September 25, 2023, 8:00 A.M., PT

US FINANCIAL MARKET

Bonds Fall, Dollar Rallies as Hawkish Fed Sinks In: Markets Wrap – Bloomberg, 9/25/2023

• Government bonds fell while stocks steadied as traders speculated central banks will keep interest rates elevated to quell inflation. A gauge of dollar strength hit its highest level this year.
• The US Treasury 10-year yield climbed nearly 10 basis points to a high of 4.53%, a level last seen in 2007.
• Bloomberg’s Dollar Spot Index rose for a fourth day, reaching the highest since December.
• The S&P 500 and tech-heavy Nasdaq 100 slumped as traders returned to their desks following the worst weekly selloff on Wall Street since March.
• The S&P 500 fell 0.2%. The Nasdaq 100 fell 0.3%. The Dow Jones Industrial Average fell 0.4%.
• Among individual movers, Netflix rose 0.4% leading film and TV producers higher, after striking Hollywood screenwriters reached a tentative new labor agreement.
• Fed Bank of Chicago head Austan Goolsbee said it’s still possible for the US to avoid a recession.
• “I’ve been calling that the golden path and I think it’s possible, but there are a lot of risks and the path is long and winding,” he said in a CNBC interview.
• While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required.
• Meanwhile, fresh signs of concern for China’s property developers were highlighted after China Evergrande Group missed a debt payment, adding to fears about its debt pile.
• That’s compounding concern that global growth will stall as the economic engine of China sputters.
• The Stoxx Europe 600 fell 1%.
• The Bloomberg Dollar Spot Index rose 0.4%.
• The yield on 10-year Treasuries advanced nine basis points to 4.53%.
• West Texas Intermediate crude fell 0.6% to $89.51 a barrel.
• Gold futures fell 0.5% to $1,936.80 an ounce.

Amazon to Invest Up to $4 Billion in Anthropic as AI Arms Race Escalates – Wall Street Journal, 9/25/2023

• Amazon said it has agreed to invest up to $4 billion in artificial-intelligence company Anthropic, the latest big startup investment by tech giants jockeying for an edge in the AI arms race.
• Amazon said that, as part of the deal, Anthropic would be using its custom chips to build and deploy its AI software.
• Amazon also agreed to incorporate Anthropic’s technology into products across its business.
• People familiar with the deal said Amazon has committed to an initial $1.25 billion investment in two-year-old Anthropic, a number that could grow to $4 billion over time depending on certain conditions.
• As part of the agreement, Anthropic has agreed to spend a certain amount of the capital on Amazon’s cloud infrastructure business, Amazon Web Services, one of the people said.
• Anthropic, founded in 2021, offers an AI assistant called Claude that competes with ChatGPT.
• Led by siblings Dario and Daniela Amodei, who both used to work at OpenAI, the company claims its technology is safer and more reliable than that of competitors.

Hollywood Writers Reach Agreement With Studios, Streamers to End Strike – Wall Street Journal, 9/25/2023

• Hollywood writers, studios and streamers said Sunday that they have reached a tentative agreement that would end a monthslong strike.
• The new three-year deal includes several hard-fought victories for the writers including increased royalties, mandatory staffing for television “writing rooms” and protections regarding the use of artificial intelligence, people familiar with the pact said.
• Neither side would address the terms of the accord.
• The Writers Guild of America said it is still finalizing the memorandum of agreement with the Alliance of Motion Picture and Television Producers, a coalition representing movie and TV studios, networks and streamers.
• The negotiating committee will then vote on whether to recommend it and send the contract forward for approval.
• Until that happens, writers have been instructed not to return to work by the WGA.
• Both sides agreed to terms just after reaching a self-imposed deadline of Sunday evening before the start of the Yom Kippur holiday.
• The deal comes after five consecutive days of talks that involved Warner Bros. CEO David Zaslav, Disney CEO Bob Iger, Netflix Co-CEO Ted Sarandos and NBCUniversal Studios Group Chairman Donna Langley.

Costco Offers Members $29 Online Health Care Visits – Bloomberg, 9/25/2023

• Costco Wholesale will offer members access to medical care through a deal with online marketplace Sesame, as the retail giant joins peers by pushing deeper into health care.
• Costco’s members will be eligible for Sesame’s “best pricing,” including online primary care visits for $29, Sesame said.
• They’ll also get mental health visits for $79 and 10% off other services.
• On the platform, clinicians set their prices and patients pay them directly, not through insurance.
• Sesame aims “to provide great health care to the value-conscious,” said David Goldhill, the startup’s chief executive officer.
• And Sesame, a New York-based startup that’s backed by Alphabet’s venture unit, gets its marketplace in front of a vast pool of potential customers; Costco has about 125 million cardholders worldwide, and generates roughly 70% of sales in the US.

Getty Images to Debut Its Own Artificial Intelligence Image Generator – Bloomberg, 9/25/2023

• Photography giant Getty Images Holdings is releasing an artificial intelligence tool that will generate images from the company’s vast content library — an attempt to create AI content free of the copyright and ownership concerns that have plagued the technology so far.
• Getty, which holds the rights to millions of photographs, earlier sued Stability AI, the company that popularized the image generator Stable Diffusion, for using images without permission.
• Getty’s new product, developed with chipmaker Nvidia, will be trained Getty’s own data and will endeavor to sidestep thorny legal issues, in part, by limiting what images will power the generator.
• The new tool will tap Getty’s bank of creative images, but not its news photo collection, part of an effort to prevent the creation of deepfakes, Chief Executive Officer Craig Peters said.
• In order to cater to businesses looking to create ads and other content, Getty will allow customers to add their own proprietary data or branding.

US ECONOMY & POLITICS

FTC’s Khan Targets Private Equity ‘Roll-Up’ Tactic in Court – Bloomberg, 9/25/2023

• Federal Trade Commission Chair Lina Khan is going after a common acquisition strategy for private equity firms, putting the industry on notice with a new lawsuit that US regulators are scrutinizing “roll-up” deals involving small companies that compete in local markets.
• The FTC sued US Anesthesia Partners and its private equity partner Welsh Carson Anderson & Stowe LP on Thursday, alleging they engaged in a scheme to monopolize the market for anesthesiologists in Texas using the “roll-up” strategy.
• It’s the first time the agency has targeted such deals, which usually are small enough to avoid antitrust review.
• Welsh Carson systematically bought up more than a dozen anesthesiology practices, becoming the dominant provider of the services in Texas, including in Houston and Dallas, according to the complaint.

Railroads to Receive $1.4 Billion for Fixes and Upgrades – Wall Street Journal, 9/25/2023

• Dozens of aging U.S. rail bridges and tracks have been chosen to receive $1.4 billion in federal grants for repairs and upgrades, with businesses and rail commuters expected to benefit from these funds as early as next year.
• The 70 approved projects, including around 40 that involve bridges, were judged on how they would improve safety, increase capacity of both freight and passenger railroads, and bring economic benefits to the country, officials in the Biden administration said in a briefing.
• The Federal Railroad Administration said it received 234 eligible applications with requests totaling $6.1 billion for the grants.
• There are more than 70,000 railroad bridges in the U.S.
• The selected projects span 35 states and the District of Columbia.

Fed’s Goolsbee Says Soft Landing Possible, But Risks Remain – Bloomberg, 9/25/2023

• Federal Reserve Bank of Chicago President Austan Goolsbee said it’s possible for the US to avoid a recession even as the US central bank raises interest rates to cool inflation.
• “I’ve been calling that the golden path and I think it’s possible, but there are a lot of risks and the path is long and winding,” Goolsbee said Monday in an interview with CNBC.
• He pointed to the unemployment rate, which at 3.8% last month was still very close to where it was last year when inflation was more than double what it is now and the Fed was just embarking on its aggressive tightening campaign.

EUROPE & WORLD

Lagarde Says ECB Rates to Stay Restrictive as Long as Needed – Bloomberg, 9/25/2023

• European Central Bank President Christine Lagarde reiterated that borrowing costs will remain elevated for as long as needed to tame consumer prices — even as the economy struggles.
• “Our future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary,” Lagarde told lawmakers in the European Parliament.
• “We remain determined to ensure that inflation returns to our 2% medium-term target in a timely manner,” she said Monday in Brussels, sticking closely to this month’s ECB policy statement that accompanied a 10th straight hike in rates to 4%.
• “Our duty is to return inflation back to target in a timely manner,” she said.
• “The faster it gets there, the more stable prices are, the less painful it will be going forward for both those who invest but also those who have borrowed.”

Ukraine Advances on Russian Defenses as US Battle Tanks Arrive – Bloomberg, 9/25/2023

• Ukraine’s military said its troops made advances along the southern frontline against entrenched Russian defenses as US battle tanks arrived to bolster the four-month-old counteroffensive.
• Kyiv’s forces moved forward near the village of Verbove in the southern Zaporizhzhia region, with troops pushing toward the occupied Russian strongholds of Tokmak and Melitopol farther south, according to the Ukrainian General Staff.
• The Institute for the Study of War called it a “tactical breakthrough,” though it said the situation is fluid.
• Ukrainian President Volodymyr Zelenskiy meanwhile confirmed the delivery of US Abrams tanks.
• Ukraine’s military is expanding on gains made a month ago, when its forces pierced the first line of Russian fortifications and recaptured the town of Robotyne.
• Zelenskiy said troops will also aim to take Bakhmut, a town in the east that fell to Russia after months of bloody fighting earlier this year.

India Loosens Planned Restrictions on Laptop, Tablet Imports – Bloomberg, 9/25/2023

• India is loosening its planned restrictions on imports of laptops, tablets and other IT hardware, giving manufacturers such as Apple, HP and Dell Technologies more time to prepare for potential curbs.
• The South Asian country is doing away with a compulsory licensing requirement for tech importers, and will instead only ask such companies to register under its so-called import management system, people familiar with the policy said.
• The system will start operating on Nov. 1, they said, asking not to be named as the matter isn’t public.
• India is seeking to boost local production while trying to ensure sufficient availability of consumer electronics.
• A quota on imports could gradually kick in as companies begin to manufacture laptops, tablets and other hardware locally.
• The size of each company’s quota will depend on its local production, import of IT hardware as well as export of such products from India, the people said.

Russia’s Diesel Exports Dropped by Almost 30% Before Export Ban – Bloomberg, 9/25/2023

• Russia’s daily diesel exports plunged by 28% in the first 20 days of September, before the government banned overseas shipments of the fuel in a move to curb domestic prices.
• The nation’s oil companies exported an average of about 65,700 tons of diesel a day from Sept. 1 to 20 via sea ports and railways, according to a person with knowledge of the matter.
• That compares with an average of some 91,800 tons a day for most of August.
• Russia, the world’s biggest seaborne exporter of diesel-type fuels, shocked global markets last week by imposing a temporary ban on overseas supplies of the road fuel as it struggles to rein in surging prices at home.
• The restrictions came into force on Sept. 21 and have no expiry date.
• Re-direction of some diesel cargoes to the domestic market also contributed to the decline in exports.

Egypt Calls December Presidential Vote as Economic Woes Mount – Bloomberg, 9/25/2023

• Egypt will hold its next presidential election in December, with the vote taking place earlier than expected as authorities face pressure to devalue the currency and take other steps to end an economic crisis and unlock funding from the International Monetary Fund.
• Until recently, it was widely expected that the polls wouldn’t take place until the first few months of next year, with Egyptian state media typically referring to an election in 2024.
• The government’s plans changed in recent weeks and Bloomberg reported on Sept. 14 that it was considering elections as soon as December.
• President Abdel-Fattah El-Sisi, who first took office in 2014, has yet to announce whether he will stand again.
• But the former defense minister is widely expected to run and win, pressing ahead with big infrastructure projects his supporters say have heralded a new era for Egypt.
• Egyptian expatriates will cast their ballots on Dec. 1-3 and voting in the country will take place on Dec. 10-12, Walid Hamza, head of the National Election Authority said Monday.

Factmonster – TODAY in HISTORY

• Ethan Allen was captured by the British. – 1775
• The first Congress adopted 12 amendments to the Constitution and sent them to the states for ratification. The first ten became the Bill of Rights. – 1789
• Wilford Woodruff, president of the Mormon church, renounced the practice of polygamy. This paved the way for Utah’s acceptance as a state in 1896. – 1890
• Nine black children were escorted to Central High School in Little Rock, Arkansas, under heavily armed guard, because of racial violence. – 1957
• Sandra Day O’Connor was sworn in as the first female justice on the Supreme Court. – 1981
• It was reported that more than 14,000 had lost their lives in France in a summer heat wave. – 2003
• King Abdullah of Saudi Arabia grants women the right to vote and run for office in future elections. – 2011

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