MARKET SNAPSHOT
There Will Be Bonds
- America had a lackluster Tuesday: U.S. stocks ended mixed, with the S&P 500 finishing lower to end its 5-day winning streak, while the Dow still rose. Unease over earnings season (which kicks off this week) put a damper on the recent rally, and expectations continue to mount that companies had a rough third quarter.
- Oil continued its surge by jumping almost five percent, hitting a celebratory three-month high. Why? Mostly from the U.S. forecasting lighter oil supply with expected decreases in rig numbers, as well as rumors that oil heavyweights Russia and Saudi Arabia, which are attempting to cut their oil overabundance.
- Finally, U.S. bond yields took a tumble as investors flocked to safe-haven investments following a worrying sign from the IMF. Speaking of…
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WORLD MACRO
IMF Downgrades Global Economic Outlook…Again
The Brew has some bad news: the International Monetary Fund cut its projection for this year’s global growth to 3.1 percent from its previous forecast of 3.3 percent. Emerging markets are primarily to blame for slowing things down: their growth rate is half of what it was just six years ago. The IMF is cautiously pessimistic about its revision—it thinks there’s a 50 percent chance global growth will end up falling below 3 percent next year, which would be equivalent to a global recession. To prevent such a situation, the IMF thinks that the Federal Reserve should delay its interest rate hike at least into next year (easy enough) and that emerging markets need to reassess their economies (not so easy).
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CORPORATE PRIMER
Brew Gone Bad
In mid-September, brewing company Anheuser-Busch announced plans to make an acquisition bid for fellow brewer SABMiller—a deal that had the potential to create the world’s biggest brewing company. Yesterday, news broke that the offer was for $100 billion—and SABMiller rejected it, stating that it’s seeking an offer upwards of $110 billion. Though the failed deal caused both companies’ stocks to dip, avoiding a brewing monopoly may be in the best interest of the global beer market (not to mention our slush funds).
Yum Brands Earnings Not Yummy
It looks like fast-food consumers have some bitter taste buds. Yum Brands, the large fast-food company that owns chains such as Taco Bell, KFC and Pizza Hut, reported earnings growth well below 10 percent, falling short of analyst expectations for 14 percent growth. And like many things these days, the Chinese economy’s rough patch is to blame: around 52 percent of Yum’s sales are derived from Chinese consumers, and same-store sales in China only rose 2 percent—not the 10 percent analysts were expecting. No surprise that Yum’s stock price fell a sour 18 percent following the negative outlook.
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TODAY IN TECH
Twitter’s Big Moment
Yesterday, Twitter unveiled a brand new feature dubbed “Moments,” which packages curated tweets, news and content related to a single event and presents it in a user-friendly “Moment.” The new feature shows that Twitter is in fact paying attention to content consumption trends (think Snapchat stories) and is making a serious effort to turn its growth and profitability around by putting the focus back on the actual platform. Between new CEO Jack Dorsey and Moments, what could go wrong?
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OTHER STORIES
- UAW threatens strike at Fiat Chrysler U.S. operations
- Airbus, Bombardier end talks over CSeries jet investment
- Costco sells record amount of cage-free eggs despite feud
- 10 biggest takeaways from Microsoft’s event
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ECONOMIC CALENDAR
- Monday: ISM Non-Manufacturing Index
- Tuesday: U.S. Trade Gap, Yum Brands/PepsiCo Earnings
- Wednesday: Monsanto Earnings
- Thursday: FOMC Minutes Release, Weekly Jobless Claims, Alcoa/Domino’s Earnings
- Friday: Import/Export Prices
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MOVE OVER MORTGAGE
“I’ll pay in cash.” That’s what a third of buyers in the U.S. home market are saying in 2015, up from 20 percent all-cash purchases in 2005. RealtyTrac, a real estate analytics and data provider, released a report based on 10 million home sales on Tuesday supporting these findings:
- The increase in cash purchases may be due to tighter lending standards, which deter buyers from using debt financing.
- Increases in foreign money in the U.S. home market, specifically of the Chinese variety, are also supporting this trend, with 46 percent of their transactions in all-cash.
- These foreign cash buyers have helped accelerate the appreciation of U.S. homes in recent years. However, if foreign demand dries up, you can say adios to those favorable home valuations.
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INTERVIEW QUESTION OF THE DAY
You have eight jars of the same size and shape. Seven of the jars weigh five ounces while the eighth jar weighs six. You have a scale you can use to measure the jars but you can only measure twice. How do you find out which is the heavier jar? (Answer)
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BUSINESS TERM OF THE DAY
Zero-Sum Game — A situation in game theory in which one person’s gain is equivalent to another’s loss, so the net change in wealth or benefit is zero. A zero-sum game may have as few as two players, or millions of participants.
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FOOD FOR THOUGHT
41: the number of games Raffi Torres of the NHL’s San Jose Sharks was suspended for a brutal check on Jakob Silfverberg of the Anaheim Ducks in a preseason game.
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