Wall Street Breakfast: Bear No Longer

Dec. 01, 2022 7:10 AM ET62 Comments
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Bear no longer

Volatility predicted, and volatility there was. A speech from Fed Chair Jay Powell on Wednesday sent markets flying amid signals that the central bank could begin slowing its aggressive interest rate increases. When the dust settled at the end of the session, the Nasdaq Composite (COMP.IND) closed up a whopping 4.4%, while the S&P 500 (SP500) and the Dow (DJI) finished the day ahead by 3.1% and 2.2%, respectively.

Snapshot: While Powell warned that the Fed might have to retain restrictive policy for some time - as policymakers needed to see "substantially more evidence" of falling inflation - he buoyed markets with a less-hawkish stance on the pace of interest hikes and by raising hopes that a soft landing was "very plausible." "It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting," the Fed chief said in prepared remarks for an event hosted by The Brookings Institution.

"Despite some promising developments, we have a long way to go in restoring price stability," Powell continued. "My colleagues and I do not want to overtighten because... cutting rates is not something we want to do soon. The truth is that the path ahead for inflation remains highly uncertain. That's why we’re slowing down and going to try to find our way to what that right level is. It can't be that we can go on for five years at a very high level of inflation and that it doesn’t work its way into the wage and price setting process pretty quickly. That's a serious concern."

Getting technical: Wednesday's move resulted in the Dow Jones Industrial Average rising more than 20% since Sept. 30 - its lowest point of the year - meaning it is now officially in bull market territory. Elsewhere, the benchmark S&P 500 is up 17% from its YTD low, and while tech-heavy Nasdaq still has some ways to go, it has rebounded nearly 14%. (104 comments)

Meet Semi

It has been quite a long wait, but Tesla's (NASDAQ:TSLA) electric Semi truck is about to see the light of day. The company first unveiled a concept of the Class 8 tractor in late 2017, with output expected to commence in 2019, but since then the production version has been delayed several times. Today's event at Giga Nevada, where the Semi will be produced, will see the first electric truck delivered to Pepsi (NASDAQ:PEP), which will use the vehicles at Frito-Lay plants and beverage facilities in California.

Specs: Not too many details have been revealed over the past several years, but the Semi is expected to achieve an efficiency of less than 2 kWh per mile, and have a range of approximately 300 or 500 miles. Remaining to be seen are production targets and configurations, as well as its battery charging capabilities, software, displays and cockpit design. Other big name companies that have put down a deposit for the tractor include Anheuser-Busch (BUD), FedEx (NYSE:FDX), UPS (NYSE:UPS) and Walmart (NYSE:WMT).

When first unveiled in 2017, the 500-mile-range version of the Semi started at $180,000. While the price tag is likely a lot higher today, as an all-electric Class 8 truck, it would qualify for a tax break of up to $40K under the Inflation Reduction Act. Should the Tesla Semi be everything the company says it is, the vehicle could revolutionize the freight transport industry, with its cost savings on diesel fuel and a smaller carbon footprint.

The competition: Other rivals are already getting in on the game, with long-haul cargo truck makers like Daimler (OTCPK:DTGHF) releasing an electric rig. Volvo-owned (OTCPK:VOLVF) Renault Trucks even trolled Tesla in early October, with the release of its "E-Tech D" truck that was delivered to Coca-Cola (NYSE:KO). While the two models aren't exact competitors, Renault followed up by tweeting a video teaser, "Some talk the talk. Some walk the walk. Ain't that right, @elonmusk?" (10 comments)

Taylor out

After climbing 5.7% during the regular session on Wednesday, Salesforce (CRM) shares gave back all of their gains, and then some, after plunging 6.9% AH. Third-quarter earnings and sales topped expectations, but traders were looking at another development that could shake things up at the cloud business software company. Co-Chief Executive Bret Taylor will leave the firm on Jan. 31, with founder Marc Benioff taking over as Salesforce's sole CEO at that time.

Quote: "While there’s absolutely no easy time for a transition like this, I do now feel like it’s time to return to my entrepreneurial roots particularly given the landscape and economy going through such shifts," Taylor declared, without giving details about his plans following the departure. It's the second time that the co-CEO structure didn't last long at Salesforce, with Keith Block ditching the role after 18 months back in 2018.

Benioff called Taylor's leaving Salesforce "bittersweet", but that it was "understandable" why he would want to move on. "Bret founded two incredible companies [prior to joining Salesforce]. I’m excited to see his next chapter unfold," he added. "[Bret] made his mark on Salesforce as an incredible technologist, leader and friend to us all."

Career highlights: Taylor co-created Google Maps in 2005, and later founded social network FriendFeed, which was acquired by Facebook for an estimated $50M and led it to adopt the app's game-changing "Like" button. Taylor went on to become CTO at Facebook, but left to found Google Docs competitor Quip, which was bought by Salesforce in 2016. As he worked his way up the Salesforce ranks, he subsequently became a board member and then chairman at Twitter, until the purchase of the company by Elon Musk in October. He is also credited as the architect of Salesforce's $27.7B purchase of Slack Technologies, which was its largest acquisition ever. (10 comments)

2022 DealBook Summit

Some of the biggest names in business are being interviewed at the annual New York Times DealBook Summit, where "every topic is fair game, and no question is out of bounds." Amazon (NASDAQ:AMZN) CEO Andy Jassy was the latest to take the stage and go under the spotlight, providing some important insights into the company and the overall economy. Not only is Amazon one of the biggest employers in the country, but it can easily size up trends taking place across the retail space, while Amazon Web Services (responsible for the bulk of the company's profits) supports nearly a third of all cloud businesses.

Economic environment: "It's very clear that consumers are spending, but they are being very careful on trying to stretch their dollars. People care a lot about getting a bargain right now. They were attracted to stocking stuffers in an even more pervasive way than normal. In discretionary categories like computers, electronics or TVs, you see consumers trading down models just to try and get more for their money. In difficult and uncertain economies, we've found over time that consumers are very careful about who they partner with and they go with companies that are going to provide a great customer experience."

Layoffs: "It's the time of year that our leaders take a look at where they want to spend resources and where they should adjust. This year we had the lens of a very uncertain economic environment, as well as having hired very aggressively over the last several years. I think as we went through our plans, you just started seeing pretty similar trends, that the economy was more uncertain and things that were different than before, and we just felt that we needed to streamline our costs. One of the first things we did was to pause incremental hiring, but as we went through the plans, we realized we needed to be more slim on our resources."

Organized labor: "This is one of many topics in this country that is very hard to discuss and debate. The truth is, employees get to choose. It's not up to us, it is up to them. What we tell employees in our fulfillment centers is that we think they are better off without a union for a few reasons. If employees can make the experience better for customers or their fellow teammates - they can go fix it rather than a bureaucratic and slow [process]. We like to hear from all our employees, as opposed to being filtered through one or two voices, and it also champions an 'us vs. them' mentality that is not as productive. We have compelling benefits like a $19 minimum wage, full health insurance, 401k, up to 20 weeks of parental leave and a career choice program for an advanced education. In the U.S., only one of our facilities voted for a union in Staten Island. There were a lot of irregularities in that vote and it's working its way through the legal process."

Media: "Our Prime Video offering and all of that content is a really important ingredient when people choose to sign up for Prime or not. It's always something that has driven Prime subscriptions, but increasingly you are seeing more and more people signing up to Prime because of the video content. That's very attractive, and even when they sign up to Prime for the video content, they tend to spend money with us in our e-commerce offerings. I do think over time, we do have opportunities to make our Prime Video business a standalone business. What we want to do is provide the world with the best selection of streaming content for customers."

Today's Markets

In Asia, Japan +0.9%. Hong Kong +0.8%. China +0.5%. India +0.3%.
In Europe, at midday, London +0.1%. Paris flat. Frankfurt +0.6%.
Futures at 6:30, Dow -0.2%. S&P -0.1%. Nasdaq -0.3%. Crude +0.6% to $81.03. Gold +1.8% to $1791.60. Bitcoin +1.2% to $17,085.
Ten-year Treasury Yield -10 bps to 3.60%

Today's Economic Calendar

7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Personal Income and Outlays
9:25 Fed's Logan Speech
9:30 Fed's Bowman Speech
9:45 PMI Manufacturing Index
10:00 Fed's Kashkari Speech
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 EIA Natural Gas Inventory
3:00 PM Fed's Barr Speech
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

All good? Tim Cook gives Elon Musk a tour of Apple's (AAPL) HQ.

Taiwan Semiconductor (TSM) to build 4nm chips at new Arizona plant.

CNN (WBD) begins layoffs expected to reach hundreds of staffers.

Okta (OKTA) surges as Q3 results, forecast blow away expectations.

Snowflake (SNOW) slips as guidance, revenue shows slowing growth.

U.S. House passes bill by wide margin to avoid a rail strike.

HPE recently held takeover talks with Nutanix (NTNX) - Bloomberg.

GSK is a potential buyout candidate for Novartis (NVS) - Intron Health.

This article was written by

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