JOLTS: Job Openings Fall Sharply, But Hires Still Increase

Job openings dropped 1,117,000, exactly 10.0% in August (-5.4% y/y). The July increase was revised somewhat to 130,000 from 199,000 reported before. The August decline was the steepest since April 2020, in the midst of the COVID recession. The job openings rate (job openings as a percentage of the sum of establishment employment plus openings) was 6.2% in August, down from 6.8% in July and the lowest since 6.0% in April 2021. These series extend back to December 2000.

The drop in job openings was spread across several industries, with the largest in education and health care, 280,000, but 100,000 or more in manufacturing, retail trade, professional and business services and leisure and hospitality.

New hires rose 39,000 in August after dropping 218,000 in July. The August increase was mainly in leisure and hospitality, up 60,000, especially in accommodation and food services, but there were also increases in manufacturing, retail trade and government.

Quits increased 100,000 while layoffs and discharges rose 70,000, with “other separations” increasing 12,000. The quit rate — that is, the number of quits as a percent of total employment — was 2.7%, the same as in July. The high was 3.0% in November and December of 2021.

Layoffs and discharges, that is, involuntary separations, rose to 1,460,000 in August from 1,390,000 in July; that’s a 5.0% increase and was the largest number since 1,512,000 in March 2021. They had fallen 0.7% in July. The layoff rate was 1.0% in August, up from 0.9% where it had held since October 2021, except for December 2021, when it was 0.8%.

Private-sector job openings dropped 1.028 million in August to 9.037 million (-10.2% m/m, -7.6% y/y). Total private-sector hires rose 34,000 to 5.880 million (+0.6% m/m, -2.1% y/y) while total private-sector separations rose 157,000 to 5.607 million (2.9% m/m, +0.5% y/y).

This is the biggest drop on record, ex-pandemic. Goldman Sachs’ “jobs-workers gap decreased by 0.9pp to 2.5% of the labor force—or 4.0mn workers—in August, a significant drop from its peak of 3.6% of the labor force—or 5.9mn workers—in March.”

• This data echoes the headlines from this morning’s KPMG CEO survey whereby 39% of top CEOs have reportedly instigated hiring freezes. It also means that the ratio of job vacancies to the number of unemployed Americans falls from 1.97 to 1.67. Nonetheless, we have to remember that even after today’s drop there are still 4mn more job vacancies than there are unemployed American while the job opening/unemployed Americans ratio is still more than double the average 0.6 figure seen over the past 20 years. Hence there are still plenty of jobs out there and people are still prepared to move roles for better pay and conditions, with the quit rate staying at 2.7%. (…) As such the jobs market is still incredibly tight, but the Fed will take some satisfaction in today’s direction of travel. While business caution is likely to spread, firings are still a way off – note last week’s initial and continuing claims remain very low by historical standards. Payrolls are still set to post a decent increase on Friday – the market is looking for 265,000 – but with the ISM employment index back in contraction territory and the vacancy data softening the momentum will weaken further in coming months. (ING)

The 2022 KPMG CEO Outlook features insights from more than 1,300 CEOs at large companies globally, including 400 in the United States, on the key challenges and opportunities in driving business growth. Key perspectives from U.S. CEOs are highlighted below.

• 91% believe that there will be a recession in the next 12 months; only 34% of U.S. CEOs think it will be mild and short.
• 79% have expected and planned for a recession. 51% are considering workforce reductions over the next six months in preparation for a potential recession.
• 57% predict 6-10% of anticipated earnings could be impacted by a recession in the next 12 months, while 37% predict 0-5% of anticipated earnings and 6% predict 11-20% of anticipated earnings.
• Over the next six months, U.S. CEOs are confident in the resilience of their companies (83%), the domestic economy (80%) and global economy (72%).
• Long term (over the next three years), CEOs are confident in the growth prospects of the domestic economy (93%) and their company (95%), but fewer are confident in the global economy (71%).

Amazon Freezes Hiring in Retail Division The company has been dealing with slowing growth in its retail segment this year.

• Small Business Employment Watch

Small businesses represent nearly 95 percent of all U.S. employers. Monitoring their performance — the number of people they employ and wages they’re paying — is an important indicator of the health and direction of the overall economy. The Paychex | IHS Markit Small Business Employment Watch draws from the payroll data of approximately 350,000 Paychex clients to gauge small business wage and employment trends on a national, regional, state, metro, and industry basis.

Hourly earnings growth for workers of U.S. small businesses slowed in September, according to the latest Paychex | IHS Markit Small Business Employment Watch. Hourly earnings growth stood at 4.98 percent in September, falling below 5 percent for the first time since April. The Small Business Job Index, which measures the rate of small business job growth, also slowed slightly from the previous month, down -0.19 percent to 99.75.

“Decreasing for the seventh consecutive month, the jobs index is now below its level from one year ago,” said James Diffley, chief regional economist at IHS Markit.

“With low unemployment levels continuing, small businesses are relying on their current staff to do more, driving an increase hours worked,” said Martin Mucci, Paychex chairman and CEO. “The moderation in hourly earnings growth is of particular note, though, as it may be a sign that the Fed’s actions are possibly having an impact in the battle against inflation.”

In further detail, the September report showed:

• One-month annualized hourly earnings growth fell to 3.35 percent, the weakest growth rate since April 2021.
• Small business employment gains slowed during the spring and summer as monthly decreases averaged -0.26 percent from April through September.

Small business employment

SERVICES PMIs

Eurozone: Private sector output falls at sharpest rate since January 2021

Any hopes of the eurozone avoiding recession are further dashed by the steepening drop in business activity signalled by the PMI. Not only is the survey pointing to a worsening economic downturn, but the inflation picture has also deteriorated, meaning policymakers face an increasing risk of a hard landing as they seek to rein in accelerating inflation.

Business activity has now deteriorated for three successive months, indicating falling GDP, with the rate of decline gathering momentum over the third quarter. A worsening of business expectations for the months ahead and a worryingly steep loss of orders currently point to an even sharper decline in GDP in the fourth quarter.

Soaring inflation, linked to the energy crisis and war in Ukraine, is destroying demand at the same time that business confidence is slumping to levels not seen since the region’s debt crisis in 2012, excluding pandemic lockdowns. Companies and households alike are therefore cutting back on discretionary spending and investment in preparation for a harsh winter.

Private sector business activity across the euro area fell at the sharpest pace since January 2021 in September, extending the downturn into a third straight month. Output in both the manufacturing and service sectors fell at a quicker rate as high inflation, soaring energy costs, rising economic uncertainty and weakening demand drove the euro area economy into a deeper contraction. Total new orders fell to the greatest extent in almost two years, while a considerable drop was seen in export sales.

Employment growth continued to slow in September, reflecting a lack of incoming new work and a sustained drop in the level of outstanding business.

For the first time since March, cost pressures intensified, primarily reflecting sharply rising energy costs and higher wages. Concerns surrounding the economic outlook grew, with business confidence slumping to its lowest level since the first COVID-19 wave in 2020.

The seasonally adjusted S&P Global Eurozone Composite PMI Output Index posted below the crucial 50.0 mark in September for a third successive month, signalling a sustained downturn in business activity across the euro area private sector. At 48.1, this was down from 48.9 in August and pointed to the fastest decline in output since January 2021.

Sector data revealed another broad-based decrease at the end of the third quarter, with contractions accelerating at both manufacturers and service providers. The downturn was stronger at goods producers as high energy costs, ongoing issues with input availabilities and order cancellations impeded production volumes at eurozone factories. Nevertheless, high inflation was also a notable hindrance to services companies during the month.

Overall intakes of new business fell for a third straight month in September, and the rate of decline was the strongest since November 2020.

Of the monitored eurozone constituents, only two saw private sector output grow in September. In Ireland, the rate of expansion edged up slightly. France also recorded an improvement in activity levels, but one that was weak overall and significantly softer than those seen earlier in 2022 following the lifting of COVID-19 restrictions.

Elsewhere, economic trends worsened in September. Spain recorded its first decrease in business activity since January, while the downturn in Italy accelerated. In Germany, private sector output levels fell at a rate which, excluding pandemic-hit months, was the sharpest since the global financial crisis in 2008-09.

A key factor pulling back demand was inflation, according to surveyed companies. This was especially evident in the manufacturing sector, where factory orders dropped at the quickest pace in almost two-and-a-half years. Overall cost pressures intensified during September, marking the first month in which inflation has accelerated since March. This primarily stemmed from energy prices, although mentions of rising material prices and wages were also seen. In response, selling prices were raised once again in September. The rate of output price inflation was the strongest for three months as companies opted to pass higher cost burdens on to their clients.

In another sign of growing economic weakness, demand for euro area goods and services from non-domestic customers also fell at a considerable pace in September. Overall, new export business declined at the strongest pace since June 2020.

Business confidence across the euro area sank to its lowest level since the initial outbreak of COVID-19 amid growing fears of recession, concerns around a prolonged period of high inflation and the prospect of further spikes in energy costs. The outlook was particularly gloomy among manufacturers, who were pessimistic as a whole towards the next 12 months.

Lower business confidence fed through to hiring decisions in September, with the rate of job creation across the euro area slowing to an 18-month low. Backlogs of work also fell further as lower new business intakes enabled firms clear some of their outstanding business.

The S&P Global Eurozone Services PMI Business Activity Index fell to 48.8 in September, down from 49.8 in August to its lowest level since February 2021. Overall, this marked back-to-back monthly decreases in services activity across the euro area.

The volume of incoming new business continued to fall at the end of the third quarter. The rate of decrease was unchanged from August, which was the sharpest in a year-and-a-half. Nonetheless, the rate of contraction was modest overall.

Weak demand conditions were underscored by a renewed reduction in backlogs of work. Latest survey data signalled the first drop in outstanding business volumes since March 2021. Employment levels continued to rise across the euro area service sector, although the rate of job creation was the joint-slowest since April 2021.

Meanwhile, price pressures intensified in September. Rates of input cost and output charge inflation accelerated to three-month highs. Lastly, business confidence slumped to a level unseen since the start of the COVID-19 pandemic.

Global Trade Slowdown Points to Possible Recession, Lower Inflation World trade in goods is set to slow more sharply than previously expected next year, possibly easing inflationary pressures but raising the risk of a global recession, the World Trade Organization said.

With the surge in energy costs and rising interest rates weakening household demand, exports and imports should increase by just 1% in 2023, down from a previous forecast of 3.4%, the World Trade Organization said Wednesday.

A slowdown in trade flows driven by weakening demand could help bring down price pressures by unblocking supply chains and reducing transport costs. It also means there is an increased risk that the global economy will contract. (…)

The WTO also lowered its forecast for global economic growth in 2023 to 2.3% from 3.3%, and warned of an even sharper slowdown should central banks raise their key interest rates too sharply.

“One has to watch out if there are supply-side constraints that are not responsive to interest rates,” Ms. Okonjo-Iweala said. “There is a danger you could overshoot.” (…)

The Organization for Economic Cooperation and Development on Tuesday said the annual rate of inflation across the Group of 20 largest economies was unchanged at 9.2% for the third straight month in August. (…)

UAE set to support Saudi Arabia and Russia on oil output cuts Influential Gulf state’s backing ahead of Opec+ meeting could hinder US efforts to stop deal

• Saudi Aramco chief sounds alarm over global oil capacity Head of world’s biggest producer says ‘world should be worried’ about supply limitations

Manhattan’s Housing Market Is Starting to Cool With Sales Stalling

Sales of co-ops and condos dropped 3.7% in the third quarter from the previous three months and more than 18% from a year earlier, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report Tuesday. The median price on transactions completed slipped 7.6% to $1.15 million from the second quarter. (…)

The number of Manhattan homes entering contract in September was down roughly 32% from a year earlier, the sixth consecutive month of year-over-year decreases. The high-end part of the market has been hit the hardest, with contracts for homes priced at $4 million or more falling nearly 50% in September from a year earlier. (…)

The median price was up 3.6% from the same time a year ago. The number of closings, while down from last year, was 14.3% higher than the third-quarter average of 3,231 over the previous decade.

• Toronto Home Prices Are Down 17% as Sales and Listings Plunge

The benchmark price for a home in Canada’s largest city fell a further 1.2% from August, adding to the string of declines that began in April, according to data released Wednesday from the Toronto Regional Real Estate Board. (…) Only 5,038 homes were sold during the month, down 44% from a year earlier. (…)

New listings fell to their lowest level for the month of September in 20 years, the real estate board said. (…)

Meanwhile, in Vancouver, long Canada’s most expensive real estate market, benchmark prices fell 2.1% in September, bringing the cumulative decline in the last six months to 8.5%. But sellers were still coming to market, with new listings up 27% from the month before, according to data from the city’s real estate board.

China’s Covid-19 cases climbed to the highest in more than two weeks as outbreaks during a week-long holiday spark worries ahead of the politically significant Party Congress

Micron to Spend Up to $100 Billion on Chip Factory in New York The semiconductor plant in Clay, N.Y., would be the largest in the U.S., as Washington tries to boost the industry.

(…) Micron’s new New York and Idaho factories would raise the portion of the company’s production in the U.S. to 40% from 10% in about 10 years, Mr. Mehrotra said in an interview. (…)

(…) Intel Corp. and Texas Instruments Inc. also have unveiled chip-factory investments in the U.S. in recent months, among a host of companies evaluating plant-building in the U.S. to tap new federal and state incentives. (…)

Europe has its own chip-industry funding in the pipeline and is aiming to double its share of the global market to 20% by 2030. Some of the world’s largest non-U.S. chip makers, including Taiwan Semiconductor Manufacturing Co. and South Korea’s Samsung Electronics Co., have laid out plans for hundreds of billions of dollars of manufacturing growth in the coming years, with their sights set on a bigger share of a lucrative market where the cost of manufacturing is climbing sharply.

Samsung’s contract chip-making business said this week that it planned to increase its manufacturing capacity for the most advanced chips by 70% a year. (…)

• Taiwan pledges to work closely with the US and other allies to prevent China’s military from acquiring state-of-the-art technology, as Washington steps up efforts to contain the world’s No. 2 economy

MANUFACTURING PMIs

USA: Renewed expansions in output and new orders as cost pressures soften

Operating conditions across the US manufacturing sector remained relatively subdued in September, according to latest PMI^TM data from S&P Global. Although output and new orders returned to growth during the month, rates of expansion were historically muted. Nonetheless, firms expanded their workforce numbers at the fastest pace since March, although labor shortages continued to hamper firms’ ability to work through incoming new orders. Outstanding business rose again and at a quicker rate. Concerns regarding inflation and client purchasing power weighed on expectations, which dipped from August, and input buying.

At the same time, cost pressures softened amid reports of lower prices for some inputs. Although slower than those seen earlier in the year, the rate of selling price inflation picked up slightly as firms continued to pass-through higher cost burdens to customers.

The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI™) posted 52.0 in September, up from 51.5 in August and broadly in line with the earlier release ‘flash’ estimate of 51.8.The headline index was above the 50.0 neutral mark, as has been the case for the last 27 months, but continued to signal muted improvements in the health of the manufacturing sector.

The slight uptick in the headline reading was supported by renewed expansions in output and new orders at the end of the third quarter. Greater production was linked to increased client demand. The rate of growth was the quickest since May despite being slower than the series trend and only marginal.

New orders rose for the first time for four months in September, albeit at only a mild pace. Companies noted the acquisition of new customers and an improvement in demand conditions. The rate of expansion was much slower than those seen earlier in the year, however, and well below the series trend amid cost-cutting efforts at clients.

At the same time, new export orders fell further as challenging economic conditions and a strong US dollar weighed on foreign customer demand.

On the price front, input costs rose at a slower pace in September. The rate of inflation was still historically elevated amid reports of hikes in energy and material costs, but eased to the softest since January 2021 as inputs such as steel, plastics and lumber reportedly fell in price.

In an effort to drive sales, manufacturers registered a softer increase in selling prices compared to earlier in the year. That said, the pace of charge inflation ticked up from August as firms sought to pass through higher cost burdens to clients.

Supporting the softening of cost pressures was the least marked deterioration in vendor performance for two years at the end of the third quarter. Reports of greater input availability and less severe transportation delays contributed to greater supply chain stability.

Nonetheless, input buying fell at a quicker pace and preproduction inventories were depleted for the first time since February 2021. Stocks of finished items increased marginally as some firms noted lower than expected new order inflows.

Meanwhile, employment rose at the sharpest pace since March in September. Labor shortages were nonetheless evident, leading to another rise in backlogs of work, as firms stated that job creation stemmed from greater production requirements.

Manufacturing firms remained positive on balance regarding the year ahead outlook, but the degree of confidence dipped from August. Concerns surrounding inflation and client purchasing power weighed on sentiment which was below the series trend.

The ISM:

The September Manufacturing PMI registered 50.9 percent, 1.9 percentage points lower than the 52.8 percent recorded in August. (…) the September index reading reflects companies adjusting to potential future lower demand. The New Orders Index returned to contraction territory at 47.1 percent, 4.2 percentage points lower than the 51.3 percent recorded in August. (…) After a single month of expansion, the Employment Index contracted at 48.7 percent, 5.5 percentage points lower than the 54.2 percent recorded in August. The New Export Orders Index contracted at 47.8 percent, down 1.6 percentage points compared to August’s figure of 49.4 percent. This is the index’s lowest reading since June 2020, when it registered 47.6 percent.

WHAT RESPONDENTS ARE SAYING

• “Concerns of global economic slowdown are growing, and (we are) experiencing some customers pulling back orders.” [Chemical Products]
• “Production is steady, allowing reduction of backlog amidst slightly softened demand.” [Transportation Equipment]
• “Almost all suppliers are experiencing lead times growth. It seems no one wants to keep inventory on hand anymore.” [Food, Beverage & Tobacco Products]
• “Business is flat to down due to inflation and interest rates. Hard to find and keep employees due to wage increases by competitors.” [Fabricated Metal Products]
• “Supply chain constraints on many items are still an issue; staffing on the production side continues to be a significant problem. In contrast, we have more stock than needed on some key items — specifically imports — and have begun reducing open purchase orders and decreasing extended forecasts on those items in order to bleed down inventory.” [Machinery]
• “Business continues to be strong. Some commodities within the supply chain are starting to stabilize, while others are still causing disruption for production. Electrical and wiring components continue to cause significant issues. (We) cannot run as consistently as we would like.” [Electrical Equipment, Appliances & Components]
• “Quotes and orders still strong; however, we are not able to accept any new orders for shipment (for the rest of) 2022 due to motor and electronic component shortages.” [Miscellaneous Manufacturing]
• “The supply chain is still stressed, and it challenges our manufacturing plants for uptime. We have strong demand and need to run.” [Nonmetallic Mineral Products]
• “Business is still strong; raw materials are becoming more available, and some raw materials prices are falling.” [Plastics & Rubber Products]

The two surveys are coming back more in line, indicating subdued and spotty growth in demand and employment.

• The Goldman Sachs Analyst Index, which includes service as well as manufacturing industries, tallies GS analysts about their assessments of their respective industries: “The shipments component declined substantially, the new orders component declined into contractionary territory, and the exports component declined to its lowest level since June 2020, while the employment and wages components both increased. (…) 45% of surveyed analysts indicated that higher labor costs were the main driver of price increases so far in 2022, while around 40% indicated higher input costs and roughly 5% indicated higher margins.”

Eurozone: Manufacturing sector downturn accelerates in September as demand tumbles further and price pressures intensify

Excluding the initial pandemic lockdowns, eurozone manufacturers have not seen a collapse of demand and production on this scale since the height of the global financial crisis in early-2009. Worse looks set to come, with orders slumping at a significantly steeper rate than production is being cut. Further steep production cuts look to be on the cards in the coming months unless demand revives.

The euro area’s manufacturing sector fell deeper into contraction territory during September, latest PMI® data from S&P Global showed, due to further slides in both output and new orders. In some cases, production volumes were reduced in response to high energy prices, while many firms downwardly adjusted their operating schedules in line with lower order books. Demand for eurozone goods sank sharply in September as high inflation and economic uncertainty reportedly squeezed client appetite. Business confidence subsequently fell to its lowest level since May 2020, leading firms to cut purchasing activity further in anticipation of more challenging conditions.

Meanwhile, inflationary pressures accelerated in September. Although pressures arising from material shortages had reportedly faded slightly, many companies remarked on the rising costs for energy.

The S&P Global Eurozone Manufacturing PMI® fell to 48.4 in September, from 49.6 in August, signalling a further worsening of operating conditions for euro area goods producers. Moreover, the headline index slumped to its lowest level since June 2020.

Ireland was the only monitored euro area country to record a manufacturing PMI in expansion territory during September. France and Germany – the two largest eurozone economies – both recorded the worst deteriorations in manufacturing sector conditions at the end of the third quarter, with their respective PMIs at the lowest levels since the first wave of the COVID-19 pandemic in the first half of 2020.

For a fourth successive month, manufacturing output levels fell across the euro area. The reduction was solid overall and of a similar strength to that seen in August. Lower production was primarily a consequence of fading demand, according to panellists, although others commented on the adverse impact of ongoing supply shortages. In some cases, factory output was restricted as some firms looked to curb energy usage amid soaring prices.

The downturn in manufacturing new orders continued in September and accelerated from the previous month. Overall, the decrease in demand was the sharpest since May 2020 and reflected a broad weakening of client appetite. High prices reportedly deterred customer purchases, although other companies commented on the adverse impact from economic uncertainty.

With the rate of contraction in new orders exceeding that for output, euro area manufacturers were able to make inroads into their backlogs during September. In fact, the level of work outstanding fell at the quickest rate in over two years. Employment growth continued nonetheless, but slipped to its weakest since February 2021.

In a further sign of distress, eurozone manufacturers reduced their purchases of inputs for a third month and to the quickest extent since June 2020. This was in response to lower output requirements, and as part of efforts to prevent overstocked warehouses. Indeed, pre-production inventories rose once again in September despite the sustained drop in buying activity. According to firms, this reflected improving raw material availability, although others mentioned an unintentional expansion due to poor sales.

Meanwhile, supplier delivery delays were at their least widespread for almost two years in September as improved raw material availability and a drop in demand helped ease pressures on vendors.

Nevertheless, rates of input cost and output price inflation accelerated in September, the first time since April this has been the case. According to panellists, soaring energy prices were a key factor behind the intensification of cost pressures. In turn, factories passed on higher expenses to their clients through stronger increases in selling charges.

Lastly, the level of business confidence slipped back into negative territory in September. In fact, euro area manufacturers were at their most pessimistic since May 2020. Survey respondents attributed their downbeat assessment of the year ahead to soaring energy costs, the ongoing war in Ukraine and fears of a recession.

Top Fed Official Warns of More Persistent Price Pressures ‘Tighter monetary policy has begun to cool demand and reduce inflationary pressures, but our job is not yet done,’ said New York Fed President John Williams

Despite some signs of easing inflation, underlying price pressures have too much momentum and will likely require a period of higher interest rates, a top Federal Reserve official said Monday. (…)

Mr. Williams compared inflation to an onion, with the prices of globally traded commodities such as lumber, steel, and oil, serving as the outer layer, and durable goods such as appliances, cars, and furniture serving as a middle layer. Declining commodities prices and improving supply chains should slow inflation for many goods, Mr. Williams said.

“Unfortunately, that’s it for the good news on inflation,” he said. “The fact is, lower commodity prices and receding supply-chain issues will not be enough by themselves to bring inflation back to our 2% objective.” (…)

“Therein lies our biggest challenge…. Inflation pressures have become broad based across a wide range of goods and services,” Mr. Williams said. “Demand for labor and services is far outstripping available supply. This is resulting in broad-based inflation, which will take longer to bring down.” (…)

S&P Global’s findings do not point to much goods deflation just yet:

Although the latest price and supply indicators from S&P Global continued to point to relatively mild cost pressures across the global manufacturing sector during September, reports of price rises were up compared to August and were slightly above the long-run trend. Greater energy costs were a key driver of this, with reports of higher energy prices running at over 14 times the normal level as the war in Ukraine continued to impact energy markets. Increased semiconductor prices were also cited as a key source of inflationary pressure.

There were further signs of supply chain pressures easing,
however, with total supplier shortages at their least severe for nearly two years. Nevertheless, only 11 out of 20 raw material categories noted a reduction in supplier shortfalls, as shortages worsened for key materials such as oil, copper and semiconductors.

Vehicles Sales Increased to 13.49 million SAAR in September Wards Auto estimates sales of 13.49 million SAAR in September 2022, up 2.3% from the August sales rate, and up 9.8% from September 2021.

• That Covid Goods Boom is Going Bust, Bloomberg Trade Tracker Shows You can see the suffering illustrated on the Bloomberg Trade Tracker, where several of the 10 primary gauges floated in “below normal” range at the start of October and none looked good relative to their long-run averages.

2%+ Starts to a Quarter: A Baker’s Dozen

(…) The last time the index kicked off a quarter with a 2%+ gain was in Q1 of 2013, and the last time it started Q4 with a 2%+ advance was 19 years ago in 2003.  If the S&P 500 manages to hold onto its current gains, it would be just the 6th such gain of 3%+ to kick off a quarter since 1953. (…)

Of the twelve different 2%+ rallies highlighted, the S&P 500 rallied an average of an additional 2.1% (median: 2.5%) for the rest of the quarter with gains two-thirds of the time.  Of those twelve different occurrences, though, the range of returns varied widely with the best rest-of-quarter performance being a gain of 18.7% (Q1 1975) while the largest rest-of-quarter decline was 14.4% in Q1 2009. 

At the bottom of the table, we also show the average ‘rest of quarter’ returns after the first day of trading for all quarters since 1953.  With an average gain of 2.0% (median: 2.7%) and gains 66.5%, the returns are nearly the same as returns following strong starts to the quarter.  In other words, based on the results following the 12 prior occurrences, a strong start to the quarter tells you very little about the rest of the quarter’s performance. Click here to learn more about Bespoke’s premium stock market research service.

U.S. Seeks to Further Restrict Chip Exports to China The Biden administration’s action is aimed at preventing China from making high-end semiconductors, sources say.

The Biden administration is preparing new export controls on semiconductors and the machines to make them, the latest push in its effort to deny China the ability to make the fastest, most cutting-edge circuitry possible, according to people familiar with the situation.

The administration in recent weeks has already placed new restrictions on some U.S. exports of chips used for artificial-intelligence calculations and manufacturing equipment used to make some of the most powerful number-crunching chips.

But more export curbs are under consideration, including ones targeting high-end memory-chip manufacturing capabilities and advanced components that go into some of the most cutting-edge chip-making tools, according to the people familiar with the matter. Advanced quantum computing is another target under discussion, they said. (…)

Many of the expected actions the Biden administration is set to announce are likely to expand restrictions that it already has taken against individual companies, by making them apply industrywide, according to one of the people familiar with the situation.

For example, Nvidia Corp. disclosed in August that it could lose as much as $400 million in quarterly sales after the U.S. imposed new licensing requirements on shipments of some of its most advanced chips to China. The U.S. imposed the requirement to address the risk that the products could reach the hands of military users, Nvidia said.

Kim Kardashian Pays $1.26 Million to Settle SEC Probe The entrepreneur and reality-TV star failed to disclose compensation received for promoting EMAX tokens, the SEC said.

Axios explains:

Kim Kardashian was fined $1.26 million yesterday for touting crypto schemes — even as much more high-profile pitches from the likes of Matt Damon and Larry David have gone unpunished. The seeming double standard is a function of a subtle yet crucial distinction in securities law, Axios’ Felix Salmon writes.

Celebrity crypto endorsements drew millions of Americans into the crypto market at the beginning of this year, just before prices cratered. (…)

Legally speaking, it’s fine for celebrities and influencers to endorse investment opportunities, including crypto investments. Where Kardashian crossed the line was when she endorsed a crypto asset security.

• The height of the crypto advertising boom was the 2022 Super Bowl, where companies like FTX and Crypto.com spent untold millions touting their websites as a place to buy crypto — and, implicitly, to get rich doing so.
• Kardashian’s relatively low-budget 2021 Instagram post, by contrast — she was paid just $250,000 for it — touted a specific coin, EthereumMax, that the SEC has determined qualifies as a security. That brings it under SEC jurisdiction, which is much stricter than the FTC regulations governing most advertising.

If you’re endorsing a company, the only rules that apply are the relatively lax ones from the FTC.

• If you’re shilling a security, then disclosing that you were paid — as Kardashian did with an #AD hashtag — is not enough; you also need to disclose how much you were paid.