Daily Market Report | 09/01/2023
US FINANCIAL MARKET
Stocks Rise as Jobs Report Fuels Fed-Peak Wagers: Markets Wrap – Bloomberg, 9/1/2023
- Stocks rose after jobs data fueled bets that the Federal Reserve will refrain from raising interest rates again this year to prevent an economic recession.
- The S&P 500 headed toward its best week since March.
- The S&P 500 rose 0.4%. The Nasdaq 100 was little changed. The Dow Jones Industrial Average rose 0.5%.
- Energy shares led gains on Friday as US oil hit $85 a barrel for the first time since November.
- Megacaps were mixed, with Apple climbing and Tesla down 2.5%.
- Treasury two-year yields were little changed — after sliding as much as 11 basis points earlier in the session.
- Swap contracts priced in a less than 50% chance of another rate hike this year — while wagers on a rate cut were shifted to May from June.
- Nonfarm payrolls rose 187,000 after the prior two months were revised significantly lower.
- The unemployment rate rose to 3.8%, partly reflecting a pickup in labor-force participation, and average hourly earnings rose just 0.2% — the most-tepid increase since February 2022.
- Equities came off session highs after Fed Bank of Cleveland President Loretta Mester said US inflation remains too high despite recent improvements, and the labor market is still strong.
- Tesla revamped the Model 3 sedan with sleeker looks and longer range while slashing prices of its premium vehicles in an all-out push to boost sales.
- Amgen can move forward with its $27.8 billion takeover of Horizon Therapeutics after the US Federal Trade Commission said Friday that it accepted a binding settlement that the combined company won’t bundle together two of Horizon’s blockbuster drugs.
- Walgreens Boots Alliance’s Rosalind Brewer stepped down from her post as chief executive officer and board member during a rocky shift to a wider offering of health-care services while the shares have plunged.
- Broadcom, a supplier of chips to Apple and a broad swath of the tech industry, fell on a bearish outlook.
- Lululemon Athletica rose after lifting its full-year outlook as it takes business from competitors and defies the broader retail slump.
- The Stoxx Europe 600 rose 0.2%.
- The Bloomberg Dollar Spot Index rose 0.2%.
- The yield on 10-year Treasuries advanced six basis points to 4.17%.
- West Texas Intermediate crude rose 1.4% to $84.80 a barrel.
- Gold futures fell 0.2% to $1,962.10 an ounce.
Broadcom stock slips after earnings as forecast fails to bring upside – Market Watch, 9/1/2023
- Broadcom shares slipped 4% in premarket trading Friday after the chip and software company delivered a revenue forecast for the current quarter that failed to offer upside versus the consensus view.
- Revenue increased to $8.88 billion from $8.46 billion in the year-ago quarter, while analysts were modeling $8.85 billion.
- Chip sales rose 5% to $6.94 billion from the year-ago period, and infrastructure software sales also were up by 5%, to $1.94 billion.
- The FactSet consensus was for $6.97 billion in chip sales and $1.89 billion in software sales.
- After adjustments, Broadcom earned $10.54 a share, compared with $9.73 a share in the year-ago quarter.
- Analysts tracked by FactSet were expecting $10.43 a share.
- Broadcom generated $4.6 billion in free cash flow during its third quarter.
- The company forecast fiscal fourth-quarter revenue of about $9.27 billion, in line with the FactSet consensus.
Lululemon ups guidance after ‘strong’ growth in China boosts quarterly sales – CNBC, 9/1/2023
- 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 retailer saw sales jump 52% in markets outside of North America, boosted by a 61% increase in China.
- The retailer now has 107 stores in the country, and of the 35 it plans to open internationally during the current fiscal year, the majority will be in the region, McDonald said.
- 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.
- 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.
- Direct to consumer revenue was up 15% but it was a smaller part of Lululemon’s overall channel mix in the quarter.
- Direct to consumer sales represented 40% of Lululemon’s overall sales, compared to 42% in the year ago period.
- 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.
SentinelOne raises full-year forecast, adds partnership with Wiz still on – Reuters, 9/1/2023
- SentinelOne raised its annual revenue forecast on Thursday, riding on resilient adoption of its AI-backed security offerings as macroeconomic fears abate.
- SentinelOne’s total customer count grew about 30% to over 11,000 customers, as of July 31, as its flagship offering Singularity Platform saw resilient adoption among both public and private customers.
- The company posted a loss of 8 cents per share, excluding items, compared to expectations of a 14 cent per share loss.
- The cybersecurity company also forecast revenue of $156 million for the third quarter, higher than analysts’ estimate of $154.20 million.
- The Mountain View, California-based company expects revenue for the full-year to be $605 million, up from the $590 million to $600 million range it had forecast in June.
- Analysts on average estimate it at $594.77 million, according to Refinitiv data.
MongoDB’s stock gains after earnings top expectations, AI in focus – Market Watch, 9/1/2023
- Shares of MongoDB rallied in the extended session Thursday after the software company reported fiscal 2024 second-quarter earnings well above forecasts and said it has an “even stronger” competitive advantage “in the world of AI.”
- Revenue rose 40% to $423.8 million, the company said.
- Adjusted for one-time items, MongoDB earned 93 cents a share.
- Analysts polled by FactSet expected adjusted earnings of 46 cents a share on sales of $394 million.
- “We are at the early stages of AI powering the next wave of application development,” Chief Executive Dev Ittycheria said in a statement.
- The company guided for full-year revenue of $1.596 billion to $1.608 billion and adjusted EPS of $2.27 to $2.35 for the fiscal 2024.
Dell’s stock soars as company easily beats on earnings – Market Watch, 9/1/2023
- Dell Technologies shares were surging in aftermarket trading Thursday after the technology giant posted sizable beats on profit and revenue.
- Revenue declined to $22.9 billion from $26.4 billion, whereas analysts were looking for $20.9 billion.
- On an adjusted basis, Dell earned $1.74 a share, up from $1.68 a year before, while analysts tracked by FactSet were projecting $1.14 a share.
- “We continue to focus on the most profitable segments of the market where we have a leading position,” Chief Operating Officer Jeff Clarke said in a release.
Tesla Refreshes Model 3 and Slashes Prices of Top-End Cars – Bloomberg, 9/1/2023
- Tesla revamped the Model 3 sedan with sleeker looks and longer range while slashing prices of its premium vehicles in an all-out push to boost sales.
- The automaker slimmed down the front end of its entry sedan in the first major face-lift of the Model 3 since it went into production six years ago.
- The car is rated to go 606 kilometers (377 miles) on a charge in China, a 9% improvement.
- Other upgrades include a new 8-inch rear touch screen and added speakers to the sound system.
- Hours after the long-anticipated unveiling, Tesla made steep cuts to the Model S sedan and Model X sport utility vehicle in the US and China, and lowered the price of the driver-assistance system marketed as Full Self-Driving by $3,000, to $12,000.
- Tesla is now charging $74,990 for the base Model S and $79,990 for the Model X, according to its US website.
- Dropping the base Model X below $80,000 makes the SUV eligible for the $7,500 federal tax credit revived by the Inflation Reduction Act.
- The updated model is live on Tesla’s order pages in China, Europe, the Middle East and Australia, though not yet in the US.
Walgreens Chief Executive Rosalind Brewer Steps Down – Wall Street Journal, 9/1/2023
- Rosalind Brewer has stepped down as chief executive of Walgreens Boots Alliance less than three years after taking the helm of the pharmacy operator.
- Brewer, a former Starbucks and Sam’s Club executive, took over as CEO of Walgreens in 2021.
- Her abrupt exit leaves the drugstore giant in search of a new leader at a time of upheaval.
- On Friday, the company warned that it expects earnings per share for the year to come in at the low end of its forecast.
- Walgreens said Brewer agreed to step down as CEO and as a board member, effective Thursday.
- She will advise Walgreens while it conducts its CEO search, the company said.
Spectrum owner Charter calls pay-TV model broken as it battles Disney over blackout – CNBC, 9/1/2023
- Cable giant Charter Communications and Disney are in a battle over contract fees that has left millions of people without access to U.S. Open and potentially “Monday Night Football,” with the NFL’s season starting in just days.
- On Thursday, Disney said that the two companies have been in ongoing negotiations but yet to agree to a new deal.
- That resulted in Charter’s roughly 14.7 million Spectrum customers losing access to its networks, including broadcaster ABC and pay-TV channels such as ESPN and FX.
- These sorts of battles, which can lead to so-called blackouts for pay-TV customers, are common in the industry.
- But, in the age of streaming, this one is different.
- “This is not a typical carriage dispute,” Charter CEO Chris Winfrey said Friday on a call with investors.
- Early Friday, Charter executives called the pay-TV ecosystem “broken.”
- They said they pushed for a revamped deal with Disney that would see Charter cable customers receive access to Disney’s ad-supported streaming services like Disney+ and ESPN+ at no additional cost.
- This seemed to be the sticking point as Charter said it accepted Disney’s request for higher fees, although Charter executives didn’t provide specifics on the negotiations as they remain hopeful to get a deal done.
- The Federal Trade Commission said Friday it reached a settlement with drugmaker Amgen that would allow the company to acquire Horizon Therapeutics in a $27.8 billion deal.
- The pact also dismisses the antitrust claims of six states that joined the FTC in May seeking to block the deal over concerns that Amgen would illegally bundle its products with Horizon’s medicines for thyroid eye disease and gout.
- Amgen agreed in the proposed settlement to not bundle any drugs and swore off other tactics that could entrench the monopoly position of Horizon’s products, which treat rare diseases.
- Amgen previously said it had told the FTC it wouldn’t bundle any products, but the antitrust enforcer filed the lawsuit anyway and Friday presented the settlement as a win.
- Amgen said Friday that it expects to quickly seek the final approval needed to close the transaction in the early fourth quarter of this year. The commitments it made to settle with the FTC and six states will have no impact on its business, the company added.
US ECONOMY & POLITICS
US Payrolls Rise by More Than Forecast While Wage Growth Cools – Bloomberg, 9/1/2023
- US hiring picked up in August and wage growth slowed, offering a mixed picture of both resilience and moderation in the labor market.
- Nonfarm payrolls rose by 187,000 after the prior two months were revised significantly lower, a Bureau of Labor Statistics report showed Friday.
- The unemployment rate climbed to 3.8%, the highest since early last year and largely reflecting a pickup in participation.
- The payrolls figure also includes a combined drop of 54,000 in the film and trucking industries, mainly due to an entertainment strike and the shutdown of a major carrier, the report showed.
- June and July payroll gains were revised lower by 110,000, following data last week that estimated US job growth was probably less robust in the year through March.
- The overall participation rate — the share of the population that is working or looking for work — rose for the first time since March to 62.8%, the highest since February 2020.
- For those ages 25-54, known as the prime-age group, it approached a record.
- The August advance in payrolls was broad based, led by gains in health care, leisure and hospitality and construction.
- Manufacturing payrolls increased by the most since October and reflecting more hiring in machinery and fabricated metals.
- Job growth would have been even higher if not for strikes by Hollywood workers and the bankruptcy of trucking firm Yellow.
- Looking ahead, a potential strike by the United Auto Workers and a possible government shutdown could also weigh on payrolls in the coming months.
- The average workweek ticked up to 34.4 hours.
- The underemployment rate, a broader measure of joblessness that includes those who prefer full-time work, rose to 7.1%, the highest in over a year.
- Reentrants to the labor force rose the highest since June 2022.
- However, a growing number of those people were not able to find work in August.
US Factory Activity Gauge Suggests Stabilization at Weak Level – Bloomberg, 9/1/2023
- A measure of US factory activity shrank less in August than a month earlier in a hopeful sign that the malaise in manufacturing is no longer deepening.
- The Institute for Supply Management’s manufacturing gauge edged up to a six-month high of 47.6, from 46.4 in July, according to data released Friday.
- While the overall gauge of manufacturing has contracted for 10 straight months, the figures hint conditions are stabilizing at weak levels.
- Producers are starting to see some signs of relief after companies made strides reducing an inventory overhang and consumer spending on merchandise picked up.
- The government’s revised second-quarter growth figures showed inventories fell for the first time in nearly two years.
- Producers are also finding relief in declining commodities prices.
- The group’s index of prices paid for materials showed costs fell for a fourth month, though at a slower pace in August.
Fed’s Mester Says US Inflation Too High But Jobs in Better Balance – Bloomberg, 9/1/2023
- Federal Reserve Bank of Cleveland President Loretta Mester said US inflation remains too high despite recent improvements, and the labor market is still strong.
- Policymakers need to closely monitor markets and economic data to assess how the economy is evolving to inform their future policy decisions, Mester said Friday in remarks prepared for a research conference hosted by the Cleveland Fed and the European Central Bank.
- She did not specify whether she thinks another interest-rate increase is needed or what she believes the Fed should do at its Sept. 19-20 policy meeting.
- “Although there has been some progress, inflation remains too high,” she said.
- “The monetary policy questions are whether the current level of the federal funds rate is sufficiently restrictive and how long policy will need to remain restrictive to keep inflation moving down in a sustainable and timely way to our goal of 2%.”
- Mester, speaking after Friday’s US employment report showed the jobless rate rose to 3.8% in August, said the central bank’s actions are helping the labor market come into better balance but employment remains strong.
- “Future policy decisions will be about managing the risks and the intertemporal costs of over-tightening versus under-tightening monetary policy,” she said.
Student loan interest resumes today — what that means for borrowers – CNBC, 9/1/2023
- The interest on federal student loans has started accruing again.
- Since March 2020, the interest rate on most government-owned education debt was set to zero, and people faced no penalties for not making payments.
- Now borrowers will see their loans return to their pre-pandemic rates, typically between 3% and 7%.
- The interest rates on federal student loans are fixed once disbursed, but vary depending on when they’re taken out.
- Borrowers’ first loan payments are due in October.
- “Millions of federal student loan borrowers are starting to adjust to the reality of having to figure out how to bake their student loan payments into their budget once again,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.
- Senate Minority Leader Mitch McConnell’s second public health scare in as many months has fueled speculation about who might succeed him, even as the Capitol’s top doctor cleared him for duty and backers played down the significance of the incidents.
- The developments have focused attention on a trio of McConnell allies seen as potentially next in line: Sens. John Thune of South Dakota, John Cornyn of Texas and John Barrasso of Wyoming—often referred to in Capitol Hill shorthand as “the three Johns.”
- Talk about who would fill McConnell’s shoes as party leader is no longer the taboo subject it once was within the Senate GOP conference as lawmakers ponder whether they will have to select their first new chief in more than 16 years.
- Republican aides and senators say that lawmakers have begun quiet conversations among themselves on text chains about who they would like to succeed McConnell if he steps down from the leadership post.
- “Texts between members are being exchanged,” said one person familiar with the communications among senators.
- “But my guess is there’ll be a wait-and-see attitude certainly until we get back to see what’s happening.”
- Nursing homes will have to maintain minimum staffing levels under a Biden administration proposal despite furious lobbying from the industry, which says it will be too onerous amid a continuing labor shortage.
- Biden administration officials said the first-ever national staffing rule would require nursing homes that participate in Medicare and Medicaid to provide a minimum of 0.55 hours of care from a registered nurse per resident a day, and 2.45 hours of care from a nurse aide per resident a day.
- A registered nurse would be required to be on-site at all times and nursing-home care assessments would be strengthened under the proposal.
- The Centers for Medicare and Medicaid Services estimates that about 75% of nursing homes would have to strengthen staffing in their facilities under the proposal.
- The proposed staffing standard exceeds those existing in nearly all states.
- “Establishing minimum staffing standards for nursing homes will improve resident safety and promote high-quality care so residents and their families can have peace of mind,” said Health and Human Services Secretary Xavier Becerra in a statement.
- It will invest more than $75 million in financial incentives such as scholarships and tuition reimbursement to support staffing prospects for nursing homes.
EUROPE & WORLD
Hong Kong Slammed by Saola, Biggest Typhoon Since 2018 – Bloomberg, 9/1/2023
- Super Typhoon Saola pummeled Hong Kong Friday night, bringing hurricane force winds and heavy rain across the territory.
- The Hong Kong Observatory raised the No. 10 storm signal — the highest — at 8:15 p.m. and said it expects it to remain in force “for some time.”
- It also warned of heavy rains, serious flooding with record water levels, rapidly rising waters in coastal areas, and “phenomenal” swells.
- The stock market and schools were closed Friday in advance of the storm’s arrival.
- Most public transportation was grounded.
- The storm has sustained winds of 210 km/hour near the center, according to the local observatory.
- That makes it as strong as a category 4 major hurricane on the Saffir-Simpson wind scale.
- Saola will come within 40 km south of the territory, the observatory said, warning that a storm surge will cause water levels to rise rapidly in low-lying coastal areas.
Xi Planning to Skip G-20 Summit While China-India Tensions Mount – Bloomberg, 9/1/2023
- Chinese President Xi Jinping is planning to skip next week’s Group of 20 summit in New Delhi, according to officials familiar with preparations for the meeting, a snub that’s likely to aggravate an already rocky relationship with India.
- Tensions between China and India — the world’s two most populous countries — already threaten to prevent G-20 leaders from issuing a joint communique for the first time since the forum was created in 1999, according to separate people familiar with the situation.
- Xi’s non-attendance would be a further blow for the host, Prime Minister Narendra Modi.
- Xi is not intending to travel to the Indian capital for the summit, diplomats from several countries involved in the planning said.
- Chinese Premier Li Qiang will attend in his place, according to one of the people, while a second said it would be another yet-to-be-named government official.
- All asked not to be named discussing internal deliberations.
Ukraine Fights to Widen Its Puncture of Russian Front Lines – Wall Street Journal, 9/1/2023
- Ukrainian troops’ piercing of Russian lines this week marks a small move with big potential.
- The Ukrainians are trying to gradually force their way through the main Russian defensive line in the southeast under heavy fire to expand fissures they opened and achieve a larger-scale breach.
- This is a critical moment in Kyiv’s three-month counteroffensive because a full-scale penetration would allow Ukraine to pour armored vehicles through and wreak havoc among Russian forces.
- Advancing a few miles through the defenses around Verbove—a settlement in the country’s southeast unknown even to most Ukrainians—would amount to a modest gain compared with the roughly 20% of their country that Russia controls, or compared with the greater gains that Ukrainian and Western military leaders had hoped earlier this year to have achieved by now.
- But if Ukrainian forces manage to cross minefields, trenches and cement blockades known as dragon’s teeth, they will have overcome impediments that Russia hopes are impassable.
Factmonster – TODAY in HISTORY
- Former U.S. vice president Aaron Burr was found innocent of treason. – 1807
- A devastating earthquake struck the Japanese cities of Tokyo and Yokohama. Nearly 150,000 people were killed and more than two million left homeless. – 1923
- World War II began when Nazi Germany invaded Poland. – 1939
- A coup in Libya toppled the monarchy of King Idris and brought Muammar al-Qaddafi to power. – 1969
- A Korean Air Lines Boeing 747 was shot down by a Soviet jet fighter, killing all 269 people aboard. – 1983
- A joint U. S.-French expedition located the wreck of the Titanic 560 miles off the coast of Newfoundland. – 1985
- Chechen terrorists took about 1,200 schoolchildren and others hostage in Beslan, Russia. Commandos stormed the school on Sept. 3. – 2004
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