Wall Street Lunch: To Smoke Or Not To Smoke?

Joint in the hand

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The U.K. goes ahead with phasing out legal cigarettes and Ohio legalizes marijuana. (0:15) Warner Bros. Discovery plunges despite ‘Barbie.'(2:36) Grand Theft Auto VI hype gears up. (3:22)

This is an abridged transcript of the podcast.

Our top story so far

No tobacco in the U.K.; more legal pot in the U.S.A.

The U.K. government will introduce legislation that will raise the legal age for smoking cigarettes every year. King Charles confirmed the plan at the state opening of Parliament.

The major crackdown, proposed by Prime Minister Rishi Sunak last month, would effectively create the first smoke-free generation in the U.K.

The proposed law would ensure that children currently aged 14 or younger can never be sold cigarettes and would restrict the sale and marketing of e-cigarettes to children.

Recreational weed is coming to Buckeye State after Ohio voters approved a ballot measure to legalize adult cannabis use for non-medical purposes. It’s a big deal as it makes Ohio the 24th state to approve recreational pot, in addition to Washington, D.C., meaning nearly half of all U.S. states now embrace such a stance. The latest approval also shows how the sentiment is expanding to more parts of the country, like the Midwest, after Minnesota and Missouri approved similar measures over the past year.

Cannabis market research firm BDSA even expects legal U.S. cannabis sales to grow 14% to $36.5 billion by the end of 2023, though investors trying to gain exposure to the sector have not yet seen such promising returns. Multistate operators like Cresco Labs (OTCQX:CRLBF), Curaleaf (OTCPK:CURLF), Green Thumb Industries (OTCQX:GTBIF), and Trulieve Cannabis (OTCQX:TCNNF) have seen negative returns in recent years, as have cannabis-related funds like the AdvisorShares Pure Cannabis ETF (YOLO) and ETFMG Alternative Harvest (MJ).

In today’s trading

The markets are taking a breather. There was some anticipation of remarks from Federal Reserve Chairman Jerome Powell right before the opening bell. But he sidestepped the opportunity to drop anything on monetary policy, sticking to the script and praising the Fed’s statistics office.

The major stock averages are up slightly. Treasury yields are little changed.

In commodities, oil is down again. WTI crude (CL1:COM) is below $77 per barrel. It topped $90 on Oct. 19.

And palladium hit a five-year low.

Looking to active stocks and earnings

Robinhood Markets (HOOD) stock retreated after turning in a Q3 loss that was slightly better than feared and revenue that fell short of Wall Street estimates. Also, the company raised its expectations for full-year total operating expenses to $2.40 billion to $2.44 billion from the prior outlook of $2.33 billion to $2.41 billion.

Warner Bros. Discovery (WBD) reported mixed third-quarter results, despite seeing the full benefit from the hit movie “Barbie.” For the period ending September 30, Warner Bros. Discovery lost 17 cents per share on $9.98 billion in sales. It ended the period with 95.1 million subscribers, down from the 95.8 million it had in the second quarter.

Video game platform company Roblox (RBLX) surged after reporting stronger-than-expected third-quarter results and said it would start offering guidance in 2024. For the quarter, Roblox lost 45 cents per share on a GAAP basis, as bookings came in at $839.45 million, up 19.6% year-over-year. Analysts had expected a loss of 51 cents per share on $803.67 million in bookings.

In other news of note

Rockstar Games is planning to announce the much-anticipated Grand Theft Auto VI as early as this week, according to Bloomberg.

Rockstar’s parent company, Take-Two Interactive Software (TTWO), plans to publish a trailer for the video game in December to celebrate Rockstar’s 25th anniversary.

In September, Raymond James analysts said that they were very excited about the upcoming sequel when they upgraded the stock on a “very interesting” 2025 and beyond.

Grand Theft Auto V sold more than 185 million copies and is the second-best-selling video game of all time behind Minecraft, which can also be played on phones.

And in the Wall Street Research Corner

We take a look at flows into exchange-traded funds. For 2023, so far, the top ten ETFs have seen inflows of $164.26 billion.

Along with popular index-tracking ETFs, bond funds have been in demand, while some actively managed income funds also made the list.

At the top is the Vanguard S&P 500 ETF, ticker symbol VOO, which has seen inflows of $32.62 billion. Also making the list is the iShares 20+ Year Treasury Bond ETF, symbol TLT, and the JPMorgan Equity Premium Income ETF, symbol JEPI.

Socially responsible investing hasn’t lured in the cash. The iShares ESG-aware MSCI USA ETF, symbol ESGU, saw the biggest outflows at $9.33 billion.

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