K - Wall Street Breakfast Podcast: Disinflation Could Become A Headwind - MS

2023-07-25 06:36:36 ET

Summary

• Morgan Stanley predicts disinflation could become a new headwind in financial markets, suggesting investors should focus on companies with strong sales growth.
• Adobe is likely to face an antitrust probe from the EU over its proposed $20B acquisition of Figma, with the company reportedly not offering remedies to address concerns.
• Kellogg has filed an SEC statement relating to its planned separation into Kellanova and WK Kellogg Co., expected to be completed in Q4 2023.

Listen below or on the go on Apple Podcasts and Spotify Disinflation could become a headwind - Morgan Stanley. (00:30) Adobe ( ADBE ) reportedly won't offer remedies to address EU concerns over Figma deal. (01:26) Kellogg (K) files SEC statement for splitting up as Kellanova and WK Kellogg Co. (02:28)

This is an abridged transcript of the podcast.

After years of investors worrying about high inflation, Morgan Stanley's Michael Wilson reportedly said “We were wrong” and argued on Monday that disinflation may become a new headwind in financial markets.

Wilson stated in one of the financial institution's investor notes , "2023 has been a story of higher valuations than we expected amid falling inflation and cost cutting." He went on to say, "However, disinflation is now eating into sales growth, which means investor focus is likely to shift toward top line growers rather than just companies exhibiting cost efficiencies."

As Wall Street heads into the thick of earnings season, Morgan Stanley predicted that performance dispersion will increase and recommended that financial participants look for stock ideas with "high earnings quality, strong free cash flow generation and improving earnings revisions driven by sales growth."

Adobe (NASDAQ: ADBE ) is increasingly likely to face an in-depth review from the European Union's antitrust regulator concerning its proposed $20B Figma acquisition.

Bloomberg reported , citing two people familiar with the matter, that Adobe ( ADBE ) will not offer remedies to address the concerns of the agency,

an Adobe spokesperson told Seeking Alpha. “We continue to have productive conversations with regulatory bodies worldwide."

Last month, it was reported that Adobe ( ADBE ) was likely to face an in-depth review and deal with a more detailed phase 2 probe from the European Commission.

Adobe ( ADBE ) shares rose 0.7% on Monday.

In May, the U.K.'s antitrust authority, the Competition and Markets Authority, said it was probing the $20B deal. The U.S. Department of Justice is also reportedly planning to file an antitrust lawsuit to block the deal.

Adobe announced its plan to acquire Figma with a combination of cash and stock in September 2022.

Kellogg (NYSE: K ) has filed a Form 10 statement with the SEC relating to its previously announced plan to separate into two businesses .

The companies will be separated into Kellanova and WK Kellogg Co., and existing Kellogg shareowners will receive shares in the latter.

After the spin off the remainder of Kellogg Company named Kellanova will continue to be traded on the NYSE under the "K" symbol.

The separation transaction is expected to be completed during the fourth quarter of 2023.

Other headlines to look out for on Seeking Alpha:

Biden administration proposes new rules for residential water heaters

Gasoline futures hit highest since October after Exxon refinery outage

Alphabet Q2 earnings look-ahead: All eyes on new AI development

Apollo Global plans to make equity investment in PetSmart

West Virginia AG files brief asking Supreme Court to OK Mountain Valley Pipeline

On our catalyst watch for the day- The three-day Mining Disrupt Conference will begin in Miami, Florida. The world's largest Bitcoin mining expo will include presentations by mining industry companies such as CleanSpark ( CLSK ).

Pacific Gas and Electric Company ( PCG ) will hold an Innovation Summit. The summit will include a one-on-one conversation and Q&A between PG&E CEO Patti Poppe and Tesla ( TSLA ) CEO Elon Musk.

U.S. stocks ended higher on Monday.

The Nasdaq ( COMP.IND ) closed up 0.19%. The Dow ( DJI ) added 0.52% while the S&P 500 ( SP500 ) gained 0.40%.

Of the 11 S&P sectors, nine ended trading in the green, led by Energy and Financials. Utilities and Health Care were the two losers.

Treasury yields were slightly higher . The 10-year yield ( US10Y ) was up 3 basis points to 3.87%, while the 2-year yield ( US2Y ) was up 6 basis points to 4.91%.

Looking at active movers, Mattel ( MAT ) gained 1.84% after the new live-action Barbie film raked in $155M at the U.S. box office to notch the biggest domestic opening of the year.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are in the green. The Dow is up 0.1%, the S&P 500 is up 0.3% and the Nasdaq is up 0.5%. Crude oil is up 0.03% at more than $78 a barrel. Bitcoin is down 0.6%.

In the world markets, the FTSE 100 is up 0.2% and the DAX is up 0.2%.

On today’s economic calendar, the FOMC meeting begins today. At 9 am the FHFA house price index and 10am consumer confidence.

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