Punch bowl trading

Chatter is that Blackrock is telling financial advisers that they expect "pivot language" at the next Federal Reserve meeting. Rumour mill…Is this just wishful thinking, or outright lies designed to stoke retail bagholders? I don’t know but maybe the Fed thinks it can pause around 4.75% (75bps next week, 50bps in Dec and 25bps in its first meeting of 2023) and wait and see and then everyone will say it’s a pivot even if it’s not really one. Schrodinger’s Pivot: it’s a pivot whatever way you see it...it’s there and not there at the same time. Backwards looking data yesterday showed GDP rebounded well in the third quarter and inflation was down too. The economy grew by 2.6%, whilst headline inflation rose 4.2%, down sharply from 7.3%.

Meanwhile this from Morgan Stanley: "We expect the FOMC to deliver a fourth 75bp rate hike at its November meeting, and indicate that it could soon be appropriate to step down the pace of hikes. We continue to expect the Fed to step down to 50bp in December and 25bp in January.” I don’t know – my firm belief has been that the Fed will keep going and is not near a pivot, but it could be near a short-term pause, which can be construed by the market as a pivot.

Defaanged

Former Amazon boos Bezos was right to say it was time to batten down the hatches. Too much spend...Q4 rev guidance very light for Amazon, expects Q4 operating incomes of $0-$4bn – quite the range, vs about $.4bn expected; revs $140bn to $148bn vs $155bn expected...catching up to Meta. AWS +27% vs +39% last year, weakest in a long time though a touch better than expected. This is the market we are in – guidance getting severely punished because no one wants to own uncertainty when you are trading at 80x earnings.... AMZN traded 20% lower in the after-hours market before trimming losses to about –12%.

Rare bright spot

Apple beat but iPhone was a miss, as was Services, shares managed to climb slightly in after-hours trading. EPS was $1.29 vs $1.27 expected, revenues $90bn vs $89bn expected. Unique installed base is acting as insulation to macro trends...December quarter is key – CEO Cook said there is constrained supply on the iPhone 14 and has been from the day it launched...only 8 days of 14 sales in the current quarter so we get a better idea from the Dec quarter, which is expected to show deceleration of revenue growth. Dollar headwinds are a major factor – about $12bn in the quarter and affecting margins in Services too. Mac revenues were very good (+25% at $11.51 billion vs. $9.36 billion estimated) but expected to decline sharply in the Dec quarter. I think the numbers show Apple remains very strong despite huge supply pressures and enormous foreign exchange headwinds.

Tech carnage is affecting sentiment

After the Nasdaq composite declined another 1.63% yesterday European shares are off colour to the tune of about 1% this morning. The Dow rallied on the better-than-expected GDP report and earnings from Caterpillar, McDonald’s and Honeywell.  The tech wreck sent the S&P 500 down 0.6%. Later today is the monthly PCE reading for September, which is seen rising a little less than in August. Monthly core PCE is expected at +0.5% vs +0.6% in the previous month, whilst annual core inflation is seen rising by 5.2%. Remember the core CPI number came in super hot at +6.6% earlier this month.

Chief Twit strikes

Elon Musk’s acquisition of Twitter is complete. The bird is freed, Musk tweeted. And he’s already sacked the lady who pushed most fiercely for Donald Trump’s permanent suspension. In addition to firing legal Head Vijaya Gadde, CEO Parag Agrawal and CFO Ned Segal are also out. It’s going to be fascinating to see whether he can eliminate bots but all anyone really wants to know is whether Trump is allowed back.