Tesla shares rise on Citi upgrade and possible new factory in Asia (3 min read)
Tesla shares rose nearly 8% after hitting a new 52-week low just a day earlier. The rebound was led by the stock upgrade from Citi and potentially a new factory being built in South Korea. Shares of Tesla have lost half of its value this year from the market sell-off and the massive stock sales by Elon Musk to finance the Twitter deal. Citi changed the stock rating to neutral based on the belief that the pullback has balanced out the near-term risk/reward and will be bullish when Tesla fulfills its full self-driving capability.
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HP Announces Layoffs as PC Demand Drops (2 min read)
HP announced that it will reduce its workforce by up to 6,000 people in the next three years. The layoffs are part of their broader restructuring plan to save $1.4 billion by the end of 2025. HP’s Q4 revenue dropped 11.2% from the same time last year. The decrease in sales were specifically in the company’s personal systems and printing. Their CEO said the poor performance was driven by the volatile macro-economy and softening demand started in the second half of the year.
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The Fed offers more clues about rate hikes (3 min read)
In the Fed’s meeting on Wednesday, chairman Jerome Powell said they are seeing progress in its fight against inflation and signaled a slower pace of rate hike may begin soon. Several other Fed officials were also shown to agree with Powell’s assessment. US stocks jumped shortly after the meeting release and closed higher for the second day. Traders have priced in more than 75% chance that the next rate hike in December will only be 0.5%.
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Treasury Market Warns US Recession Risk Is Elevated (2 min read)
The spread on the 2-year and 10-year treasury have edged deeper into the negatives and recently reached a new four-decade low. Historically when the yield curves are inverted, it usually indicates a recession is coming. However, it’s possibly different this time as the latest labor market and consumer spending data still point towards growth. The November and December economic numbers will be critical on whether this growth is sustainable.
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Is the growth of passive investing messing with the markets? (6 min read)
Passive investing has grown rapidly in the last decade but many criticize that the growth of it is starting to distort market prices. While passive funds do affect market prices to an extent, the effect is not significant. Passive funds are only about 16% of the US stock market and less than 5% of the trading volume on any given day. The current size of these funds and the shares being traded are not sufficient to have a meaningful impact on market prices.
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Global X Taps Into Sector-Focused, Covered Call ETFs (2 min read)
Global X launched three new covered call strategy ETFs that tracks the financial, healthcare, and information technology sector. Each ETF will use the corresponding SPDR sector fund as the underlying while writing call options at the same time. The goal of the strategy is to allow investors to receive additional income without sacrificing all of the upside potentials. They are listed on the NYSE Arca and come with a management fee of 0.6%.
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That's it for today! You can reply to this email if you have any comments or feedback.
Thanks,
Thomas
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