Evergrande Surprise, Trump’s New Truth, Phunware Fun, Bitcoin Weirdness

No Way!!

Now, this I did not expect. Equity index futures trading, if not higher, at least a little better than where they were when you stopped paying attention Thursday night?

No, it’s not because the New York Rangers went down to Nashville and came out with two points. No, it’s not because manufacturing sector PMIs are beating expectations across Europe.

In a move that certainly surprised this market participant and appears to have pleasantly surprised Asian markets, The Security Times is reporting that heavily indebted Chinese property developer Evergrande has transferred an $83.5 million interest payment to Citibank (the trustee) ahead of this Saturday’s deadline in New York, effectively servicing the coupon payment missed on Sept. 23 that triggered a 30-day grace period. The funds will now be paid to foreign investors prior to any potentially taking legal action.

Evergrande did not make any kind of regulatory filing in Hong Kong or provide any formal statement that might clarify any questions regarding the developer’s short- to medium-term future.

When EF Hutton Talks…

He’s baaaack…. Former President Donald Trump had seen his access to social media whither down to nothing in response to the events of Jan. 6. The former president had used Twitter as his preferred method in order to disseminate his opinion since before he served as president. Trump had more than 88 million followers on that one platform alone and had sought to regain his ability to communicate through social media.

On Thursday, Trump Media & Technology Group announced that it would combine with blank check or special purpose acquisition company Digital World Acquisition Corp (DWAC) to launch a new social network to be called “Truth Social,” where it is believed that users won’t self-publish “posts” but publish “Truths” instead. What qualifies as a truth? Your guess is as good as mine. What is undeniable is the investor interest in the deal.

DWAC had closed at $9.96 on Wednesday after trading as high as $10.04. On Thursday, the stock traded as high as $52 during the regular session before closing at $45.50 at the Nasdaq Market Site. So new, the stock had no related options, could not be shorted and did not trade on margin. DWAC has continued to trade higher overnight. I played this game on Thursday, but took my leave above $67 ahead of the 8 p.m. ET ARCA close on Thursday. I was too chicken to stay in this stock for a few hours while I caught some shuteye. The stock traded in the $80s during that time.

What’s also interesting is that in June, Kingswood Capital Markets rebranded itself as EF Hutton, and this version of EF Hutton is acting as the sole financial and capital markets adviser to Digital World Acquisition. You know what they say: “When EF Hutton talks… people listen.”

Some Related Fun?

Another name that I got long on Thursday, but was much less afraid to sleep on, was Phunware Inc (PHUN) . Phunware built and managed the Trump/Pence 2020 re-election campaign app. No idea if Phunware is being tapped to build “Truth Social,” but the stock is up significantly on speculation. This stock closed at $1.05 on Wednesday and $1.53 on Thursday at the Nasdaq after trading as high as $1.92 during the regular session. I see the name trading above $6 as I pass the wee hours writing this note. I would expect to take my profits in this one ahead of the weekend.

Thursday

Action-packed session. The Dow Jones Industrials gave up a whopping six points, a day after the Nasdaq Composite posted a “red candle” day. Though both of these down days were truly minute relative to October month-to-date market performance, that left the S&P 500 as the only one of the three with a winning streak fully intact, now up to seven regular sessions. That index also closed at a brand-new all-time high. Breadth got a little sloppy, as outperformance was scattered across sector types.

Six of 11 sector select SPDR ETFs closed in the green with four in the red, and one, Utilities (XLU) , closing unchanged even though the yield for the U.S. 10-year note grazed the 1.70% level late Thursday for the first time since May. One takeaway was clear… defensive sectors in general outperformed more cyclical sectors. Losers actually beat winners at the New York Stock Exchange while the split was very close to even at the Nasdaq. Declining volume decisively beat advancing volume at the NYSE, while the opposite was true up by Father Duffy’s statue.

Aggregate trading volume was very heavy for Nasdaq-domiciled names, in part because trading volume in DWAC alone popped from just a few thousand shares per day earlier this week to just under 500 million shares traded for the regular session on Thursday. Just an FYI…. According to Yahoo Finance, DWAC only has 28.75 million shares outstanding.

You Can’t Do That

The Federal Reserve is introducing new rules significantly limiting the ways in which Fed officials can participate in financial markets in response to questionable trades last year that led to the resignations in September of two regional district presidents, Eric Rosengren in Boston and Robert Kaplan in Dallas.

Policy makers and senior staff will no longer be permitted to own individual stocks, individual bonds investments in agency securities or any derivative involvement. These officials will be limited to “purchasing diversified investment vehicles such as mutual funds.”

Oh, No You Didn’t

Fat finger? Fat algo? At 07:34 ET on Thursday morning the price of Bitcoin on the Binance US exchange plunged from close to $65,000 in U.S. dollars to a low of $8,200 and snapped right back to where it had been. Bitcoin did no such thing on any other exchange where it trades. Binance US emailed a statement to those concerned:. “One of our institutional traders indicated to us that they had a bug in their trading algorithms, which appears to have caused the sell-off. We are continuing to look into the event, but understand from the trader that they have now fixed their bug and that the issue appears to have been resolved.”

Need for increased regulation much? No kidding. I mean, I know that the old open outcry auction-style market model is apples to oranges in comparison to today’s high speed, highly fractured world of algorithmic trading, but it was impossible for me to sell a stock at a lower price on the New York trading floor, if say some broker in Chicago or Boston was offering (bidding) price improvement. How in the world can the investor be less protected now, in this high-tech world, than he or she was back in the day when orders were represented by agency brokers using only their brains, a pen and a pad as tools?

Unless, maybe there was no one on any Bitcoin exchange bidding a better price than $8,200 at that time, which would mean that no potentially improved price had been bid. However, back in the days when dinosaurs ruled the earth, if an 87% drop in price for an NYSE listed name were imminent, that specialist would temporarily shut down the stock due to an “order imbalance.” It’s called using your head. Humans used to do it. Apparently algorithms still cannot. Something valuable has been lost somewhere along the road that we have travelled.

Snap, Crackle and Pop!

Snapchat patent Snap Inc. (SNAP) reported on Thursday night. Snap beat the street on the bottom line but fell short on revenue generation. Snap guided fourth-quarter revenue below consensus. Snap blamed a number of factors, but significantly singled out changes made by Apple (AAPL) to the way advertisers are able to track users on iOS.

Down went SNAP, which is still not a profitable company, if one includes non-recurring items. Down went other tech giants also reliant upon the ability to sell highly focused advertising. Facebook (FB) , Twitter (TWTR) and Alphabet (GOOGL) all traded lower overnight in sympathy with SNAP, as all in some way rely upon Apple’s iOS, and Apple now allows users to opt out of being tracked by individual apps.

Snap CEO Evan Spiegel commented, “Our advertising business was disrupted by changes to iOS ad tracking that were broadly rolled out by Apple in June and July. While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS.”

I don’t know about you kids, but I have refused every request by every app to track my activity. It’s only decent that those who wish to track must ask for permission.

Economics (All Times Eastern)

09:45 – Markit Manufacturing PMI (Oct-Flash): Expecting 55.2, Last 60.7.

00:45 – Markit Services PMI (Oct-Flash): Expecting 55.2, Last 54.9.

13:00 – Baker Hughes Oil Rig Count (Weekly): Last 445.

The Fed (All Times Eastern)

10:00 – Speaker: San Francisco Fed Pres. Mary Daly.

Today’s Earnings Highlights (Consensus EPS Expectations)

Before the Open: (AXP) (1.74), (CLF) (2.23), (HCA) (3.94), (HON) (2.00), (ROP) (3.85), (SLB) (.36)