Oct 13, 2022
TradeUP Thursday
Latest news and bulletin updates
Market Trends
Dow Jones  up
S&P 500  up
(Opening price as of 10/13/2022 compared to last close)
Weekly Highlights
#1 Stocks plunge as Sep CPI comes hotter than expected
#2 Biden administration cites inflation as national, global security threat
#3 UK bonds, currency gain on hopes of government spending U-turn 
#4 Pepsi will be fine “regardless of the economic environment,” CFO said
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Defense stocks see prices rise amid Russia’s invasion of Ukraine

Since Russia’s invasion of Ukraine, many defense stocks have skyrocketed. Defense companies secure billions of dollars every year from government contracts. Many of these companies like Northrop Grumman, General Dynamics, Lockheed Martin, and Raytheon are publicly traded. Defense stock prices have risen as much as 30% this year, a stark contrast against the S&P 500, which is down 20%.

The US has authorized a staggering flow of weapons and security aid since the start of President Putin’s invasion on February 24. The Biden administration has sent Ukraine over $17 billion of military aid, including missile systems and drones. Top Pentagon officials met with the CEOs from the 8 largest Defense Department contractors this April to discuss the military aid to Ukraine, and Ukrainian President Zelenskiy spoke to these arms makers and military leaders directly this September to appeal for more weapons.

(The Army has awarded a $311m production order for Javelin missiles in September)

The White House said on Sunday it would continue to arm Ukraine after the Crimea bridge blast and Russian threats to retaliate following the explosion. However, the Washington Post reported that as American consumers grapple with inflation and a slowing economy, polls indicate that fewer Republicans believe the United States has a responsibility to protect Ukraine.

Will the defense sector continue to outperform the broad market?
A.Yes, due to significantly increased military spending B.No, the price has already peaked in past months C.Uncertain
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Inside Scoop

#1. Stocks plunge as Sep CPI comes hotter than expected

• The overall CPI increased by 8.2% in September as core prices hit a 4-decade high. Housing costs rose by the most since the early 1980s and worker wages took another hit, falling 0.1% monthly and 3% YoY when adjusted for inflation. 

• Markets now expect the Fed could institute consecutive 0.75 percentage point rate hikes in both November and December.

#2. Biden administration cites inflation as national, global security threat

The Biden administration cited inflation as a national and global security threat. The national defense strategy outlined Wednesday enumerates inflation as one of the cross-border issues that “people all over the world are struggling to cope with.”

A Monmouth poll conducted in late September showed 82% of Americans called inflation an extremely or very important issue and just 30% approve of Biden’s handling of the issue.

#3. UK bonds, currency gain on hopes of government spending U-turn

• UK government bonds rose in price Thursday and the pound gained against the dollar as investors hoped that the UK government would reverse course on its recent tax-cutting plans, or even see a change of leadership.

• Officials at No. 10 and the Treasury were discussing how to back down from Prime Minister Liz Truss’s fiscal plans, according to Bloomberg News. The Times of London reported that lawmakers in the ruling Conservative, or Tory, party were talking seriously about whether Ms. Truss should be ousted

#4. Pepsi will be fine “regardless of the economic environment,” CFO said

• The company posted better-than-expected Q3 earnings despite a gloomy read on the economically challenged consumer, not unlike recent commentary from Nike and FedEx.

• The maker of Pepsi and Doritos said its third-quarter sales rose as prices increased by 17% on average. In comparison, food inflation is at the highest level in 40 years, with grocery prices up 13.5% in August compared with a year earlier.

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