🇺🇸 Midterms and markets

Monday, November 14, 2022 by Robinhood Snacks |
Wall Street’s waiting (Kena Betancur/Getty Images)

Wall Street’s waiting (Kena Betancur/Getty Images)

Wall Street’s waiting (Kena Betancur/Getty Images)

Wall Street’s waiting (Kena Betancur/Getty Images)

Last Week’s Market Moves
Dow Jones
33,748 (+4.15%)
S&P 500
3,993 (+5.90%)
Nasdaq
11,323 (+8.10%)
Bitcoin
$16,858 (-20.27%)

Hey Snackers,

It’s that time of year: the National Toy Hall of Fame inducted its three newest members, including a spinning top and Masters of the Universe figurines. Honorary mentions: bingo and the piñata.

Stocks rallied majorly last week after encouraging inflation data. The Nasdaq spiked 8% as investors hoped the Fed would slow its roll on rate hikes. Cryptocurrencies plunged as the FTX drama unraveled. On Friday the crypto exchange filed for bankruptcy.

Voted

The midterm hangover… isn’t over. It’s still too close to call, but the US might get a split government, with one GOP-controlled chamber of Congress. Stocks plunged Wednesday after midterm results didn’t show clear gridlock. Investors generally prefer when power’s shared, because historically that’s meant less legislation (it’s harder to agree on things). That can mean fewer potential blockers for business, regardless of which party’s in power.

  • Democrats maintained their slim majority in the Senate after key victories in Nevada and Arizona over the weekend. Georgia’s runoff election is slated for December 6.
  • If Republicans take the House (which they’re favored to) that’s enough to unlock gridlock. Either way, majorities will likely be slim within both chambers.

Ballot bubbles giving SAT flashbacks… From choosing lawmakers to voting on propositions, Americans’ ballot decisions could have big implications. A few sectors that could be affected:

  • Energy: Republican lawmakers have supported US energy independence, and that could lead to easier access to drilling permits if the GOP takes the House.
  • Cannabis: Voters in Maryland and Missouri legalized recreational marijuana, joining 19 other states and DC. Meanwhile, Colorado voted to decriminalize and regulate some psychedelic substances (think: magic mushrooms).
  • EVs: California voted down an extra tax to build EV infrastructure. Lyft was the biggest backer of the prop, since the funds would’ve helped it meet the state’s requirements.
  • Gambling: CA voters also struck down a prop that would’ve allowed gambling companies like FanDuel and DraftKings to offer online sports betting.
  • Tobacco: And CA became the largest state to ban flavored-tobacco products after voters upheld the state’s ban. Tobacco titans like Philip Morris and RJ Reynolds had spent big in hopes of overturning it.
THE TAKEAWAY

Investors care more about the Fed right now… Because the central bank has the levers to influence rates and inflation. Inflation was voters’ most pressing issue in these elections (two years ago it wasn’t on the radar). Markets rallied hard Thursday after news that inflation cooled more than expected last month, which suggests the Fed might slow its rate hikes (top of mind for investors).

Zoom Out

Major whiplash… Crypto exchange FTX (including FTX US and 130 affiliated companies) filed for bankruptcy Friday after a whirlwind week revealed an $8B balance-sheet hole — and rival Binance bailed on its takeover plan. Oh, and FTX halted customer withdrawals — but that didn’t stop $515M from being moved out of the exchange Friday night in a possible hack. Sam Bankman-Fried, the exchange's now former CEO, had been a Capitol Hill regular lobbying for industry-friendly regs. Now, that regulation's in doubt. Meanwhile, investors fear FTX's "contagion" could spread. One sign that it may have already: BlockFi (which got bailed out by FTX in June) suspended withdrawals, citing FTX's downfall.

Googling “packing hacks”... to avoid the $50 luggage fee. Budget airlines are booming as more travelers turn to no-frill flights to hit the inflated skies. Last week, Irish airline Ryanair reported record passengers and profits for its summer quarter. Meanwhile, US-based Frontier saw sales jump 35% as passengers paid extra for perks (think: bearable legroom). Travel is still hot: even with airfare forecast to be the priciest in five years, half of Americans plan to travel this holiday season.

Events

Xi Jinping saw his shadow… and Chinese stocks may have six more weeks of winter. China’s tech giants posted their slowest growth ever in August as Beijing’s zero-Covid policy raised costs and hurt demand (because: more lockdowns). Chinese stocks popped this month on reopening rumors. But as Covid cases surged last week hawkish President Xi said he planned to “hold fast” to the strict policy (though he relaxed some rules on Friday). We’ll see how wounded giants Alibaba, JD.com, and Tencent Music are faring when they report this week.

Jingle bells in November… Retailers are getting into the holiday spirit early. Walmart’s sales jumped 8% last quarter, but profits were squeezed as inflation-fatigued shoppers avoided big-ticket items like TVs. Target’s profits fell 90% as it offered steeper discounts on overstocked goods. Still, holiday sales are expected to rise from last year, and retailers are already setting up festive displays to hype demand. But an unmerry combo of discounts and high costs could keep Walmart and Target from wowing investors when they report this week.

ICYMI
  • HitTok: From Sony to Universal Music, the largest record labels want a bigger cut from TikTok as the app becomes a hit-maker. While TikTok needs the music industry, the industry increasingly needs the Tok.
  • iSag: Apple's expecting a drop in iPhone shipments this holiday season (picture: 3M fewer iPhone 14s than anticipated). Last week, China’s Covid policy triggered a weeklong shutdown at the main iPhone assembly site.
  • Alexa: Amazon's reportedly looking to cut costs, and Alexa could get downsized. But instead of Meta-sized layoffs, Amazon is said to be pushing workers to find roles in more lucrative divisions of the company.

What else we’re Snackin’

  • Loanly: The Biden admin stopped taking applications for student-loan forgiveness after a federal judge in Texas blocked the president's plan, putting 26M applications on hold. Biden plans to fight the decision.
  • Cooling: The once booming housing market has hit a wall. Online brokerage Redfin cut 13% of its staff last week as the housing market slides into what’s expected to be its second-worst correction since WWII.
  • Power: It's not luck that last week's lotto jackpot ($2B) was the largest in US history. Advertised prizes are based on estimated returns for 30-year bonds, and Fed rate hikes mean those estimates have soared.

Snack Fact of the Day

China is nearly as wide as the US, but the entire country officially has just one time zone

This Week

  • Monday: Earnings expected from Tyson, Nu, Clear Secure, Getty Images, and Oatly
  • Tuesday: Earnings expected from Walmart, Home Depot, Advance Auto Parts, Aramark, Tencent Music, and Krispy Kreme
  • Wednesday: Earnings expected from Nvidia, Cisco Systems, Lowe’s, TJX, Target, and Grab
  • Thursday: Jobless claims. Earnings expected from Alibaba, Palo Alto Networks, NetEase, Ross Stores, BJ’s, Dolby, Macy’s, Gap, Kohl’s, Weibo, and Williams-Sonoma
  • Friday: Earnings expected from JD.com, Foot Locker, Spectrum Brands, and Twist Bioscience

Authors of this Snacks own: shares of Amazon, Apple, Clear Secure, Nvidia, and Walmart

ID: 2590862