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Money Talk: Fed Holds Steady, but the Dollar’s Got Swagger

Morgan Stanley’s financial fortune tellers are anticipating a bit of a snoozer at the Federal Reserve’s upcoming meeting on November 1st. They predict that the policy rate, currently cozy at 5.375%, will remain right where it is. While the Fed might give a nod to the improved economic activity, they’re likely to mention that the financial conditions are giving them a bit of a headache, hinting at a pause in their tightening plans. It’s as if Chair Powell started this symphony, and the rest of the band is just playing along.

Morgan Stanley’s rates gurus, on the other hand, aren’t losing sleep over it. They reckon the FOMC meeting won’t cause any major turbulence in U.S. rates; it’s all about the technical details and surprise data twists.

Now, when it comes to the foreign exchange playground, Morgan Stanley has some swagger of its own. They’re calling it: the dollar’s going to flex its muscles by the end of the year. Thanks to yield differentials shimmying in a USD-positive direction and some not-so-sure vibes in the Euro Area, the dollar is expected to have a strong finish, all while keeping its cool on the home front. Buckle up, folks, the greenback might just have a surprise ending for 2023!

Dow ends lower on drag from Google, Boeing; yields resume rise

The Dow closed lower Thursday, pressured by a Meta-led slump in tech as concerns about slowing advertising growth offset better-than-expected quarterly results.

The Dow Jones Industrial Average fell 0.8% or 251 points, and the S&P 500 fell 1.2%, the Nasdaq fell 1.8%.

Meta leads tech lower after downbeat outlook on advertising demand

Meta Platforms (NASDAQ:META) fell more than 3% after it flagged weaker advertising demand seen in the fourth quarter so far. Concerns about slowing growth overshadowed Q3 results that beat analyst estimates on both the top and bottom lines amid cost-cutting measures that boosted margin.

The social media giant attributed some of the weakness to the Israel-Hamas conflict that has impacted ad-spending in the Middle East.

“[W]e have observed softer ad spend in the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook,” the company said in its Q3 earnings call following the quarterly results on Wednesday.

Other stocks including Alphabet Inc Class A (NASDAQ:GOOGL) and Pinterest Inc (NYSE:PINS) that also rely on advertising revenue were sharply lower.

IBM rallies on Q3 earnings beat, sidesteps tech slump

International Business Machines (NYSE:IBM) jumped more than 5% after its Q3 results topped Wall Street estimates, underpinned by ongoing growth in its software segment as the technology company’s investment into artificial intelligence appears to bearing fruit.

Revenue grew 6.3% reflecting “the demand for hybrid cloud and AI services,” Wedbush said in a note.

UPS falls to 52-week low as guidance disappoints; Hasbro hammered on earnings miss

United Parcel Service (NYSE:UPS) fell more than 5% after the shipping company trimmed its guidance following mixed third-quarter results as revenue fell short of estimates.

The company said now expects full-year 2023 consolidated revenue of $91.3B to $92.3B, down from a prior estimate of $93B, as unfavorable macro-economic conditions weigh on demand.

Hasbro Inc (NASDAQ:HAS), meanwhile, reported third-quarter results that missed analyst expectations and the toy maker lowered its annual revenue guidance ahead of the key holiday quarter, sending its shares more than 11% lower.

“The outlook incorporates the impact of the broader Toy category declines, which is impacting the Consumer Product Segment,” Hasbro said.

Treasury yields slip as signs of easing inflation offsets strong Q3 economic growth

Treasury yields fell as signs that inflation eased more than expected in the third quarter overshadowed stronger-than-expected preliminary data showing the U.S. economy grew at its fastest quarterly pace since 2021.

U.S. Treasury yields fell after the data because “markets placed greater emphasis upon a small miss by core PCE inflation and ignored a beat by Q3 GDP alongside impressive details,” Scotiabank Economics said in a note.

The slew data come ahead of the core price consumer expenditure index data due Friday that is expected show inflation in the 12 months through September slowed to a 3.7% pace from 3.9% the prior month.

“We expect the Fed to recognize recent strength in economic activity but, with tightening financial conditions, to soften guidance about the need for additional tightening. Chair Powell’s recent speech set the tone,” Morgan Stanley, forecasting the Fed to remain on an “extended hold” on rates through 2024.

Southwest, Spirit Airlines slip as pent-up travel demand wanes

Southwest Airlines Company (NYSE:LUV) posted mixed third-quarter results as revenue missed Wall Street estimates and the airline said it planned to decrease future capacity as pent-up travel demand wanes.

Spirit Airlines Inc (NYSE:SAVE) were also lower, with the latter coming under pressure after flagging a “disappointing outcome” in Q3 amid softer travel demand.



Revving Up the Labor Game: Ford Leads the Way, GM and Stellantis Play Catch-Up

In the high-stakes world of auto labor negotiations, General Motors and Stellantis (NYSE: STLA) found themselves in the hot seat on Thursday, as they scrambled to put an end to a six-week-long strike. This scramble followed Ford Motor’s (NYSE: F) recent victory in securing a tentative contract deal, thereby setting a pace for the entire Detroit trio. With Ford emerging as the frontrunner, discussions between the United Auto Workers (UAW) and GM and Stellantis were in full swing. Sources hinted at positive developments in the talks concerning economic matters, painting a picture of a potential deal in the making. But, of course, in the world of labor negotiations, “potential” is the name of the game.

Ford’s recently inked agreement, still awaiting the nod from union members, packs a punch with a 25% wage hike spread over a 4.5-year contract, improved retirement benefits, and the long-overdue scrapping of lower-tier pay in certain Ford operations. Not to mention, it speeds up the journey to top-tier pay, taking it from an eight-year trek to a brisk three-year sprint. The UAW even secured the right to kick up a fuss over plant closures. However, as John Lawler, Ford’s Chief Financial Officer, pointed out, the strike came at a cost – a whopping $1.3 billion in earnings and a whopping 80,000 vehicles left idling. The restart of production, he noted, wouldn’t be a walk in the park. And for the finance folks, the labor deal adds a few extra digits to the cost, with an estimated $850 to $900 tacked onto each vehicle in higher labor expenses for U.S. production. The saga isn’t over yet, as the fate of battery plant workers remains an intriguing subplot.

This labor negotiation is nothing short of a plot twist. It rewinds concessions made by the UAW since 2007, when the auto industry was veering towards financial catastrophe. However, it’s not the full-on blockbuster the UAW initially envisioned, with its requests for a 40% pay boost, a 32-hour workweek, and the resurrection of defined benefit pensions left partially unmet. In a world where staying competitive is key, the carmakers argue that excessive pay hikes could become a pitfall, especially when pitted against budget-savvy rivals like Tesla (NASDAQ: TSLA), the reigning champion of electric vehicles. The end result? A labor deal boasting a more than 33% pay bump when accounting for all the financial acrobatics, according to the UAW. So, while the car industry is transforming, Ford’s front-row victory sets the tone for a new era in labor talks. Fasten your seatbelts; this is one ride that’s far from over.

Intel’s Earnings Turbocharge Tech Enthusiasts: Q3 Proves PCs Still Pack a Punch!

In a stunning twist, Intel Corporation (NASDAQ: INTC) flexed its tech muscle on Thursday, exceeding even the loftiest expectations for the third quarter. Wall Street’s best and brightest were left wide-eyed as Intel’s earnings of $0.41 per share soared past the predicted $0.22, while the revenue clocked in at a hefty $14.2 billion, overshadowing the estimated $13.53 billion.

It’s like the company played a game of ‘hide and seek’ with those PC skeptics and proved that PC demand had merely been napping. The Client Computing Group, the heart and soul of Intel’s PC business, had a minor hiccup with a 3% revenue decline, but it’s not a storm in a teacup when you’ve got such stellar overall numbers.

Buckle up for Q4, as Intel is forecasting adjusted EPS of $0.44 on revenue ranging from $14.6 billion to $15.6 billion, showing they’re not just thinking inside the box; they’re designing the box everyone else wants to be in! After these dazzling results, it’s no surprise that Intel stock rocketed up 5% in after-hours trading.

Smart investing on a Friday is like picking the ripest fruit from the investment tree. Just as Fridays signal the weekend’s arrival, they can also usher in unique market dynamics. It’s a bit like getting a sneak peek into the stock market’s weekend plans. So, while others might be in weekend mode, wise investors can seize the opportunity to assess their strategies, explore new opportunities, and maybe even discover a hidden gem before the market clocks out for the weekend. After all, making your money work for you is a 24/7 gig, and Fridays are just another chance to outsmart the market, even if it’s itching for that Friday feeling.