Weekly Financial Market Insights 📈
Trading Week 42 ... US Home Sales Plunge To Decade Low, Japan Intervenes In Bond Market, UK PM Liz Truss Resigns, Turkey Cuts Rates Despite 83% Inflation, and Netflix + Tesla + Snapchat Earnings
Sunday Morning Markets ☕
Your weekly financial markets update, in less than 5 minutes. Covering Monday, Oct 17 through Friday, Oct 21.
The Week In Review ⏪
It was a relatively quiet week for economic headlines, but earnings season has indeed begun! Snapchat reported its slowest quarterly growth on record with its ARPU (average revenue per user) dropping 11% from the year prior. Similar ad-based names such as Meta, Pinterest, and Twitter fell in tandem. News leaked that Elon Musk plans to lay off nearly 75% of all Twitter employees to help with profitability and operational efficiency.
Home sales and homebuilder sentiment hit a decade low, US deficit gets cut in half in 2022, UK Prime Minister Liz Truss resigns, Japan buys bonds again to settle markets, and Turkey cuts interest rates despite 83% inflation — all that and more on this week of Sunday Morning Markets…
US Markets 🇺🇸
Existing home sales sink to decade low as mortgage rates continue to soar. Sales fell 1.5% during the month of September to a seasonally-adjusted rate of 4.71m units. This marked the eighth straight month of declines as sales are now lower by 24% for the year.
Musk reportedly plans to lay off 75% of Twitter’s workforce once the deal goes through, according to the Washington Post. Twitter’s current management has already planned to slash the company's payroll by about $800m. The deal is expected to close by next Friday.
Spirit shareholders approve Jetblue takeover after a long battle for the discount airline. In April, JetBlue made a $3.8B all-cash offer for Spirit. The airlines said they expect to close the transaction no later than the first half of 2024. ( JBLU 0.00%↑, SAVE 0.00%↑ )
SPAC liquidations top $12B so far this year as a new buyback tax has motivated more SPAC sponsors to close up shop before the year-end. 27 SPAC deals, worth $12.8B, have been liquidated this year.
US budget deficit for 2022 cut in half amid lower post-covid spending and record-high revenue for the US government. Spending declined $550B from the year prior, while revenue rose $850B. However, the deficit still remained historically high at $1.375T.
Homebuilder sentiment drops over 50% in six months as tighter monetary policy has taken mortgage rates above 7%. The NAHB Index fell another 8 points to a level of 38 in October; the lowest level since 2012.
Rest of World 🌏
UK Prime Minister Liz Truss resigns following a failed tax-cutting budget that rocked financial markets and led to a revolt within her own Conservative Party. Truss was in office for just 44 days, making her the shortest-serving PM in British history.
Japan ramps up bond buying intervention as the yen slides past the key 150 level. The BoJ offered to buy a total of 200 billion yen worth of Japanese government bonds with mixed maturities from 5-20 years.
Turkey cuts interest rates 150 bps despite 83% inflation as President Erdogan notes that he believes raising interest rates increases inflation, rather than the other way around. The Turkish lira touched an all-time low following the news.
Russia’s Putin introduces martial law in the illegally annexed Ukrainian regions. The decree, announced by the Russian Security Council on Wednesday, will likely mean that the regions’ civil administrations will be replaced by military.
Lafarge Cement fined $777m for paying ISIS to keep a plant operating in Syria. The French industrial company paid more than $10m to ISIS even as the terror group was kidnapping and killing Westerners.
Crypto ⚡
SEC, CFTC probes Three Arrows Capital to examine whether the bankrupt crypto hedge fund violated rules by misleading investors about its balance sheet and not registering with the two agencies.
IRS expands tax language to include NFTs in an effort to clarify how they will be taxed. The Treasury Dept. released an updated draft that swaps the old category for “virtual currency” with broader new language on “digital assets,” including explicit recognition of NFTs.
TravelX integrates with Lemon Exchange to allow its LATAM-based users to buy airline tickets with USDC from their wallet and receive 50% cash back in BTC. After acquiring an NFTicket, a customer can auction, sell, transfer, gift, or exchange it through a peer-to-peer system.
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Earnings Reports 💰
Bank of America ($BAC) — View report
Revenue: $24.5B vs $24.5B expected and $22.8B year ago (+7% YoY)
EPS: $0.81 vs $0.78 expected and $0.85 year ago (-5% YoY)
Segment Breakdown:
Consumer Banking: $9.9B, +12% YoY
Wealth Management: $5.4B, +2% YoY
Global Banking: $5.6B, +7% YoY
Global Markets: $4.5B, -1% YoY
Guidance: No guidance given.
Market Reaction (24hrs after report): +5.9%
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Netflix ($NFLX) — View report
Revenue: $7.93B vs $7.85B expected and $7.48B year ago (+6% YoY)
EPS: $3.10 vs $2.18 expected and $3.19 year ago (-3% YoY)
Subscribers: 223.1m vs 213.6m year ago (+4% YoY)
Guidance for Q4: Sales of $7.78B and EPS of ~$0.36
Market Reaction (24hrs after report): +13.1%
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United Airlines ($UAL) — View report
Revenue: $12.88B vs $12.74B expected and $7.75B year ago (+66% YoY)
EPS: $2.81 vs $2.28 expected and ($1.02) year ago (+375% YoY)
Operating Income: $1.46B or 11.3% vs 13.4% year ago (-206 bps YoY)
Guidance for Q4: Operating margin to exceed 2019.
Market Reaction (24hrs after report): +5.0%
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Tesla ($TSLA) — View report
Revenue: $21.5B vs $21.9B expected and $13.8B year ago (+56% YoY)
EPS: $1.05 vs $1.07 expected and $1.86 year ago (-44% YoY)
Production: 366K vs 238K year ago (+54% YoY)
Deliveries: 344K vs 241K year ago (+42% YoY)
Guidance: 50% annual growth in deliveries as a multi-year target.
Market Reaction (24hrs after report): -6.7%
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Snapchat ($SNAP) — View report
Revenue: $1.13B vs $1.12B expected and $1.07B year ago (+6% YoY)
Adjusted EPS: $0.08 vs ($0.02) expected and $0.17 year ago (-53% YoY)
Adjusted EBITDA: $73m vs $174m year ago (-58% YoY)
Notes: Daily active users increased 19% to 363m. Stock-based compensation of $343m or 30.4% of revenue.
Guidance: No guidance given.
Market Reaction (24hrs after report): -28.2%
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Other Reports:
Week Ahead 📅
Monday
US Manf. PMI (Oct) 🇺🇸
US Services PMI (Oct) 🇺🇸
US Composite PMI (Oct) 🇺🇸
China Industrial Production (Sep) 🇨🇳
German Manf. PMI (Oct) 🇩🇪
Tuesday
CB Consumer Confidence (Oct) 🇺🇸
German Ifo Bus. Climate Index (Oct) 🇩🇪
Australian CPI Inflation (Q3) 🇦🇺
Earnings Reports: Microsoft ($MSFT), Alphabet ($GOOG), Visa ($V), Coca-Cola ($KO), United Parcel Service ($UPS), General Electric ($GE), General Motors ($GM), Chipotle ($CMG), Twitter ($TWTR), Spotify ($SPOT)💰
Wednesday
New Home Sales (Sep) 🇺🇸
BoC Interest Rate Decision 🇨🇦
Earnings Reports: Meta Platforms ($META), Thermo Fisher ($TMO), Boeing ($BA), ServiceNow ($NOW), Ford ($F)💰
Thursday
US GDP (Q3) 🇺🇸
US Durable Good Orders (Sep) 🇺🇸
ECB Interest Rate Decision 🇪🇺
BoJ Interest Rate Decision 🇯🇵
Earnings Reports: Apple ($AAPL), Amazon ($AMZN), Mastercard ($MA), Merck ($MRK), McDonalds ($MCD), T-Mobile ($TMUS), Intel ($INTC), Starbucks ($SBUX), Shopify ($SHOP) 💰
Friday
Earnings Reports: ExxonMobil ($XOM), Chevron ($CVX), AbbVie ($ABBV), NextEra Energy ($NEE)💰
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Until next Sunday…