Month: November 2022

Cautious Optimism on Skirting Recession (Moody’s)

We are sticking to our baseline assumption that the Federal Reserve is able to engineer a soft landing that skirts a recession as inflation, over time, returns to the central bank’s target. Though the U.S. is not in recession, the economic expansion is highly vulnerable to anything that might go wrong. (…) However, if a downturn is in the cards for the U.S. economy, it is likely to come from a currently underappreciated weakness brought to light by the sharply rising cost of capital. (…)

The risk of overtightening seems to be one that the Fed is willing to stomach. Tightening accommodative policy, which acts on a lag, too quickly and by too much represents the most significant potential catalyst for a U.S. recession. (…)

Rising long-term interest rates create problems for corporations. Overleveraged firms, accustomed to the Fed’s previous commitment to easy credit given inflation’s generation-long absence, are set to come under pressure as rates rise. A string of corporate defaults or a significant widening of corporate bond spreads could dampen investor sentiment and soften investment. This would presage a turnaround in the labor market, which to this point has been relentlessly tight, and given the Fed cover to continue raising rates. (…)

The U.S. labor market’s strength continues and makes it hard to believe that an economic recession is knocking at the door.

There were, however, some conflicting signals within October’s report that suggest things are beginning to weaken. According to the household survey, the unemployment rate rose from 3.5% to 3.7%. The uptick was owed to a reduction in jobs and the size of the labor force. Generally, we consider the payroll survey more credible because of its far-larger sample. The household survey, however, may hold some value when the labor market is at a turning point. The household survey, for example, can capture the impact of firm closures, something that the payroll survey is less successful in capturing.

Since March 2022, payroll employment is up 1.6% while household employment is up only 0.1%. Full time employment (from the household survey) is actually down 0.3% during the same period.

Is this like the recent discrepancies between Gross Domestic Product and initially faster growing Gross Domestic Income which was eventually revised down to reveal an actually slower economy than originally measured by GDI?

Last month, the household survey was much weaker than the payroll survey with a 328k decline in household employment driven by a 489k decline in the important prime-age employment. The BLS household employment measure adjusted to reflect nonfarm payrolls methodology showed an even larger employment decline (-741k).

Investors read the latest CPI report with their almost total focus on the eventual Fed pivot. Core CPI, up 0.27% MoM, came in somewhat lighter than expected.

Perhaps the most important line in this CPI report will prove to be the headline CPI, up 0.44% after +0.39% in September, and up 7.8% YoY and eliminating any positive growth in real labor income (blue vs red lines).

The slowdown in real spending growth will thus accelerate (it was +1.9% YoY in September). The hope that accumulated excess savings will act as offsets may be just wishful thinking. Actually, Americans have already tapped out their borrowing capacity and banks have significantly tightened lending standards.

This next chart deflates aggregate payrolls with my “CPI-Essentials” series, only focusing on inflation in food, energy and shelter which together account for 54% of the CPI. Essentials inflation jumped from zero in July and August to +0.4% in September and +0.85% in October (+9.0% YoY). As a result, aggregate payrolls deflated by CPI-Essentials (red line below) declined -0.9% YoY and will likely drag real spending into negative territory in coming months.

Goldman Sachs Friday smartly observed that “Investor euphoria over the prospect of a “Fed pivot” contrasts with the deteriorating profit margins and darkening business outlook expressed by many S&P 500 firms.”

• Disney to Cut Costs, Says Layoffs Likely Chief Executive Bob Chapek announced company-wide cost-cutting measures and told division leaders that layoffs are likely, according to an internal memo viewed by the Journal. The moves come days after Disney reported lackluster earnings.

• Walmart Is Flexing Its Muscle Again The largest U.S. retailer and other industry giants are taking an increasingly aggressive stance with suppliers as the economy slows. ‘The world has turned.’

America’s biggest retailer has a new message for its suppliers: We’re not going to pay higher prices anymore.

Walmart Inc. WMT 0.15%increase; green up pointing triangle Chief Executive Doug McMillon delivered the warning in person last month in an appearance before companies that produce products sold by the company’s Sam’s Club chain. Inside a hotel auditorium, he said Walmart would be pushing back against suppliers’ efforts to raise prices, according to people familiar with the situation. (…)

Walmart, long known for its ability to lower prices by squeezing vendors, is once again showing its muscle as a slowing economy and an inventory glut upend a power dynamic between retailers and suppliers that took hold during the pandemic, when demand surged for everything from paper towels to patio furniture. (…)

Large retailers are canceling orders, resisting price increases and in some cases asking suppliers to provide discounts. This puts pressure on product makers that are struggling to adapt to shifting consumer demand. It could also contribute to a slowing of inflation. (…)

The pullback from retailers is spreading across numerous companies that make products sold in stores around the country. (…)

The WSJ numbers show that Amazon inventories were up 58% YoY in July, Target: +36% and Walmart +25.5%. Their aggregate sales exceed $1.2 trillion! U.S. GDP in 2021: $23T.

• Price Rises Are Helping European Manufacturers While increases boosted quarterly results, executives see signs that consumers’ tolerance for higher prices may be hitting its limits.

European companies have defied the continent’s darkening economic prospects by raising prices, but there are signs the strategy that has protected their profits is sputtering.

Executives at some of the companies that have benefited from sharply higher prices are warning that soaring energy and food bills and concerns about jobs are beginning to deflate consumers’ appetite for their products. (…)

In Germany, the European Union’s biggest economy, incoming orders for manufacturers fell 4% overall in September after falling in August. Orders for German manufacturers from the eurozone fell twice as much. (…)

Yet, company earnings have surprised on the upside, largely thanks to price rises that have matched or exceeded rising costs. (…)

Coming to company reports soon: slower real sales, slower price hikes, if any, “naturally” squeezing margins for goods producers and distributors.

But there’s also, unbeknown to many, the FIFO accounting margin squeeze soon to hit P&Ls. The WSJ last June 27:

Inflation Puts Spotlight on Companies’ Use of Last-In, First-Out Accounting

Concerns about rising inflation and slowing growth are putting the spotlight on an accounting method U.S. companies use to lower their federal tax bill by inflating their costs, which also squeezes their quarterly earnings. (…)

With LIFO—which is permitted under the U.S. Generally Accepted Accounting Principles, but not under International Financial Reporting Standards—companies recognize their most recently acquired inventory through their cost of goods sold. With inflation around a four-decade high, such inventory is more expensive than goods purchased earlier, and acts as a drag on earnings.

Companies use LIFO to lower their taxable income. But to do so, they also must use it for financial accounting, even though it can ding financial results. By contrast, under first-in, first-out accounting—another popular accounting method—companies record the cost of their oldest inventory first.

In 2021, approximately 15% of companies in the S&P 500 used LIFO as their primary inventory method and 50% used FIFO, according to Credit Suisse Group AG , citing annual reports. The remainder used an average-cost method, a combination of methods, or methods that couldn’t be determined, Credit Suisse said. (…)

When costs are rising, FIFO accounting initially boosts margins as selling prices rise faster than input costs. Eventually, the more recent, more costly physical inputs, begin to enter COGS. If selling prices then stall or decline, gross margins are reduced.

When inflation stays high for long periods, FIFO accounting produces inventory profits and rising margins which investors tend to discount as non-operational and fleeting.

EARNINGS WATCH

From Refinitiv/IBES

Through Nov. 11, 460 companies in the S&P 500 Index have reported earnings for Q3 2022. Of these companies, 70.7% reported earnings above analyst expectations and 25.0% reported earnings below analyst expectations. In a typical quarter (since 1994), 66% of companies beat estimates and 20% miss estimates. Over the past four quarters, 78% of companies beat the estimates and 18% missed estimates.

In aggregate, companies are reporting earnings that are 3.4% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.1% and the average surprise factor over the prior four quarters of 7.0%.

Note that 5 of the 11 sectors have a negative surprise factor averaging -4.3%.

Of these companies, 69.8% reported revenue above analyst expectations and 30.2% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 74% of companies beat the estimates and 26% missed estimates.

In aggregate, companies are reporting revenues that are 2.3% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.2% and the average surprise factor over the prior four quarters of 2.7%.

The estimated earnings growth rate for the S&P 500 for 22Q3 is 4.1%. If the energy sector is excluded, the growth rate declines to -3.6%.

The estimated revenue growth rate for the S&P 500 for 22Q3 is 11.5%. If the energy sector is excluded, the growth rate declines to 8.1%.

The estimated earnings growth rate for the S&P 500 for 22Q4 is -0.1%. If the energy sector is excluded, the growth rate declines to -4.9%.

Q4’22 earnings are now seen down 0.1% vs +5.8% on Oct.1. Ex-Energy: -4.9% (+1.4% on Oct. 1), a third consecutive negative (accelerating) quarter with Q1’23 barely positive for now vs +5.1% on Oct. 1).

Corporate guidance is gloomier:

Alibaba Reports Weak Singles Day Sales Growth The annual retail festival is another sign of depressed consumer sentiment under China’s stringent Covid-19 policy.

Alibaba on Friday didn’t disclose exact sales figures for the first time since it started its signature event, known as Singles Day, saying the results were in line with last year’s turnout. Alibaba reaped $84.5 billion in the total value of merchandise sold across its platforms last year, up 8.5% from 2020, the slowest increase since the company started the festival. (…)

Its rival JD.com Inc. also didn’t reveal total sales numbers, saying that sales set a new high and that growth was faster than the industry average. (…)

The country’s retail sales grew 2.5% in September from a year earlier, weaker than the 5.4% expansion seen in August, government data show. Elsewhere, China’s headline measure of joblessness, the surveyed urban unemployment rate, inched up to 5.5% in September from 5.3% in August. Unemployment among young people remained elevated at 17.9%. (…)

China Plans Property Rescue as Xi Surprises With Policy Shifts

Beijing issued its most extensive 16-point rescue package for the struggling real estate market, according to people familiar with the matter, marking a decisive effort to turn around an economy devastated by two years of Covid Zero curbs. (…)

Unlike previous piecemeal steps, the notice included 16 measures that range from addressing the liquidity crisis faced by developers to loosening down-payment requirements for homebuyers, the people said.

As part of the rescue plan, developers’ outstanding bank loans and trust borrowings due within the next six months can be extended for a year, while repayment on their bonds can also be extended or swapped through negotiations, the people added. (…)

Authorities on Friday also issued a set of measures to recalibrate their pandemic response, publicly outlining a 20-point playbook for officials aimed at reducing the economic and social impact of containing the virus.

The changes by no means signal the end of Covid Zero. A day after releasing the new parameters, officials were quick to clarify that Covid rules were being refined, not relaxed, and a strict attitude toward stamping out infections remains China’s guiding principle.

Global investors of Chinese property dollar bonds are still likely facing massive losses. (…)

Still, the financial backstop is dwarfed by the looming debt maturities facing developers. China’s property sector has at least $292 billion of onshore and offshore borrowings coming due through the end of 2023. That includes $53.7 billion in borrowings this year, followed by $72.3 billion of maturities in the first quarter of next year. (…)

From the numbers in the chart above, home prices have only declined 2.1% in the past year. I would not trust these NBS numbers.

For one, the independent CEIC has house prices down 3.9% YoY in Sep. 2022. This is still likely too low low. The South China Morning Post says that “Based on sales data from 21 cities, the transaction volume plunged 38 per cent from a year ago, with Hangzhou, the capital of East China’s Zhejiang province, diving 80 per cent, and Beijing’s witnessing a 60 per cent fall.”

Terry sent me these two intriguing links:

• Tesla mulls exporting China-made EVs to United States-sources Tesla is considering exporting made-in-China electric cars to the United States, two people with knowledge of the planning told Reuters, a reversal that would reflect the automaker’s deepening cost advantage at its Shanghai plant and slower demand from Chinese consumers.

• Nigeria offers concession on $1.3 billion China-funded hydro power plant Nigeria plans to grant a concession on its $1.3 billion hydropower plant now under construction and is seeking bids from private investors to operate the China-funded plant, authorities said on Friday.

(…) The private partner will be responsible for repaying the Chinese loan, the privatisation agency told investors in an online roadshow on Thursday, because it wanted to reduce government’s financing of the plant.

TECHNICALS WATCH

After my favorite technical analysis firm (Lowry’s Research) was acquired by a private equity firm last spring, they boosted my costs and changed the terms such that I regrettably had to cancel. I did not totally mind given the evolving bear market. I expected them to come back to their senses as the bear worsened.

That happened last week. Near bottom?, although Lowry’s is not calling that yet.

The recent extreme volatility is typical of bear markets. We had 5%+ days in 2001 (Jan. 3) and in 2002 (July 24, 29) before the S&P 500 bottomed in October, 14% lower (with another big dip in March 2003). There were 8 mega up days during 2008, averaging +7.2%, the last one on December 16 (+5.1%) with a 913 close, 27% above the March 6, 2009 low of 666.

This snapshot of 2002-03 illustrates the extreme volatility and the behavior of the 100dma and 200dma trendlines (charts courtesy of TradingView):

• 2008-09:

• 2022:

The body of technical evidence says that most long-term measures remain in a downtrend.

• S&P 500 Large Cap Index – 13/34–Week EMA Trend at the Nov. 10 close (CMG Wealth):

• The large gap with the S&P 500 200dma has been closed…once more…

• …but the 200dma is still falling

FYI, this week, FOMC member will be sharing their thoughts on the recent CPI report and monetary policy. It starts today at 11:30 with Vice-Chair Lael Brainard and at 6:30PM with NY Fed’s John Williams, both highly influential. There are eleven other speaking engagements this week, none from Jay Powell.

• Fed’s Waller Says There’s a ‘Ways to Go’ Before Rate Hikes Done

Stocks vs Bonds: The ASR global stocks vs bonds indicator is saying 2 things:

• -there’s a long way to go in the equity bear market
• -odds are massively in favor of bonds beating stocks in the coming months/years (Callum Thomas)

@IanRHarnett

Morgan Stanley Sees Rough Ride for US Stocks in 2023

US stocks will end 2023 almost unchanged from their current level — but will have a bumpy ride to get there, according to Morgan Stanley’s Michael Wilson.

The top-rated strategist sees a “volatile path” to get to his 2023 year-end S&P 500 base-case target of 3,900 index points, about 2% below where the gauge closed on Friday. He expects stocks to fall as earnings estimates come down, before rebounding in the second half of the year.

“The path forward is much more uncertain than a year ago, and likely to bring several twists and days/weeks of remorse for investors regretting they traded it differently,” Wilson wrote in a note on Monday. In the short-term, he sees the stock-market rebound sparked by last week’s good inflation data running for a few more weeks.

The portfolio strategist — who correctly predicted the slump this year and is ranked No. 1 in the latest Institutional Investor survey — said consensus earnings estimates for 2023 are still much too high. His base case is for US company profits to decline 11% in 2023, before a strong rebound in 2024 as positive operating leverage returns. (…)

Wilson expects the S&P 500 to trough between 3,000 and 3,300 index points — at least 17% below current levels — in the first quarter. (…)

JPMorgan Chase & Co. strategist Mislav Matejka is more positive. He sees continued support to equity markets from a peak in bond yields, cooling inflation, light positioning, and the likelihood of a smaller-than-typical earnings contraction, according to a report on Monday.

FTX starts bankruptcy proceedings and Bankman-Fried resigns as CEO (Axios)

Sam Bankman-Fried, SBF, as he’s universally known, was in many ways the public face of crypto.

• No other industry player had so much credibility — and money — that Tony Blair and Bill Clinton would fly to the Bahamas to make a joint appearance at his crypto conference.
• That credibility is now shot to smithereens, and there’s no one who can take his place. It’s a safe bet that neither Clinton nor Blair will ever appear at a crypto conference again.

Scam Bankrupt Fraud, as ZeroHedge nicknamed him, tweeted last Monday: “FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries).”

• That tweet has been deleted, probably because it’s simply not true. The WSJ has reported that FTX lent more than half of its customer funds to its sister company Alameda, and Reuters earlier reported that FTX had transferred at least $4 billion of its funds to Alameda.
• That would explain why FTX had to pause withdrawals on Tuesday morning — it simply didn’t have client assets on hand.

All fake, except some $9B in client losses… And now this:

• Bankrupt FTX Hit by Mysterious Outflow of About $662 Million “Abnormalities with wallet movements”

Trust, anybody?

The NBA’s Steph Curry, the NFL’s Tom Brady and tennis star Naomi Osaka are among the celebrity athletes who partnered with FTX.

Iran’s Protesters Mark ‘Bloody Friday’ Deaths Demonstrators in southeastern Iran clashed with security forces as they gathered to mourn the deaths of dozens of people during the antigovernment protests that have swept across the country, in one of the most serious challenges to the clerical establishment in decades.

Rise in Consumer Prices Slowed to 7.7% Underlying price increases excluding energy and food slowed from a four-decade high

The Labor Department on Thursday said that its consumer-price index increased 7.7% in October from the same month a year ago, down from 8.2% in September and June’s 9.1% rate, which was the highest in four decades.

The so-called core CPI—which excludes volatile energy and food prices—climbed 6.3% in October from a year earlier, down from 6.6% in September, which was the biggest increase since August 1982. (…)

Investors are hoping that easing inflation means the Fed might not have to raise interest rates as high as previously feared. (…)

“This morning’s CPI data were a welcome relief, but there is still a long way to go,” said Dallas Fed President Lorie Logan in a speech Thursday in Houston. (…)

Thursday’s report offered investors a glimmer of hope that rates wouldn’t have to rise significantly above 5%.

On a monthly basis, the CPI rose 0.4% in October from September, the same pace as the previous month. The CPI measures what consumers pay for goods and services.

Core CPI rose 0.3% in October, down sharply from 0.6% in both September and August. (…)

“Early on, goods prices were driving that increase, but more recently it’s services prices, and that likely reflects the very tight labor market,” said Brett Ryan, senior economist at Deutsche Bank. (…)

• “The October CPI report renews some hope that a soft-ish landing might be achievable,” Evercore ISI’s Krishna Guha wrote in a note. (Axios)

(Haver Analytics)

Some key numbers:

• Core Goods (27% of Core CPI) declined 0.4%, to be expected and to be continued given lesser demand, high inventories and easing supply chains. They are up 5.1% YoY. Goods producers and retailers are now in deflation.
• Core Services (73%) rose 0.5% after +0.6% and +0.8% in August and September respectively. That’s 7.7% annualized and largely reflects shelter costs and rising wages.
• Medical care services (12% of Core Services) “suddenly” declined 0.6%. Health Insurance dropped a very large 4.0% MoM (+20.6% YoY). This is because of a statistical quirk in the CPI methodology which bases the price of health insurance mainly on health-insurer profits, which are reported with a lag of about 10 months. Thus, data in the October 2022 CPI reflect what happened in 2021. Note that this only affects the CPI. The PCE, the Fed’s preferred inflation gauge “draws from the producer-price index, said Oscar Munoz, macro strategist at TD Securities, which includes expenditures by governments, such as through Medicare and Medicaid. Moreover, health services have a much bigger weight in the PCE price index than in CPI. The healthcare category of the PCE price index rose about 2.5% in August from the same month in 2021.” (WSJ)
• The lagged nature of the CPI’s health-insurance index means that it may not reflect current underlying price pressures in medical-care services. Those are likely building, thanks largely to labor costs. Medicare’s recently negotiated 4.3% reimbursement rate for inpatient hospital services for fiscal 2023 was the biggest increase in around 15 years. A large share of how Medicare calculates those rates is based on employment cost index data for hospital wages, said Mr. Sharif. That measure rose at an annual rate of 5.6% in the second quarter, up from 2.3% in the last quarter of 2020. The increase is likely to spill over into negotiations now under way between private insurers and hospital groups, he said. “It feels like we’re likely to see higher medical services inflation in 2023 than we have in the last few years,” said Mr. Sharif. “The magnitude of how much higher it is, we just don’t know yet—and that is going to determine how much of the health insurance drag is going to get offset.” (WSJ) So much for data dependency!
• Energy prices rebounded by 1.8% MoM after 3 months of declines and are +17.6% YoY. Food prices rose another 0.6% (+11% YoY). My “CPI-Essentials” series is up 0.84% MoM (+9.0% YoY) in October, substantially higher than disposable income growth (+3.2%). No “soft-ish landing” yet for consumers.

• United Airlines Advances 5% Pay Raise for Pilots United will accelerate an increase promised during the pandemic; pilots last week voted to reject a tentative contract.

(…) The move comes at a time when relations between United and its pilots have frayed. United’s pilots last week voted by a big margin to reject a tentative deal that would have included raises of more than 14.5% over 18 months. (…)

FYI, the next FOMC meeting is Dec. 14. The next CPI report is Dec. 13.

bloom.bg/3UuS0Hs

@bespokeinvest

Bank of Canada Open to ‘More Normal’ Rate Hikes Amid Softer Data “We indicated that we expect interest rates do have further to go,” Macklem told reporters, “and I think that could be another bigger-than-normal step or it could be reverting to more normal 25-basis-point steps, we’ll see.”

(…) In a speech before the press conference, Macklem said Canada’s unsustainably tight labor market needs to soften in order to rein in soaring inflation with the economy still in excess demand. He reiterated that the central bank is working to balance the risks of over- versus under-tightening financial conditions.

“We need to rebalance the labor market,” Macklem said. “This will be a difficult adjustment. We want to do this in the best way possible for Canadian workers and businesses.”

Speaking to the Public Policy Forum, Macklem flagged elevated job vacancies and broadening wage growth as evidence of the labor market overheating. He said, however, that wage pressures “now look to be plateauing” and that the central bank is seeing “initial signs” of employment pulling back from unsustainable levels. (…)

Macklem said in his speech that while increasing labor supply is valuable, it’s “not a substitute for using monetary policy to moderate demand and bring demand and supply into balance.” (…)

China Eases Some Covid-19 Rules Even as Cases Pass 10,000 China eased pandemic controls, as the country’s leaders seek to lessen the pain of a stringent zero-Covid policy that has exacted a heavy economic toll and stoked rising public resentment.

The newly appointed Politburo Standing Committee of the nation’s top leaders, in one of its first major decisions, set out new rules to “optimize and adjust” the policy to minimize its impact on economic growth and people’s lives, as well as further open the country’s borders to foreign visitors, according to a release Friday by the National Health Commission.

Temporary bans on routes operated by airlines found to have brought passengers infected with Covid-19 into the country have been dropped, the health agency said. Travelers from other countries must now quarantine for eight days—five in a hotel or government center and three days of home health monitoring—down from a total of 10 days, it said. Passengers will also have to take only one test before boarding a flight.

At home, the scope of close contacts subject to isolation and mass testing has also been narrowed, a move that may alleviate one of the biggest sources of resentment among the many millions of residents who have been subject to stay at home orders simply for being in proximity to someone who had been close to a positive case. Quarantine for close contacts was cut to eight days from 10.

The designation of areas at risk—the basis for restrictions on people’s movements—has also changed, the health commission said, with high-risk areas limited to residential blocks rather than entire districts. (…)

The controls were eased even as China confronted its worst outbreak in more than six months, with infections spread across the entire country—many of them “considerable” in scale, in the words of the Politburo Standing Committee. New cases topped 10,000 on Thursday, a number not seen since Shanghai was placed under stringent lockdown for two months from the end of March.

It wasn’t immediately clear how the changes would affect continuing efforts to curb the spread of the coronavirus, and whether those facing lockdown in some parts of the country could expect restrictions to ease. About four million people were told to stay home in parts of Guangzhou, the southern economic hub, as authorities tightened controls to halt a growing outbreak this week. (…)

The easing of restrictions on Friday have raised expectations that China could further loosen its zero-Covid policy in the coming months. “We are now more convinced that a meaningful reopening will likely take place after the National People’s Congress next March,” Citigroup analysts said in a note. (…)

At the Politburo Standing Committee meeting on Thursday, Mr. Xi said that more effort needed to be placed on developing vaccines and inoculating vulnerable populations.

China has attempted to soften its Covid policies before, only to implement harsher measures as case numbers grew. Before Shanghai was locked down for nearly two months this spring, officials said they didn’t need to implement such sweeping restrictions.

@Sino_Market

U.K. Economy Shrank in Third Quarter, Sliding Toward Recession High energy costs, rising interest rates and a labor shortage weighed on British output in the three months through September.

COSTLY COINS!!!

JPM

Scratch my back… Bankman-Fried invested in venture capital backers of his FTX exchange

Presidents Biden and Xi will meet in Bali Monday, where they’ll discuss a variety of topics, including the war in Ukraine.

Amazon Unveils Smaller Delivery Drone That Can Fly in Rain The new drone will go into service in 2024. It has a longer range, can fly in a wider range of temperatures and has new safety features.

• Amazon’s New Warehouse Robot Could One Day Replace Humans “It’s a major leap in technology challenge, and technology development.”

Amazon.com Inc. has developed a robot capable of identifying and handling individual items, a milestone in the e-commerce giant’s efforts to reduce its reliance on the human order pickers who currently play a key role in getting products from warehouse shelves to customers’ doorsteps.

The robotic arm, tipped by a set of retractable suction devices, is called Sparrow. In demonstrations on Thursday, the machine autonomously grabbed items of different sizes and textures from a plastic tote and placed them in other receptacles. Amazon said the bot is capable of handling millions of different products. (…)

It wasn’t immediately clear how quickly or widely Sparrow would be deployed. (…)