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CCP Meetings & Fed Updates

Well folks, this is going to be quite the week and we’ve laid it all out for you with this morning’s Monday opener. Starting with a review of this earnings season, a short on the troubled electric automaker $NKLA, then capping it off with a couple of stories on the CCP’s big leadership conference which just kicked off as well as a quick update on the Fed. As such, make sure to trade with a stop-loss, because good trading starts with proper risk management.


Markets in Review

After trading sideways to lower last week, all indices are opening up in the premarket with the Dow, S&P and Nasdaq 97, 121 and 160 bps in the green currently - this comes as the Q3 reporting period is really starting to heat up with a slew of Fortune 500 financial issuers reporting earnings through the week. Below find a compilation of this reporting period’s updated key figures and metrics as well as the companies reporting over the next couple days: Earnings Scorecard: For Q3 2022 (with 7% of S&P 500 companies reporting actual results), 69% of S&P 500 companies have reported a positive EPS surprise and 67% of S&P 500 companies have reported a positive revenue surprise. Earnings Growth: For Q3 2022, the blended earnings growth rate for the S&P 500 is 1.6%. If 1.6% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q3 2020 (-5.7%). Earnings Revisions: On September 30, the estimated earnings growth rate for Q3 2022 was 2.8%. Nine sectors are reporting (or are expected to report) lower earnings today (compared to September 30) due to downward revisions to EPS estimates and negative EPS surprises. Earnings Guidance: For Q4 2022, 5 S&P 500 companies have issued negative EPS guidance and 4 S&P 500 companies have issued positive EPS guidance. Valuation: The forward 12-month P/E ratio for the S&P 500 is 15.5. This P/E ratio is below the 5-year average (18.5) and below the 10-year average (17.1).


Short: Nikola Corporation (NKLA-NASDAQ) | Timeline: 2 days

Nikola Corporation (NKLA), which operates as a technology innovator and integrator that works to develop energy and transportation solutions ran into some major turmoil after markets and a fraud case against the company’s founder wrapped up on Friday. The founder, Trevor Milton, was found guilty of three of four counts of fraud, as he "lied to Nikola's investors — over and over and over again. That's fraud, plain and simple," said Damien Williams, the U.S. Attorney for the Southern District of New York. (Full Story) Referring to the chart, Nikola has had a rough year so far as major selling has occurred from highs of over $10. Since that high, the stock has been riding just above a downwards trending support line, and with this most recent news, the stock is likely to break below this support and continue to fall to prices unseen by Nikola investors.


Zooming out...

The big conference Over the weekend the latest CCP leadership conference began with some rather interesting sentiments from leader Xi Jinping. This conference happens every five years and if Xi is able to win the crucial leadership vote which takes place later this week, he would be the first Chinese leader since Mao to win a third term. Speaking of Xi, in his two-hour opening monologue, he relished the takeover of Hong Kong and made sure to restate that the repatriation of Taiwan is inevitable (at least in Beijing’s eyes). While this speech also stated his plans for China’s next five years, we’ll have to wait until later in the week to find out whether he will be leading this grand plan. The FED’s Benefit for Banks Bank of America, the Bank of New York Mellon, and Charles Schwab reported earnings this morning, and they seem to be reaping the rewards of the FED’s rate hikes. Net interest income, which is equal to interest income on assets less any interest losses on liabilities has skyrocketed across all three companies. Bank of America’s has risen 24% and Charles Schwab’s has climbed 31% relative to last year. This is while BNY’s net interest revenue has jumped by an astonishing 44%. While rate hikes may decrease the total volume of loans given out, it seems that the banks have found a way to benefit as they likely locked in debts during the period of low-interest rates. This means they’re now free to issue higher-yielding loans while pocketing the difference.


Making headlines...

UK Treasury chief scraps nearly all government tax cut plans

  • The U.K.’s new Treasury chief ripped up the government’s economic plan on Monday, dramatically reversing most of the tax cuts and spending plans that Prime Minister Liz Truss announced less than a month ago. (Full Story)

Kanye West to buy conservative social media platform Parler

  • The rapper formerly known as Kanye West is offering to buy right-wing friendly social network Parler shortly after being booted off Twitter and Instagram for antisemitic posts. (Full Story)

Credit Suisse pays $495M tied to mortgage-backed securities

  • Credit Suisse has agreed to pay $495 million as part of a settlement with the U.S. over a yearslong dispute tied to mortgage-backed securities, an investment vehicle that played a central role in the 2008 financial crisis. (Full Story)

Ont. court to hear case of former CannTrust leaders charged with securities offences

  • The Ontario court of justice is expected to hear opening arguments today in a case against three former CannTrust Holdings Inc. leaders accused of securities offences. (Full Story)

Europe Gas Drops to 3-Month Low as EU Plans More Crisis Measures

  • Natural gas prices fell as the European Union prepares measures to curb volatility in its biggest marketplace in an attempt to rein in the energy crisis. (Full Story)


Chart of the Day: Services inflation vs. goods (CPI)


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