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- Starbucks and McDonald's in trouble
Starbucks and McDonald's in trouble
and IMF expects growth
Good morning investors! All eyes today will be on Tesla as the company is set to announce earnings.
Today we cover:
The World Economic Outlook report from IMF.
Starbucks and McDonald’s in trouble?
Boeing not going anywhere.
Reminder: Paul Tudor Jones recommends owning a basket of gold (check this guide for more), bitcoin, commodities and Nasdaq, and staying away from fixed income.
📊 Economy and News
IMF Has a Lot to Say
The International Monetary Fund (IMF) has indicated that global inflation is largely under control, marking an improvement from its previous warning of stalled progress. The IMF also updated its economic forecasts for several countries:
United Kingdom: Growth forecast for 2024 raised to 1.1%, up from 0.7%, due to lower inflation and Bank of England rate cuts. No change for 2025.
China: The IMF cut China’s 2024 growth rate by two-tenths of a percentage point to 4.8%.
India: kept its financial years 2024-25 and 2025-26 GDP growth outlook for India unchanged at 7% and 6.5% respectively.
Saudi Arabia: 2024 GDP growth forecast lowered to 1.5%, with expectations of 4.6% growth in 2025. Overall for Middle East & Central Asia, it expects growth of 2.4% for 2024, and 3.9% in 2025 as oil and shipping disruptions ease.
Japan: 2024 growth outlook reduced, but a rebound is expected in 2025, driven by rising real wages.
Latin America & Caribbean: GDP growth forecast for 2024 revised to 2.1%. Brazil's growth raised to 3.0%, while Mexico's lowered to 1.5%.
United States: Expected to drive global growth through 2024 and 2025, supported by strong consumer spending despite inflation and high interest rates.
Lastly, it warned that global markets may be underestimating geopolitical risks.
Global hits:
Hyundai Motor India’s shares drop 7% on trading debut after record IPO.
Economists see UK cutting interest rates more substantially as inflation pressures ease and IMF paints a positive picture.
World’s largest sovereign wealth fund posts $76 billion in quarterly profit as interest rates fall.
Exciting: Qatar Airways partners with Elon Musk’s Starlink for high-speed Wi-Fi milestone.
Will you pay extra for good on-flight WiFi? |
📈 Stocks
S&P 500 5,851.20 (-0.048%)
DJIA 42,924.89 (-0.016%)
NASDAQ 18,573.13 (+0.18%)
BRENT CRUDE 76.04 (+1.75%)
* Prices as of Oct 23rd, 12:20 AM UTC
Starbucks slides again as sales remain sluggish
Starbucks released preliminary quarterly results on Tuesday, showing a 3% drop in net sales to $9.1 billion and adjusted earnings per share (EPS) of 80 cents. These figures fell short of analysts' expectations, who had predicted EPS of $1.03 and $9.38 billion in revenue. Same-store sales declined globally by 7%, marking the third consecutive quarterly drop.
Since becoming CEO nearly two months ago, Brian Niccol has focused on revitalizing demand, particularly in the U.S. and China, Starbucks' largest markets. In the U.S., the company has struggled to retain occasional customers, who are cutting back on higher-priced drinks. In China, Starbucks faces competition from cheaper local rivals like Luckin Coffee and a more cautious consumer market post-pandemic.
Despite these challenges, Starbucks' stock has risen 1% this year, with full fourth-quarter earnings to be reported on October 30.
GM Shines: GM easily outperformed third-quarter earnings expectations, leading the Detroit automaker in raising key guidance targets for 2024. The company now expects full-year adjusted EBIT of between $14 billion and $15 billion, or $10 and $10.50 a share, up from between $13 billion and $15 billion, or $9.50 and $10.50.
Shares of the Detroit automaker closed Tuesday at $53.73, up 9.8% — marking the highest daily percentage increase for the stock since volatile trading during the onset of the coronavirus pandemic in March 2020.
McDonald’s trouble: McDonald’s shares fell -8% in extended trading after the CDC said an E. coli outbreak was linked to the chain’s Quarter Pounder burgers. The outbreak has led to 10 hospitalizations and one death, the CDC said.
Walmart goes big: Walmart said that it will start delivering prescriptions to customers’ doorsteps. The discounter will begin with six states, but plans to offer prescription delivery in 49 states by the end of January. Walmart’s move comes as Walgreens and CVS shutter stores and try to turn around their struggling businesses.
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💵 Personal Finance
Boeing isn’t going anywhere
Boeing’s financial problems are bad news for the US economy. It is the nation’s largest exporter. And more immediately, business in communities where laid-off Boeing employees and strikers live, mostly in Washington state, could see problems as those people pull back on spending.
But the other way that the financial problems would spread beyond Boeing will be the impact of the strike on suppliers. Boeing has 10,000 suppliers, which can be found in all 50 US states. It estimates its own annual contribution to America’s economy at $79 billion, supporting 1.6 million jobs directly and indirectly.
According to analysis by Anderson Economic Group, losses by Boeing employees, strikers, suppliers and the company itself, along with local governments, have already reached $5 billion in the first month of the strike.
Boeing’s credit rating is at risk of being downgraded to junk bond status, which would create more financial problems by raising its cost of borrowing.
Junk bond status means there’s an increased risk of default and perhaps bankruptcy. But even if it is forced to file for bankruptcy, that doesn’t mean it will go out of business. It just means Boeing would use the bankruptcy process to shed some of its unaffordable debt and other obligations.
Numerous successful companies, including General Motors and most of the nation’s airlines, have gone through bankruptcy and gone on to report record profits afterwards.
And it is not likely that Boeing would be forced out of business by its current financial crisis. Boeing and European rival Airbus are essentially the only companies that make the full-size jets that the global airline industry needs. Its place as part of a duopoly essentially ensures its survival.
Union leaders today expect a close vote when 33,000 Boeing hourly workers weigh a sweetened contract offer that could end an almost six-week strike. However, if they fail to reach a deal then we may see the stock fall below $140.
Check this interesting video on the company:
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