Stocks have been suffering a miserable October, so it was nice to see them cheer up a bit as Halloween falls.
The Dow Jones Industrial Average finished 1.6% higher on Monday. That’s the first gain of more than 1% since Aug. 7, snapping the longest stretch without an advance of that size since 2017. The index is still on track for its third straight monthly decline, the worst streak in three years.
Oil prices also fell sharply after spiking at the end of last week. That’s a small bit of good for companies coping with inflation as well as the Federal Reserve, which should still feel comfortable about keeping interest rates on hold Wednesday.
Given the recent correlation between stocks and bonds, it surely helped that the U.S. government said it won’t need to issue as much debt in the fourth quarter as previously thought on Monday. The Treasury releases more details of borrowing plans on Wednesday.
Interestingly, one reason the Treasury gave for revising down its plans for the fourth quarter was expectations for higher tax receipts. While that may be down to some technical reasons—delayed income tax payments from California and other states after natural disasters were mentioned—it’s also a sign the economy has been performing well.
The question, as always, is whether the good mood can be sustained. There are still two months left in the fourth quarter. If 5% proves to be a ceiling for the 10-year Treasury yield, there’s hope that stocks can break their spooky losing streak in time for a Christmas rally.
—Brian Swint
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AI Safety in Focus After White House Issues First U.S. Rules
Vice President Kamala Harris will lead a U.S. delegation at a global artificial intelligence safety summit this week in the U.K., after the Biden administration issued an executive order on AI aimed at protecting Americans from the emerging technology’s potential risks including reporting requirements for AI developers.
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The order exceeds voluntary pledges by companies including
Amazon.com,Microsoft,
Google-parent
Alphabet,
and
Meta Platforms
to require developers to share safety-test results and other information with the government to ensure AI systems are safe before their public release. - The National Institute of Standards and Technology will develop standards for safety testing. The Energy and Homeland Security Departments will address AI threats to infrastructure, along with chemical, biological, radiological, nuclear, and cybersecurity risks. The Commerce Department will develop guidance to clearly label AI-generated content.
- Tech companies are raising their AI spending since the viral success of Microsoft-backed OpenAI’s chatbot ChatGPT. Google has raised its investment in AI start-up Anthropic to $2 billion, The Wall Street Journal reported, after Amazon committed to invest $4 billion in the company.
- The Biden administration also urged Congress to pass AI-related data-privacy legislation, saying that without safeguards AI makes it easier to extract, identify, and exploit personal data including that of children, and heightens the incentives to do so.
What’s Next: Generative AI is expected to boost long-term growth estimates for the U.S. and other economies over the next decade, according to
Goldman Sachs
Chief Economist Jan Hatzius. The AI effect raises Goldman’s U.S. gross domestic product forecast to a 2% expansion in 2027 and to 2.3% in 2034.
—Adam Clark and Janet H. Cho
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AB InBev
Sales Grow Despite Bud Light Hit
Anheuser-Busch InBev reported a rise in revenue and stuck to its full-year guidance on Tuesday despite a hit to U.S. sales as some drinkers boycotted its Bud Light beer brand.
- AB InBev reported underlying earnings per share of 86 cents on sales of $15.57 billion for the September quarter. Revenue was up 5.0% from the same period a year earlier but total volumes dropped 3.4%.
- Revenue in the U.S. declined by 14% and sales to American retailers were down 17%. AB InBev’s flagship American brand Bud Light has faced a conservative boycott over its marketing partnership with transgender influencer Dylan Mulvaney.
- The company said it would repurchase $1 billion in shares and up to $3 billion worth of its debt. It also reiterated previous guidance that it expects its 2023 earnings before interest, taxes, depreciation, and amortization to grow in line with its medium-term outlook of between 4% to 8% and revenue to grow ahead of Ebitda.
What’s Next: TAB InBev is looking to recoup lost ground in the U.S. It said its share of the country’s beer market has remained stable since the last week of April and it has increased advertising spending. Last week it struck a marketing contract with mixed martial arts league the UFC.
—Adam Clark
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The Season of Labor Activism Is Coming to a Head
A season of labor activism is drawing closer to an end across the country and industries, as the United Auto Workers union confirmed it reached a tentative contract with
General Motors
that would potentially end the strikes against Detroit’s Big Three car makers. Striking Hollywood actors are also working on their ending.
-
UAW members must approve the agreements, reached in the past week with
Ford Motor,Stellantis,
and GM. The new contracts raise pay 25% over four years. It could also embolden UAW leadership to organize at nonunion
Tesla
and foreign companies that make cars in the U.S. - In other labor action, the St. Lawrence Seaway reopened Monday after the nonprofit that manages it reached an agreement over wages and working conditions with Canadian union Unifor. Employees will vote on the deal soon. The waterway moved $13 billion of cargo between the Great Lakes and the East Coast last year.
- The seaway strike shut down 13 Canada-controlled locks between Lake Erie and Montréal, stalling more than 120 vessels carrying more than 635,000 metric tons of cargo, according to the nonprofit management corporation.
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Separately, Hollywood actors and performers and studios and streaming companies including
Disney,Netflix,
Warner Bros Discovery,
and NBCUniversal, could be nearing agreement on a new three-year contract after a weekend of negotiations. The actors have been on strike for 109 days.
What’s Next: The actors union said it worked independently on Monday and would meet today with the studio group. Chief negotiator Duncan Crabtree-Ireland told Variety several issues were still being addressed, including boundaries on the use of AI.
—Janet H. Cho, Al Root, and Evie Liu
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At FTX Fraud Trial, Prosecutors Hammer at Bankman-Fried’s Credibility
Federal prosecutors cross-examined FTX founder and former CEO Sam Bankman-Fried, trying to chip away at his credibility by pointing out discrepancies between his public comments and actions taken behind the scenes as the cryptocurrency exchange collapsed.
- Bankman-Fried, who has pleaded not guilty, repeatedly told the Assistant U.S. Attorney he didn’t remember the exact details of what he said in media interviews around the time FTC collapsed, losing $8 billion in customer deposits.
- He also tried to put distance between himself and the decision-making at FTX-related company Alameda Research, where risky bets helped doom the crypto trading platform. But under questioning he did say he “called some” of the shots at Alameda.
- The government says Alameda had carte blanche to use FTX customer money to make risky bets. One element supporting that argument was that risk management systems FTX used to liquidate negative customer accounts were disabled for Alameda, prosecutors said.
- Bankman-Fried said he became aware of how bad a liquidity issue Alameda faced but only well after a financial crisis began sweeping through the crypto industry in summer 2022. He said he believed Alameda and FTX were on firmer footing until just days before their collapse.
What’s Next: Cross-examination is expected to continue today, followed by one or two hours of questioning from Bankman-Fried’s lawyers, The Wall Street Journal reported. Prosecutors expect to present a short rebuttal case with one or two witnesses.
—Liz Moyer
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‘Spookflation’ Haunting This Year’s Halloween Candy, Chocolate Prices
Halloween might be a little spookier this year, largely because of rising prices for candy amid a global rise in the price of commodities used to make the treats and shrinking portion sizes by confectionery makers in an age of shrinkflation.
- Candy prices are up 13% from October 2022, more than double the increase in overall grocery prices, according to market intelligence firm Datasembly. Prices have climbed even higher in Northeastern states such as Pennsylvania and Maryland.
- Hot and dry weather in Mexico, where America gets much of its sugar, cut production by more than 15% this year, according to the Agriculture Department. Raw sugar futures on global markets have gained 50% from last year, and are trading at their highest level since 2011.
- Heavy rains and a rot-causing disease have wreaked havoc on cocoa crops in West Africa, which grows two-thirds of the world’s harvest. Cocoa futures have jumped 67% from last year, and recently hit $3,880 a metric ton, the most expensive since the 1970s.
- The price of a king-size pack of Reese’s Peanut Butter Cups went up 14% in 2022, a Kinder Joy Chocolate Egg Treat costs 16% more, and a 1.55-ounce Hershey’s milk chocolate bar went up 15%, the Washington Post reported, citing commerce data platform Klover.
What’s Next: Spending on candy is expected to reach $3.6 billion for Halloween, up 16% from last year, the National Retail Federation said. Snack companies including
Nestlé,
Chocoladefabriken Lindt & Spruengli, and
Hershey
have recently said they won’t rule out the possibility of further price hikes.
—Evie Liu and Janet H. Cho
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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner
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