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Elon Musk Puts Tesla’s Fate in Twitter’s Hands

Elon Musk, head of Tesla and its largest shareholder, once again surprised the market. Over the weekend, Elon Musk put out the survey below asking Twitter…

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This article was originally published by Real Investment Advice

Elon Musk, head of Tesla and its largest shareholder, once again surprised the market. Over the weekend, Elon Musk put out the survey below asking Twitter followers to sell 10% of his Tesla holdings. About 58% of the 3.5 million people that voted support his proposal to sell. In reply to his survey, he says he will “abide by the results.” Elon Musk owns nearly a quarter of Tesla. Shares in Tesla fell 5% yesterday. But, surprisingly, his survey and its results did little to slow down the broader market.


What To Watch Today

Economy

  • 6:00 a.m. ET: NFIB Small Business Optimism index, October (99.5 expected, 99.1 in September)
  • 8:30 a.m. ET: PPI Final Demand, month over month, October (0.6% expected, 0.5% in September)
  • 8:30 a.m. ET: PPI excluding food and energy, month over month, October (0.5% expected, 0.2% in September)
  • 8:30 a.m. ET: PPI Final Demand, year over year, October (8.6% expected, 8.6% in September)
  • 8:30 a.m. ET: PPI excluding food and energy, year over year, October (6.8% expected, 6.8% in September)

Earnings

Pre-market

  • 7:00 a.m. ET: Palantir (PLTR) to report adjusted earnings of 4 cents per share of $385.00 million
  • 9:00 a.m. ET: Workhorse Group (WKHSto report adjusted losses of 19 cents on revenue of $883,286 
  • Before market open: Blue Apron (APRNto report adjusted losses of 57 cents on revenue of $120 million

Post-market

  • 4:00 p.m. ET: Wynn Resorts (WYNN) to report adjusted losses of $1.32 on revenue of $938.10 million
  • 4:00 p.m. ET: Poshmark (POSHto report adjusted losses of 10 cents on revenue of $82.96 million
  • 4:00 p.m. ET: Coinbase (COIN) to report adjusted earnings of $1.71 on revenue of $1.57 billion
  • 4:05 p.m. ET: Vroom Inc. (VRM) to report adjusted losses of 73 cents on revenue of $890.08 million
  • 4:05 p.m. ET: DoorDash (DASH) to report adjusted earnings of 1 cent on revenue of $1.16 billion
  • 4:05 p.m. ET: fuboTV (FUBOto report adjusted losses of 62 cents on revenue of $143.63 million
  • 4:05 p.m. ET: Plug Power (PLUG to report adjusted losses of 8 cents on revenue of $144.81 million
  • 5:30 p.m. ET: Nio (NIOto report adjusted losses of $3.64 on revenue of $36.26 billion

Market Is Crazy Overbought

The market continues to push higher, although struggling to do so. Yesterday’s action was choppy all day, with the index retesting the flatline several times during the day. However, the market made a slight gain despite Elon Musk selling some of his Tesla shares.

The market on all measures is very extended, deviated, and overbought. Nevertheless, a correction is coming; we are only missing a catalyst to spark a change in sentiment. Therefore, some profit-taking and risk management remains well advised.

Market Overbought due to earnings

Richard Clarida Speaks

Fed Vice Chair Richard Clarida largely mimicked Powell’s comments from last week. In regards to raising interest rates, he states:

While we are clearly a ways away from considering raising interest rates, if outlooks for inflation & unemployment turn out to be the actual outcomes… then I believe that these 3 necessary conditions for raising fed funds rate will have been met by year-end 2022″

His comments were generally dovish, as widely expected. Jerome Powell spoke today but not on the topic of monetary policy. The Fed speaker schedule is full this week, and we anticipate a wide range of thoughts on advancing monetary policy. Some of these speakers will discuss raising rates much sooner than year-end 2022.

18 Days?

S&p 500 Winning Streak

Gamma Band Update

Gamma Update Market Earnings

Earnings Growth Fading

The graph below from Bank of America shows earnings growth is likely to decline quickly in the coming quarters. Given valuations, this is an important topic which we have been discussing. To wit, in 2022 Earnings Estimates Still Too Bullish, we wrote:

“The “sugar high” of economic growth seen in the first two quarters of 2021 resulted from a massive deficit spending surge. While those activities create the “illusion” of growth by pulling forward “future” consumption, it isn’t sustainable, and profit margins will follow suit quickly.

The point here is simple, before falling victim to the “buy the market because it’s cheap based on forward-estimates” line, make sure you understand the “what” you are paying for.

Wall Street analysts are always exuberant, hoping for a continued surge in earnings in the months ahead. But such has always been the case.”

S&P 500 EPS Market Earnings

Valuations Are Soaring

As shown below, the Shiller PE ratio is now above 40, a milestone only seen for a few months in late 1999. The prior high got witnessed during the speculative market advance leading to the crash of 1929. From a fundamental perspective, the risks are palatable, but cash continues to drive prices higher. Therefore, close attention to technical analysis is warranted to help establish proper risk strategies.

Market Valuations

The Week Ahead

With the self-imposed public speaking blackout over, we look forward to hearing the thoughts of Fed members. Many members are more hawkish than Chairman Powell. As such, we expect some of them to voice concern over inflationary pressures and discuss their desire to speed up tapering and possibly start to raise rates. Last Friday’s strong employment report will further encourage some members to disagree with Powell regarding the timing of rate hikes. Chairman Powell will be speaking on Monday and Tuesday. We do not expect to hear anything new from him.

The market gets its next dose of inflation information, with PPI on Tuesday and CPI Wednesday. A consensus of economists expects CPI to uptick another 0.4% to 5.8% annually. JOLTS – job openings data comes out on Friday. The forecast is for a slight decline, but still at levels well above historical norms. Bond markets will be closed on Thursday for the Veterans Day Holiday.

All eyes will be on Elon Musk and stock market darling Tesla to see if he follows through with his Twitter survey results.

The post Elon Musk Puts Tesla’s Fate in Twitter’s Hands appeared first on RIA.









Economics

Watch Live: Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony

Watch Live: Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony

With the new year just weeks away, Treasury…

Watch Live: Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony

With the new year just weeks away, Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell will testify before the Senate Banking Committee on Tuesday, part of routine testimony required by the CARES act.

Just two weeks ago, investors could be forgiven for writing off Tuesday’s testimony as a likely snoozefest now that Powell has been nominated for his second term as Fed chairman. But over the last week, the emergence of the omicron variant has (according to some) thrown the recovery timeline out of whack. After the release of Powell’s prepared remarks last night, markets eagerly priced in a more dovish outlook at the Fed.

But hours later, warnings from Moderna CEO Stephane Bancel sent markets back into turmoil, as investors struggled to decide who to trust more: the “science” (ie trial data which haven’t yet been gathered or released), or the authoritative executives who have been talking their book this entire time (whether the market realizes that or not is unclear).

In yet another indication of just how confused Wall Street has become, Deutsche Bank described Powell’s prepared testimony as “hawkish”, an assessment that we (and plenty of investors, judging by the market reaction) would strongly disagree with. Although DB specifies that the only hawkish aspects of Powell’s statement pertained to inflation.

We would agree with DB that nobody cares much about the pair’s prepared remarks. The “real fireworks” – as DB put it – will likely land during the Q&A, where Powell and Yellen will be grilled by Senators of both parties.

Fed Chair Powell set to appear before the Senate Banking Committee at 15:00 London time, where he may well be asked about whether the Fed plans to accelerate the tapering of their asset purchases although it’s hard to believe he’ll go too far with any guidance with the Omicron uncertainty. The Chair’s brief planned testimony was published on the Fed’s website last night. It struck a slightly more hawkish tone on inflation, noting that the Fed’s forecast was for elevated inflation to persist well into next year and recognition that high inflation imposes burdens on those least able to handle them. On omicron, the testimony predictably stated it posed risks that could slow the economy’s progress, but tellingly on the inflation front, it could intensify supply chain disruptions. The real fireworks will almost certainly come in the question and answer portion of the testimony.

Keep in mind: regardless of what Moderna CEO Bancel says, only a tiny minority on Wall Street actually expect omicron to be a major issue a few weeks from now.

But that still presents some difficulties for the central bank as it weighs whether to continue tapering asset purchases, as well as what it should signal regarding the pace of rate hikes.

Read Yellen’s prepared remarks, released Tuesday morning:

Chairman Brown, Ranking Member Toomey, members of the Committee: It is a pleasure to testify today. November has been a very significant month for our economy, and Congress is a large part of the reason why. Our economy has needed updated roads, ports, and broadband networks for many years now, and I am very grateful that on the night of November 5, members of both parties came together to pass the largest infrastructure package in American history.

November 5th, it turned out, was a particularly consequential day because earlier that morning we received a very favorable jobs report– 531,000 jobs added. It’s never wise to make too much of one piece of economic data, but in this case, it was an addition to a mounting body of evidence that points to a clear conclusion: Our economic recovery is on track. We’re averaging half a million new jobs per month since January.

GDP now exceeds its pre-pandemic levels. Our unemployment rate is at its lowest level since the start of the pandemic, and our economy is on pace to reach full employment two years faster than the Congressional Budget Office had estimated. Of course, the progress of our economic recovery can’t be separated from our progress against the pandemic, and I know that we’re all following the news about the Omicron variant.

As the President said yesterday, we’re still waiting for more data, but what remains true is that our best protection against the virus is the vaccine. People should get vaccinated and boosted. At this point, I am confident that our recovery remains strong and is even quite remarkable when put it in context. We should not forget that last winter, there was a risk that our economy was going to slip into a prolonged recession, and there is an alternate reality where, right now, millions more people cannot find a job or are losing the roofs over their heads.

It’s clear that what has separated us from that counterfactual are the bold relief measures Congress has enacted during the crisis: the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan Act. And it is not just the passage of these laws that has made the difference, but their effective implementation. Treasury, as you know, was tasked with administering a large portion of the relief funds provided by Congress under those bills. During our last quarterly hearing, I spoke extensively about the state and local relief program, but I wanted to update you on some other measures. First, the American Rescue Plan’s expanded Child Tax Credit has been sent out every month since July, putting about $77 billion in the pockets of families of more than 61 million children.

Families are using these funds for essential needs like food, and in fact, according to the Census Bureau, food insecurity among families with children dropped 24 percent after the July payments, which is a profound economic and moral victory for the country. Meanwhile, the Emergency Rental Assistance Program has significantly expanded, providing muchneeded assistance to over 2 million households. This assistance has helped keep eviction rates below prepandemic levels.

This month, we also released guidelines for the $10 billion State Small Business Credit Initiative program, which will provide targeted lending and investments that will help small businesses grow and create well-paying jobs. As consequential as November was, December promises to be more so. There are two decisions facing Congress that could send our economy in very different directions. The first is the debt limit. I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession. The second action involves the Build Back Better legislation.

I applaud the House for passing the bill and am hopeful that the Senate will soon follow. Build Back Better is the right economic decision for many reasons. It will, for example, end the childcare crisis in this country, letting parents return to work. These investments, we expect, will lead to a GDP increase over the long-term without increasing the national debt or deficit by a dollar. In fact, the offsets in these bills mean they actually reduce annual deficits over time. Thanks to your work, we’ve ensured that America will recover from this pandemic. Now, with this bill, we have the chance to ensure America thrives in a post-pandemic world. With that, I’m happy to take your questions.

And readers can find Powell’s prepared remarks, first released last night, below:

Chairman Brown, Ranking Member Toomey, and other members of the Committee, thank you for the opportunity to testify today.

The economy has continued to strengthen. The rise in Delta variant cases temporarily slowed progress this past summer, restraining previously rapid growth in household and business spending, intensifying supply chain disruptions, and, in some cases, keeping people from returning to work or looking for a job. Fiscal and monetary policy and the healthy financial positions of households and businesses continue to support aggregate demand. Recent data suggest that the post-September decline in cases corresponded to a pickup in economic growth. Gross domestic product appears on track to grow about 5 percent in 2021, the fastest pace in many years.

As with overall economic activity, conditions in the labor market have continued to improve. The Delta variant contributed to slower job growth this summer, as factors related to the pandemic, such as caregiving needs and fears of the virus, kept some people out of the labor force despite strong demand for workers.

Nonetheless, October saw job growth of 531,000, and the unemployment rate fell to 4.6 percent, indicating a rebound in the pace of labor market improvement.

There is still ground to cover to reach maximum employment for both employment and labor force participation, and we expect progress to continue.

The economic downturn has not fallen equally, and those least able to shoulder the burden have been the hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on African Americans and Hispanics.

Pandemic-related supply and demand imbalances have contributed to notable price increases in some areas. Supply chain problems have made it difficult for producers to meet strong demand, particularly for goods. Increases in energy prices and rents are also pushing inflation upward. As a result, overall inflation is running well above our 2 percent longer-run goal, with the price index for personal consumption expenditures up 5 percent over the 12 months ending in October.

Most forecasters, including at the Fed, continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate. It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace.

We understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation. We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.

The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.

To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission.

We at the Fed will do everything we can to support a full recovery in employment and achieve our price-stability goal.

Thank you. I look forward to your questions.

The big question now: will Powell sound dovish, or hawkish, under questioning? What’s more, investors should be on the lookout for Yellen’s comments on the debt ceiling – particularly anything she says about the timing for when the Treasury might run out of funds.

Tyler Durden
Tue, 11/30/2021 – 09:56







Author: Tyler Durden

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Economics

Whiplash Price Action Continues

There’s no shortage of volatility in the markets this week and today we’re seeing the negative side of that…

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There’s no shortage of volatility in the markets this week and today we’re seeing the negative side of that, with Europe down around 1% and US futures not far behind.

The old adage that markets hate uncertainty couldn’t be more true and it’s going toe to toe with another well-known force, investors’ love of dips. It’s been so beneficial over the years, backed by endless central bank cash, so you can’t blame them. But on this occasion, they may be swimming against the tide as the downside risks are potentially severe.

It’s was encouraging over the weekend to hear that cases appear more modest, which drew dip buyers in on Monday. But huge uncertainty still remains and we’re seeing that in action today, as Moderna Chief Executive Stéphane Bancel warned current vaccines will be far less effective against Omicron.

This whipsaw price action could become a regular feature over the next couple of weeks as information on the variant trickles out and we get a much better understanding of what we’re dealing with. For now, markets will remain very sensitive to indications that vaccines may not protect us this winter as much as we hoped.

This brings us to central banks and what they intend to do if countries are forced to impose tight restrictions and lockdowns. It’s always assumed that they’ll just turn the taps on, drown the market in liquidity and save the day. But throughout the experiment of the last decade or so, they’ve never had to contend with high inflation, rather the theoretical risk of it.

Are they really going to be so keen to flood us with QE this time around? Or is the best we can hope for that they don’t raise rates for a few months and pause the tightening cycle before it’s really begun. And at what cost given that lockdowns may exacerbate the supply-driven inflationary pressures and give central banks a worse headache. That could be a drag for equity markets in the near term.

Of course, this is all hypothetical at this point and a bit of good news on the vaccine front would quickly get investors back on board and allow central banks to proceed with cautious tightening. But the early signs from the actual experts suggest there is something to worry about with Omicron, which may be a shock to the system this winter.

Euro buoyed by higher inflation data but shouldn’t get carried away

The euro is rallying strongly after eurozone inflation soared to 4.9% in November – a record high – led by higher energy prices, while the core reading also blew past expectations rising to 2.6%. The single currency had been on the rise all morning after the French data surpassed expectations, as did Germany and Spain on Monday. Ultimately though, I don’t think it changes much as far as the ECB is concerned. Euro area inflation will ease after the turn of the year and as a result the central bank is not among those that will be feeling the pressure at this stage.

Lira hit again as economy grows slower than expected

The lira is getting hit once again after reports that the CBRT Executive Director for Markets has left their post. The dollar broke back above 13 against the lira after the reports and remains above there despite paring some of those gains, which also came after the country reported growth of 7.4% in the third quarter, a little shy of expectations.

The currency remains extremely vulnerable to further losses as President Erdogan continues to fiercely oppose higher rates and the central bank shows no sign of changing its approach, rather its staff.

Bitcoin seeing strong support despite market risk aversion

Bitcoin bounced back strongly on Monday, along with other risk assets, but failed to break back above USD 60,000 and has come under pressure once again today. What’s interesting though is it appears to have found support around USD 56,000 again, ahead of last week’s lows which may suggest we’re seeing a flurry of bargain hunters hoping to capitalise on the recent 20%+ dip.

It seems premature given the wild swings we’re seeing in sentiment at the moment and risks to the downside that Omicron poses. But bitcoin has performed well since the start of the pandemic and perhaps there’s a view that should central banks be forced to step in, bitcoin could benefit once more. I guess we’ll see if that turns out to be the case.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

Author: Craig Erlam

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Economics

Oil drifting, gold steady

Oil drifts lower as prospect of OPEC+ cut fades Oil prices are unsurprisingly taking another hit as risk sentiment turns negative once again. While OPEC+…

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Oil drifts lower as prospect of OPEC+ cut fades

Oil prices are unsurprisingly taking another hit as risk sentiment turns negative once again. While OPEC+ pushing back their meeting to later in the week to analyse the Omicron data may have appeared to be a bullish signal for the markets, as it increased the likelihood of a pause or reduction in the output increases, I still don’t think that will turn out to be the case.

There’s being vigilant and there’s being hasty and I don’t think the group wants to be the latter. Even later in the week, there’s unlikely to be sufficient data to warrant such an important shift in their output when, by their own admission, they’d already factored Covid into their calculations before. And comments from Russia and Saudi Arabia this week appear to back that up.

Brent crude is closing in on USD 70 now – which looks a big support level – as traders continue to fret about the efficacy of the current vaccines and what it means for the global economy in the coming months. WTI has slipped below but could see some support around USD 67 after such a severe drop.

Gold edges higher but remains broadly stable

Gold has been remarkably stable this past week. Even Friday’s spike was quickly pared back and it hasn’t really moved since. It seems very unresponsive to shifts in risk appetite in the markets and even a softer dollar and lower yields are doing little to lift the yellow metal.

I can understand why it may not be soaring higher as I’m not convinced central banks can do much in the face of higher inflation, even if we see more lockdowns. But current price action seems to conflict with what we’re seeing elsewhere which is interesting, to say the least. It’s not a particularly bullish signal, nor is its struggle to get back above USD 1,800.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/




Author: Craig Erlam

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