US FINANCIAL MARKET
‘Overloved’ Dollar Falls as Buyer Fatigue Kicks In: Markets Wrap – Bloomberg, 9/8/2023
- The dollar lost traction, following a seemingly unstoppable rally that pushed currency toward a record streak of weekly gains on bets the Federal Reserve will keep rates elevated. Stocks and bonds edged higher.
- The Bloomberg Dollar Spot Index fell, while still on pace for its eighth consecutive week of advances — the longest run since 2005.
- A respite in the greenback’s surge reduced the pressure on commodities and emerging markets.
- The S&P 500 saw a small gain, while the Nasdaq 100 outperformed amid a rebound in megacaps like Tesla and Apple.
- The S&P 500 rose 0.4%. The Nasdaq 100 rose 0.6%. The Dow Jones Industrial Average rose 0.2%.
- Treasury 10-year yields dropped to 4.2%.
- The recent dollar rally reflects the fissures that are opening in the global economy, with reports signaling that the US economy is accelerating even as growth cools in Europe and China.
- Fed Bank of New York President John Williams said late Thursday US monetary policy is “in a good place,” but officials will need to parse through data to decide on how to proceed on interest rates.
- His Dallas counterpart Lorie Logan noted that skipping an interest-rate hike at the central bank’s upcoming policy meeting may be appropriate, while also signaling rates may have to rise further to get inflation back to 2%.
- Kroger and Albertsons agreed to sell 413 stores to C&S Wholesale Grocers in a divestiture designed to help win antitrust approval for their $24.6 billion merger.
- Liquefied natural gas workers at key Chevron sites in Australia began partial strikes Friday after talks failed to reach an agreement in a dispute that’s roiled global gas markets.
- The Stoxx Europe 600 rose 0.1%.
- The Bloomberg Dollar Spot Index fell 0.3%.
- West Texas Intermediate crude rose 0.7% to $87.44 a barrel.
- Gold futures rose 0.5% to $1,953 an ounce.
Kroger Swings to Loss on Opioid Settlement – Wall Street Journal, 9/8/2023
- Kroger swung to a loss in the latest quarter as it incurred a $1.4 billion charge related to a nationwide opioid settlement.
- Kroger said it reached an agreement to settle the majority of opioid claims that have been or could be brought against the company by states, subdivisions and Native American tribes.
- Kroger will pay $1.2 billion to states and subdivisions and $36 million to Native American tribes in funding for abatement efforts over an 11-year period, as well as $177 million to cover attorney fees and costs over a six-year period.
- The Cincinnati-based grocery operator also disclosed that it joined with Albertsons in a definitive agreement with C&S Wholesale Grocers for the sale of some stores and other assets as the two grocery giants work to complete their proposed acquisition.
- C&S, which operates Grand Union grocery stores and the Piggly Wiggly franchise, will pay Kroger an all-cash offer of about $1.9 billion.
- Kroger said it may require C&S to purchase up to an additional 237 stores in certain geographies to secure regulatory clearance.
- C&S will pay more to Kroger if additional stores are added to the transaction.
- Kroger logged sales of $33.85 billion in the second quarter, down from $34.64 billion a year earlier.
- Analysts polled by FactSet expected $34.12 billion.
- Identical sales, which strip out effects from store openings and closings, excluding fuel, were up 1%.
- Kroger said identical sales in the quarter would have been higher if not for the reduction of pharmacy sales following its terminated agreement with pharmacy-benefit manager Express Scripts.
- Adjusted earnings were 96 cents a share.
Lululemon ups guidance after ‘strong’ growth in China boosts quarterly sales – CNBC, 9/8/2023
- Lululemon raised its full-year guidance Thursday after reporting an 18% jump in both sales and profit for its fiscal second quarter, boosted by a 61% revenue spike in China.
- Revenue: $2.21 billion vs. $2.17 billion expected.
- The top and bottom line beats were fueled by strong growth internationally.
- Sales in North America were up 11%.
- Meanwhile same-store sales across the global business fell short of expectations: Comparable sales were up 11% in the quarter, compared to an estimate of up 12.1%, according to StreetAccount.
- The retailer saw sales jump 52% in markets outside of North America, boosted by a 61% increase in China.
- Sales in the men’s category were up 15% during the quarter, and the retailer opened 10 new stores on a net basis, including its first in Thailand.
- By the end of the quarter, it had 672 stores globally.
- Lululemon’s gross margin was largely in line with expectations at 58.8%, compared to the 58.5% analysts had expected, according to StreetAccount.
- Earnings per share: $2.68 vs. $2.54 expected
- During its second quarter, inventories were up 14% to $1.7 billion, compared with $1.5 billion in the year-ago quarter.
- For its current quarter, the retailer is forecasting earnings per share of $2.23 to $2.28 and sales of $2.17 billion to $2.19 billion, in line with analysts’ expectations, according to Refinitiv.
- The athletic apparel retailer now expects sales to be between $9.51 billion and $9.57 billion for the fiscal year, compared to a previous range of $9.44 billion to $9.51 billion.
- Lululemon is expecting profits to be between $12.02 to $12.17 per share for the year, compared to a previous range of $11.74 to $11.94.
DocuSign stock rises after earnings beat and raised outlook, despite macro pressures – Market Watch, 9/8/2023
- Revenue rose to $687.7 million from $622.2 million in the year-ago period, while billings rose 10% to $711.2 million.
- Adjusted earnings, which exclude one-time charges and stock-based compensation charges, rose to 72 cents a share from 44 cents a share in the year-ago period.
- Analysts surveyed by FactSet had estimated 66 cents a share on revenue of $677.6 million, and billings of $652.2 million.
RH warns that luxury housing will remain challenging amid higher mortgage rates – Market Watch, 9/8/2023
- Luxury furniture retailer RH on Thursday reported second-quarter results that topped estimates, but management warned that the higher-end housing market that the company depends on would likely remain rocky up ahead.
- Revenue fell to $800 million from $992 million in the prior-year quarter.
- Adjusted for legal settlements, noncash compensation and other items, RH earned $3.93 a share.
- Analysts polled by FactSet had expected RH to report adjusted earnings per share of $2.65 on revenue of $791 million.
- The company forecast third-quarter sales of $740 million to $760 million, below FactSet estimates for $779 million.
- But for the fourth quarter, the company said it expected $760 million to $800 million in sales, with the midpoint a bit above FactSet forecasts for $775 million.
- The company raised the low end of its full-year sales outlook to $3.04 billion to $3.1 billion, compared with a prior forecast for $3 billion to $3.1 billion and FactSet expectations for $3.08 billion.
- RH kept its outlook for adjusted operating margin at a range of 14.5% to 15.5%.
UPS to Raise Average Prices by 5.9%, Matching FedEx’s Increase – Bloomberg, 9/8/2023
- United Parcel Service price increase will take effect on Dec. 26.
- The higher average price “helps to support ongoing expansion and capability enhancement,” UPS says on website
Companies Pay More to Borrow in Record Bond Rush – Wall Street Journal, 9/8/2023
- Borrowing money is more expensive than it has been in a decade. Companies are paying the price.
- Large companies with top credit ratings issued bonds at a record clip this week despite a rise in Treasury yields that sent borrowing costs to a roughly 15-year high.
- Nineteen companies on Tuesday sold 47 bond tranches in the U.S. investment-grade market, according to PitchBook, a record since the data provider began tracking deals in 2012.
- Duke Energy, Southern, and Philip Morris International were among the borrowers.
- Tuesday’s bond sales totaled almost $38 billion.
- It was the best sales day since April 2020 when the Federal Reserve had cut rates to near-zero.
- High-grade firms paid an average of 5.7% to borrow this week, a level many haven’t paid since the global financial crisis.
- Companies on Wednesday sold 10 more bonds totaling $13.5 billion in the U.S.
SEC Probes Ryan Cohen’s Bed Bath & Beyond Trades – Wall Street Journal, 9/8/2023
- The Securities and Exchange Commission is investigating billionaire Ryan Cohen’s ownership—and surprise sale—of Bed Bath & Beyond shares at a time when such so-called meme stocks were all the rage with investors.
- Cohen took a $120 million stake in Bed Bath & Beyond and pushed for changes to the housewares retailer’s sales strategy, but abruptly sold his 11.8% interest in August 2022, just days after tweeting positively about the company.
- The five-month investment netted him a profit of nearly $60 million.
- Cohen’s interest in the company spurred a frenzy of trading that caused its stock to soar 34% in a day before collapsing when he disclosed the sales, prior to which he had gotten three new members appointed to the board.
- The SEC has requested information from Cohen about his trades and his communications with officers or directors at Bed Bath & Beyond, according to people familiar with the matter.
- The regulator has also sought records from some of the company’s current and former board members.
- The SEC’s civil investigations sometimes take more than two years and can end without the regulator bringing formal claims of wrongdoing.
SpaceX Ordered by FAA to Make Fixes After Starship Launch Mishap – Bloomberg, 9/8/2023
- Elon Musk’s Space Exploration Technologies must take “corrective actions” to prevent a recurrence of mishaps during an April test of its Starship rocket before the Federal Aviation Administration will grant it another launch permit.
- The FAA blamed “multiple root causes” of the flawed Starship test launch in an emailed statement Friday, and said the company needs to, among other things, redesign its hardware to prevent leaks and fires. It cited a total of 63 actions in need of remedy.
- “SpaceX must implement all corrective actions that impact public safety and apply for and receive a license modification from the FAA that addresses all safety, environmental and other applicable regulatory requirements prior to the next Starship launch,” it said.
US ECONOMY & POLITICS
US Housing Affordability Remains at a Record Low, NAR Says – Bloomberg, 9/8/2023
- US housing affordability remained a record low in July as high mortgage rates and prices kept home ownership out of reach for many Americans.
- The National Association of Realtors housing affordability index was unchanged at 87.8 in July, matching the lowest level in data back to 1989.
- The typical family spent 28.5% of their income on the principal and interest of their mortgage payment each month, also matching an all-time high, according to the report released Friday.
- Qualifying income for a mortgage, based on a 20% down payment, was a record $104,496 in July.
- By region, affordability increased in the Midwest and Northeast.
- It dropped to a record low in the West and South.
Fed’s Barr says central bank ‘a long way’ from any decision on issuing digital currency – Reuters, 9/8/2023
- The Federal Reserve’s top regulatory official said on Friday the central bank is “a long way” from any decision on whether it would issue its own digital currency, and added it would not do so without official support in Washington.
- Fed Vice Chair for Supervision Michael Barr said while officials are investigating a central bank digital currency (CBDC), the Fed was far from any decision.
- He added it would only proceed with one with “clear support” from the president and authorizing legislation from Congress.
- “In my view, as both the issuer of U.S. currency and an operator in the payments system, the Federal Reserve must understand these developments and the tradeoffs [CBDCs] introduce,” said Barr in prepared remarks to a fintech conference in Philadelphia.
- “Of course, investigation and research are very different from decision-making about next steps in terms of payments system development, and we are a long way from that.”
- On the matter of digital currencies issued outside official agencies, Barr said he remained “deeply concerned” about so-called stablecoins gaining a strong foothold in the financial system without significant oversight.
- Barr said banks interested in dealing with such assets must clear the activity with their supervisors, who will check to ensure the firms have sufficient risk management in place to handle these newer products.
Guns and Ammunition Tax Passed by California Legislature – Wall Street Journal, 9/8/2023
- The California Legislature passed a first-in-the-nation excise tax on firearms and ammunition, the latest in a series of strict gun laws to gain traction in the Democratic-controlled Statehouse.
- If Gov. Gavin Newsom signs the bill, California would impose an 11% excise tax on all guns and ammunition sales.
- The proceeds would be spent on gun violence prevention and school safety programs.
- The federal government has long imposed an excise tax of 10% on the wholesale price of handguns and 11% on long guns and ammunition, with the proceeds funding conservation and hunter education.
- Some local jurisdictions including Seattle also have gun taxes.
- The California bill received final passage in both the state Senate and Assembly Thursday.
- All Republicans in both chambers opposed it or didn’t vote in preliminary tallies.
- It now heads to the desk of Newsom, who hasn’t taken a public position on the bill.
- Newsom has championed gun control and a new amendment to the U.S. constitution limiting Second Amendment right.
- A spokesman for the Democrat declined to comment.
Hurricane Lee Is a Powerful Category 5 Storm, but Path Still Unclear – Wall Street Journal, 9/8/2023
- Hurricane Lee intensified into a Category 5 storm late Thursday and is expected to remain a powerful hurricane well into next week.
- Forecasters say it is too early to predict the storm’s path, but some are urging people in the Caribbean and on the U.S. East Coast to keep an eye on its movement.
- Lee rapidly intensified over warm Atlantic Ocean waters Thursday after becoming a Category 1 Wednesday.
- Lee had maximum sustained winds of 165 miles an hour Friday morning, according to the National Hurricane Center.
- The storm could be the most intense hurricane so far this year as it travels from the northern Caribbean to a spot next week several hundred miles off the Carolinas, said Jonathan Porter, chief meteorologist at AccuWeather.
- Forecasters couldn’t rule out the possibility of Lee making landfall or coming close to the Eastern U.S. or Canada, he said Wednesday.
- The storm could also turn away from the mainland and make little impact on North America.
- By Friday morning, the storm was about 630 miles east of the northern Leeward Islands, according to the center.
- Lee’s core is expected on Friday to sweep north of the Leeward Islands, which include the Virgin Islands, Antigua, St. Martin and St. Kitts and Nevis.
EUROPE & WORLD
Huawei Debuts Even More Powerful Phone as Controversy Swirls – Bloomberg, 9/8/2023
- Huawei Technologies added a new top-of-the-line model to its controversial Mate 60 smartphone family on Friday, putting the Mate 60 Pro+ on sale in mainland China.
- The Shenzhen-based firm is offering the upgraded handset, equipped with satellite messaging and more memory than the Mate 60 Pro, online for a down-payment of 1,000 yuan ($140) and promised delivery no later than Oct. 9.
- The Pro+ adds a 1-terabyte maximum storage option and 4GB more memory than on the Pro model, which retails at 6,999 yuan.
- The Mate 60 Pro has drawn international attention for its made-in-China applications processor and other components, a sign of the country’s progress in developing domestic tech capabilities.
- The upgraded Pro+ also taps into China’s Beidou satellite messaging system, a point of national pride.
- The Pro+ similarly emerged without the typical marketing and fanfare surrounding a major product launch.
- A brief teaser video posted to Huawei’s Weibo account showcased a device very similar to its lesser cousin, with the same outsized back-camera array.
US Probes Made-in-China Chip as Tensions Flare Over Technology – Bloomberg, 9/8/2023
- The US government has begun an official probe into an advanced made-in-China chip housed within Huawei Technologies’s latest smartphone, as tensions flare between the two superpowers over technological prowess.
- The Commerce Department, which enacted a series of restrictions against Huawei and China’s chip industry over the past two years, said it’s working to get more information on a “purported” 7-nanometer processor discovered within the Mate 60 Pro.
- The chip was made by China’s Semiconductor Manufacturing International, which like Huawei is blacklisted by the US and restricted from accessing American technology.
- The discovery of the chip set off a debate in Washington about the efficacy of sanctions intended to contain a geopolitical rival and coincided with a move in China to expand a ban on the use of iPhones in government-backed agencies and state companies.
- “We are working to obtain more information on the character and composition of the purported 7nm chip,” a Commerce spokesperson said in a statement.
- “Let’s be clear: export controls are just one tool in the U.S. government’s toolbox to address the national security threats presented by the PRC. The restrictions in place since 2019 have knocked Huawei down and forced it to reinvent itself — at a substantial cost to the PRC government.”
India Hosts G-20 Summit in Shadow of Geopolitical Rivalries – Wall Street Journal, 9/8/2023
- Deepening global rivalries will overshadow this week’s gathering of the world’s largest economies in India, as the leaders of China and Russia stay home and the U.S. seeks to strengthen ties to India as a counter to Beijing.
- President Biden is expected to arrive Friday for the summit of the Group of 20, made up of 19 economically advanced and developing nations and the European Union.
- Ahead of the trip, Indian and U.S. officials stressed they would focus on climate change and economic issues, with Biden aides promising to press for changes to international financial institutions to better serve developing countries.
- With international tensions likely to make a joint declaration even harder to bring about than last year, Indian Prime Minister Narendra Modi called for unity ahead of the gathering.
- “We have repeatedly emphasized that a divided world will find it difficult to fight common challenges,” Modi told the news agency Press Trust of India in an interview published Sunday.
- While Russian President Vladimir Putin and Chinese leader Xi Jinping won’t be present at the G-20 summit, their influence will be felt.
- Russian Foreign Minister Sergei Lavrov will lead the country’s delegation, while Premier Li Qiang will represent China.
- Russia has said it won’t sign off on a statement that doesn’t reflect its position.
Nvidia to Partner With India’s Tata and Reliance for AI Development – Bloomberg, 9/8/2023
- Nvidia plans to partner with the Tata Group on artificial intelligence, according to people familiar with the matter, hours after another Indian conglomerate, Reliance Industries, announced a similar deal.
- The US-based chipmaker is tying up with Tata Motors, Tata Consultancy Services and Tata Communications, the people said, asking not to be identified as the details aren’t public.
- Nvidia and Reliance earlier Friday said they plan to jointly develop artificial intelligence infrastructure in India including a large language model.
- The companies will host the AI infrastructure with a planned power capacity of 2,000 MW, executed by Reliance’s telecom unit Reliance Jio Infocomm, which will be trained to understand and create content in Indian languages.
Chevron Workers Begin Industrial Action at Australian Natural-Gas Plants – Wall Street Journal, 9/8/2023
- Workers at two large natural-gas plants run by Chevron in Australia began industrial action Friday, intensifying a dispute that has rattled global gas markets.
- A week of talks between Chevron and staff at its Gorgon and Wheatstone liquefied-natural-gas facilities had failed to produce an agreement on issues such as pay.
- Industrial action had originally been planned to start on Thursday but was delayed to allow the talks to continue.
- Offshore Alliance, a partnership of two local unions, said the action had started at 1 p.m. local time in Perth, Western Australia’s capital.
- It would include work bans and short stoppages ahead of a two-week walkout starting Sept. 14, it said.
- Chevron said it had negotiated in good faith but couldn’t accept the demands sought by representatives of the around 500 workers.
Spotify to Offer Paying Subscribers Free Audiobook Trial – Wall Street Journal, 9/8/2023
- Spotify plans to test a free audiobook bundle for its paying subscribers in the coming months, part of a push to become a go-to provider of that content.
- The streaming service is working with some of the largest publishers in the U.S. on the pilot program, which would allow subscribers to listen to up to 20 hours of audiobooks a month at no additional cost, according to people familiar with the matter.
- Details are still evolving, but the company expects to offer the program for a limited time and aims to gauge customer interest in audiobooks.
- Audiobooks represent a way for Spotify to diversify its offerings to subscribers—and its sources of revenue.
- Executives at Spotify are eager to challenge incumbent audiobook platform Audible, and told some publishers that their participation would help break the Amazon.com-owned platform’s hold on the industry, some of the people said.
- The test will likely roll out over time to a group of English-speaking countries, including the U.S., Canada, Australia and the U.K.
- The scope of titles available through the program is expected to be broad, but is still being finalized.
Chinese Car Sales Hit Record High for August on Export Growth – Bloomberg, 9/8/2023
- China delivered 2.24 million cars wholesale in August, the most for a month this year and a record high for what is usually a slow period.
- Deliveries of China-made electric vehicles and plug-in hybrids reached 716,000, up 35% from August 2022, the China Passenger Car Association said Friday.
- While still the standout market, China’s EV sales growth slowed to 37% in the second quarter from a year earlier versus a global average of 50%, the consultancy said in a research note published Thursday.
- Chinese manufacturers’ share of EV sales in countries excluding China will likely top 10% in third quarter, Counterpoint said, up from 9% last quarter, when US brands led by Tesla held 35% and German carmakers had 22%.
Factmonster – TODAY in HISTORY
- A hurricane struck Galveston, Texas, killing about 8,000 people. – 1900
- Louisiana Senator Huey P. Long, “The Kingfish,” was shot and mortally wounded by Dr. Carl Austin Weiss, Jr. – 1935
- The San Francisco Peace Treaty was signed, formally ending World War II hostilities with Japan. – 1951
- Star Trek premiered on television. – 1966
- President Gerald Ford gave former President Nixon a full pardon for all federal crimes he may have committed while he was in office. – 1974
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