Good morning. Happy Friday.
The Asian/Pacific markets were split. Hong Kong, Taiwan and Malaysia did well; Japan and China were weak. Europe, Africa and the Middle East are currently doing well. Denmark, Poland, Germany, Greece, Switzerland, Norway, Hungary, Spain, the Netherlands, Portugal and Austria are up. Futures in the States point toward a positive open for the cash market.
————— VIDEO: State of the Market —————
The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Time to strike
The latest challenge has surfaced for American planemaker Boeing (BA), whose biggest labor union just voted overwhelmingly to walk off the assembly line. A strike that started at midnight Pacific time will shut down production of its best-selling jets, including the 737, 777 and 767. An extended stoppage would weigh on the financials of Boeing and make things worse for the jetliner industry, which is already struggling with capacity shortages.
What happened? Tens of thousands of machinists (95%) rejected a labor deal struck between union leaders and Boeing executives. The contract offered a 25% wage increase over four years, as well as pledges for local manufacturing, more retirement benefits and lower healthcare costs, but employees felt that would not be enough after a decade of stagnating pay and the current cost of living. Prior to the vote, Boeing maintained that it offered as much as it could, given its finances, with a soaring debt load that has topped $60B.
It’s the first big test for Boeing CEO Kelly Ortberg, who took the yoke last month to steer the company towards better brighter skies. The planemaker’s reputation has suffered in recent years amid questions over safety and lack of accountability. Two crashes in 2018/19 uncovered design flaws with the MCAS system, a 737 MAX door plug blew out mid-flight in January, and more recently, Boeing’s Starliner spacecraft couldn’t make it back to Earth with its crew on board.
A striking success: Unions and walkouts have notched strong results over the past year, as new leadership and members spot the opportunity for leverage. That has led to new labor agreements for the auto industry, for Hollywood, and even others in the aerospace sector, like the machinists at Spirit AeroSystems (SPR), which was later bought by Boeing. Will the surge in industrial action impact even more industries? (30 comments)
Ballooning interest
The U.S. federal government spent $380B more than it earned in August, according to the Treasury Department. It also spent more than $1T on interest payments so far this fiscal year – for the first time ever – as the government’s fiscal YTD budget deficit swelled to $1.9T, up 24% from the same period a year ago. The Fed’s aggressive tightening cycle, which pushed rates to their highest levels in over two decades, has been a big driver in the increase in interest payments, but the central bank is set to start its easing cycle next week. (26 comments)
Escalation risk
Vladimir Putin has announced that the West would be directly at war with Russia if Ukraine is allowed to strike Russian territory with Western-made long-range missiles. Ukrainian President Volodymyr Zelenskyy has long called on NATO allies to allow Kyiv to use such missiles – like the ATACMS made by Lockheed Martin (LMT). “If this decision is made, it will mean nothing less than the direct participation of NATO countries, the U.S. and European countries in the war in Ukraine,” Putin declared. “If this is so, we will make appropriate decisions based on the threats that will be created for us.” (57 comments)
The labor force
Despite public opposition and concerns about youth unemployment, China will gradually raise the statutory retirement age by up to five years for the first time since 1978. The decision, which will come into force on January 1, 2025, takes into account increased life expectancy in China, a shrinking overall workforce and more years of education. Notably, people aged 60 and above are expected to cross 400M by 2035, representing 30% of China’s total population, which has been declining amid low birth rates. (5 comments)
Today’s Economic Calendar
08:30 AM Import and Export Prices
10:00 AM Consumer Sentiment
01:00 PM Baker Hughes Rig Count
What else is happening…
Ahead of the Fed: ECB cuts interest rates for second time this year.
Oracle (ORCL) climbs after hiking long-term targets at analyst meeting.
New push towards Fannie Mae and Freddie Mac privatization?
Wells Fargo (WFC) slides after OCC issues enforcement action.
Grayscale launches XRP closed-end fund, sending XRP higher.
Amazon (AMZN) boosts investment in delivery service program.
American Airlines (AAL) flight attendants approve new five-year contract.
Adobe (ADBE) plunges after earnings beat as guidance disappoints.
Microsoft (MSFT) ropes in GE (GE) finance chief Happe for COO job.
Little damage seen despite 40% of Gulf oil output shut-in by Francine.
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Good morning. Happy Thursday.
The Asian/Pacific markets did great. Japan, Hong Kong, South Korea, India, Taiwan, Australia, New Zealand, Indonesia, Singapore and the Philippines did great. China was weak. Europe, Africa and the Middle East are currently doing well. The UK, Denmark, Poland, France, Turkey, Germany, South Africa, Norway, Hungary, Spain, the Netherlands, Italy, Israel, Austria and Sweden are posting solid gains. Futures in the States point toward a positive open for the cash market.
————— Free Online Course: Mini Masterclass in Trading —————
The dollar is unchanged. Oil and copper are up. Gold and silver are up. Bonds are unchanged.
Stories/News from Seeking Alpha…
Skywalker
As most people began waking from their beds, there were a couple of individuals who were making history by walking around. The first-ever private spacewalk was conducted by civilian astronauts Jared Isaacman and Sarah Gillis, two members of the four-person Polaris Dawn mission that launched to Earth orbit earlier this week. It was once again made possible by SpaceX (SPACE), which has clearly become the front-runner in the burgeoning commercial space industry following the latest debacle by Boeing (BA).
Back to the 1960s: Since the Crew Dragon spacecraft has no airlock, the only way to conduct a spacewalk is to let all the air out of the spacecraft and open the front hatch. That exposed the entire interior to the vacuum of space (a.k.a. vented), requiring all four astronauts aboard to don spacesuits. The extravehicular activity (EVA) was made possible by new handrails that SpaceX named Skywalker, and took place 870 miles above Earth, which is 3x higher than the International Space Station (or the deepest point ventured into space by humans without going to the moon).
The key objective of the spacewalk was to test SpaceX’s new suits, which were developed in-house to prepare for further missions to the final frontier. “It’s not lost on us that, you know, it might be 10 iterations from now and a bunch of evolutions of the suit, but that, someday, someone could be wearing a version of [it] that might be walking on Mars,” Isaacman declared. “And it feels like, again, a huge honor to have that opportunity to test it out on this flight.”
Space race: Tech entrepreneur and billionaire Jared Isaacman is an accomplished pilot and CEO of Shift4 Payments (FOUR), but he’s not the only one interested in space. The industry has been growing at an exponential rate, although many new entrants have struggled in the public markets. Others have blasted above the exosphere in 2024, including AST SpaceMobile (ASTS), EchoStar (SATS) and Intuitive Machines (LUNR), which are looking to capitalize on satellite and exploration technologies.
New valuation
Microsoft-backed OpenAI is in discussions for a $6.5B funding round from investors, according to fresh reports. It would value the world’s biggest artificial intelligence startup at around $150B, which is nearly double OpenAI’s valuation of $86B earlier this year. The round will be led by Thrive Capital, with participation from Microsoft (MSFT), while Apple (AAPL) and Nvidia (NVDA) have also been in talks about investing in the startup. OpenAI is additionally weighing a $5B revolving credit facility as it continues to invest heavily to maintain its edge in the AI race. (28 comments)
Rate cut odds
Traders on Wednesday strengthened bets that the Fed will cut interest rates by a quarter point next week instead of a jumbo 50 bps move. While the headline CPI figure was in line with expectations, core inflation data came in slightly hotter than expected. Markets initially fell on the news, but later ended the volatile session higher, which “appeared to be in response to the market favoring the prospect of a rate cut at all,” according to SA Investing Group Leader Daniel Jones. The producer price index will also be released this morning, while the ECB is expected to cut rates again today, beating the Fed to the party. (17 comments)
Trading trouble
Atlanta Fed President Raphael Bostic broke the central bank’s trading restrictions, its internal watchdog revealed in a report, but noted there was no evidence that he made trades based on insider information. Bostic created an “appearance of acting on confidential” information from the FOMC following the execution of 154 trades on his behalf since 2018 during the committee’s so-called blackout periods. This, in turn, created an “appearance of a conflict of interest,” with the scale and timing of his trades nonetheless raising concerns. (9 comments)
Today’s Economic Calendar
08:30 AM Jobless Claims
08:30 AM Producer Price Index
10:30 AM EIA Natural Gas Report
01:00 PM Results of $22B, 30-Year Bond Auction
02:00 PM Treasury Statement
02:00 PM Treasury Buyback Results
04:30 PM Fed Balance Sheet
What else is happening…
Boeing (BA) could face strike as workers push back on contract.
Norfolk Southern (NSC) fires CEO over relationship with legal chief.
Nvidia (NVDA) CEO sees $1T opportunity in accelerated computing.
Berkshire Hathaway (BRK.B) sheds more of Bank of America (BAC).
Stellantis (STLA) dealers in U.S. blame CEO for ‘degradation’ of brands.
Report: Couche-Tard (ATD:CA) weighs raising bid for 7-Eleven owner.
BurgerFi International (BFI) files for Chapter 11 bankruptcy protection.
FOX could shake up sports betting sector by activating FanDuel stake.
Rivian (RIVN) execs detail growing pains as manufacturing ramps up.
23andMe (ME) CEO Wojcicki open to considering other takeover bids.
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Good morning. Happy Wednesday.
The Asian/Pacific markets were mostly down. Japan, China, Hong Kong, South Korea, Malaysia, Thailand and the Philippines posted the biggest losses. Europe, Africa and the Middle East are currently mixed. Denmark, Norway, Spain, the Netherlands and Portugal are up; Poland, the UAE, Greece, South Africa, Finland, Saudi Arabia and the Czech Republic are down. Futures in the States point toward a moderate down open for the cash market.
————— VIDEO: A Changing of the Guard —————
The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
On the way down
All eyes are on the U.S. Consumer Price Index for August, which is set to be published at 8:30 AM ET. While the Fed usually turns to the PCE Price Index as its favorite gauge to monitor price pressures, today’s report is the last inflation reading before the FOMC rate decision next week. Investors are primed for another soft reading, helped by a decline in gasoline prices during the month and a labor market that has been cooling.
Snapshot: The headline CPI figure is expected to come in at 2.5%, which would mark the first time inflation fell firmly below the 3% mark in over three years. It would also mean that inflation is as close to 2% as to 3%. The Fed has set a 2% target as the goal for winning its inflation battle and a big move in that direction would have broad impacts on monetary policy and a coming easing cycle.
“There are two broad categories that are still above 5% annual inflation: Shelter at 5.1% and Transportation at 8.8% (insurance and maintenance/repair),” wrote SA analyst Damir Tokic. “The return to price stability requires the stabilization in the shelter inflation, given its weight in the CPI. In fact, the key argument for an expected return to price stability is the expected fall in rents.”
Outlook: Fed policymakers have made it clear that it’s time to cut rates. However, the biggest debate on Wall Street is by how much, with the current target range at 5.25%-5.50%. Many feel that the Federal Open Market Committee will trim borrowing costs by the standard 25-basis-point increment, but others see the potential of slashing them by a jumbo 50 bps before any serious economic fallout ensues.
Debate recap
Vice President Kamala Harris and former President Donald Trump faced off at the second presidential debate on Tuesday, where both candidates sparred over the state of the economy, inflation and foreign policy. Both Harris and Trump touted their respective track records in office, and even clarified their stand on the energy sector. Betting markets tipped slightly in favor of Harris winning the election after the debate, but the contest remains extremely tight. ING predicts that a Trump win would result in the selling of Treasuries. (189 comments)
Basel III
In a win for Wall Street banks, the largest lenders will only face a 9% hike in capital requirements under a revised Basel III endgame proposal unveiled on Tuesday, which was well below the 19% increase floated in the original plan. Fed Vice Chair for Supervision Michael Barr said the updated deal would bring the benefits and costs of the hike “into better balance.” Shares of too-big-to-fail banks still fell, led by JPMorgan (JPM), after its president Daniel Pinto warned that earnings expectations were too high. Ally Financial (ALLY) also plunged 18% after flagging worsening credit conditions among borrowers. (44 comments)
Long range
Russia has received a transfer of Fath-360 ballistic missiles, according to the U.S., prompting the West to impose fresh sanctions against Iran. “We’ve warned Tehran publicly, we’ve warned Tehran privately that taking this step would constitute a dramatic escalation,” Secretary of State Antony Blinken declared. “Russia has now received shipments of these ballistic missiles and will likely use them within weeks in Ukraine.” Blinken also said Moscow is sharing nuclear and space-related technology with Tehran, but the latter called the claims “completely baseless.” (1 comment)
Today’s Economic Calendar
07:00 AM MBA Mortgage Applications
08:30 AM Consumer Price Index
10:00 AM Quarterly Services Survey
10:30 AM EIA Petroleum Status Report
11:00 AM Treasury Buyback Announcement
01:00 PM Results of $39B, 10-Year Note Auction
What else is happening…
Campbell Soup (CPB) plans to drop ‘soup’ from its iconic name.
Sony (SONY) to release PlayStation 5 Pro priced at $700.
Nike (NKE) shareholders block proposal on human rights issues.
Google (GOOG, GOOGL) Cloud CEO details path for AI monetization.
Amazon Web Services invests £8B in the U.K. to boost data centers.
Report: 16 new GLP-1 weight-loss drugs could be launched by 2029.
Nearly half of Southwest (LUV) board will quit after pressure from Elliott.
Starbucks (SBUX) CEO: Refocusing on community coffeehouse vibe.
GameStop (GME) sees Q2 sales plummet, but turns a surprise profit.
Palantir (PLTR) Chairman Peter Thiel files to sell up to $1B in stock.
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Good morning. Happy Tuesday.
The Asian/Pacific markets leaned to the upside. India, Malaysia, Indonesia and Singapore did well; South Korea was weak. Europe, Africa and the Middle East currently lean down. The UAE is up; the UK, Denmark, Turkey, Germany and Italy are down. Futures in the States point toward a positive open for the cash market.
————— VIDEO: A Changing of the Guard —————
The dollar is up slightly. Oil and copper are down. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
The C-Suite
The numbers don’t lie. Goldman Sachs (GS) is warning of some trouble for the third quarter after witnessing a strong rebound in the first half of the year. The storied investment bank sees trading revenue headed for a 10% decline due to difficult fixed-income conditions and year-over-year comparisons, while it is also preparing to take a $400M pretax hit related to its costly exit from the consumer arena.
Bigger picture: Before embarking on a turnaround, Goldman closed out a difficult 2023 after profits fell by nearly a third from the prior year. It stemmed from a slump in investment banking deals and earlier write-offs surrounding its Marcus consumer banking franchise, which resulted in some high-profile departures from the firm. There was even a point where there were whispers that CEO David Solomon was on his way out, but those rumors have since cooled as he approaches six years in the top spot.
First pivoting away from its consumer business, Goldman eventually decided to nix it entirely. It was an expensive endeavor that saw it record billions of dollars in losses, and abandon other mass-market products like its financial planning unit, online lending service GreenSky, and its partnership with the Apple Card. That led to many questions about leadership, as well as effective collaboration and communication within the organization.
What’s next? Things at the bank now seem to have stabilized after doing “too much, too quickly.” Goldman’s core global banking & markets, or GBM, division has topped the market share of its rivals, while the bank has seen strong growth within its asset and wealth management unit. That appears to have kept Solomon, who is known for his brash attitude, at the top, with the stock advancing 130% since he took the helm in October 2018.
aiPhone
Apple (AAPL) unveiled several new products on Monday at its highly anticipated ‘Glowtime’ event, but it did little to excite investors as shares ended the day unchanged. SA analysts also discussed whether the September event supercharged Apple’s platform strategy, or if it was lacking growth catalysts. The new iPhone 16 is designed for AI from the ground up and “marks the beginning of an exciting new era,” CEO Tim Cook declared. Overnight, Apple also lost an EU court battle in a long-standing €13B Irish tax case. (106 comments)
Supply shift
Taiwan’s exports rose to a new record high of $43.6B in August, as the artificial intelligence boom continues to fuel demand for semiconductor equipment. Exports to the U.S. surged about 79% to an all-time high of $11.9B, surpassing the previous record for shipments to Taiwan’s largest trading partner China, and underscoring the major shift in Asian supply chains. Taiwan’s finance ministry expects total exports to steadily advance in the second half of the year, helped by the peak export season and continued AI-related demand. (2 comments)
The debate stage
Kamala Harris and Donald Trump are set to face off in their first presidential debate tonight, and the high-stakes showdown could dictate which candidate can secure a lead in the tight contest. The debate will also give the candidates a chance to detail their widely contrasting plans for the economy, which might be the biggest issue on the minds of American voters. While analysts have given their takes on how each candidate’s plans would impact the economy and the deficit, Oppenheimer has published its 2024 U.S. election playbook featuring its stock ideas providing exposure to key policy proposals. (9 comments)
Today’s Economic Calendar
06:00 AM NFIB Small Business Optimism Index
01:00 PM Results of $58B, 3-Year Note Auction
02:00 PM Treasury Buyback Results
What else is happening…
WSB survey results: Mixed opinion on U.S. sovereign wealth fund.
Oracle (ORCL) in charts: Cloud services revenue rises 21% Y/Y.
Under Armour (UAA) slashes outlook on higher restructuring costs.
Norfolk Southern (NSC) CEO expected to exit amid board probe.
Eli Lilly (LLY) taps veteran Lucas Montarce as new finance chief.
IBM (IBM) goes all in on hybrid cloud, GenAI, M&A to drive growth.
Starboard to News Corp. (NWSA, NWS): End dual-class structure.
IPO Roundup: Bicara (BCAX), Kairos Pharma (KAPA) and more.
AWS CEO sees massive opportunity to expand cloud offerings.
Citi pitches barbell strategy for mid-cap tech stocks along with Mag 7.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets leaned to the downside. Singapore and the Philippines did well, but Japan, China, Hong Kong, South Korea and Taiwan were weak. Europe, Africa and the Middle East are currently doing well. The UK, Denmark, France, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are leading. The UAE and Hungary are down. Futures in the States point toward a moderate gap up open for the cash market.
————— VIDEO: A Changing of the Guard —————
The dollar is up. Oil and copper are up. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
A new fund
Calls are increasing for the U.S. to set up a sovereign wealth fund, or an investment arm of the federal government. Republican presidential contender Donald Trump announced support for such an initiative last week during a speech to the Economic Club of New York. The Biden administration has also reportedly been working on a similar plan in recent months, which is being spearheaded by National Security Advisor Jake Sullivan and deputy Daleep Singh, whose role centers around international economics.
Where would it invest? Funds would be allocated to national development projects, like infrastructure and manufacturing hubs. It could also help in areas that are seen as critical for national security, like supply chain minerals, defense capabilities or nuclear fusion projects. The U.S. already has a dozen or so state-level sovereign wealth funds, like the Alaska Permanent Fund, and could invest in traditional sectors like stocks, bonds, private equity and real estate.
However, there are scant details about where the money would come from at the federal level. Trump has said he would source cash from “tariffs and other intelligent things,” while White House officials are looking at several additional streams. The fund’s creation would also require an act of Congress (one can imagine the hurdles that will be present there) and the proposal can get even more controversial if funding was sourced through appropriations bills or new debt issuance.
Quotes: “It would be great to see America join this party and instead of having debt, have savings,” said hedge fund manager John Paulson, adding that over time it could become bigger than any rival funds. “At best you’ve got to grade that one as incomplete because it’s not fully fleshed out,” countered former Treasury Secretary Larry Summers. “It’s one thing if you’re Norway or the Emirates that has this huge natural resource that’s going to run out, but we’ve got a big trade and budget deficit.” Take the WSB survey.
Antitrust showdown
The Justice Department’s second antitrust trial against Google (GOOG, GOOGL) will begin today in Virginia, where the search giant will defend itself against claims that it illegally operates a monopoly in the advertising market. The DOJ is seeking, at minimum, the divestiture of the Google Ad Manager platform. The trial comes a little over a month after a landmark court ruling on Google’s search monopoly. In other Big Tech news, Apple (AAPL) is set to unveil the new iPhone 16, which will feature a next-generation chip developed by Arm’s (ARM) latest design architecture.
On the economy
Treasury Secretary Janet Yellen has said recent economic data signaled that the U.S. economy is pulling off a soft landing, but noted there are “downside risks” to employment. “So what I see when I look at the economy is very strong growth deep into a recovery, with the economy operating basically at full employment,” Yellen said at the Texas Tribune Festival, adding that there were “no red lights flashing.” Her statements followed last week’s jobs data and renewed growth fears, triggering the S&P 500’s worst weekly selloff since the 2023 regional banking crisis. (18 comments)
Not taking ‘no’
Alimentation Couche-Tard (ATD:CA) has informed Seven & i (OTCPK:SVNDY) that it’s still interested in pursuing an acquisition after the 7-Eleven store owner rejected its initial bid. The Canadian operator of Circle K convenience stores may even be willing to raise its offer price after its initial proposal was said to be too low and didn’t factor in regulatory hurdles. Couche-Tard prefers a friendly takeover, but it reportedly hasn’t excluded the possibility of presenting its offer directly to Seven & i shareholders. (10 comments)
Today’s Economic Calendar
10:00 AM Wholesale Inventories (Preliminary)
3:00 PM Consumer Credit
What else is happening…
SA Asks: Which defense stock is the best long-term investment?
Big Lots (BIG) files for bankruptcy, sells business to Nexus Capital.
Norfolk Southern (NSC) CEO faces probe for alleged misconduct.
Boeing (BA) labor contract to boost wages by 25% over four years.
On the way… U.S. to propose new bank capital rule changes.
‘One, maybe two’ years left to turn Volkswagen brand around.
Gulf of Mexico oil drilling faces threat from ruling on endangered species.
Dell Technologies (DELL), Palantir (PLTR) set to join S&P 500 (SP500).
DirecTV files FCC complaint accusing Disney (DIS) of stifling competition.
Unpacking the differences between multifamily and office CRE outlooks.
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