Market Munch 🥞| July 14 2022
American inflation numbers take us by surprise, Twitter gets a little help from some smart money, and Canada has a surprise rate hike.
Good morning Munchers!
Here is your daily dose of the news that’ll help you with elevator small talk - in 5 minutes and 12 seconds.
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Market Commentary
The SP500 fell for it’s fourth consecutive session as investors weighed the impacts of inflation.
Said inflation clocked in at a whopping 9.1%. That’s the highest it’s been in 40 years, and the highest month-on-month rise since 2005.
Markets are now pricing in a 40% probability of a 100bps rate hike. That means that stocks are yet to fall a little more. Wild times.
Story Roundup
1 - If US inflation was an asset class, I’d bet my life on it. 📈
Headline inflation in the world’s biggest economy came in at 9.1% yesterday.
That’s a jump in cost-of-living that was
a) unexpected
b) larger than normal
c) big enough to take inflation to fresh, 40-year highs.
“Everything is in play” to tame spiraling cost-of-living, according to the Fed.
Heightened inflation and red-hot labour demand means that the Fed has the green light to continue with their plan to tighten the economy.
Let’s hope they don’t tap the brakes too hard and send us into a recession
2 - Short-seller’s confidence sends Twitter flying. 🕊️
Twitter shares bounced 8% after a vote of confidence from one of the biggest short sellers in the market.
Hindenburg Research - best known for calling out the fraud of Nikola Motors - just announced that “Musk has squandered most of his leverage” and that they took a long position in Twitter.
The interesting thing to note is that Hindenburg was actually short Twitter until recently - they rode the stock down from $49 to $30, netting a decent profit of ~30%.
Twitter just sued Elon Musk - and it looks like courts are going to force him to carry through with the deal.
According to Hindenburg, Twitter’s complaint poses a significant threat to Musk’s entire empire.
Bold words, bolder action. In a market like this you back whatever makes you money.😏🔥
3 - Delta Airlines’ CEO couldn’t care less about recession. ✈️
Delta Airlines was one of the hardest-hit over all the travel pandemonium - but there was a silver lining.
Hidden behind all the overfilled planes, operations failures, and staff resignations, one thing is clear - the demand for flights has gone nowhere.
An economic slowdown would also reduce the cost of jet fuel - which would give airlines some breathing room.
Despite all the chaos of late, Delta was able to turn over a profitable second quarter and just slightly missed analyst expectations.
Looks like this bird’s ready to take off.
4 - Canada gives everyone a shock with a 100bps rate hike. 🍁
Canada’s serious about fighting inflation - and an uppercut to the chin has come in the form of a 100bps interest-rate hike.
The bump in rates is the largest since 1998 and brings Canada’s benchmark rate to the highest level since 2008.
This news came just after America announced unexpectedly higher inflation - and Canada is committed to stamping all residue out from it’s economy.
The Canadian central bank said it wanted to “front load” inflation and predicted that it would stay at “about 8%” for the next few months.
If they’re right, it means that a lot of the world is playing a game of catch-up.
A very, very costly one
5 - Yield curve at it’s most inverted level in 20 years. 😔
An leading indicator of recession risk is the yield curve - and it hit it’s highest level in over two decades.
The yield on the US 2-year note rose to 3.13%, while the yield on the US 10-year note fell to 2.91%.
The 2yr yield has been higher than the 10yr yield for the last week - and this is an interesting phenomenon.
Why is it interesting? It’s preceded every recession for the last 60 years.
Unexpectedly high inflation will be forcing the US central bank to spam the brakes on the economy by hiking rates - something that looks like it will slow growth for quite a few businesses.
Fingers crossed that we come out unscathed. 🤫
Aaaand that’s a wrap.
Thanks a ton for reading. Any feedback is open - positive or negative. Hit my line at aryaansh.rathore@gmail.com or https://www.linkedin.com/in/aryaansh/.