GDP report. Then on Friday, we’ll see the latest PCE price data.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.

Morning News: May 23, 2023
Posted by Eddy Elfenbein on May 23rd, 2023 at 7:06 am

Russia Pushes India for Help to Avert Global Financial Isolation

Australia Tries to Break Its Dependence on China for Lithium Mining

Saudi Energy Minister Tells Oil Speculators to ‘Watch Out’

Why Inflation Erupted: Two Top Economists Have the Answer

Fed Rate Path Hinges on Trade-Off Between Stable Banks or Prices

New Report Underscores Increasing Chances of U.S. Default in Early June

Why We May Need a Stock Market Plunge to Solve the Debt Ceiling Crisis

$793 Billion PGIM Fund Is Betting on Rerun of US Debt Drama

PacWest Shares Jump After $2.6 Billion Real Estate Loan Sale

Citi Says Buyers Plow $21 Billion Into US Stocks

Jamie Dimon Has No Plans to Step Down as JPMorgan CEO Anytime Soon

Carl Icahn Is $15 Billion Poorer After Hunter Becomes the Hunted

The Son of a Murdered Tycoon Who Grew Up to Become a Ponzi Scheme Fugitive

With Ban on Micron, China Escalates Microchip Clash With U.S.

TikTok Sues Montana Over State’s Ban of Its Service

Meta Fined $1.3 Billion Over Data Transfers to U.S.

Shareholder Activists Drag Companies Into U.S. Culture Wars

Retailers Clamp Down on Returns

Just Build the Homes

Hilton, Marriott Square Off in Extended-Stay Battle

One Scoop of the World’s Most Expensive Ice Cream Will Set You Back Nearly $7000

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Morning News: May 22, 2023
Posted by Eddy Elfenbein on May 22nd, 2023 at 7:07 am

China’s $23 Trillion Local Debt Mess Is About to Get Worse

In Contrast to China, Japan at G-7 Basks in Newfound Appeal to Companies

Goldman Sachs Says the US Has an Extra 8 Days Before it Runs Out of Money to Pay Its Bills. That Could Buy It More Time to Negotiate the Debt Ceiling

Morgan Stanley Says US Rally Isn’t Start of Bull Market

America’s Biggest Bank Is Everywhere—and It Isn’t Done Growing

JPMorgan Boosts Net Interest Outlook on First Republic Deal

Immigrants’ Share of the U.S. Labor Force Grows to a New High

Minnesota Passes Bill Seeking to Ensure Minimum Wage for Gig Workers

An Oil Refiner Leans on Manure to Provide a Greener Future

An American Oil Hub Is Pivoting to Offshore Wind

The U.S. Needs Minerals for Electric Cars. Everyone Else Wants Them Too

How Did Hyundai Get So Cool?

Silicon Valley, Cradle of Computer Chips, Gains Big New Research Center

Micron Stock Tumbles as China Says Chips Are Security Risk

Apple’s Relentless Rally Puts $3 Trillion in View

Meta Fined $1.3 Billion Over Data Transfers to U.S.

As Preteens Ignore Social-Media Age Limits, Governments Push for Better Checks

Disney’s ABC, ESPN Weakness Adds Pressure to Make Streaming Profitable

The E-Sports World Is Starting to Teeter

Ultra-Low Fare Pioneer Bids Farewell to Ultra-Low Fares

Messi, Ronaldo Lead Saudi Arabia’s Multibillion-Dollar Makeover

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Morning News: May 19, 2023
Posted by Eddy Elfenbein on May 19th, 2023 at 7:04 am

To Counter China, G7 Countries Borrow Its Economic Playbook

Japanese Stocks Have Hit a 33-Year High. Warren Buffett Helped.

What Would Happen if the U.S. Defaulted on Its Debt

Fed Officials Consider Skipping a Hike in June — But Don’t Call It a Pause

Even a ‘Mild’ US Recession Comes With Steep Price in Lost Jobs

Rebound in Treasury Yields Fueled by Resilient Growth, Inflation

BlackRock’s Wei Li Says the ‘Goldilocks’ Era is Over for Markets

ESG Investing Goes Quiet After Blistering Republican Attacks

SVB’s Collapse Resurrects the Idea of Banking Without Bank Runs

Home Prices Posted Largest Annual Drop in More Than 11 Years in April

America’s Semiconductor Boom Faces a Challenge: Not Enough Workers

TikTok Users Sue Montana, Calling State Ban Unconstitutional

A.I. Is Having a ‘Netscape Moment’

Google Is Spared a Search-Engine Switch by a Major Partner

Amazon Is Everywhere. That’s What Makes It So Vulnerable

Disney Scraps Plan for $900 Million Florida Campus, Closes ‘Star Wars’ Adventure Hotel

‘Movie Theaters Are the Marketplace of Free Ideas’

ESPN Plans to Stream Flagship Channel, Eyeing Cable TV’s Demise

Kia and Hyundai to Pay $200 Million to Settle Suit Over Car Thefts

Dozens of Car Models Tied to Potentially Explosive Air-Bag Part, WSJ Finds

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Morning News: May 18, 2023
Posted by Eddy Elfenbein on May 18th, 2023 at 7:07 am

An Untested Oil Price Cap Has Helped Choke Revenue to Russia

As Oil Giants Retreat Globally, Smaller Players Rush In

A Pipeline Pushed to the Limit Preceded Keystone’s Worst Oil Spill

How to Use the Debt Ceiling to Inflict Cruelty on the Poor

Wall Street Fears $1 Trillion Aftershock From Debt Deal

A $1 Trillion T-Bill Deluge Is Painful Risk of a Debt-Limit Deal

Micron Outlines $3.6 Billion Investment in Chip Plant With Japan’s Backing

Alibaba to Spin Off Cloud Unit. Stock Falling Despite Earnings Beat

AT&T Is Spending Billions to Wire U.S. for Fast Internet as Rivals Take Different Path

Apple’s New Headset Meets Reality

In Battle Over A.I., Meta Decides to Give Away Its Crown Jewels

TikTok Banned in First US State, Bringing Legal Test to Montana

For Gen Z, Playing an Influencer on TikTok Comes Naturally

The 31-Year-Old Learning to Run the World’s Biggest Meat Supplier

Job Cuts Ripple Across Corporate Europe, Despite Resilient Economy

For Executives Only, CEOs Amass Billions in Savings With ‘Top Hat’ Plans

Getting an MBA Closes the Gender Pay Gap—for a Little While

Job Prospects for Black Workers Have Never Been Better—In Ways That Might Last

American Workers Testing Positive for Marijuana Reaches 25-Year Record

The Scramble to Take Over What Bed Bath & Beyond Left Behind

Why Wealthy Homebuyers Are Flocking to Puerto Rico

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Morning News: May 17, 2023
Posted by Eddy Elfenbein on May 17th, 2023 at 4:35 am

EU States Approve World’s First Comprehensive Crypto Rules

China’s Recovery Loses Steam, Signaling Trouble for Global Economy

U.S. Tech Espionage Team Unveils First Cases Involving China and Russia

UBS Sees $35 Billion Gain on Credit Suisse, Warns of Legal Costs

‘Foreign Investors Are Back’: Japan Stocks Surge To Their Highest Since 1990

Wall Street’s Biggest Banks Face a Harsh Reality Check in China

Default Fears Rattle Main Street Investors

JPMorgan Asset Says Markets Are Right to Bet Fed Cuts Are Coming

Shoppers Boosted Retail Sales in April, Reversing Two Months of Declines

What Everyone—Except the U.S.—Has Learned About Immigration

America’s Biggest Source of Jobs Is Cooling Off

Americans Are Falling Behind on Their Bills

OpenAI’s Sam Altman Urges A.I. Regulation in Senate Hearing

The IRS Is Building Its Own Online Tax Filing System. Tax-Prep Companies Aren’t Happy

Burning Man Becomes Latest Adversary in Geothermal Feud

Drug Shortages Near an All-Time High, Leading to Rationing

Elon Musk Says Tesla Will Try Advertising

Siemens Raises Fiscal 2023 Guidance After 2Q Profit Soared

Here’s How Much Wealth You Need to Join the Richest 1% Globally

Taco Bell is Fighting to Cancel the ‘Taco Tuesday’ Trademark

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