Weekly Financial Market Insights 📈
Trading Week 38 ... Real Estate Volume Collapsing, Fed Hikes Interest Rates, Meta Cuts 10%, Wintermule $160m Hack, and Costco + FedEx + Accenture Earnings
Sunday Morning Markets ☕
Your weekly financial markets update, in less than 10 minutes.
Last Week ⏪
Ouch! US stock indices close just above their 52W lows, plunging over 4% during the week. Jerome Powell reiterated the Federal Reserve’s strong stance to break inflation at the FOMC meeting on Wednesday. Treasury yields then soared to new highs, as the 2Y jumped over 30 bps during the week.
Existing home sales plunge, Meta & Alphabet announce cost-cutting measures, Ford warns of $1B in supply chain costs, Wintermule gets hacked for $160m, and Turkey cuts interest rates despite 80% inflation — all that and more on this week of Sunday Morning Markets…
US Markets 🇺🇸
The Fed hikes rates by 75 bps and indicated it will keep hiking well above the current level. This marks the third consecutive FOMC meeting with a 75 bps hike, as inflation seems to be stickier than originally hoped. The dot plot showed a terminal rate of 4.6% by end of 2023.
Existing home sales fall in August as higher mortgage rates send ripples through the housing market. Sales fell 0.4% during the month, to an annualized rate of 4.8m units, the slowest sales pace since May 2020. The median price of an existing home sold fell 6% during the last three months, nearly 3x worse than the seasonal average.
Meta plans to cut 10% of operating expenses over the next few months, which may include job cuts in certain areas of the organization. This comes after the company reported its first-ever annual revenue decline, and predicted that its sales would drop again in Q3.
SEC reports they will not ban payment-for-order-flow, though the agency may still make changes that could lower the profitability of the practice. This marks a major win for zero-commission trading platforms such as Robinhood, Webull, TDAmeritrade, E-Trade, Schwab, and Fidelity.
Ford warns of an extra $1B in supply chain costs in Q3, resulting from part shortages affecting roughly 40K to 45K vehicles, primarily high-margin trucks, and SUVs that haven’t been able to reach dealers. The automaker reaffirmed its full-year guidance, saying it expects to deliver the vehicles to dealers in Q4.
Rest of World 🌏
Turkey cuts rates 100 bps despite 80% inflation, to a repo rate of 12%. Prices in the country sped up for the 15th consecutive month to the highest level in 24 years. The Turkish Lira now trades at ~5.4 cents, down from 28 cents just five years ago.
The Bank of England hikes rates 50 bps to a base rate of 2.25%. Inflation in the U.K. dipped slightly in August to 9.9%. The BOE now expects inflation to peak at just under 11% in October, down from a previous forecast of 13%.
UK announces tax cuts as the country braces for a recession. The measures include canceling the planned rise in corporate tax to 25%, thereby keeping it at 19%, the lowest rate in the G-20. They will also scrap various plans to raise income tax and other bonus structures.
Crypto ⚡
Wintermute loses $160m in a hack relating to its decentralized finance (DeFi) operation. The firm's lending and over-the-counter (OTC) services have not been affected. The company remains solvent, with "twice over" $160 million remaining in equity.
Nasdaq starts crypto custody services as it aims to cash in on the demand from institutional investors. The company has hired Ira Auerbach, who previously ran prime brokerage services at Gemini, as the head of its digital assets unit. Auerbach noted that Nasdaq is open to working with crypto-native firms, although it doesn't have any plans for acquisitions in the short term.
Celsius may try to convert its debt into IOU tokens as they owe nearly $5B to 500K creditors. In a leaked audio file, Nuke Goldstein, the firm's co-founder and CTO, detailed a potential plan to issue wrapped tokens representing the debt to customers.
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Earnings Reports 💰
Trip.com ($TCOM)
Revenue: $599m vs $512 expected and $879m year ago (-32% YoY)
Non-GAAP EPS: ($0.05) vs $0.02 expected and $0.18 year ago (-460% YoY)
Segment Breakdown:
Accomodations: -45% YoY to $203m
Transportation: -15% YoY to $263m
Packaged Tours: -67% YoY to $18m
Corperate Travel: -46% YoY to $31m
Other: -8% YoY to $84m
Guidance: No guidance given.
Important Notes: Both air-ticket and hotel bookings on global platforms increased over 100% YoY in Q2. “We are delighted to see the domestic hotel bookings quickly bouncing back to the pre-pandemic level at the end of Q2. We will continue to improve our operating efficiency and conduct prudent cost control in the face of the changing environment.” said Jane Sun, CEO.
Market Reaction (24hrs after report): +4.8%
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Costco ($COST)
Revenue: $72.1B vs $72B expected and $62.7B year ago (+15% YoY)
EPS: $4.20 vs $4.17 expected and $3.76 year ago (+12% YoY)
Operating Income: $2.5B vs $2.28B year ago (+10% YoY)
Guidance: No guidance given.
Important Notes: Excluding changes in gas and foreign exchange rates, comparable sales grew 9.6% in the US, 13.7% in Canada, 11.3% in all other countries and 10.4% overall. Their e-commerce division grew just 8.4% during the quarter.
Market Reaction (24hrs after report): -4.3%
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FedEx ($FDX)
Revenue: $23.2B vs $23.5B expected and $22B year ago (+6% YoY)
EPS: $3.33 vs $4.09 expected and $5.14 year ago (-19% YoY)
Operating Income: $1.2B vs $1.4B year ago (-15% YoY)
Q2 Guidance: EPS of $2.65 on sales of $23.5B - $24B (-45% YoY)
Important Notes: For fiscal 2023, the company announces cost savings actions of $2.2-2.7B and plans share repurchases of $1.5B, including ~$1.0B in the next quarter.
Market Reaction (24hrs after report): -3.2%
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Accenture ($ACN)
Revenue: $15.4B vs $15.4B expected and $13.4B year ago (15% Yoy)
EPS: $2.60 vs $2.57 expected and $2.20 year ago (+18% YoY)
Operating Income: $2.25B vs $1.96B year ago (+16% YoY)
Guidance:
Q1’23: Revenues of $15.2B to $15.75B
FY’23: Revenues growth of 8% to 11%, EPS of $11.09 to $11.41
Important Notes: New bookings of $18.4B representing 21% annual growth. 15% increase in quarterly dividend to $1.12/sh.
Market Reaction (24hrs after report): -0.9%
Week Ahead 📅
Monday
German Business Climate Index (Sept) 🇩🇪
Tuesday
Durable Good Orders (Aug) 🇺🇸
CB Consumer Confidence Index (Sept) 🇺🇸
New Home Sales (Aug) 🇺🇸
Wednesday
Pending Home Sales (Aug) 🇺🇸
Earnings Reports: Paychex ($PAYX), Cintas ($CTAS) 💰
Thursday
Jobless Claims 🇺🇸
China Manf. Index (Sept) 🇨🇳
Canada GDP (July) 🇨🇦
Earnings Reports: Nike ($NKE), Micron ($MU), Carnival Cruises ($CCL), CarMax ($KMX)💰
Friday
PCE Price Index (Aug) 🇺🇸
Real Consumer Spending (Aug) 🇺🇸
Real Disposable Income (Aug) 🇺🇸
Euro-Zone CPI (Sept) 🇪🇺
German Unemployment (Sept) 🇩🇪
India Interest Rate Decision 🇮🇳
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Until next Sunday…