US FINANCIAL MARKET
Stocks Climb as Data Rekindle Bets on Soft Landing: Markets Wrap – Bloomberg, 9/14/2023
- Stocks rose after strong economic reports revived speculation the Federal Reserve will be able to engineer a soft landing even if it keeps interest rates higher for longer.
- The euro fell on bets the European Central Bank will stay on hold after hiking on Thursday.
- The S&P 500 rose 0.7%. The Nasdaq 100 rose 0.8%. The Dow Jones Industrial Average rose 0.7%.
- Earlier in the session, equity futures briefly pared gains as both retail sales and producer prices figures topped estimates amid higher fuel costs.
- Two-year yields were little changed after spiking in the immediate aftermath of the data.
- The dollar saw a small gain. West Texas Intermediate oil hit $90 a barrel for the first time since November.
- Arm Holdings is indicated to open higher at $58 a share in its New York debut.
- Traders also continued to monitor negotiations between the United Auto Workers and automakers to prevent a strike.
- An extended shutdown at Ford Motor, General Motors and Stellantis risks triggering a recession in swing states like Michigan — while reviving inflation for car prices.
- Adobe is due to report its results after the closing bell, and the earnings call will likely be focused on its artificial-intelligence offerings after the company revealed its generative tools will cost less than competitive products.
- Delta Air Lines reduced its expectations for third-quarter profit on higher fuel prices and larger-than-expected maintenance costs, but it reaffirmed its full-year guidance on earning
- SoftBank Group satisfied its ambitions for Arm Holdings by raising $4.87 billion in the year’s biggest initial public offering, while resisting the temptation to try for more.
- The Stoxx Europe 600 rose 1.5%.
- The Bloomberg Dollar Spot Index rose 0.1%.
- The yield on 10-year Treasuries was little changed at 4.26%.
- West Texas Intermediate crude rose 1.6% to $89.92 a barrel.
- Gold futures were little changed.
Delta Trims Quarter Outlook, Keeps 2023 Earnings Guidance – Bloomberg, 9/14/2023
- Delta Air Lines reduced its expectations for third-quarter profit on higher fuel prices and larger-than-expected maintenance costs, but it reaffirmed its full-year guidance on earnings.
- Adjusted profit will be $1.85 to $2.05 a share, compared with an earlier outlook for as much as $2.50, Delta said in a regulatory filing Thursday.
- It maintained its guidance for full-year profit of $6 to $7 per share.
- Revenue for each seat flown a mile will decline as much as 3%, versus prior outlook for a dip of as much as 4%, and Delta said total sales would be in the upper half of its earlier expectation for an increase of as much as 14% from last year.
- While citing strong transatlantic travel demand, Delta said domestic trends are “steady.”
- Delta’s operating margin this quarter will be about 13%, compared with its earlier outlook for the mid-teens.
- Non-fuel unit costs, a gauge of efficiency, will climb as much as 2%, compared to earlier expectations that they would fall as much as 3%.
Arm’s Much-Anticipated IPO Values Chip Designer at $54.5 Billion – Bloomberg, 9/14/2023
- SoftBank Group satisfied its ambitions for Arm Holdings Plc by raising $4.87 billion in the year’s biggest initial public offering, while resisting the temptation to try for more.
- A smooth trading debut from the chip designer on Thursday could help revive a weak IPO market and provide a boost for upcoming listings from companies like Instacart and Birkenstock Holding.
- At the IPO price, Arm is valued at about $54.5 billion, according to Bloomberg News calculations.
- Arm’s offering was oversubscribed more than 10 times, people with knowledge of the matter have said, which means investor interest exceeded supply at the price range of $47 to $51 a share and could help buoy the stock once trading begins.
- In setting the price for the IPO, Masayoshi Son, SoftBank’s founder, chairman and chief executive officer, signaled that he was unwilling to push things too far even if it meant leaving a bit of money on the table.
- In the final price-setting meeting Wednesday, some bankers and executives made the case for a higher price, with some of the debate centering on whether $52 made sense, people familiar with the matter said, asking not to be identified because the meeting was private.
- Son joined the discussion and chose $51, saying it wasn’t worth risking a healthy debut for $100 million or so in additional proceeds, they said.
UAW, Automakers Remain ‘Far Apart’ in Contract Talks, Union President Says – Wall Street Journal, 9/14/2023
- The United Auto Workers union remains far apart in negotiations with Detroit automakers for a new labor agreement and is preparing walkouts at select factories when contracts expire late Thursday, its president said.
- UAW President Shawn Fain told members during a livestream Wednesday evening that General Motors, Ford Motor and Stellantis have come closer to the union’s wage-increase demands and other priorities, but he expressed doubt that a deal would be reached before the 11:59 p.m. ET Thursday deadline.
- Fain said the union’s goal is to reach an agreement.
- But he told workers to be prepared to strike, and confirmed plans to target a limited number of factories initially if a walkout is called.
- That tactic would involve fewer workers than a traditional action that involves all workers walking off the job at once.
- “We’re preparing to strike these companies in a way they’ve never seen before,” Fain said.
- Fain said each of the companies has bumped up its wage-increase proposals, to between 17.5% and 20%.
- The union’s initial proposal was for a 40% hike.
Caesars Paid Ransom After Suffering Cyberattack – Wall Street Journal, 9/14/2023
- Caesars Entertainment paid roughly half of a $30 million ransom that hackers demanded after a cyberattack late this summer, another example of a major casino operator suffering from an attack as MGM Resorts grapples with the fallout of a recent incident.
- Hackers used a social-engineering scheme, in which a person pretending to be an employee contacted the company IT help desk to have a password changed, according to people familiar with the matter.
- In a Securities and Exchange Commission filing Thursday, Caesars said that the incident resulted from a social engineering attack on an outsourced IT support vendor, without providing further detail on “the unauthorized actor” responsible for it.
- “After detecting the suspicious activity, we quickly activated our incident response protocols and implemented a series of containment and remediation measures to reinforce the security of our information technology network,” Caesars said in the filing.
- The company said it discovered that the attacker acquired a copy of data including driver’s license numbers and social security numbers for “a significant number” of members of its loyalty program.
- There is no evidence that passwords, payment or bank account information was accessed, Caesars said.
Lazard’s New Boss Lays Out Strategy – Wall Street Journal, 9/14/2023
- Peter Orszag, who will take over as chief executive of Lazard detailed how he plans to revive the storied firm’s fortunes in a note to employees Thursday.
- Lazard’s shares are down around 4% this year after doing little in the past 15 years.
- Orszag said in the note he aims to double Lazard’s revenue by 2030 and hit average total shareholder returns of 10% to 15% a year.
- Lazard’s total shareholder return has been negative in the past few years.
- As recently as a decade ago, Lazard, which traces its roots to 1848, was considered by many to be the premier independent investment bank.
- More recently, newer firms such as Centerview and Evercore have encroached on its lucrative business of advising on mergers and other deals.
- In addition to its advisory business, Lazard also has an asset-management business that accounts for roughly 40% of revenue.
- To increase revenue in that business, Orszag indicated Lazard could do deals, possibly in adjacent areas such as wealth management or private markets.
- On the advisory side, he wants Lazard to double in size in both the U.S. and Europe, which would put it in line with Evercore’s U.S. business and Rothschild’s European business.
- It also plans to hire managing directors away from competitors.
VinFast’s Rise and Fall Burns Investors in Familiar SPAC Pattern – Wall Street Journal, 9/14/2023
- A crash in the shares of electric-car startup VinFast Auto is serving as a warning: One of Wall Street’s hottest financial trends in recent years often ends with everyday investors getting burned.
- The Vietnamese firm last month became one of the latest startups to go public by merging with a shell company, an alternative route to the stock market that became popular during the pandemic.
- The eye-popping swings in its shares that followed mirror the volatility that has been common among startups that went public the same way and reflect the quirks of how such deals often work.
- For some, the big stock moves are reminiscent of another pandemic phenomenon that resulted in many individual investors losing money: the trading frenzy that turned struggling companies such as GameStop into meme stocks.
- At their peak, VinFast’s shares briefly valued the six-year-old business at $190 billion.
- That is twice the combined value of Ford and General Motors, despite the company just starting to increase production.
- Its shares have tumbled nearly 80% from that high in the past 11 trading days.
US ECONOMY & POLITICS
US Retail Sales, Producer Prices Jump on Rising Energy Costs – Bloomberg, 9/14/2023
- US retail sales and producer prices both rose in August by more than forecast, driven by higher fuel costs that risk tempering household spending and keeping inflation elevated.
- The value of total retail purchases increased 0.6% from July following downward revisions to the prior two months, Commerce Department data showed Thursday.
- Excluding gasoline, sales climbed a more modest 0.2%.
- A separate government report showed the producer price index for final demand increased 0.7% from a month earlier.
- The cost of gasoline surged 20%, accounting for much of the gain.
- Excluding energy, the wholesale inflation picture was more favorable.
- The retail sales figures, which aren’t adjusted for inflation, showed purchases rose in most retail categories last month, but the gains were more moderate in several areas.
- So-called control group sales — which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations — rose 0.1%, the smallest advance in five months.
- Other energy categories that increased last month included jet fuel, diesel and heating oil.
- Within services, residential real estate, truck transportation of freight and wholesaling of machinery and equipment also rose.
U.S. 4-week average of jobless claims drops to lowest level in seven months – Market Watch, 9/14/2023
- Initial jobless benefit claims stayed in ultra-low territory in the latest week with the 4-week moving average of claims falling to lowest level since February.
- In the week ended Sept. 9, claims for state unemployment benefits rose by 3,000 to 220,000, the Labor Department said Thursday.
- Non-seasonally adjusted claims dropped 16,854 to 174,499. That’s the lowest since last October.
- Economists polled by The Wall Street Journal had estimated new claims would rise 4,000 to 220,000.
- Last week claims rose a revised 12,000 to 217,000.
- That compared with the initial estimate of a decrease of 13,000 to 216,000.
- The four-week moving average of claims fell 5,000 to 224,500 in the latest week.
- The number of people already collecting jobless benefits in the week ended Sept. 2 rose by 4,000 to 1.69 million.
Musk Warns Senators About AI Threat, While Gates Says the Technology Could Target World Hunger – Wall Street Journal, 9/14/2023
- Elon Musk, Bill Gates, Mark Zuckerberg and other technology heavyweights debated the possibilities and risks of artificial intelligence Wednesday in a closed-door meeting with more than 60 U.S. senators who are contemplating legislation to regulate the technology.
- Musk, the chief executive of Tesla and owner of X (formerly Twitter), warned about what he views as AI’s potential to threaten humanity, according to a participant. Microsoft co-founder Gates said the technology could help address world hunger, said Sen. Chuck Schumer (D., N.Y.), who convened the session.
- Other speakers included Facebook founder Zuckerberg and the CEOs of Google, Microsoft, Nvidia and IBM, along with union leaders, civil-rights advocates and others.
- Schumer at one point asked the guests if they agreed that the government needed to play a role in regulating artificial intelligence.
- “No one backed off in saying we need government involvement,” Schumer said in an interview after the session ended.
- “They understood that there needed to be government responsibility, because let’s say even these companies would be willing to install guardrails on themselves—they’ll have competitors who won’t.”
Hurricane Lee Moves Toward Maine, Atlantic Canada as Category 2 Storm – Wall Street Journal, 9/14/2023
- Hurricane Lee was churning toward New England and Atlantic Canada as a Category 2 storm that could lash certain areas with heavy rain starting Friday night.
- It is too early to predict exactly where the storm will make landfall.
- Forecast models show that Lee could come ashore in Maine, New Brunswick or Nova Scotia before moving across Atlantic Canada over the weekend.
- Forecasters said Lee would be a large and dangerous cyclone as it approaches land.
- Lee is expected to pass by Bermuda on Thursday, bringing wind and rain, according to the National Hurricane Center.
- The storm will be too far off the coast to cause major issues, said Alex DaSilva, a tropical meteorologist at AccuWeather.
- Lee rapidly intensified over warm Atlantic Ocean waters after becoming a tropical storm Sept. 5, according to the National Hurricane Center.
- It peaked as a Category 5 storm days later over the open ocean.
Congress Asks Hawaiian Electric CEO to Appear in Maui Wildfire Inquiry – Wall Street Journal, 9/14/2023
- A U.S. House committee has asked top Hawaii energy officials, including the chief executive of utility Hawaiian Electric, to testify at a hearing on the causes of the wildfire that destroyed the town of Lahaina and killed at least 115 people.
- The House Energy and Commerce Committee, which is investigating the causes of August’s deadly blaze, said that it would hold a hearing Sept. 28 in Washington and expects Shelee Kimura, who heads Hawaiian Electric, to appear.
- Top Republican members of the GOP-led committee said Leodoloff R. Asuncion Jr., chair of the Hawaii Public Utilities Commission, and Mark Glick, who leads Hawaii’s state energy office, have also been invited to the hearing and are expected to testify.
- A Hawaiian Electric spokesman said Kimura has agreed to appear before the committee.
- “As we have done with all the inquiries regarding the events of Aug. 8, we stand ready to share what we know about what happened on Maui as well as the need to address increasing threats from extreme weather events moving forward,” said the spokesman, Jim Kelly.
- Lee over the weekend swept north of the Leeward Islands, which include the Virgin Islands and Antigua. The storm was bypassing Bermuda on Thursday on its way toward New England and Atlantic Canada.
- It is expected to stay away from the lower U.S. East Coast but generate dangerous surf conditions.
EUROPE & WORLD
ECB Delivers 10th Hike as Lagarde Won’t Quite Confirm Rate Peak – Bloomberg, 9/14/2023
- The European Central Bank raised interest rates for the 10th consecutive time as President Christine Lagarde signaled a shift in gear that could mean the peak has been reached.
- While economists and investors now see the 4% level set on Thursday as the high point for borrowing costs in the current tightening cycle, the ECB chief insisted that she can’t yet say if that’s the case.
- “With today’s decision, we have made sufficient contributions, under the current assessment, to returning inflation to target in a timely manner,” Lagarde told reporters in Frankfurt.
- “The focus is probably going to move a bit more to the duration, but it is not to say — because we can’t say — that now that we are at peak.”
- A “solid majority” of policymakers supported the outcome, according to the president, who acknowledged that some colleagues would have preferred a pause instead.
- Before the meeting, officials acknowledged that the decision was the most finely balanced since the ECB began tightening in July 2022.
- The Governing Council repeated language that it will keep borrowing costs at “sufficiently restrictive levels for as long as necessary.”
- That could keep the door open to further hikes should inflation prove more sticky than thought.
- Meanwhile Lagarde was at pains to insist that the prospect of a future cut in borrowing costs “was not even a word that we have pronounced.”
- “Inflation has declined, and we want it to continue to decline,” Lagarde said.
- “We’re doing that not because we want to force a recession, but because we want price stability.”
- “We are clearly in a period of slow and sluggish growth,” she said. “The difficult times are now.”
- The new outlook shows markedly softer annual economic expansion through 2025, while inflation will weaken to average 3.2% in 2024 and then 2.1% in the final year of that outlook.
- Underlying consumer-price growth will be a touch stronger at the end of the horizon, averaging 2.2% in 2025.
- Hawkish officials including Nagel and Latvia’s Martins Kazaks had signaled support for another hike, while dovish colleagues such as Italy’s Ignazio Visco cautioned against overdoing tightening because of “delayed effects.”
Ukraine Says It Hits Russian Missile Outpost in Western Crimea – Bloomberg, 9/14/2023
- Ukraine said it destroyed a Russian air defense compound on the western coast of Crimea, stepping up military pressure alongside efforts to cut off Moscow’s land route to resupply the strategic peninsula it annexed in 2014.
- Ukraine’s Security Service and the country’s navy targeted a Russian S-400 “Triumph” missile complex overnight, a person with knowledge of the joint operation said Thursday.
- Ukrainian drones first damaged radars and antennas for the air defense unit near Yevpatoriya, a city on the western coast of Crimea.
- Then two Neptune cruise missiles destroyed the launching units, the person said.
- The air defense complex may have cost as much as $1.2 billion, according to the person.
- Russia overnight reported downing 11 drones over Crimea, even as its officials didn’t mention the attack on the missile compound.
- Local social media channels circulated videos of a large illuminated plume of smoke and powerful explosions, apparently in the area near Yevpatoriya.
U.S. to Sanction 150 Entities Amid Campaign Against Transit-Country Trade With Russia – Wall Street Journal, 9/14/2023
- The U.S. on Thursday will sanction around 150 foreign companies and individuals, including for allegedly shipping American or other Western technology to Russia, according to people familiar with the matter, marking an expanding Western effort to cut off the flow of goods Moscow needs to prosecute its war against Ukraine.
- But as the Kremlin and its agents seek to sidestep Western sanctions and export controls by channeling the flow of prohibited goods through intermediary nations, officials say they are ramping up a campaign to target companies and individuals in countries acting as transit hubs for Russia.
- Western allies representing more than half of the world’s economic power have severed much of Russia’s direct access to the global financial system and banned the export of technology that Russia’s military relies upon for modern warfare.
- Officials say their efforts to cut off the sale of goods such as computer chips, satellite parts and navigational equipment needed to target Ukrainian forces have hobbled Moscow’s war machine.
- Russia has been able to continue importing many of those products by buying them through countries such as China, Turkey, Hungary and the United Arab Emirates.
- Western diplomats and security officials have in recent months jetted around the globe seeking to convince those governments to enforce their prohibitions, sharing intelligence on those aiding Moscow and helping grow their bureaucratic capacity to crack down on illicit activities.
- Elizabeth Rosenberg, the Treasury Department’s sanctions deputy, for example, is touring several countries in the Middle East this week as part of that mission.
- President McKinley died of gunshot wounds inflicted by an assassin. Vice President Theodore Roosevelt succeeded him. – 1901
- Modern dance pioneer Isadora Duncan died in Nice, France. – 1927
- Congress passed the Selective Service Act, providing for the first peacetime draft in U.S. history. – 1940
- The Soviet space probe Luna 2 became the first man-made object to reach the Moon when it crashed onto the lunar surface. – 1959
- Princess Grace of Monaco died from injuries sustained in a car crash the previous day. – 1982