Friday, December 30, 2022

Highlighting 2022


Saturday, December 10, 2022

Wall Street Breakfast: What Moved Markets

Stocks wrapped up their worst week since September, as recession fears resurfaced after a hotter than expected report on wholesale price inflation ahead of next week's Federal Reserve policy meeting. The Fed has delivered four 75-basis point increases to its benchmark rate and is widely expected to raise rates by another 50 basis points next week. Investors also are awaiting next Tuesday's report on U.S. consumer prices for a reading on whether inflation has receded. U.S. Treasurys endured a bumpy week, with the 10-year yield ending six basis points higher at 3.57%. For the week, the Dow Jones average sank 2.7%, the S&P 500 fell 3.3%, and the Nasdaq Composite tumbled 4%
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Stocks wrapped up their worst week since September, as recession fears resurfaced after a hotter than expected report on wholesale price inflation ahead of next week's Federal Reserve policy meeting. The Fed has delivered four 75-basis point increases to its benchmark rate and is widely expected to raise rates by another 50 basis points next week. Investors also are awaiting next Tuesday's report on U.S. consumer prices for a reading on whether inflation has receded. U.S. Treasurys endured a bumpy week, with the 10-year yield ending six basis points higher at 3.57%. For the week, the Dow Jones average sank 2.7%, the S&P 500 fell 3.3%, and the Nasdaq Composite tumbled 4%

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A price cap on Russian seaborne oil came into force on Monday as the West tries to curb revenue flows to Moscow's war machine. After intense negotiations, G7 nations and Australia agreed to a $60 per barrel price level, with an adjustment mechanism that keeps the cap at least 5% below the market rate and allows for revisions every two months. Crude remains Russia's economic lifeblood, especially after the country put a stop to natural gas sales to Europe (a move that was first attributed to maintenance problems and later to sanctions).

How it works: The deal allows Russian oil to be shipped to third-party countries using G7 and EU tankers, only if the cargo is bought at or below the $60 per barrel cap. The level is seen as high enough to cover production costs and encourage more output, though Ukraine's Volodymyr Zelenskyy slammed the agreement, calling it "quite comfortable for the budget of a terrorist state." G7 insurance companies, credit institutions and transport services will also have to observe the price ceiling, which is important as 95% of the world's oil tanker fleet is covered by the International Group of P&I Clubs in London and companies based in continental Europe.

While the industry is still awaiting a complete response from Russia, the Kremlin has said it will redirect its oil supply to "market-oriented partners" even if that means it will have to cut production. A presidential decree would also prohibit loadings destined for any countries that adopt the restrictions, and ban any reference to a price cap in contracts for Russian crude or oil products. "We are working on mechanisms to prohibit the use of a price cap instrument, regardless of what level is set, because such interference could further destabilize the market," said Russian Deputy Prime Minister Alexander Novak.

Outlook: Russia is the world's second-largest oil exporter, meaning how the situation plays out could influence prices in the months ahead. Many analysts still say that Russia has enough of a shadow fleet to skirt the sanctions, meaning more shipments will be rerouted, which is already happening across global crude markets. While that could keep oil prices at current levels, or even depress them based on demand factors, others are more fearful about the future, saying that a drop in Russian sales or output could lead to a surge in crude and gasoline prices worldwide. (160 comments)
Taiwan Semiconductor Manufacturing (NYSE:TSM) made history on Tuesday with one of the largest foreign investments in the United States. The company announced plans today to build its second chip plant in Arizona, increasing its investment in the state to $40B. The event was attended by President Biden, as well as CEOs who will benefit from the increase in American chip production, like Apple's (NASDAQ:AAPL) CEO Tim Cook, Micron's (NASDAQ:MU) Sanjay Mehrotra and Nvidia's (NASDAQ:NVDA) Jensen Huang.

Cutting edge: TSMC previously disclosed a $12B investment plan to build its first factory in Arizona that was slated to manufacture 5-nanometer chips (and later changed to 4-nanometers) with mass production expected in 2024. Construction on the second site that will make 3-nanometer chips (the tiniest "die shrink" available today) will start in the coming year, with production set to begin in 2026. Once the plants come online, they are expected to deliver enough chips to meet U.S. annual demand of 600K wafers per year, according to Ronnie Chatterji, White House Coordinator for CHIPS Implementation at the National Economic Council.

"It's the foundation of our personal electronics, and also the future of quantum computing and AI," Chatterji declared. "That's the definition of supply chain resilience. We won't have to rely on anyone else to make the chips we need."

Go deeper: The passage of the CHIPS and Science Act in early August helped provide certainty to companies like TSMC to expand their footprint in the U.S. The bill included $52B in loans, grants and other incentives, as well as billions in tax credits to support domestic semiconductor production. Washington has been worried about reliance on microchips made in Taiwan for years, but the dependence became more apparent during the pandemic, when supply chain issues affected everything from cars and electronics to healthcare equipment and advanced weapons systems. (223 comments)
Stocks in China didn't get much love on Wednesday despite another easing of the country's zero-COVID policy. The Shanghai Composite ended the session down 0.4%, while the Hang Seng Index closed 3.2% lower. Investors appeared to be focused on trade data for November instead, which showed exports (-8.7% Y/Y) and imports (-10.6% Y/Y) shrinking at their steepest pace since 2020.

Commentary: "Outbound shipments will receive a limited boost from the easing of [China's] virus restrictions, which are no longer a major constraint on the ability of manufacturers to meet orders," said Julian Evans-Pritchard, senior China Economist at Capital Economics. "Of much greater consequence will be the downturn in global demand for Chinese goods due to the reversal in pandemic-era demand and the coming global recession."

The government has tried to respond to weakening growth by implementing a series of policy measures, like cutting the reserve requirement ratio of banks and loosening financing restrictions to save the property sector. China is also trying to play catch-up by loosening its severe COVID measures, though a full-blown relaxation of pandemic controls will take significantly more time and high-risk areas still remain subject to lockdown-like restrictions.

The latest: Asymptomatic or mild coronavirus cases are now allowed to isolate at home rather than at hospitals or centralized quarantine facilities. Citizens also no longer need negative tests in order to travel between different parts of the country, while Beijing became the latest city to announce negative tests won't be needed to enter public venues. "When it comes to implementation, there are a lot of inconsistencies between different departments and different regions," noted Dan Wang, chief economist at Hang Seng China.
Big Tech appears to be in for a rude awakening as the Federal Trade Commission flexes its muscles under the leadership of Lina Khan. The antitrust enforcer voted 3-1 on Thursday to block Microsoft's (MSFT) $69B deal for game developer Activision Blizzard (ATVI), making waves across the industry. The decision is a clear sign that Khan and her team at the FTC will be more aggressive in cracking down on the biggest U.S. tech giants, who frequently grow their influence or fight off upcoming challengers via acquisition.

What are the concerns? Simply put, the FTC feels that the tie-up between Microsoft - the company behind Xbox - and one of the best known game developers could harm competition. Activision's Call of Duty and World of Warcraft are some of the most popular gaming franchises, and turning Microsoft into the No. 3 gaming company in the world could limit rivals' access to titles or raise prices for other gaming platforms. The FTC also said it would give the Xbox maker an unfair advantage in the new market for game subscriptions, as well as the emerging market for cloud gaming.

Microsoft has gone to great lengths in recent days and weeks to assuage the fears, like inking a deal to bring Call of Duty to Nintendo (OTCPK:NTDOY) for the next decade. A similar offer to Sony (SONY) on same-day access to the game on its PlayStation platform has so far been rebuffed, but the Xbox maker remains "committed to helping bring more games to more people - however they choose to play." Microsoft President Brad Smith has also been spotted in Washington, meeting with lawmakers to argue that the deal would "create more opportunities for gamers and game developers."

Go deeper: The U.S. is not the only jurisdiction where Microsoft might have to fight, as the transaction is also seeing in-depth reviews in Europe and the U.K. While the company initially took the concessions route, it now looks like it will be presenting its case in court. Prepare for a drawn-out battle that might include precedent of so-called vertical deals, whether withholding games from platforms would be profitable and whether Microsoft has made good on its past promises. The tech giant has also been in the antitrust spotlight before in a landmark DOJ suit from 1998, which saw Microsoft agree to modify some of its business practices. (90 comments)
The Commercial Aircraft Corporation of China, better known as COMAC, delivered its first domestically-developed passenger jet to launch customer China Eastern Airlines (NYSE:CEA) on Friday. The C919, similar to the Airbus (OTCPK:EADSY) A320 and Boeing (NYSE:BA) 737 narrow-body jet families, brings China a step closer toward its ambitious goal of becoming a global civil aerospace player. The plane, which underwent 14 years of development, is expected to make its maiden commercial flight in the spring, with a trip between Shanghai and the capital Beijing.

Industry response: "Congratulations to COMAC for delivering the first C919, bringing a new model to the global civil aviation market," Boeing China wrote on its WeChat account. "We look forward to working with COMAC and other industry peers to continue working on the long-term sustainable development of the aviation industry," Airbus added in a statement.

China's first national passenger jet contains 164 seats, with a maximum range of 3,450 miles. The C919's price tag also comes in at $99M, compared with costs of around $111M and $122M for similar-sized Airbus A320neos and the Boeing 737 Max family. In terms of backlog, COMAC has already booked 1,115 orders (mostly from Chinese lessors) versus the 6,200 and 3,590 order backlog for the A320neo and 737.

Outlook: Despite the emerging C919, it will take many years before COMAC becomes a serious threat to the Western aerospace duopoly. Besides finding new customers outside of China, the program is expected to produce only 25 C919s per year by 2030, which is way lower than the monthly narrow-body production rates at its rivals. The C919 also relies heavily on Western components, including engines, flight systems and other critical parts that are manufactured by companies like GE (NYSE:GE), Honeywell (NASDAQ:HON) and Safran (OTCPK:SAFRY). (25 comments)

U.S. Indices
Dow -2.8% to 33,476. S&P 500 -3.4% to 3,934. Nasdaq -4% to 11,005. Russell 2000 -5.1% to 1,797. CBOE Volatility Index +19.8% to 22.83.

S&P 500 Sectors
Consumer Staples -1.8%. Utilities -0.3%. Financials -3.9%. Telecom -5.4%. Healthcare -1.3%. Industrials -3.2%. Information Technology -3.3%. Materials -3.3%. Energy -8.4%. Consumer Discretionary -4.5%.

World Indices
London -1.1% to 7,477. France -1% to 6,678. Germany -1.1% to 14,371. Japan +0.4% to 27,901. China +1.6% to 3,207. Hong Kong +6.6% to 19,901. India -1.1% to 62,182.

Commodities and Bonds
Crude Oil WTI -10.9% to $71.59/bbl. Gold flat at $1,809.4/oz. Natural Gas +0.4% to 6.307. Ten-Year Bond Yield -0.2 bps to 3.586.

Forex and Cryptos
EUR/USD -0.04%. USD/JPY +1.69%. GBP/USD -0.22%. Bitcoin +1.6%. Litecoin flat. Ethereum +2%. XRP -0.1%.

Top S&P 500 Gainers
Evergy (EVRG) +7%. Newell Brands (NWL) +3%. Campbell Soup (CPB) +3%. CMS Energy (CMS) +3%. Realty Income (O) +2%.

Top S&P 500 Losers
NRG Energy (NRG) -22%. Lincoln National (LNC) -18%. V.F. (VFC) -15%. Halliburton (HAL) -15%. Catalent (CTLT) -14%.

Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.

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Wednesday, November 2, 2022

Upcoming Events and Post Meeting Highlights

Fellow Tea Party Patriots:

Thank you to everyone who attended this past month's meeting.  Below you will find some highlights from this past meeting, and notes about upcoming events.  

Upcoming Events:

05 November: We Hold Rights will be having an evening Bonfire and BBQ from 5-9PM.  Please see attached flyer for the RSVP information.

08 November (Tuesday):  Election Day!  Make sure to go out and vote legally.  If you or any other citizens need assistance in getting to the polls, Karen Lanacelli can place you in contact with individuals who will be able to provide transportation.  
Additionally, the Republican party has asked if there are volunteers to man the table at any of the 5 polling stations in our county.  if you are interested, the available timeslots are 6-11AM, 11AM-3PM, 3-7PM.  Please reach out to Karen for additional information.

Tea Party Meetings November and December:
Because of the Holiday Schedule with Thanksgiving and Christmas, we are expecting to have a social gathering each month in lieu of our standard meetings.  Details will be forth coming, so be on the lookout for additional information, but it will likely be closer to the middle of the month than our current meeting times.

Meeting Highlights:
We Hold Rights had a brief discussion of their continuing efforts to secure expanding medical rights for all citizens.  Please see attached for an article that appeared in the Northern Neck Sentinel, which includes a history of the vaccine mandates related to federal employment and the impact on those who have not shared an affirmative vaccination status with their employer, regardless of the reasons provided or exemptions requested.  

Efforts to stir potential voter interest in the county include individuals door knocking on behalf of candidates, to the tune of larger than 1000 homes.  That's quite a feat for our rural county and is an effort to be proud of!

For those who may not be aware, there have been updates to polling locations in our county.  Of particular note is the update for the Dahlgren District to the UMW Campus, behind Walmart.  Please check out the county website to confirm your voting location.

As a reminder to all citizens, the King George Board of Supervisors holds public meetings the 1st and 3rd Tuesday of every month, at 6:30PM.  An informed public is necessary to hold our county officials accountable for their actions and decisions.

A memorable statement from the evening:
A conservative county such as ours deserves conservative representation

As always, we look forward to seeing you at our next meeting and we appreciate all of your efforts.

The King George Tea Party