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NOVEMBER 16, 2023

APPROVALS DELAYED

The U.S. Securities and Exchange Commission has once again deferred making a decision on the approval of the first U.S. exchange-traded fund (ETF) investing in Bitcoin. The regulator was expected to decide on the applications by November 17, but it has chosen to extend the process until 2024, as has been done previously for other ETF hopefuls. This deferral also covers a filing from Hashdex for the conversion of its existing Bitcoin futures ETF into a spot fund. Additionally, the SEC also postponed its decision on Grayscale’s attempt to launch a new Ether futures ETF, while continuing discussions regarding the rejection of a spot Bitcoin ETF application that the digital asset management had previously submitted. Nonetheless, it is worth noting that despite these delays, analysts from Bloomberg Intelligence forecast a 90% likelihood of the SEC approving a Bitcoin ETF in the U.S. by January 10, 2024.

TEMPORARY FUNDING APPROVED

The U.S. Senate has approved a temporary funding measure to prevent a government shutdown, temporarily delaying a partisan clash over federal spending until the New Year. The 87-11 vote late Wednesday night sends the measure, already passed by the House, to President Joe Biden for his expected signature before the shutdown deadline late Friday night. This outcome offers a breather from the recent ideological struggles over spending, which nearly caused a debt default and led to the downgrade of the nation’s sovereign credit rating. Senate Majority Leader Chuck Schumer announced that assistance for Israel and Ukraine would be the chamber’s next priority, and work on it will begin immediately after the Thanksgiving holiday. The funding package, proposed by new House Speaker Mike Johnson, faced criticism from some hardline conservatives for not meeting their demands for immediate deep spending cuts or changes to immigration policies. Illustrating the impact of the turmoil, Moody’s Investors Service had lowered the US’s credit-rating outlook to negative from stable, however, it is worth noting that despite the not yet fully resolved crisis in Congress, the approval of this interim funding measure will provide short-term stability.

LABOR MARKET SOFTENING

According to the Labor Department, last week, there was a higher than expected number of Americans filing for unemployment benefits, suggesting that the job market was easing. This rise, with 13,000 more initial claims for state unemployment benefits, brought the total to 231,000 for the week ending Nov. 11. Economists, however, predicted 220,000 claims for that week. The labor market’s cooling trend is attributed to higher interest rates reducing job demand. This slowdown is mirrored in October’s decreased job growth and a rise in the unemployment rate to 3.9%, the highest level since January 2022. Nonetheless, despite the challenges, the Labor Department reported 1.5 job openings for every unemployed person in September, showing that the job market remains fairly tight, and there is an ongoing debate among economists over the reasons for the sustained rise in those receiving benefits after the initial week of aid, with some attributing the increase to seasonal fluctuations. Moreover, economists at Goldman Sachs noted that the increase in the unemployment rate since April has come entirely from an expansion in the size of the labor force rather than a decline in employment.

STRONG RESULTS

In the recent fiscal quarter, Walmart demonstrated strong performance, surpassing sales expectations despite a cautious outlook for the year due to a slowdown in consumer spending, and although the company anticipates slightly lower adjusted earnings per share than analyst estimates, it foresees significant growth in consolidated net sales. Walmart observed consumer behavior shifted to prioritize major promotions and better deals, influencing purchasing trends during sales events, however, as the holiday season began, sales surged, particularly in clothing items, indicating a positive change. Furthermore, leveraging its e-commerce strength, Walmart+ innovations, and its status as the largest national grocer, Walmart maintains a competitive edge over rivals, reflected in its rising stock value. On the other hand, Macy’s exceeded Wall Street’s projections for the quarter by enhancing inventory and margins to counter a substantial sales decline. CEO Jeff Gennette noted steady holiday sales in key categories, particularly beauty products, highlighting factors favoring Macy’s during the season, including steady inventory levels and a positive response to cooler weather, and despite the challenges at its flagship stores and upcoming leadership changes, Macy’s reported a better-than-expected decline in comparable sales, attributed to robust performances from Bloomingdale’s and Bluemercury, and improved gross margins due to reduced markdowns. Nevertheless, Macy’s stocks struggled, experiencing a significant decline compared to market gains throughout the year.

INCONSISTENT PERFORMANCE

On Tuesday, global hedge funds using trading algorithms suffered their second worst day this year due to softer than expected U.S. inflation numbers, causing a strong rally in stocks. This led to the S&P 500 and Nasdaq indices showing their largest daily percentage gains since April. Conversely, stockpicking hedge funds that actively chose bets managed to gain 0.6% on Tuesday, their best month since January according to Goldman Sachs. These funds had a positive 2.7% performance in November and were up 5.8% for the year, however, on average, all hedge fund strategies were down by 0.58% in October and up by 3.75% for the year ending in October. In addition, at the end of October, MSCI’s global stock index was down by 2.88%, and although according to BNP Paribas, quantitative multi-strategy hedge funds turned out to be the best performing strategies, with a positive 11.05% performance ending in October,  hedge funds trading on market volatility had the lowest average gain at 2.46% for the year ending in October.

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