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Market Headlines 👀 

• US NY Fed manufacturing October index comes in at -4.6; est: -7.0. Previous +1.9.

• US plans to tighten curb on China’s access to advanced chip technology.

• US heading into a recession is no longer consensus on the street.

• Microsoft (MSFT) officially closed its deal to acquire Activision Blizzard.

• Apple (AAPL) staple iPhone 15 model shows weakness in China with ~5% YoY decline in sales compared to the 14.

• Microsoft (MSFT) owned LinkedIn announces 700 employees being let go.

• Snapchat (SNAP) CEO announces strong 2024 projections, outlining growth in ad revenue and DAUs.

• Rite Aid (RAD) announces it will be filing for bankruptcy.

Earnings 💸

• Charles Schwab (SCHW)

  • EPS: $0.77 beats (exp. $0.75)

  • Revenue: $4.61b misses (exp. $4.63)

  S&P 500 Heat Map

Recap Around the Street 🧠

It’s Been a Long, Cold, Lonely, Winter: Is 3Q23 the End to the Earnings Recession?

An earnings recession began in S&P 500 EPS in the fall of 2022. Earnings began to decline in 4Q22 and have continued to post YoY drops in each subsequent quarter. Based on consensus forecasts, analysts expect this to be the last quarter of YoY EPS declines, with a return to growth in 4Q23 and into 2024. Importantly, this earnings recession occurred without an economic recession, but instead was the result of normalizing/falling operating margins after the surge in margins in 2021/2022 driven by strong corporate pricing power. Importantly, if an economic recession were to materialize in 2024 or after, renewed earnings weakness could be expected, challenging the current consensus forecasts of strong growth next year and the year after. (Contributed by Cameron Dawson, CIO at NewEdge Wealth)

Fed quantitative tightening means one less price insensitive buyer for US Treasuries. Foreign investors largely comprise other central banks managing their currency reserves. Lower trade surplus with the US means lower demand for Treasuries. Money market funds only invest in the shortest maturities as higher t-bill issuance has led a a drawdown in the reverse repo facility (RRP). The Treasury market is increasingly beholden to price sensitive buyers who are demanding higher risk premiums in the form of higher real (inflation-adjusted) rates. (Contributed by Benjamin Lavine, CIO at 3D/L Capital).

Market Preview 🎞️

• Tuesday, October 17th: Retail sales; Industrial production;

• Tuesday earnings: Bank of America (BAC), Goldman Sachs (GS), Johnson & Johnson (JNJ), Lockheed Martin (LMT), and United Airlines (UAL)

• Wednesday, October 18th: MBA mortgage applications;Housing starts; Fed beige book

• Wednesday earnings: Tesla (TSLA), Netflix (BAC),and Morgan Stanley (MS)

• Thursday, October 19th: Weekly jobless claims; Philadelphia Fed business outlook; Housing starts

• Thursday earnings: The Blackstone Group (BX), AT&T (T), American Airlines (AAL), and Intuitive Surgical (ISRG)

• Friday, October 20th: Monthly OPEX options expiration

• —> Podcast spotlight: Pounding the Table 👊 : listen now; where you will find in-depth analysis around these highlights, read company deep dives, and interviews with public CEO's!

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