This Is The Worst…Since September

November’s producer price index (PPI) came in higher than expected, rising by 0.3% MoM and 7.4% YoY. 🔥

The culprit this time? Wholesale vegetables…which saw a 38% surge. This caused the overall food index to rise 3.3%, which offset the 3.3% decline in energy costs.

Core PPI doubled the 0.2% MoM estimate at 0.4%, excluding food and energy. While the YoY rise of 6.2% is less than October’s 6.6% reading, inflation remains far too high for the Fed’s liking.

The news sent bond yields, which had been trending lower for a few weeks, higher. The Fed says they’re staying aggressive until inflation comes down meaningfully, and today’s reading was anything but that.

Meanwhile, China’s producer prices fell overseas in November as inflation cooled consumer demand. Weak activity and soft demand in the world’s second-largest economy remain a concern for investors. 📉

Oof. Crypto can’t catch a break. 

The collapse of FTX must have been the final straw for the SEC. Some new guidance came out yesterday, specifically related to crypto and corporate public filings. 

The SEC pushed out a Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets

In a nutshell, the SEC wants companies to report some additional details with their public filings:

• Describe how any cryptocurrency bankruptcies have impacted their business directly or indirectly. 
• Include exposure to cryptocurrency assets and holdings.
• Include exposure, if any, to FTX’s bankruptcy and any other major market developments. 

The full letter contains 16 points the SEC wants more information on.

And speaking of the FTX collapse, Sam Bankman-Fried says he’s willing to testify at a U.S. House hearing, even though he missed the response deadline. Whether or not that happens remains to be seen, but he’s sure spending a lot of time in the media these days…

Chinese electric vehicle maker Li Auto veered off course today after missing earnings estimates.

The company saw revenues rise 20.25 YoY to $1.31 billion, missing estimates of $1.40 billion. Its Non-GAAP net loss per share was greater than expected at $0.18 vs. $0.15. ⚡

Getting into delivery numbers, Q3 rose 5.6% YoY to 26,524 vehicles. However, that represents a 7.5% QoQ decline.

More concerningly, its vehicle margin fell 910 bps YoY to 12%. Contracting margins pressured gross profit, which fell 34.8% YoY. Its gross margin contracted by 1,060 bps to 12.7%. 🔻

To become profitable again, the company’s chief engineer will replace its president and director, who recently resigned. The company is also rationalizing its costs and ramping production to benefit from economies of scale. However, they recognize they’re doing so in the face of an uncertain macro environment and supply chain issues.

Despite the challenges, management remains optimistic about their ability to execute and deliver 45,000-48,000 vehicles in Q4.

With that said, investors appear less confident as $LI shares fell 12% on the day. 📉

Meanwhile, small-cap outdoor recreational products retailer Johnson Outdoors surprised analysts with better-than-expected earnings. 😮

The company saw Q4 sales growth of 18% YoY to $196.39 million vs. the $168.57 million expected. Earnings per share of $0.95 also beat consensus expectations of $0.37 by a wide margin. 💪

Like other retailers, the company is dealing with gross margin contraction. However, they note the 620 bp YoY decline to 34.9% is primarily due to increased material costs and inventory reserves.

Overall operating expenses were up just 1% YoY, and operating margins of 6.8% were higher than expected. With that said, the company does expect supply chain constraints to occur periodically in 2023. And margins will remain impacted by higher prices.

Overall, investors seemed happy with the results. $JOUT shares rose 18% on the day. 👍