Follow-Through Friday at the Strong Bounce Lines

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phil
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SPX Dec 9 2022We made it!  

Yesterday we were looking for a Strong Bounce on the S&P 500 and this morning you can see how useful our 5% Rule™ can be in predicting the movement of the indexes.  The most important thing the 5% Rule™ does for us is it reminds us not to get excited about these little bounces – they are a natural part of a trend and only if they are conquered do we consider it an actual reversal.  

The more volatile Nasdaq came in at 11,637 at the close and our weak bounce line was 11,620 but this morning we have a strong overnight move in the Futures back to 11,702 and that’s almost to the Strong Bounce Line at 11,740 but we’re not likely to get there because AAPL failed $143 and I’m not seeing a catalyst today to move it over.  

Covid Dec 9 2022Also we have the weekend and the Dollar is below 105 and the Fed has a rate hike next week…  Lots of reasons to be cautious but how about this one:  

That’s a 50% increase in new Covid cases (reported) in the last two weeks in the US and 32% more globally.  Last Dec 8th, we were averaging 120,737 but by Jan 13th, our daily average had jumped up to 802,191 cases per day with spikes over 1M – that’s how fast this virus can spread.  Looking at the chart, I’d say we are about 50% more immune than last year but that’s still going to make for a nasty winter and China is in for a complete disaster, most likely.  

I know we all like to have the fairy tale that Covid has gone away but we’ve had more people infected in the last 12 months than in the 24 months before that.  

Covid2 Dec 9 2022

You can’t pretend when you are investing.  You have to see the World for what it is so you are able to best navigate the obstacles along the way and set up your portfolio to win under the conditions that lie ahead.  I’m not so much concerned for the US, where we are approaching herd immunity (because we’re the most infected country on the planet) but China’s population has relatively no exposure – just 1.8M cases out of 1.4Bn people (0.13%) so, for the other 1,398,200,000 people – it’s a brand new disease they have no resistance to.  

That’s the downside to a zero-tolerance property.  It makes sense if, in a year or so, you have a 100% effective vaccine or the virus goes away from the World but, if that doesn’t happen (and it did not) then you are back on square one trying to face down the virus. 

Xi’s math made sense, you can’t have 50M people needing hospitalization (we had 10M in US with 1/5th the population) – there aren’t enough ventilators in the World or other vital supplies hospitals needed.  Pushing the spread of the disease back has allowed him to give at least one dose of vaccine to 91% of the population – though the Chinese vaccines are not as effective as the ones we use.  

China has stepped up their vaccine program and are now vaccinating 2M people per day but, with 1.4Bn people, that’s 700 days to get to everyone.  And how fast can Covid start to spread as China re-opens?  Well just 30 days ago, China had less than 1M total cases, so 800,000 move in 30 days is pretty darned fast, right?  

Covid3 Dec 9 2022

They haven’t even officially re-opened yet!  And the worst thing about China going from 2M infections to 20M by March is that then creates an environment for more Covid variants – even ones that can elude our current vaccines in the US.  So this is not over until it is over and it’s very far from over – don’t forget that!  

Speaking of China, congrats to all who followed our Trade Idea for Hello Group (MOMO), which was:

They should do well if China does ease their Covid policies.  It does seem Biden and China are working out the accounting issues to keep Chinese companies on the US exchanges.  A nice way to play is with the 2024 $3 ($2.80)/5 ($1.80) bull call spread at net $1, which pays $2 (100% gain in 13 months) if MOMO simply stays above $5.  So, if you have $1,000 now and you want to have $2,000 to start off 2024, then buying 10 of those spreads would do the trick if all goes well.

If not, the net Delta of the two is just 0.16, so MOMO would have to drop $1.50 for you to lose $250 – which makes it a good stop if the $5 line fails.  Risk $250 to make $1,000 on an undervalued stock with almost it’s entire market cap in the bank?  Sounds good to me!  

As you can see, they blasted up to $6.79 yesterday (so you had all week to get in) so it looks very good for our anticipated $2 return and 100% gain – you’re welcome!  

Both LULU and COST just warned of slowing sales into the holidays and AVGO had a nice beat but said they can’t possibly say what will happen next year and pulled guidance – so let’s be careful out there and stay “Cashy and Cautious” and well-hedged into the Holidays.  

Have a great weekend, 

– Phil

“You thought the leaden winter
Would bring you down forever
But you rode upon a steamer
To the violence of the sun
And the colours of the sea
Blind your eyes with trembling mermaids
And you touch the distant beaches
With tales of brave Ulysses
How his naked ears were tortured
By the sirens sweetly singing
For the sparkling waves are calling you
To kiss their white laced lips” – Cream

 

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Phil.l / AVGO – hit it out of park

VMWR acquisition on track

Broadcom (NASDAQ:AVGO) shares gained more than 3% in premarket trading on Friday after the semiconductor company  fourth-quarter results that were seen as “particularly impressive,” given the operating environment and global economy.
Oppenheimer analyst Rick Schafer, who has an outperform rating and $720 price target on Broadcom (AVGO), noted the results were impressive, especially considering the commentary from its peers surrounding enterprise storage. Schafer also pointed out that Broadcom’s (AVGO) management talked up cloud growth for next fiscal year, with overall enterprise spending as “flattish” to up.
And with concerns that wireless revenue will be flat sequentially, due to Apple’s (AAPL) iPhone production issues, the company is still operating at a high level, Schafer explained, with its fiscal 2023 backlog covered at 100% despite the uncertain global economy. 
“We believe [management’s] strict scrubbing of orders safeguards [Broadcom] better than most from channel inventory surprise,” Schafer wrote in a note to clients.
On its earnings call, Broadcom (AVGO) said it still expects its proposed $61B acquisition of VMware (NYSE:VMW) to close next fiscal year. 
“We see [greater than] 10% cash-on-cash return and are bullish on [Broadcom’s] record of accretive M&A, execution, and [free cash flow] growth/return,” Schafer added. “Networking, wireless, broadband, and software franchises support stable growth. We remain [long-term] buyers.”
Truist analyst William Stein, who has a buy rating on Broadcom (AVGO) and raised his price target to $662 from $630 following the results, said the fourth-quarter results and guidance were good, but the dividend increase of 12.2% was seen as “slightly disappointing.”
“Investors hoped for explicit [calendar year 2023] guidance, explicit backlog, and explicit lead time commentary, but management was unwilling to provide these, considering well-documented macro headwinds (Covid shutdowns in China, rates, FX, etc.),” Stein wrote. 
Coupled with the fact that the dividend payout ratio was “slightly below” the 50% historical target, Stein said these issues balanced out “management’s otherwise surprisingly positive views.”

Good morning and wheeeee!

Well we knew the PPI would be hotter than expected but up 0.4% at the core vs 0.2% expected by Leading Economorons was the killer.

S&P, Dow, and Nasdaq futures slide after hot PPI print

SPX -0.26%

Dec. 09, 2022 8:41 AM ET

21 Comments

Stock index futures pointed to a lower open on Friday as the latest producer price index report came in hotter than forecasted.

S&P futures (SPX) -0.4%, Nasdaq 100 futures (NDX:IND) -0.5% and Dow futures (INDU) -0.4% were lower.

The S&P (SP500) is off 2.7% for the week going into the open, with the Nasdaq Composite (COMP.IND) down 3.3% and the Dow (DJI) off 1.9%.

The November producer price index came in at +0.3%, above the anticipated +0.2% consensus figure. Y/Y PPI moved to +7.4% versus the expected +7.2% data point.

Treasury yields ticked higher with the 10-year Treasury yield (US10Y) up 2 basis points to 3.50% and the 2-year yield (US2Y) was up 1 basis point to 4.31%.

What “we care about is the path of margins excluding fuels,” Pantheon Macro’s Ian Shepherdson said. “In October, they fell 0.2%, after a flat reading in September, in sharp contrast to the average 0.5% increases across the previous three months, and 0.9% gains in the three months before that. We think sustained hefty declines are imminent, pulling down core PPI inflation rapidly next year.”

After the bell, the University of Michigan’s preliminary measure of December consumer sentiment is out. The consensus is for little change from November at 56.9.

Michigan sentiment “fell back in November after having risen for the 4 previous months, so the question will be whether that was just a blip or the start of a more pronounced downturn,” Deutsche Bank’s Jim Reid wrote. “We’ll also get their measure of longer-term inflation expectations that is closely watched. That’s begun to tick back up over the last couple of months, so any further rises would be concerning from the Fed’s point of view, who thus far have been reassured by the fact that longer-term expectations have remained anchored.”

Among active stocks, DocuSign (DOCU) is jumping following beats on the top and bottom lines.

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And, don’t forget, we’ve been discussing how China is a no-win situation because, if the openings cause Covid to spike – the economy contracts and there’s a Recession but, if the opening goes well – then China adds to global inflation and the Fed keeps tightening and there’s a Recession. Either way – there’s a Recession.

5 stocks to watch on Friday: Broadcom, Costco and more

AVGO +3.33%
Dec. 09, 2022 8:43 AM ET
Wholesale inflation data will be in focus on Friday, as investors continuing to look ahead to next week’s Federal Reserve meeting. On Thursday, the S&P 500 finished higher, breaking a five-session losing streak. Here are some stocks to watch for Friday:

  • Broadcom (NASDAQ:AVGO) rose in premarket trading after the company issued a Street-topping earnings report. The semiconductor company reported quarterly results that beat projections on both its top and bottom lines, with revenue that rose 21% from last year. AVGO also gave a strong forecast, predicting revenue of about $8.9B compared to the $8.8B that analysts were targeting.
  • Costco (COST) reported a quarterly profit that advanced from last year, with net income climbing to $1.36B in Q1 compared to $1.32B last year. Revenue also rose, climbing 8% to $54.4B. However, the top-line figure came in $240M short of what analysts were predicting.
  • Activision (ATVI) will be in focus after the Federal Trade Commission moved to block its deal to be acquired by Microsoft (MSFT). The video game maker has reached a $69B agreement to merge with the software giant, which also owns the Xbox brand.
  • Chewy (CHWY) announced a profit for Q3, surprising analysts, who were predicting a loss. Revenue rose nearly 15% to reach $2.53B. The online pet supply retailer raised its full-year forecast, targeting $10.02B to $10.04B, compared to its previous guidance of $9.9B to $10B.
  • Li Auto (LI) announced a wider-than-expected loss for Q3. Revenue rose 20% to $1.31B, with gross margin that compressed to 12.7%. Looking to Q4, the EV maker predicted deliveries of 45K to 48K.

To look at the health of the overall economy as the Federal Reserve gears up for next week’s meeting, review a deep dive into the labor market from Seeking Alpha contributor Wolf Richter, who asks the question “when will the waves of layoffs loosen the labor market?”

Consumer Sentiment updates at 10:

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Hopefully doesn’t get any worse but I haven’t seen much cause for it to be better in the last 30 days.

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Good Morning.

Tardy!  😜 

Looking at new cars for our UCLA grad and she is now gainfully employed! 🙂

It’s down to a CRV and a CX5. The lots are filling up and we’ll have a great chance to buy a new car at a used car price!

My Mom has a CRV, it’s very nice. I think the SUV style is way more practical and the kids are in a moving/buying house stuff and travel phase – I’d steer them there.

Is this a good time to buy a car now? I sold off mine when the used car prices were crazy high some months ago, and now need to buy something

It matters what you are looking for. Mazda, Honda and Hyundai, all seem to be loading up their lots, here in So.Cal.
At this point, the dealers are hanging tight with sales at just MSRP, but then they try to load you up on extras and security devices.
Looking at prices at the local Carmax, it is laughable that they are still asking MSRP on their used cars….

Carmax on last legs.

Phil, do you mean Carvana?

KMX may not be a bad investment….

I sold my car to KMX, CVNA was crap who was paying less than 50% of KMX; KMX also was a quick and pleasant experience in Wayne (NJ)

No, I mean KMX, NOT CVNA!

The auto dealers are getting restocked finally but prices are still a little crazy and rates are high for leases so you have to shop around still. If it’s just for utility, check out the Chevy Equinoxes, which can be had for $30K new. And, of course, look for 2021 new cars that dealers are stuck with – those lose a ton of value to them in 2023 but a car is a car IMHO.

as a Honda salesperson in central MN. We are still at MSRP. No one has 2021’s and extremely few 2022 in this area. Used cars are finally coming down, some harder than others. If you are thinking about new get a lock on your trade value and your interest rate now. One is going up and one is going down .

I think we need to keep the big picture in mind on PPI – It’s been dropping hard and fast from 22% to 7% (2/3) so 7.4% annualized is still down from 8.1% annualized last month. Down 15% is 3% bounces and we’re not even close to a weak bounce so I don’t see this as a dire thing – Fed still at 0.5% probably.

https://pbs.twimg.com/media/Fji2mTNXkAIfnu9?format=jpg&name=large

And Consumer Sentiment is much improved at 59.1 vs 56.8 last month. The Fed doesn’t want them too happy, or they will go out and buy things, but they don’t want them as miserable as they have been either. I’d say low 70s is what the Fed is aiming for into June.

This is a good PPI chart:

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Look how energy went down and down.

Current Conditions 60.2, Expectations 58.4 – people still think things are getting worse but they can’t ignore the fact that they are actually getting better.

https://pbs.twimg.com/media/Fji4IG8WQAIajvk?format=png&name=small

https://pbs.twimg.com/media/Fji3-JFWYAErDfm?format=jpg&name=small

https://pbs.twimg.com/media/Fji2qUfXwAAtEOl?format=png&name=small

What I don’t like is the main improvements are coming from the Top 10% – who are having a blast with higher interest rates on their accounts and what is still a pretty good market.

Yield curve that ‘nearly’ matters is now inverted – Jefferies’ Wood

SPY -0.20%

Now!

There is more evidence that inflation has peaked, but the U.S. is unlikely to avoid a recession that could hit harder than most expect, Jefferies strategist Christ Wood says.

A recent yield curve inversion spells trouble from the year-end rally narrative, Wood wrote in his “Greed and Fear” note Friday.

“The key consequence of the recent Treasury bond rally (TBT) (NASDAQ:TLT) (SHY) is that the yield curve that nearly matters, by which GREED & fear means the relationship between the federal funds rate and the 10-year Treasury bond yield (US10Y), is now properly inverted for the first time in this tightening cycle,” Wood said. “And this is before the almost universally expected further 50bp rate hike in the federal funds rate at next week’s FOMC meeting on 13-14 December.”

“The spread between the 10-year Treasury bond yield and the federal funds effective rate has declined from 116bp in late October to a negative 41bp on Wednesday, the most inverted position since the Covid-triggered risk-off panic in March 2020, and is now a negative 38bp,” Wood added.

“All this is further evidence of the growing likelihood of a recession in the US in 2023,” Wood said. “In this respect, it has been interesting to GREED & fear that Jefferies’ chief US economist, Aneta Markowska, has been making the point for some time that the recession will come later than the consensus expects but will hit harder.”

“From meetings in recent weeks it is clear that there is a growing narrative that has been driving the ‘risk-on’ rally in recent weeks heading into year end,” he said. “That is a growing conviction that inflation has peaked, combined with mounting hopes that America can avoid a recession next year.”

“If that is the sentiment, GREED & fear would agree that the peaking-out-of inflation viewpoint has much more to commend itself now than was the case in the summer when the same theme drove that counter-trend rally before the US stock market (NYSEARCA:SPY) (QQQ) (DIA) turned down again in August,” Wood said.

But he is “much less convinced of the avoidance of the recession story and therefore views recent stock market action as a classic counter-trend bear move, most particularly as markets have traditionally tended to rally into year-end.”

SPY saw nearly $7B in outflows on the week.

Consumer sentiment rises above consensus in December, inflation expectations improve

Dec. 09, 2022 10:02 AM ET

  • December University of Michigan Consumer Sentiment: 59.1 vs. 56.9 consensus and 56.8 in November.
  • Expectations: 58.4 vs. 55.6 prior.
  • Current conditions: 60.2 vs. 58.8 prior.
  • Year-ahead inflation expectations: 4.6% vs. 4.9% prior. That’s the lowest reading in 15 months but still well above levels from two years ago.
  • Five-year ahead inflation expectations: 3.0% vs. 3.0% prior.
  • “Consumer sentiment rose 4% above November, recovering most of the losses from November but remaining low from a historical perspective,” said Surveys of Consumers Director Joanne Hsu.
  • “All components of the index lifted, with one-year business conditions surging 14% and long-term business conditions increasing a more modest 6%,” she added.
  • Earlier, headline and core producer price inflation come in hotter than expected in November.

Wholesale inventories fall short of consensus

Dec. 09, 2022 10:00 AM ET

  • October Wholesale Inventories (Prelim): +0.5% M/M to $923.8B vs. +0.8% consensus and +0.6% prior (unrevised).
  • October 2022 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading day differences but not for price changes, were $700.8 billion, up 0.4%.
  • The October inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.32.

• The $42 Billion Question: Why Aren’t Americans Ditching Big Banks? Big banks still pay next to nothing on savings, but their customers aren’t yet moving much money to higher-yielding alternatives. (Wall Street Journal)

• A week in the life of Vladimir Putin: Putin is often portrayed in the Western media as something of a cartoon villain. But he’s also a skillful politician who has used the state-run media, a pliant bureaucracy and brutal repression to dominate Russian politics so totally that he appears to have no significant opposition. For many in the West, he’s a figure of derision, even hatred. But at home, he retains a bedrock of popular support, even amid the Ukraine fiasco. (Washington Post)

• The Supreme Court’s Most Conservative Justices Got Outplayed on Wednesday: Great lawyering—and, surprisingly, Amy Coney Barrett—debunked a legal theory designed to subvert democracy. (Slate)

• A Psychologist Spent Five Years Studying World Cup Penalty Shootouts: Every job requires performance under pressure. Here’s what everybody can learn from the most tense few minutes in sports. (Wall Street Journal)

• Tony Fadell Is Trying to Build the iPod of Crypto: The product guru made Ledger’s new hardware wallet—a tiny vault for digital cash—flashy and fun. Plus, with this gadget you’ll never get FTX’d. (Wired)

Looks like we’re green again but certainly it’s hard to love this market action, right?

Bonds haven’t changed their minds yet:

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We KNOW $1 is unacceptable to the EU and it took them less than a month to react and another month to get back over $1 – important to know the cycle timing. 1.25 to 1.00 is 0.25 so 20% is 0.05 bounces to $1.05 (weak) and $1.10 (strong) – I don’t see how they’ll justify strong but maybe if they go 0.75 and our Fed goes 0.50 – it could happen.

https://bigthink.com/strange-maps/triple-digit-inflation/ :

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/NG finally stopped at $6.35 – looking forward to the next $5.50 entry (but never short it!).

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AAPL is doing it’s job at $144.75 so the Nas needs to show us 11,740 (now 11,705). We started the week at 12,000 so 11,700 is the -2.5% line – that’s a MUST HOLD.

https://finviz.com/futures_charts.ashx?t=NQ&p=h1

https://charts2.finviz.com/chart.ashx?t=aapl%20\&p=w&s=y

Earnings week ahead: Oracle, Adobe, Lennar, Darden and more

ORCL +0.02%
Dec. 09, 2022 11:36 AM ET
Cloud software giants and America’s second-largest homebuilder headline an otherwise light schedule of earnings reports due out for the second full week of December.
Oracle (NYSE:ORCL), Coupa Software (NASDAQ:COUP) and Adobe (NASDAQ:ADBE) will attract a great deal of attention as investors seek to understand software industry dynamics going into 2023. Additionally, homebuilder Lennar (NYSE:LEN) is due to report only a week after strong results from fellow industry player Toll Brother (TOL). Meanwhile, Darden Restaurants (DRI), an owner of various casual dining chains, is also on the docket.
Below is a curated list of reports due from December 12 to 16:

Monday, December 12

Oracle (ORCL)

Oracle (ORCL) is due to report its fiscal second quarter earnings after the bell on Monday. Shares of the Texas-based software giant have surged over 30% since the start of the calendar fourth quarter. This was aided by bullish long-term forecasts voiced during an October analyst day, where management said it was targeting $65B in revenue by 2026.
While analysts have revised earnings estimates down significantly in the 90 days ahead of earnings, many have moved to a more optimistic view overall. For example, Piper Sandler analyst Brent Bracelin raised his rating to Neutral from Underweight shortly before the results.
“[Fiscal first-quarter] could mark a margin trough as Cerner cost synergies begin to appear and Oracle refocuses on driving operating efficiencies as the cloud business scales,” Bracelin explained. “Assuming operating cash flows can exceed $15B annually, there should be ample flexibility to reduce debt and restart buy-backs over time.”

  • Consensus EPS Estimates: $1.17
  • Consensus Revenue Estimates: $12.01Bx
  • Earnings Insight: Oracle has exceeded EPS estimates in 6 of the past 8 quarters, missing revenue expectations only once in that span.

Also reporting: Coupa Software (COUP), Mesa Airlines (MESA) JOANN Inc. (JOAN), and Applied DNA Sciences (APDN)

Tuesday, December 13

ABM Industries (ABM)

New York-based industrial conglomerate ABM Industries is due to update investors on earnings results for its fiscal fourth quarter. Shares ABM have risen over 10% in 2022, far outpacing the performance of overall market. The company cruised to a narrow earnings beat for the fiscal third quarter. However, the firm also narrowed its guidance.

  • Consensus EPS Estimates: $0.88
  • Consensus Revenue Estimates: $1.96B
  • Earnings Insight: ABM has beaten EPS estimates in 7 of the past 8 quarters, exceeding revenue expectations in all 8 of those quarters.

Also reporting: Aspen Group (ASPU), Braze Inc. (BRZE), and PHX Minerals (PHX)

Wednesday, December 14

Lennar (LEN)

Lennar (LEN) is due to post its fiscal fourth quarter earnings after the bell on Wednesday. Shares of the homebuilder have fallen 20% in 2022 as the housing market has cooled down amid climbing mortgage rates.
Still, analysts remain broadly bullish. Seeking Alpha data show a consensus Buy rating on Wall Street. Citi analyst Anthony Pettinari represents one of the bulls, with the firm resuming coverage with a Buy rating ahead of the results. Pettinari argued that while housing demand is clearly moderating, the market is pricing in an overly severe correction.

  • Consensus EPS Estimates: $4.92
  • Consensus Revenue Estimates: $10.09B
  • Earnings Insight: Lennar has exceeded EPS expectations in 8 straight quarters, missing revenue estimates 3 times in that timeframe.

Also reporting: Weber (WEBR)

Thursday, December 15

Adobe (ADBE)

Adobe (ADBE) is due to report its fiscal fourth quarter earnings results after the bell on Thursday. Shares of the California-based software company have slumped nearly 50% in the past year, accelerating losses from its mid-September Q3 earnings report and its agreement to buy online design collaboration company Figma for about $20B. The blockbuster acquisition has been the target of multiple DOJ inquiries since its announcement.
Ahead of the report, analysts have trimmed targets for EPS and revenue 24 and 21 times, respectively. Meanwhile, ADBE has also showed signs of cost cutting, recently joining many tech peers in paring back its company headcount.

  • Consensus EPS Estimates: $3.50
  • Consensus Revenue Estimates: $4.53B
  • Earnings Insight: Adobe has beaten EPS estimates in 8 consecutive quarters, missing revenue estimates only once in that span.

Also reporting: Scholastic (SCHL), HEXO Corp. (HEXO), and Rite Aid (RAD)

Friday, December 16

Darden Restaurants (DRI)

Rounding out the earnings week, Darden Restaurants (DRI), the parent company of The Capital Grille, Olive Garden, LongHorn Steakhouse, and more, is set to post earnings in Friday’s premarket hours. The Wall Street community surveyed by Seeking Alpha is broadly bullish, with a consensus Buy rating reflected in survey figures. Amid expected menu price increases, analysts have revised revenue upward 16 times in the 90 days prior to earnings.
Still, consumer belt-tightening remains a concern as Baird’s weekly restaurant survey showed slowing demand for restaurant spending.
“While we would consider Darden relatively well positioned to navigate a slower economy, we highlight the risk that tougher macro conditions could cause revenue trends to lag current model assumptions for FQ4/F2024, potentially creating some risk to earnings estimates,” Baird analyst David Tarantino said ahead of the report, downgrading the stock to Hold.

  • Consensus EPS Estimates: $1.43
  • Consensus Revenue Estimates: $2.42B
  • Earnings Insight: Darden has beaten EPS estimates in 6 of the past 8 quarters, rising above revenue expectations 5 times in that span.

Also reporting: Winnebago Industries (WGO)

Juul Labs to pay $1.2B to settle scores of lawsuits – Bloomberg

Dec. 09, 2022 11:33 AM ET

1 Comment

Juul Labs (JUUL) has reached an agreement to pay $1.2B to settle scores of lawsuits, according to Bloomberg.

The outlet indicated that the total $1.2B payment will resolve 10K lawsuits, citing people familiar with the matter.

The company had announced on Tuesday that it had reached an agreement to resolve “more than 5,000 cases brought by approximately 10,000 plaintiffs against Juul Labs and its officers and directors.” Juul did not disclose the financial terms of the settlement at that time.

The e-cigarette manufacturer, a major investment of Altria (MO), has teetered on the edge of bankruptcy in recent months amid persistent litigation.

Uber rises as it sues New York City Taxi Commission over ‘unprecedented’ pay hikes

UBER +1.55%
Dec. 09, 2022 11:30 AM ET

  • Uber Technologies (NYSE:UBER) shares rose more than 1% on Friday as the mobility company sued the New York City Taxi & Limousine Commission to try to block a significant pay increase for its drivers that it called “unprecedented.”
  • The fare increase was approved by the commission on November 15 and would result in Uber (UBER) and Lyft (NASDAQ:LYFT) increasing driver pay rates by 7% per minute and 24% per mile, according to Bloomberg. The news outlet noted a 30 minute trip of 7.5 miles would require a minimum driver payment of $27.15.
  • In the suit, Uber (UBER) said it would be forced to spend an additional $21M to $23M per month if the proposal went into effect, slated to happen on December 19. If it did, Uber (UBER) would be forced to raise rider fares, it added.
  • Lyft (LYFT) shares rose more than 3.7% in early Friday trading.
  • The lawsuit is Uber USA LLC v. New York City Taxi & Limousine Commission, 160451/2022, New York State Supreme Court, New York County.
  • Uber (UBER) and driverless technology company Motional recently announced they will bring a robotaxi service to Las Vegas.

OK, now we know we’re doomed when WMT has to start offering Buy Now, Pay Later:

Walmart’s fintech startup plans to offer Buy Now, Pay Later loans – report

WMT -1.18%
Dec. 09, 2022 11:27 AM ET
2 Comments

  • One, the fintech startup backed by retail behemoth Walmart (NYSE:WMT), is planning to offer Buy Now, Pay Later loans as soon as next year, The Information reported earlier this week, citing three people with knowledge on the matter.
  • The move to offer installment loans would put Walmart (WMT) in direct competition with leading BNPL players, including Affirm (AFRM), -1.5%, Paypal (PYPL), +0.2%, Visa (V) +0.3%, Mastercard (MA), -0.1%, and Block (SQ), +2.1%.
  • As consumers’ paychecks get eaten into from high inflation, One is seeking to launch the BNPL service that shoppers can use at Walmart’s (WMT) website and stores, in addition to other retailers, the people told The Information. Note that BNPL financing products enable customers to split payments for products into interest-free installments and repay over time.
  • Last year, Walmart (WMT) worked with fintech investment firm Ribbit Capital to create One, which is majority-owned by Walmart, in an effort to deliver tech-driven financial services.
  • Previously, (Dec. 7) rising theft at Walmart could lead to higher prices and store closures.

S&P, Nasdaq, Dow mixed as stocks look for direction in choppy trading

SP500 +0.32%

Dec. 09, 2022 11:22 AM ET

U.S. stocks on Friday had reclaimed most of their losses but were trading mixed in a volatile session, as investors parsed economic data on inflation ahead of the Federal Reserve’s policy meeting next week.

All three major indices had opened lower after hotter than expected producer price inflation data but have since recovered. The tech-heavy Nasdaq Composite (COMP.IND) had pushed into positive territory and was up 0.21% to 11,105.45 points in morning trade.

The benchmark S&P 500 (SP500) had also reversed course, higher by 0.01% to 3,963.94 points. The blue-chip Dow (DJI) was 0.13% lower at 33,737.31.

Of the 11 S&P sectors, six were trading in the green, with Communication Services and Real Estate leading the way. Energy and Health Care fell the most among the losers.

The November producer price index came in at +0.3%, which was above the forecasted +0.2% figure. Moreover, the core producer price index was also higher than expected at +0.4%.

Pantheon Macroeconomics highlighted that “margin inflation is trending down, and has a long way to go.”

“Our PPI projections suggest that core PCE inflation is likely to fall much faster than the Fed expects. Policymakers will wait to see the downshift in consumer inflation, rather than responding immediately to the message from the PPI, but they likely won’t have to wait long.”

On the other hand, economic data in the form of the University of Michigan’s consumer sentiment reading showed a better-than-expected rise for December. Furthermore, short-term inflation expectations improved.

Turning to the bond markets, Treasury yields were mixed. The 10-year Treasury yield (US10Y) was up 7 basis points to 3.56%, while the 2-year yield (US2Y) was flat at 4.31%.

Among active movers, Arcellx (ACLX) was among the top movers on the Nasdaq Composite after signing a collaboration deal with Gilead’s (GILD) Kite. Autolus Therapeutics (AUTL) was the top Nasdaq loser, after pricing a stock offering.

Broadcom (AVGO) advanced as investors cheered its quarterly performance.

In an outsized move, Ambrx Biopharma (AMAM) shares gained more than seven-fold on results from a mid-stage trial.

Pakistan’s top court backs settlement with Barrick Gold in $7B mining project

GOLD +2.32%

Dec. 09, 2022 10:58 AM ET

2 Comments

Pakistan’s supreme court endorsed a settlement between Barrick Gold (NYSE:GOLD) and the country’s government to resume mining at the $7B Reko Diq copper and gold project, Mining.com reported Friday.

The court decision is vital to securing parliamentary support for Reko Diq, which is the final approval Barrick (GOLD) would need to start construction at the project, which hosts one of the world’s largest undeveloped copper-gold deposits.

The project has been on hold since 2011 over a dispute about the legality of its licensing process, but a preliminary out-of-court agreement was reached earlier this year that cleared the way for a final deal on how to run the mine and profit-sharing arrangements.

The court endorsement was a condition of the settlement to resume mining.

Barrick (GOLD) hopes to deliver production from Reko Diq as early as 2027-28 from Phase 1 at a cost of ~$4B, with Phase 2 to follow at a ~$3B cost.

Barrick Gold (GOLD) is one of the world’s largest gold miners and boasts a financial position “whereby the discussion centers around its net cash position, not its debt,” Daniel Thurecht writes in an analysis newly published on Seeking Alpha.

Still love them!

Still love MOMO too – now $9.30!

Saw that coming in Aug: 2022/08/01 at 12:16 pm

CVNA/1020, RN – If they are paying less trying to save money, that’s going to be self-defeating as people will stop buying from them as their cars will likely be of lower quality too. I’ve always thought KMX was better but now it’s an ass-kicking with KMX at $34Bn in sales, dropping $1Bn (3%) to the bottom line and CVNA with $16Bn in sales, losing $1Bn. KMX is right to keep pushing to knock CVNA out.

Not that KMX is doing great ($66) but at least they are getting interesting now.

CVNA Dec 9 2022.png

Hi Phil Trying to sort out the subscription renewal issues. I emailed admin a few days ago but got crickets.. Thanks Can they reach out to me?

I will let them know – let me know if you don’t hear back.

I will let them know.

Phil/AAPL Thanks for prev comments.. Trying to slowly tidy up AAPL pos.
Would you BB/roll the short Mar ’23 $150s while still green?
Been trying to roll longs to the ’25 $130’s as they come onside, .. only part way there.
TIA.

130 ’25 $150c ($35)
25 ’24 $150c. ($35)
40 ’25 $130c. ($42.2)
-140 ’24 $200c ($20.8)
-30 Mar $150c ($9.28)

You have 130 2025 $150s at $30 + 25 2024 $150s ($25) and 40 2025 $130s ($40) so 195 longs and only 170 shorts and you want to buy back your already inadequate protection? That makes no sense.

If you want to spend $24,000 buying back the March $150s, why not spend that to roll the 2025 $150 to the $130s at $10 per $20 – as that’s a way better use of your money as you’d be buying something of actual value. That roll would cost $130,000 but put you $182,000 in the money at $144 and give you $260,000 more overall upside, which you can then use as your hedge against selling a proper amount of short calls, like 30 short May $155 calls at $9.30 ($27,900). 5 sales like that pays for your $260,000 roll and that is INVESTING!

You have 130 2025 $150s at $30 + 25 2024 $150s ($25) and 40 2025 $130s ($40) so 195 longs and only 170 shorts and you want to buy back your already inadequate protection? That makes no sense.

If you want to spend $24,000 buying back the March $150s, why not spend that to roll the 2025 $150 to the $130s at $10 per $20 – as that’s a way better use of your money as you’d be buying something of actual value. That roll would cost $130,000 but put you $182,000 in the money at $144 and give you $260,000 more overall upside, which you can then use as your hedge against selling a proper amount of short calls, like 30 short May $155 calls at $9.30 ($27,900). 5 sales like that pays for your $260,000 roll and that is INVESTING!

Just think of it like a home you are renting – you spend money if it will increase your rents or give you a better long-term return and you run your numbers before spending money. If you look at the numbers and you can’t see a clear path to a return on your investment – better off dumping the property than keep throwing money into it.

Thks Phil, yes, am trying to roll to the $130s but wondering why you would choose to roll the ’25 $150s rather than the ’24 $150s first, which would seem to be more vulnerable?

I would consider the 2024 $150s mainly protection against the shorter-call sales. Keep an eye on the net of that roll ($15) and don’t let it get away from you but, as long as it’s around $15, the 2025 $130s have $26 in premium, so $1/month in decay and the 2024 $150s have $25 in premium, which is $1.78/month – that’s the cost of not rolling – 0.78/month ($2,340) vs spending the $30,000 to roll.

Of course, if AAPL goes lower, the roll should get cheaper as the 2025 $30s have more intrinsic value to lose and, since we expect a sell-off – risking $5,000 to wait a couple of months is not a big deal.

Tesla Shanghai plant’s monthly domestic deliveries soared 263.3% m/m in November

TSLA +3.51%
Dec. 09, 2022 1:20 PM ET
43 Comments

  • Tesla (NASDAQ:TSLA) delivered 62,493 vehicles to Chinese customers from its Shanghai plant in November − a 263.3% gain from October levels, the China Passenger Car Association (CPCA) reported Thursday. However, the factory’s exports to other countries fell 30.7% month over month during the same period to reach 37,798.
  • The latest numbers provide expanded details to figures released earlier this week that showed the Shanghai factory delivered a total of 100,291 vehicles during November, a new monthly record.
  • Read a recent analysis on the stock here.
  • Read more on Chinese EV sales stats for November.
  • SA contributors give Tesla (TSLA) a Hold rating, while Wall Street analysts give it a Buy rating. The stock also has a Seeking Alpha Quant rating of Hold, with the lowest factor grades given to valuation and momentum.
  • TSLA shares are down 0.5% in pre-market on Thursday.

Phillips 66 plans $2B 2023 capex program, $729M to convert California refinery

Phillips 66 plans to spend $1.1B in growth capital in its refining business in 2023, including $729M on the continuing conversion of the San Francisco Refinery in Rodeo, California, into one of the world’s largest renewable fuels facilities.

S&P, Nasdaq, Dow give up gains in choppy trade as investors focus on Fed meet

SP500 +0.24%

Dec. 09, 2022 1:12 PM ET

6 Comments

U.S. stocks on Friday had pared their gains and moved lower in volatile trading, as market participants digested mixed economic data on inflation and remained non-committal ahead of the Federal Reserve’s policy meeting next week.

All three major indices had opened lower after hotter than expected producer price inflation data but had since pushed higher through the day. However, stocks were again facing pressure in afternoon trade.

The tech-heavy Nasdaq Composite (COMP.IND) had given up all its gains and was now up 0.01% to 11,082.63 points. The benchmark S&P 500 (SP500) had slipped back into negative territory, lower by 0.06% to 3,961.02 points. The blue-chip Dow (DJI) retreated 0.21% to 33,711.37 points.

Of the 11 S&P sectors, seven were trading in the red, with Energy and Health Care falling the most. Communication Services and Real Estate were the top gainers.

The November producer price index came in at +0.3%, which was above the forecasted +0.2% figure. Moreover, the core producer price index was also higher than expected at +0.4%.

Pantheon Macroeconomics highlighted that “margin inflation is trending down, and has a long way to go.”

“Our PPI projections suggest that core PCE inflation is likely to fall much faster than the Fed expects. Policymakers will wait to see the downshift in consumer inflation, rather than responding immediately to the message from the PPI, but they likely won’t have to wait long.”

On the other hand, economic data in the form of the University of Michigan’s consumer sentiment reading showed a better-than-expected rise for December. Furthermore, short-term inflation expectations improved.

“Varying economic conditions have left consumers dazed and confused. Despite expecting joblessness to rise, consumers also expect income to go up; even as the Fed raises rates, consumers expect rates to go down. Short-term inflation expectations fell, longer-term did not,” Wells Fargo economist Tim Quinlan said.

“In combination with this morning’s somewhat hotter-than-expected PPI report, there is little in today’s data to give policymakers at the Federal Reserve good reason to hold off on raising the fed funds rate another 50 bps at its meeting this coming Wednesday,” Quinlan added.

Turning to the bond markets, Treasury yields were mixed. The 10-year Treasury yield (US10Y) was up 7 basis points to 3.56%, while the 2-year yield (US2Y) was flat at 4.31%.

Among active movers, Arcellx (ACLX) was among the top movers on the Nasdaq Composite after signing a collaboration deal with Gilead’s (GILD) Kite. Autolus Therapeutics (AUTL) was the top Nasdaq loser, after pricing a stock offering.

Broadcom (AVGO) advanced as investors cheered its quarterly performance.

In an outsized move, Ambrx Biopharma (AMAM) shares gained more than seven-fold on results from a mid-stage trial.

  • Hello Group (MOMO) +32%.

PARA/Phil: Do you still like these guys, just debating closing out a losing trade or rolling? Any general thoughts on their prospects.

Not too much damage today but no progress and we’re down for the week so, once again, glad we’re well-hedged and Cashy into the weekend.

Catalyst Watch: FOMC, CPI print and spotlight on Yum Brands

SPY -0.12%
Dec. 09, 2022 2:30 PM ET
1 Comment
Welcome to Seeking Alpha’s Catalyst Watch – a breakdown of some of next week’s actionable events that stand out. Check out Saturday morning’s regular Stocks to Watch article for a full list of events planned for the week or the Seeking Alpha earnings calendar for companies due to report.
Monday – December 12

  • Volatility watch – Options trading volume has moved higher on Meta Materials (MMAT) and Wayfair (W) over the last week. Short interest positions on Bed, Bath & Beyond (BBBY) moved higher once again setting up the stock up for big swings.
  • Earnings watch – Notable companies due to report include Oracle (ORCL) and Coupa Software (COUP).
  • All week – Data reports of interest could include Caterpillar’s (CAT) monthly sales update, Boeing’s (BA) deliveries update, and broker assets under management reports from financial companies.
  • All day – Pfizer (PFE) will webcast its Near-Term Launches + High-Value Pipeline Day event. Pfizer business executives and scientific leadership will provide updates on the company’s potential near-term product launches and key high-value pipeline programs.
  • All day – Cantaloupe (CTLP) will host an Investor Day event. Members of Cantaloupe’s the senior management team will provide an overview of growth strategies, financials and key business and product initiatives.
  • All day – The three-day Palo Alto Networks (PANW) Ignite Conference will begin. Shares of PANW have rallied more than 3% the last two times the company held the event following product announcements.
  • 11:00 a.m. Amdocs (DOX) will hold an investor 5G Webinar.
  • 1:00 p.m. Wallbox (WBX) will host an investor event to highlight the company’s opportunity and strategy, the NEVI and Inflation Reduction Act subsidies, and the competitive dynamic in the growing market.
  • 1:00 p.m. CareCloud (MTBC) will host its inaugural Analyst and Investor Day event.

Tuesday – December 13

  • Earnings watch – Notable companies due to report include ABM Industries (ABM) and Braze (BRZE). Options trading is implying a double-digit share price move for Aspen Group (ASPU) when it reports.
  • All day – Yum Brands (YUM) will hold a key investor day event with a focus on the growth potential and strategies for the KFC, Taco Bell, Pizza Hut and the Habit Burger Grill chains. Other investor events scheduled for the day include a Eli Lilly & Co. (LLY) guidance call, the Terex Corporation (TEX) Investor Day, a Arthur J. Gallagher & Co. (AJG) investor meeting, the Ligand Pharmaceuticals’ (LGN) Analyst Day, a Denbury (DEN) CCUS business outlook event, Graham Holdings’ (GHC) Investor Day, and QuidelOrtho’s (QDEL) Investor Day.
  • All day – The FDA Advisory Committee Meeting will meet to review NDA for Cytokinetics’ (CYTK) omecamtiv mecarbil. Shares of CYTK have been volatile in the past after omecamtiv mecarbil developments.
  • 8:30 a.m. The highly-anticipated November consumer price index report will arrive. Economists forecast a 0.5% month-over-month increase and 7.6% year-over-year increase vs. +7.7% in October. After stripping out food and energy costs, core CPI is forecast to be up 0.3% month-over-month and 6.3% year-over-year vs. +6.4% in October.
  • 11:10 a.m. OPEC will release its monthly oil report.
  • 1:30 p.m. ARK Invest will hold its monthly webinar. Cathie Wood has been a vocal critic of Jerome Powell and the Federal Reserve over its aggressive interest rate policy.

Wednesday – December 14

  • Earnings watch – Notable companies due to report include Lennar (LEN), Trip.com (TCOM) and Rev Group (REVG). Options trading is implying double-digit share price move for Cleanspark (CLSK) after it reports.
  • All day – Shareholders with Cova Acquisition Corp. (COVA) will vote on the deal to take Chinese car technology company Ecarx Holdings Inc Ecarx public in a SPAC deal. Geely Holding (OTCPK:GELYF) and Luminar (LAZR) are Ecarx partners.
  • All day – It is the FDA action date on Zai Lab’s (ZLAB) adagrasib. Shares of ZLAB have been active before off adagrasib developments.
  • All day – The 11th Annual ROTH Deer Valley Event includes appearances by BRC Inc. (BRCC), Kura Sushi USA (KRUS), and The Real Good Food Company (RGF). The conference has led to analyst reratings and stock price moves in the past.
  • 7:00 a.m. J.M. Smucker (SJM) will host its 2022 Investor Day event. A live Q&A session with CEO Mark Smucker and CFO Tucker Marshall is scheduled. Food companies are being watched closely to see if pricing power can continue to offset volume declines in key categories.
  • All day – Inditex (OTCPK:IDEXF) will release a five-week trading update. Deutsche Bank has a catalyst call sell on Inditex on the expectation for a weaker-than-anticipated update.
  • 10:00 a.m. MKS Instruments (MKSI) will host an Analyst Day with an overview of the long-term strategy and vision for the company, key growth opportunities across end-markets and an updated long-term financial outlook
  • 2:00 p.m. Roche (OTCQX:RHHBY) data will be presented at the American Society of Hematology 2022 Meeting and Exposition.
  • 2:00 p.m. The FOMC will announce its rate decision. A 50-point rate increase by the central bank is seen as the most likely outcome. Traders will be watching to see if the Fed’s statement will retain the phrasing on expected “ongoing increases” in the benchmark interest rate or adjust the wording slightly.
  • 2:30 p.m. Federal Reserve Chairman Jerome Powell will hold a press conference. Powell is expected to push back once more against the idea of a dovish pivot.

Thursday – December 15

  • Earnings watch – Notable companies due to report include Adobe (ADBE).
  • All day – Volkswagen (OTCPK:VWAGY) CEO Oliver Blume is expected to present to the board a new software strategy for the automaker. Analysts will be looking to see if M&A is part of the plan.
  • All day – Krispy Kreme (DNUT) will hold an investor day event with presentations scheduled and a Q&A session with members of the management team. Details on the company’s strategic vision, long-term growth goals, and 2023-2026 guidance are expected.
  • All day – The spinoff of MasterBrands (MBC) from Fortune Brands Home & Security (FBHS) will be effective.
  • All day – Ericsson (ERIC) will hold a Capital Markets Day event.
  • All day – Hillenbrand (HI) will host its investor day, which will include a detailed overview of the company, its growth strategy, its transformation journey, and financial targets.

Friday – December 16

  • Earnings watch – Notable companies due to report include Accenture (ACN), Darden Restaurants (DRI), and Winnebago (WGO).
  • All day – Watch for volatility in the markets with the simultaneous expirations of stock options, stock index futures, stock index options. Triple-witching days occur only four times a year and have seen above-average market swings over the last ten years.
  • All day – The CFIUS regulatory review on the F-star Therapeutics (FSTX) sale to Sino-Biopharma (OTCPK:SBHMY) will expire.
  • Box office – Disney (DIS) tentpole film Avatar: The Way of Water opens in the U.S. to high expectations. Despite the film’s +three-hour runtime, reviews have been very positive. An opening weekend box office haul of over $150M could boost sputtering theater stocks as well as the House of Mouse.
  • 8:30 a.m. Centene Corporation (CNC) will hold its Investor Day event. Analysts think the update from the managed care company on margins and industry dynamics could swing sentiment on the stock heading into 2023.
  • 8:30 a.m. AGCO Corporation (AGCO) will conduct an analyst meeting in New York City.

Sadly, 11,620 (weak bounce) just failed on the Nasdaq and we’re barely over 3,940 (weak bounce) on the S&P and, since we’re down 2.5% for the week – that indicates we’re consolidating for a likely move lower.

We’re also right on 1,800 on the RUT – that would not be a pretty break either.

Where is Mr. Stick???

https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcTJ8oFBgDjkfaCxo9rHicmOFlut4Io9bvCmQSldoJPJOR8CSHMlzK7W9K05wUpKIfxJGVA&usqp=CAU

Have a great weekend, folks!

  • Phil