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Stocks Expand Gains, Challenging Rates, and Blooming Earnings: Markets Wrapped

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(Bloomberg) – Stocks extended a recovery that saw US stocks return from losses from a hot inflation reading. Dollar and Treasury yields have retreated from recent highs.

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Stocks gauge Stoxx in Europe rose about 1%, led by real estate and utilities, while Hong Kong-listed technology companies rose earlier as much as 5%. S&P 500 and Nasdaq 100 futures settled after Wall Street closed 2.6% higher on Thursday, ending a six-day losing streak.

The gains – after higher-than-expected consumer price data bolstered a 75 basis point rate hike by the Federal Reserve – were the S&P 500’s best reaction to a CPI release since July 2009, according to Bloomberg Intelligence. Some investors saw this as a result of extremely short positions in the market, which traders were quick to cover as soon as the data got out of the way.

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The wait for third-quarter earnings is mowed, with major Wall Street banks including JPMorgan Chase & Co and Citigroup Inc, reporting later on Friday. Banks are expected to post the largest drop in earnings of any S&P 500 sector, according to data compiled by Bloomberg Intelligence.

“Although investors may view a disappointing CPI reading, it would be a much higher bar to consider weak corporate earnings.” David Chow, Invesco’s global market analyst, told clients. “Growth is below trend and slowing as the Fed continues to tighten. This is a difficult backdrop for risky assets.”

Investors will focus on what’s brewing for banks as Fed tightening slows economic growth and may increase provisions for bad debts.

On the currency front, the dollar settled below its two-week high hit earlier this week against major currencies, while Treasury yields slipped after the previous day’s big gains, as two-year interest rates fell by more than four basis points.

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The pound fell after a sharp rally on Thursday, after a report that the government may reverse some of its controversial plans to cut taxes. Friday is the last day of the Bank of England’s emergency bond purchase programme.

Cryptocurrencies also got a boost, taking bitcoin to a one-week high and putting the biggest token on the cusp of reclaiming the $20,000 level.

Later in the day, investors will hear more comments from Federal Reserve officials, with Esther George, Lisa Cook and Christopher Waller scheduled to speak.

Elsewhere, oil and gold are headed for weekly losses as signs of a global economic slowdown and monetary tightening threaten to undermine energy consumption. The International Energy Agency warned earlier that the production cuts agreed by OPEC + could lead to higher oil prices and push the global economy into recession.

This week’s main events:

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  • Friday Earnings: JPMorgan Chase & Co. , Citigroup Inc. , Morgan Stanley, UnitedHealth Group Inc. , US Bancorp, Wells Fargo & Co., Ltd.

  • US Retail Sales, Business Inventories, University of Michigan Consumer Confidence, Friday

  • The Bank of England’s emergency bond purchase is set to expire on Friday

Some of the main movements in the markets:

Stores

  • The Stoxx Europe 600 was up 0.9% as of 8:39 am London time

  • S&P 500 futures changed little

  • Nasdaq 100 futures changed little

  • Futures contracts on the Dow Jones Industrial Average changed little

  • The MSCI Asia Pacific Index is up 2%.

  • MSCI Emerging Markets Index rose 1.5%

coins

  • Bloomberg spot dollar index up 0.1%

  • The euro fell 0.2 percent to $0.9761

  • The Japanese yen fell 0.3 percent to 147.53 per dollar

  • The offshore yuan fell 0.1 percent to 7.1873 per dollar

  • The British pound fell 0.5% to $1.1265

Cryptocurrency

  • Bitcoin rose 1.2% to $1,614.23

  • Ether rose 1.9 percent to $1,318.84

bonds

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  • The yield on the 10-year Treasury fell three basis points to 3.92%.

  • Germany’s 10-year yield fell eight basis points to 2.20%.

  • The yield on British 10-year bonds fell 11 basis points to 4.09%.

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Tesla offers discounts. Are drivers bothering her cars?

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headwind for

Tesla

– And his stock – seems to be growing. The latest might be among the company’s biggest concerns.

Bernstein analyst Tony Sacconaghi Tuesday wrote that

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Tesla

(Stock ticker: TSLA) “There appears to be a growing demand problem.”

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US Banks Warn of Recession as Inflation Hurts Consumers Stocks Fall By Reuters

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© Reuters. FILE PHOTO: Workers are seen in the windows of the JP Morgan offices in Canary Wharf, London on September 19, 2013. REUTERS/Neil Hall/File Photo

By Saeed Azhar and Noor Zainab Hussain

NEW YORK (Reuters) – The largest U.S. banks are bracing for a downturn in the economy next year as inflation threatens consumer demand, executives said on Tuesday.

Consumers and businesses are doing well, Jamie Dimon, CEO of JPMorgan Chase & Co (NYSE: NYSE), told CNBC, but noted that may not last for much longer as the economy slows and inflation erodes consumer spending power.

“Those things could derail the economy and cause this moderate to severe recession that people are concerned about,” he said.

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He told CNBC that consumers have $1.5 trillion in excess savings from pandemic stimulus programs, but they could run out some time in the middle of 2023. Dimon also said the Fed could pause for three to six months after raising benchmark interest rates to 5%, But this may “not be enough” to rein in high inflation.

The US central bank last month raised interest rates by 75 basis points during its fourth consecutive meeting to 3.75%-4%, but also signaled hopes of switching to smaller increases as soon as at its next meeting.

Major bank stocks fell sharply the next day after a group of senior bankers outlined risks to the economy. Bank of America (NYSE:) stock fell more than 4%. Goldman Sachs Group Inc (NYSE:) and Morgan Stanley (NYSE::) both fell by more than 2% and Citigroup Inc (NYSE:) fell more than 1%.

Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that the bank’s research shows “negative growth” in the first part of 2023, but that the contraction will be “moderate.”

Moynihan said the lender’s investment banking fees will likely fall 55% to 60% in the fourth quarter from a year earlier, while trading revenue will likely rise 10% to 15%.

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“Economic growth is slowing,” Goldman Sachs CEO David Solomon said at the same conference. “When I talk to our customers, they sound very careful.”

He said the job market in the banking sector remains “surprisingly tight” and competition for talent “as tough as ever”.

However, some banks are cutting staff. A source familiar with the company’s plans said Tuesday that Morgan Stanley has cut about 2% of its workforce. The job cuts, first reported by CNBC, affected about 1,600 jobs and track workforce cuts at Goldman and Citigroup.

Elsewhere on Wall Street, BlackRock Inc., the world’s largest asset manager (NYSE:) froze hiring except for critical roles, CFO Gary Shedlin said.

“We’re trying to be more prudent,” he said.

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Stocks fluctuate as investors ponder the course of prices

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Next week’s Federal Reserve decision and inflation figures may provide more clarity on interest rates

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