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Monday, October 22, 2022
Today’s newsletter is from Brian Sozzi, editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Read this and more market news on the go with the Yahoo Finance App.
Every Saturday I have some kind of ritual.
First I do two workouts – one in the morning and one in the afternoon. Second, I relax by waxing my car. And three: I’m re-watching some of the camera content I’ve produced over the week. Call it the obsessive pursuit of constant improvement. Did I miss a question for a top manager? Was I too strict for a company’s quarter? Did I smile when I should have been intensely serious? All questions I discuss.
During this weekend’s analysis, I realized that I was using the word bizarre a lot when breaking down corporate earnings and the general start of the earnings season.
This image was created by Yahoo Finance using the Dall-E image generator. (Open AI)
Just look at a few things we covered on Yahoo Finance:
Bank of America CEO Brian Moynihan tells me that consumer spending is up 10% through October. Which recession?
American Express CEO Stephen Squeri tells me in an excited phone call that the market misunderstands his quarter and advice, and he doesn’t see a recession on the horizon.
Snap’s stock has been ravaged by an ongoing advertising slowdown (and terrible execution by CEO Evan Spiegel) driven by the global economic slowdown.
Generac is posting a profit warning saying there is too much generator stock in the sales channel. Bring on the energy-saving discounts!
Whirlpool – known for impressive execution – lowers its full-year outlook and also has inventory levels that are too high for the current economic environment.
Verizon is publishing bland subscriber additions because consumers don’t like the company’s recent price increases. CEO Hans Vestberg took a more cautious tone with the company in my opinion in an interview with Brad Smith of Yahoo Finance.
AT&T CFO Pascal Desroches tells me that consumers are trading up for higher phone plans and that it added a solid number of new subscribers in the third quarter.
Netflix stocks are getting big love from investors for a somewhat comeback quarter — with everyone overlooking $1 billion in expected revenue this year due to the stronger dollar.
P&G CEO Jon Moeller tells me he doesn’t see a recession, even as his company continues to push price hikes on everything from Tide laundry detergent to Gillette razors.
Alcoa’s quarter was bad.
I wasn’t all that excited about the WD-40 quarter either.
Read all about it here: these are bizarre times for investors, because these are bizarre times for listed companies.
The interest is rising. Supply chain inflation is still high. Some companies are doing great in this environment, others less so. There really is a lack of a clearly defined story for investors to rally (or avoid) at this point. And oh yes, the market could completely ignore corporate profits and be smashed to pieces by one word uttered by a member of the Federal Reserve on TV.
So what to do? UBS chief investment officer Mark Haefele provided a good framework for evaluating these bizarre times, which will prevent markets from making sustainable progress until these conditions change:
“First, the most recent US inflation and labor market data suggest that rate cuts remain a long way off, even though the Fed is likely to stop raising rates in the first quarter of next year. Core consumer price inflation is at its highest level since 1982, the Fed has consistently made it clear that it is more willing to make policy “too tight” than to risk not doing enough, and the job market is tight.
Second, the consensus forecast, which assumes global growth of 5% in 2023, does not seem to take into account the potential negative effects of a period of tight monetary policy. Numerous leading indicators point downward. And China remains a source of near-term risk as it attempts to resolve issues related to COVID-19 and the real estate market.
Third, the continued rise in interest rates also means that despite falling absolute numbers, valuations are not yet fully accounting for a bear case, especially in the US. The sell-off in equities can almost entirely be explained by higher interest rates, while lower growth expectations have not yet been priced into equities.”
On that note, Happy Wealth Building in what could be another bizarre week.
What to watch today
8:30 a.m. ET: Chicago Fed National Activity Index, September (0.00 during the previous month)
9:45 a.m. ET: S&P Global US Manufacturing PMI, October tentative (51.0 expected, 52.0 over prior month)
9:45 a.m. ET: S&P Global US Services PMI, October tentative (49.6 expected, 49.3 over the previous month)
9:45 a.m. ET: S&P Global US Composite PMI, preliminary October (49.5 over prior month)
Bank of Hawaii (BOH), Crande (CR), Discover Financial Services (DFS), Logitech International (LOGI), Schnitzer Steel (SCHN), Zions Bancorp (ZION)
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