October 16th - 20th, 2023
Despite stronger than expected retail sales, financial tightening and a disinterest in duration-heavy securities have weighed on both equity and bond markets
The S&P 500 is down ~1.2%, the Nasdaq is down ~2.2%, and the Dow Industrials is down ~0.3% WTD; an environment of foreign conflict in combination with continued financial tightening and mixed earnings hindered public equities this week
The 10-Yr U.S. Treasury yield has increased +0.273% to a current yield of 4.931%, whereas the 30-Yr U.S. Treasury yield increased +0.223% to a current yield of 5.033%; the likeliest causes for the recent 16-year high soar in bond yields are attributed to stronger than expected retail sales data and continued disinterest in longer-term securities
US 30Y fixed mortgage rate hit 8% for the first time since mid-2000, causing housing applications to plummet [CNBC]
Economists on average expect gross domestic product, the value of all the goods and services produced in the country adjusted for inflation, to increase 2.2% in the fourth quarter of 2023 from a year earlier – a sharp upward revision from the average 1% growth forecast from July [WSJ]
Growing conflict within the Middle East and a strengthening dollar have complicated commodity markets and U.S. foreign policy
Crude oil prices increased 3.3% to a current $90.30/bbl while lithium ore prices decreased 7.7%; waning demand amidst and bearish sentiment towards EVs in combination with foreign conflict in the middle east have complicated commodity markets
Surprising strength in the U.S. economy poses a threat to the rest of the world, portending higher interest rates for longer and a stronger dollar that will weigh on other countries’ growth, global financial officials say [WSJ]
Consumer stocks are tanking as shoppers turn cautious and surging Treasury yields reduce their appeal; investors and analysts say higher gasoline prices, tighter credit conditions and sticky inflation are beginning to catch up with many consumers [WSJ]
Renting is now cheaper than buying, with the gap as wide as it’s been since 2015, especially in HCOL markets such as Los Angeles, Honolulu, Seattle, San Jose and San Francisco [BBG]
M&A activity continues to remain depressed amidst currently attractive public investment opportunities and disruptive approval processes
Microsoft completed its $69B acquisition of Activision Blizzard after a 21-month approval process [BBG]
California is preparing a lawsuit to block Kroger’s $24.6B acquisition of Albertsons on the condition that it hurts consumers and workers [BBG]
KKR is preparing its binding bid to buy Telecom Italia’s landline grid; the grid was last valued at $25.3B [RT]
DAZN Group and Comcast’s Sky Italia slightly raised their bid to broadcast Italy’s top football competition for as many as five seasons to $4.75B [BBG]
US natural gas producer Chesapeake Energy approached rival Southwestern Energy, which has a $12B valuation including debt, about a possible acquisition [RT]
CVC Capital Partners is in the early stages of considering a potential bid for European payments firm Nexi, which has an $8B market value [BBG]
Recent developments across four key industries highlight automation technology, complicated bank earnings, and tech layoffs
Energy & Natural Resources
Oil behemoths are acquiring smaller rivals as they consolidate a larger share of U.S. crude production in an era marked by increasing resource scarcity and the need for strong balance sheets [WSJ]
Albemarle's $4.16 billion takeover of Liontown Resources was scrapped as Australia's richest person, Gina Rinehart, acquired a 19.9% stake, disrupting Albemarle's privatization efforts in the competitive lithium market [WSJ]
Technology, Media, & Telecommunications
Amazon is implementing the Sequoia robotics system in its warehouses to enhance product processing and reduce delivery times by up to 25%, employing AI-equipped sortation machines and robotic arms [WSJ]
LinkedIn laid off nearly 700 employees; the cuts were centered on the social network’s core engineering team, though product, talent, and finance teams were also affected [BBC]
Healthcare & Life Sciences
CVS Health is voluntarily pulling decongestants with oral phenylephrine from its shelves following an FDA advisory panel's declaration of the ingredients’ oral ineffectiveness, although the FDA has not issued removal orders [WSJ]
Employer health insurance costs rose 7% this year due to inflation, with the average family plan reaching almost $24,000, and further increases are expected in 2024 [WSJ]
Financial Services
Goldman Sachs posted a 33% decline in Q3 profits, the eighth consecutive quarter of year-over-year profit drops, largely due to divestment losses in its consumer lending business and reduced revenue in asset and wealth management [WSJ]
Global payment giants, such as Mastercard and Visa, are making significant investments in African fintech companies to tap into the continent's growing e-commerce market [WSJ]
Outside of macroeconomic updates and M&A developments, the Israel-Hamas War and a 3rd-House Speaker vote have led news cycles
As Israel prepares for a ground war to “destroy the rule of Hamas,” the world is watching—not only with fears about the humanitarian issues, but also concerns that the fight could escalate into a broader regional conflict with global implications.The US has met directly with Arab leaders, called on Qatar and China to help limit the conflict’s spread, and even held back-channel talks with Iran [WSJ]
Republican speaker nominee Rep. Jim Jordan intends to pursue a third-floor vote, intensifying the ongoing leadership struggle among Republicans and hampering legislative progress on issues like Ukraine aid [WSJ]
Costco CEO Craig Jelinek is set to step down after the holidays, with President and COO Ron Vachris slated to take over in January, marking the second CEO transition in the company's history as it continues to thrive with record-high stock prices and growing revenue [WSJ]
Companies are dialing back or delaying hiring of M.B.A.s this fall, a sharp turn from the supercharged recruiting seasons of years past within tech, finance, and consulting [WSJ]
Gavin McManus
Oct 20, 2023
