MIDTERMS & MARKETS: Stock investors eye election results, economy and inflation top voter issues

Sweetgreen opens first Minnesota restaurant in Edina, Minn. (Photo: Sweetgreen)

Sweetgreen is lower in extended trading. The casual restaurant chain that serves salads missed Wall Street revenue and profit estimates and said its 2022 fiscal year revenue will come in at or slightly below the low end of our prior outlook.

Third quarter revenue increased 29% to $124 million. The estimate was $129.4 million.

Same store sales rose 6% from menu price increases.

The net loss for the three months ended September 25 widened to $47.4m from $30.1 million.

The loss per share was 43 cents compared to the estimate of a loss of 37 cents.

AMC theatre in the Manhattan borough of New York City, Jan. 27, 2021. (Reuters/Carlo Allegri)

AMC Entertainment Holdings Inc beat Wall Street estimates for third-quarter revenue on Tuesday as a sustained boost from movies such as "Top Gun: Maverick" and new releases including "Thor: Love and Thunder" drew more footfall to cinema halls.

Shares of the Leawood, Kansas-based company rose 3.2% in extended trading.

As big movies start dominating theater screens again after a pandemic-induced lull, the world's biggest cinema chain has seen footfall at its 950 theaters more than double each quarter this year, drawing in more ticket, food and beverage sales.

A strong pull-forward from releases during the second quarter including "Elvis" and "Jurassic World Dominion" resulted in AMC seeing the highest number of guest visits at its U.S. theaters in July since December 2019, Chief Executive Adam Aron had said in August. This boosted revenue in the third quarter, which had fewer blockbuster releases.

Adjusted revenue during the quarter ended Sept. 30 was $1.01 billion. Analysts on average had expected total revenue of $961.1 million, according to Refinitiv data.Net loss was $226.9 million, compared with $224.2 million a year earlier.

Salesforce logo at the Viva Technology conference, Paris, France June 16, 2022. (Reuters/Benoit Tessier)

Sales is cutting its workforce, Protocol reported. The customer-management software developer may furlough as many as 2,500 people, the report said.

The company wants to cut costs amid challenging economic conditions. It’s also facing a challenge from Starboard Value. The activist investor revealed last month a 7.4% holding the company.

Sources told Protocol layoffs may take place before the Thanksgiving holiday.

Branch of Barclays Bank in London, Britain, Feb. 23, 2022. (Reuters/Peter Nicholls)

Barclays Plc has cut its workforce in corporate and investment banking (CIB), according to a person familiar with the matter, joining rivals who also took similar steps to rein in costs as deals plunged from records set last year.

Investment bankers were awash with deals in 2021, but have seen few this year as companies halt buyouts and listings amid volatility in the capital markets, tensions between the United States and China, and the Russia-Ukraine war.

As a result, premier banks including Goldman Sachs Group and Deutsche bank felt compelled to cut their workforce in mergers and acquisitions (M&A).

Citigroup Inc also eliminated dozens of jobs across its investment banking division, Bloomberg News reported on Tuesday.

The cuts at Barclays account for less than 3% of their headcount in investment banking, according to the source. Barclays declined to comment when contacted by Reuters.

The move, which was earlier reported by Bloomberg, comes two weeks after the British bank reported a 45% slump in advisory fees from M&A in the third quarter that was softened by a powerhouse performance in fixed income, currencies and commodities (FICC) business.

MARKETS

Crypto exchange Binance plans to buy rival FTX

Crypto exchange Binance said Tuesday it plans to purchase rival FTX, which acknowledged it is experiencing a "liquidity crunch" and asked for the deal.

Binance Chief Executive Changpeng Zhao said on Tuesday the company had signed a non-binding agreement to buy rival FTX's unit, FTX.com, to help cover a "liquidity crunch" at the cryptocurrency exchange.

FTX has come under pressure after Changpeng Zhao, head of rival exchange Binance — the world's largest — said on Sunday his firm would liquidate its holdings of the FTX token, FTT, due to unspecified "recent revelations".

"This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch," said Zhao in a tweet, noting that Binance has the discretion to pull out from the deal at any time.

In a tweet, Sam Bankman-Fried, FTX founder and CEO said that teams are working on clearing out the current backlog of withdrawals and that all assets will be covered 1:1.

Disney+ signage is seen above the convention floor at Comic-Con International in San Diego, Calif, July 21, 2022. (Reuters/Bing Guan)

Walt Disney Co said on Tuesday its marquee streaming service, Disney+, gained more subscribers than Wall Street had expected, but investment costs dragged quarterly earnings below analysts' targets.

Shares in Disney fell 5% in after-market trading.

The entertainment company is spending billions to compete with Netflix Inc and others for streaming television customers as traditional TV declines in popularity. Disney+ reported 164.2 million subscribers in the fiscal fourth quarter, surpassing Factset estimates of 161 million.

The cost to build Disney's streaming business led to a $1.5 billion loss in the direct-to-consumer unit, which hurt quarterly earnings.

Net income from continuing operations rose 1% to $162 million. Excluding some items, Disney earned 30 cents per share, missing Wall Street's target.

Revenue of $20.15 billion for the July-to-September quarter also fell short of the consensus estimate of $21.25 billion. Disney said it recognized $1 billion in lost revenue in the quarter from terminating a film and television contract early so it could use content on its own streaming services.

Disney has amassed a total of 235 million subscriptions across Disney+, Hulu and ESPN+ streaming services, a gain of 14.6 million from the previous quarter. Hulu reported 47.2 million subscribers, up 8% from a year ago, and ESPN+ logged 24.3 million, a gain of 42% from a year earlier, and Disney+ is up 39% from a year ago.

In the days, weeks and months following midterm elections, stock historically rise. This time around there are a few more headwinds than prior cycles.

MARKETS

Midterms can be stock market gold, but wild cards remain

Midterm election years are historically a bonus for investors yet this year, with inflation and recession woes, more headwinds exist.

Elon Musk’s Telsa recalling more than 40,000 2017 to 2021 Model S and Model X vehicles due to an issue with the electronic power assist steering system.

The National Highway Transportation Safety Board said the electric vehicle maker identified the issue in about 1% of the affect models and is unaware of any injuries or deaths.

LIFESTYLE

Winning Powerball ticket for $2.04 billion jackpot sold in California

A winning Powerball ticket for the $2.09 billion grand prize was sold in California, lottery officials said Tuesday afternoon following an hours-long delay in the drawing.

The California Lottery says one lucky ticket for the November 7 Powerball drawing was sold at Joe’s Service Center in Altadena.

The announcement comes after PowerballUSA said no one had won the big jackpot.

The winning numbers for the last drawing were 10, 33, 41, 47, 56 and 10.

The drawing was delayed from Monday night when at least one of the 48 participating state lotteries needed more processing time, according to a tweet from the California Lottery. It did not identify the state in question.

Reuters contributed to this report.

MARKETS

Columbus, Ohio, to sue Kia and Hyundai over surge in vehicle thefts

The city of Columbus, Ohio, announced Monday it plans to sue Hyundai and Kia over a surge in thefts of the cars, saying the companies are responsible.

Automakers Hyundai and Kia Motors are facing legal action over the ignition systems of some models, which officials claim are easily hacked due to the lack of immobilizers that require the presence of a key fob with a transponder to work.

That has led to an increase in thefts.

“Chicago reported a 767% increase in car thefts in July 2022 compared with the same time-period last year, and in Milwaukee, Wisconsin, Kias and Hyundais now account for nearly 67% of all stolen cars,” said MLG Attorneys at Law.

The firm has filed a national class action lawsuit against Kia and Hyundai for the issue exposed by a trending TikTok challenge.

Theranos founder Elizabeth Holmes and her family leave the federal courthouse in San Jose, Calif., Jan. 3, 2022. (Reuters/Brittany Hosea-Small)

TECHNOLOGY

Judge denies Elizabeth Holmes' request for new trial

Elizabeth Holmes, 38, was found guilty in January of one charge of conspiracy and three charges of fraud after a jury found she criminally deceived investors.

Theranos founder Elizabeth Holmes' request for a new trial was denied by a federal judge in California late on Monday, court documents showed.

In January, Holmes, 37, was found guilty of defrauding investors in the blood testing startup, convicting her on four of 11 counts. She was convicted of investor fraud and conspiracy, but acquitted on three counts of defrauding patients who paid for tests from Theranos, and a related conspiracy charge.

In July, former Theranos President Ramesh "Sunny" Balwani was also convicted of defrauding investors and patients about Theranos that was once valued at $9 billion.

Holmes' lawyers filed for a new trial in September citing "newly discovered" evidence from the government's statements made at the closing arguments of Balwani’s trial, as well as alleged government misconduct.

In Monday's ruling, U.S. District Judge Edward Davila said that the arguments brought forward by Holmes' lawyers for a new trial did not produce enough material evidence to prove alleged government misconduct, adding that the statements made by the government at Balwani's trial were not material to result in Holmes' acquittal.

Holmes is currently scheduled for sentencing on Nov. 18.Attorneys for Holmes did not immediately respond to a Reuters' request for comment.

Logo of generic drugmaker Perrigo outside their factory in Yeruham, in southern Israel, Mar. 2, 2016. (Reuters/Amir Cohen)

Perrigo is plunging in Tuesday trading. The Irish–registered manufacturer of private label over-the-counter drugs missed Wall Street revenue and profit estimates.

Third quarter net sales increased 5.5% to $1.1 billion, lower than the estimate of $1.14 billion.

The net loss for the three months ended Oct. 1 narrowed to $49.4 million from $58.9 million.

Diluted earnings per share was 56 cents, lower than the estimate of 67 cents.

The company reiterated its fiscal 2022 organic net sales growth range outlook of 9.0%-10.0% versus the prior year.

Perrigo also reiterated its fiscal 2022 total net sales growth range outlook of 8.5%-9.5%.Last week the company announced it is buying the Good Start brand and a Wisconsin plant that makes the product from Nestle.

Reuters contributed to this report.

International Game Technology PLC (IGT) on Tuesday reported third-quarter earnings of $264 million.

On a per-share basis, the London-based company said it had profit of $1.30.

The results beat Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 24 cents per share.

The slot machine maker posted revenue of $1.06 billion in the period, also beating Street forecasts. Four analysts surveyed by Zacks expected $1.01 billion.

For the current quarter ending in December, IGT said it expects revenue in the range of $1 billion. Analysts surveyed by Zacks had expected revenue of $1 billion.

The company expects full-year revenue in the range of $4.1 billion to $4.2 billion.

The CEO of the troubled retailer is out.

BUSINESS-LEADERS

Kohl's CEO Michelle Gass to step down

Kohl's CEO Michelle Gass, who joined the retailer in 2013, will step down next month. The company named Tom Kingsbury as interim CEO until it finds a permanent replacement.

Woman walks past Foxconn building in Taipei, Taiwan Oct. 31, 2022. (Reuters/Carlos Garcia Rawlins)

Foxconn, the world's biggest contract electronics maker, has extended its drive into electric vehicle (EV) business with a deal to take a near-20% stake in loss-making U.S. electric truck maker Lordstown Motors Corp for up to $170 million.

The accord, which will also give a Foxconn affiliate two board seats at startup Lordstown, comes as the iPhone maker bets on replicating its dominance in contract electronics manufacturing in the booming EV industry.

Foxconn started manufacturing Lordstown's Endurance pickup trucks in September after buying the U.S. company's Ohio facility. That deal was prompted by the need to clinch funds essential for the start of production of Endurance.

Under terms of the deal, Foxconn affiliate Foxconn Ventures Pte Ltd will purchase 12.9 million shares on or after Nov. 22 and an additional 26 million shares that will propel Foxconn's holdings to 18.3% of Lordstown's common stock and all of its preferred stock, surpassing founder Stephen Burn's stake of 17.2%, according to Refinitiv.

Lordstown will use the proceeds from the share sales to fund development and design activities for a new electric vehicle program in collaboration with Foxconn, scrapping its earlier joint venture deal with the manufacturer, it said in a filing, sending its New York-listed shares up 13% in after-hours trading.

The deal requires a review by the Committee on Foreign Investment in the United States (CFIUS), an interagency panel that reviews foreign investments for potential national security risks.If CFIUS approval is granted, Foxconn is barred from pushing up its stake if it ends up owning in excess of 19.99% of Lordstown's voting shares, Lordstown said.

Separately, the startup reported a net loss of $154.4 million in the quarter ended Sept. 30, wider than loss of $95.8 million, a year earlier.

Cryptocurrency prices were lower early Tuesday morning after trading mixed on Monday morning. (Getty Images)

Cryptocurrency prices were lower early Tuesday with Bitcoin, Ethereum and Dogecoin all lower.

At approximately 5:15 a.m. ET, Bitcoin was trading at nearly $19,775 (-3.91%), or lower by $793.

For the week, Bitcoin was trading higher by more than 0.35%. For the month, the cryptocurrency was higher by nearly 5.35%.

Ethereum was trading at approximately $1,488.5 (-5.07%), or lower by more than $79.50.

For the week, Ethereum was trading lower by more than 0.45%. For the month, it was trading higher by approximately 17.7%.

Dogecoin was trading at $0.10258 (-7.93%), or lower by approximately $0.00883. 

For the week, Dogecoin was lower by nearly 12.75%. For the month, the crypto was higher by more than 78.6%.

Gasoline prices remain unchanged early Tuesday morning, while diesel prices were higher. (gasprices.aaa.com)

The nationwide price for a gallon of gasoline went unchanged early Tuesday, remaining at $3.804. On Sunday the price stood at $3.80, according to AAA. 

One week ago, a gallon of gasoline cost $3.758. A month ago, that same gallon of gasoline cost $3.904. A year ago, that same gallon of gasoline cost $3.422. 

Gas hit an all-time high of $5.016 on June 14, approximately 22 weeks ago. 

Meanwhile, diesel prices rose Tuesday morning to $5.351. On Monday, the prices was $5.338. Diesel cost $5.334 a gallon on Sunday. 

One week ago, a gallon of diesel cost $5.312. A month ago, that same gallon of diesel cost $4.985. One year ago, a gallon of diesel sold nationwide for $3.643 

Stocks were whipsawing for the second-straight day early Tuesday. (Associated Press)

U.S. stocks were higher early Tuesday morning , but whipsawing overnight for the second straight day as the U.S. midterm elections had finally arrived.

The future for the S&P 500 lost 0.3% while that for the Dow Jones Industrial Average was 0.2% lower. On Monday, the benchmark S&P 500 rose 1% and the Dow industrials 1.3%. The Nasdaq composite added 0.9%. 

The week is full of potentially market-moving events, including U.S. inflation data and the election, which could leave the U.S. government split between Democrats and Republicans. Every seat in the U.S. House of Representatives is up for election this year, along with about a third of the U.S. Senate.

On the line is control of both houses of Congress, currently under Democratic leadership. Voters are also electing governors in most of the states. They’ll be in office in 2024 when the next presidential election happens and could affect election laws or vote certifications. Many state legislative and local authorities also are on the ballot. 

A divided government would likely bring gridlock rather than big, sweeping policy changes that could upset tax and spending plans.

Historically, when a Democratic White House has shared power with a split or Republican Congress, stocks have seen stronger gains than usual. 

Analysts say a strong performance by Democrats in the elections could lead to increased spending to help the economy that might fuel inflation and leave the Federal Reserve obliged to continue to hike interest rates to get prices under control. 

Higher rates put slow the economy by making it more expensive to buy a house, car or anything else on credit, though they take time to take effect. Rate hikes could bring a recession, and they tend to drag on prices for stocks and other investments. 

With economists forecasting recessions for many economies as an inevitable side effect of the effort to quash inflation, sharp cutbacks in spending might hurt, rather than help, some analysts say.   

Meanwhile, Asian stocks were mixed Tuesday with trading likely to stay bumpy in a week that brings new inflation data and other events that could shake markets. Germany's DAX added 0.1% to 15,543.08, while the CAC40 in Paris slipped 0.4% to 6,390.14. In London, the FTSE 100 fell 0.4% to 7,274.37. 

In Asia on Tuesday, Tokyo’s Nikkei 225 gained 1.3% to 27,872.11 on strong earnings reports. The Kospi in Seoul advanced 1.2% to 2,399.04 and Australia’s S&P/AXS 200 gained 0.4% to 6,958.90. Hong Kong’s Hang Seng sank 0.2% to 16,557.31, while the Shanghai Composite index shed 0.4% to 3,064.49. Thailand’s SET gained 0.5%. India’s markets were closed for a holiday. 

Economists expect a U.S. government report on Thursday to show the consumer price index rose 8% in October from a year earlier, slightly lower than September's 8.2% inflation rate.

 A fourth straight month of moderating inflation from June’s peak of 9.1% could give the Federal Reserve leeway to loosen up a bit. The Fed has said it may soon dial back its rate hikes to half a percentage point, after it pushed through four straight mega increases of three-quarters of a point.

Recession fears and COVID-19 outbreaks are being blamed for oil prices being lower Tuesday morning. (Getty Images)

Oil prices slipped on Tuesday as recession concerns and worsening COVID-19 outbreaks in China sparked fears of lower fuel demand, outweighing supply worries. 

Brent crude fell 23 cents, or 0.2%, to $97.69 a barrel by 0726 GMT, while U.S. West Texas Intermediate (WTI) crude fell 32 cents, or 0.4%, to $91.47 a barrel. 

Both benchmarks hit their highest since August on Monday amid reports that leaders in China, the world's top crude importer, were weighing an exit from the country's strict COVID-19 restrictions. 

However, Chinese health officials over the weekend reaffirmed China's commitment to its strict zero-COVID policy. Also, recent data showed the country's exports and imports unexpectedly contracted in October. 

New coronavirus cases surged in Guangzhou and other Chinese cities, official data showed on Tuesday. The global manufacturing hub is fighting its worst flare-up ever, testing its ability to avoid a Shanghai-style lockdown. A firmer greenback also weighed on oil prices.

Oil is generally priced in U.S. dollars, so a stronger greenback makes the commodity more expensive to holders of other currencies. But the near-term fundamentals for oil remain bullish, with the focus returning to supply issues, ANZ Research analysts said in a note. 

"The market is facing the deadline for European imports of Russian oil before sanctions kick in," ANZ added. 

The European Union ban on Russian oil, imposed in retaliation for Russia's invasion of Ukraine, is set to start on Dec. 5 and will be followed by a halt on oil product imports in February.

Moscow calls its actions in Ukraine "a special operation". 

U.S. crude oil stocks were expected to have risen by about 1.1 million barrels last week, a preliminary Reuters poll showed on Monday. The poll was conducted ahead of reports from the American Petroleum Institute due at 4:30 p.m. ET (2130 GMT) on Tuesday, and the Energy Information Administration due at 10:30 a.m. (1530 GMT) on Wednesday.