US FINANCIAL MARKET
Wall Street Is Bracing for Fed’s ‘Hawkish Hold’: Markets Wrap – Bloomberg, 9/20/2023
- Stocks, bonds and the dollar saw small moves, with traders betting the Federal Reserve will keep interest rates steady on Wednesday while hinting at the possibility of hiking again, if warranted.
- The S&P 500 edged higher. The Nasdaq 100 was little changed. The Dow Jones Industrial Average rose 0.4%.
- FedEx, a global economic bellwether, is due to report earnings after the close.
- Two-year US yields halted a four-day advance. The yield on 10-year Treasuries declined three basis points to 4.33%.
- The dollar fell against all of its developed-market peers. The Bloomberg Dollar Spot Index fell 0.2%
- Oil dropped, following a rally that briefly sent Brent above $95 a barrel and spurred inflation concerns.
- West Texas Intermediate crude fell 0.2% to $91 a barrel.
- The pound underperformed as the market pared bets on further Bank of England tightening after an inflation slowdown.
- The Federal Open Market Committee is expected to keep rates in a range of 5.25% to 5.5% — a 22-year high.
- The rate decision and committee forecasts will be released at 2 p.m. in Washington.
- Chair Jerome Powell will hold a press conference 30 minutes later.
- Wall Street will be focused on whether Fed officials’ forecasts for interest rates, the so-called dot plot, show the committee seems determined to hike again.
- Pinterest climbed, with analysts positive on the social-networking company in the wake of its investor day event.
- Instacart’s debut rally is fizzling out, just a day after it went public in one of this year’s biggest US listings.
- The Stoxx Europe 600 rose 1%.
General Mills’ Earnings Show Inflation, Supply-Chain Issues Easing – Wall Street Journal, 9/20/2023
- General Mills posted higher sales in its latest quarter, during which it said inflation and supply-chain pressures eased.
- Total sales hit $4.9 billion, just ahead of Wall Street analyst forecasts for $4.88 billion.
- The maker of Lucky Charms cereal and Bisquick pancake mix reported Wednesday that revenue rose 4% for the quarter ended Aug. 27, with the top line once again boosted by price increases.
- Sales volumes, meanwhile, slipped 2%, with shortfalls in its North American retail, pet and international segments.
- The company’s pet-food business, which seemed to be rebounding last quarter, turned in flat sales as price increases were offset by lower volumes.
- The company’s North American food-service business, which works with schools, hospitals and restaurants, saw volumes jump 7% during the quarter, driving the majority of that unit’s revenue growth.
- Those higher prices helped lift the company’s gross margin, though a jump in overhead costs cut into the bottom line.
- Stripping out one-time items, adjusted earnings came in at $1.09 a share, a penny per share above the consensus estimate of analysts surveyed by FactSet.
- Chief Executive Jeff Harmening said the quarter was characterized by “moderating inflation, stabilizing supply chains and a resilient but increasingly cautious consumer.” General Mills maintained its guidance for the year, which calls for sales to rise 3% to 4%.
- For the quarter, General Mills reported a profit of $673.5 million, or $1.14 a share, down from $820 million, or $1.35 a share, in the same quarter a year ago.
Klaviyo IPO Forges $3 Billion Fortune for Harvard Physicist – Bloomberg, 9/20/2023
- The seemingly low-stakes world of text and email customer messaging will mint some big fortunes Wednesday, when marketing technology firm Klaviyo begins trading in New York.
- Andrew Bialecki founded the Boston-based firm in 2012.
- The platform enables businesses to create targeted marketing campaigns, track customer behavior, and analyze their performance.
- It grew rapidly, attracting investors including Summit Partners, Lone Pine Capital and Shopify.
- The company’s $30 a share offering price values it at $9 billion based on its fully diluted share count.
- Klaviyo had net income of about $15 million on revenue of $321 million for the first six months of 2023, compared with a loss of $25 million on revenue of $208 million for the same period last year.
- Its initial public offering raised $576 million.
- Of the $455 million in primary capital it had raised before the company’s IPO, the company says it spent only $15 million in the operation of its business.
Ford Averts Second Strike, Secures New Labor Contract in Canada – Wall Street Journal, 9/20/2023
- Ford Motor reached a new tentative labor deal late Tuesday with Canadian labor union Unifor, avoiding what could have been a second strike at the automaker’s operations in less than a week.
- Contract talks with Unifor have been running parallel to those in the U.S. with the United Auto Workers union, an unusual overlap that has put pressure on Ford and its two Detroit rivals—General Motors and Chrysler-parent Stellantis—with two unions simultaneously pressing for more in pay and benefits.
- Unifor and the company didn’t disclose details of the tentative agreement, which covers about 5,600 members at Ford’s Canadian facilities.
- The union said it would present details to members in meetings ahead of a ratification vote.
- Unifor, which is separate from the UAW, represents roughly 18,000 workers at GM, Ford and Stellantis in Canada.
- The union had said it was pressing Ford for improved pensions, higher wages, and some form of support to protect workers as the company transitions to making electric vehicles.
- Unlike in the U.S., where the UAW has taken an unorthodox approach to talks, Unifor has gone a more traditional route by targeting one automaker to reach a deal with first, with the intention of using that agreement as a template for the other two.
- The Canadian union extended its contracts at GM and Stellantis to continue bargaining with those two and will likely turn to one of them next, a union spokeswoman said Tuesday night.
UAW Strikes a Mercedes Parts Plant While Union Eyes More Targets – Bloomberg, 9/20/2023
- The United Auto Workers struck a plant that makes parts for Mercedes-Benz Group vehicles, as the union continued to weigh expanding the number of walk-out targets at Detroit’s automakers.
- On Wednesday morning, the UAW posted on X that 190 workers at a ZF plant in Tuscaloosa, Alabama, that supplies front axles to Mercedes were now on strike.
- The job action followed a union social media post Tuesday evening with a Spartacus movie clip showing “UAW locals waiting to go out on strike” as the title character’s fellow rebels in turn each stand and claim “I am Spartacus.”
- President Shawn Fain has said more plants faced walkouts if General Motors, Ford Motor and Stellantis, the maker of Jeep and Chrysler models, didn’t sweeten their offers.
- The carmakers said bargaining had continued on Tuesday.
- In Washington on Tuesday, the Biden administration continued to monitor the strike negotiations, but said Tuesday that acting Labor Secretary Julie Su and White House adviser Gene Sperling would not yet be traveling to Detroit to help the two sides.
Apple and Goldman were planning stock-trading feature for iPhones until markets turned last year – CNBC, 9/20/2023
- As equities soared in 2020 and consumers flocked to trading apps like Robinhood, Apple and Goldman Sachs were working on an investing feature that would let consumers buy and sell stocks, according to three people familiar with the plans.
- The project was shelved last year as the markets turned south, said the sources, who asked not to be named because they weren’t authorized to speak on the matter.
- The effort, which has not been previously reported, would have added to Apple’s suite of financial products powered by Goldman.
- Apple’s conversations with Goldman began during that hype cycle in 2020, two sources said.
- Their work progressed, and an Apple investing feature was meant to roll out in 2022.
- One hypothetical use case pitched by executives involved the ability for iPhone users with extra cash to put money into Apple shares, one person said.
- But as markets were roiled by higher rates and soaring inflation, the Apple team feared user backlash if people lost money in the stock market with the assistance of an Apple product, the sources said.
- That’s when the iPhone maker and Goldman switched directions and pushed the plan to launch savings accounts, which benefit from higher rates.
Goldman Sachs in Advanced Talks to Sell GreenSky in Big Step in Consumer Retreat – Wall Street Journal, 9/20/2023
- Goldman Sachs is in advanced discussions to sell its specialty lender, GreenSky, to a group of investment firms, in a major step away from the Wall Street bank’s failed experiment in consumer lending.
- The group includes Sixth Street, Pacific Investment Management and KKR, according to people familiar with the matter.
- A deal would be worth about $500 million, according to people familiar with the matter, less than one-third of what Goldman paid for the business just a year-and-a-half ago.
- Goldman paid roughly $1.7 billion for GreenSky, which specializes in extending loans to consumers for home renovations, hoping it would help the Wall Street giant be a bigger competitor in consumer lending and a “banking platform of the future,” Chief Executive David Solomon told The Wall Street Journal at the time.
Justice Department Probe Scrutinizes Elon Musk Perks at Tesla Going Back Years – Wall Street Journal, 9/20/2023
- Federal prosecutors are scrutinizing personal benefits Tesla may have provided Elon Musk since 2017—longer than previously known—as part of a criminal investigation examining issues including a proposed house for the chief executive.
- The U.S. Attorney’s Office for the Southern District of New York also has sought information about transactions between Tesla and other entities connected to the billionaire, people familiar with the investigation said.
- Prosecutors have referenced the involvement of a grand jury.
- The new information indicates that federal prosecutors have a broader interest in the actions of Musk and Tesla than was previously known and that they are pursuing potential criminal charges.
- The Wall Street Journal reported last month that the Justice Department is investigating Tesla’s use of company resources on a secret project that was described internally as a house for Musk.
- The house effort was known within the carmaker as “Project 42,” and plans called for an expansive glass building to be constructed near Tesla’s Austin-area factory and headquarters.
- The Securities and Exchange Commission has opened a separate civil investigation into the project, the Journal has reported.
- Zach Kirkhorn, who was Tesla’s chief financial officer before stepping down last month, was among those who raised concerns internally about the project.
Marlboro Maker Hits Reset on $2 Billion Bet on Medicine – Wall Street Journal, 9/20/2023
- Philip Morris International’s push into healthcare is faltering, prompting the tobacco giant to consider options such as selling a stake in its biggest pharmaceuticals unit.
- The deals inserted the Marlboro maker into the market for inhalers and other treatments for respiratory diseases that are linked to cigarette smoking.
- Philip Morris’s struggles came into view over the summer, when the company took a $680 million charge on its wellness and healthcare business and postponed its ambitious revenue goals for the business.
- Now, Philip Morris is considering the possible sale of a stake in its biggest pharmaceuticals unit, as it searches for a new partner to help it make the business work.
- Philip Morris acquired that business, an inhaled-medication company called Vectura Group, in a $1.24 billion deal after winning a bidding war against private-equity firm Carlyle Group.
- Philip Morris has had discussions with Deutsche Bank on a range of options to try to grow its wellness and healthcare division, according to people familiar with the matter.
- The tobacco company said it is looking to bring on a partner to help operate and grow Vectura’s drug manufacturing outsourcing business, possibly through a sale of a majority or minority stake in that business.
- Other options include a licensing or royalties deal or a commercial partnership, Philip Morris said.
Budweiser Parent to Stop Cutting Tails Off Clydesdale Horses After Pressure From Activists – Wall Street Journal, 9/20/2023
- Budweiser owner Anheuser-Busch said it has stopped cutting the tails off its famous Clydesdale horses after months of pressure from animal-rights activists who say the practice is cruel.
- The brewing giant’s concession to activists comes as it tries to navigate its way through the culture wars, after a consumer backlash over a promotion with transgender influencer Dylan Mulvaney buffeted sales.
- The Budweiser Clydesdales rank among America’s best-known corporate icons and are one of AB’s oldest and most consistently used marketing motifs.
- Budweiser owns dozens of Clydesdales that reside at its breweries in St. Louis, and has a further 75 at its Warm Springs breeding ranch in Boonville, Mo.
- It has used the Clydesdales for marketing since 1933, when it sent a beer wagon drawn by six horses across the East Coast delivering Buds in celebration of the end of prohibition.
US ECONOMY & POLITICS
White House Warns of Long Lines at Airports, Other Delays if Government Shuts Down – Wall Street Journal, 9/20/2023
- Long lines at airports. Delayed food-safety inspections. Halted infrastructure projects. Military personnel working without pay.
- These are just some of the potential consequences if the federal government partially shuts down next month, according to the White House, as infighting among House Republicans over spending makes a lapse in funding increasingly possible.
- The White House on Wednesday weighed in publicly on the fallout from a shutdown for the first time.
- While White House officials have criticized House Republican appropriations bills, they have largely avoided wading directly into the politics of a shutdown.
- “[I]f extreme House Republicans fail to ram through their radical agenda, they plan to take their frustration out on the American people by forcing a government shutdown that would undermine our economy and national security, create needless uncertainty for families and businesses, and have damaging consequences across the country,” the White House said.
- Some Republican lawmakers also worried about the political fallout of a shutdown. “I think all of you know, I’m not a fan of government shutdowns,” Senate Minority Leader Mitch McConnell (R., Ky.) said this week.
- “I’ve seen a few of them over the years, they never have produced a policy change and they’ve always been a loser for Republicans politically.”
SEC to Impose New Rules for Labeling Popular Investment Funds – Bloomberg, 9/20/2023
- The world’s biggest investment firms are set to get much tougher rules for naming funds, as the US Securities and Exchange Commission clamps down on labels it says can be misleading.
- The regulations, which the SEC will vote on during a meeting Wednesday in Washington, would be its most sweeping overhaul for fund-labeling regulations in more than two decades.
- Backers say the measures in particular will help rein in overblown claims about environmental, social or governance investments.
- The SEC during the Biden administration has grown increasingly concerned that funds billboard certain buzzwords to attract investors, even if they don’t accurately reflect their actual strategies.
- One focus has been on a lack of consistent standards for investments that claim to be sustainable, with the ESG label slapped on everything from exchange-traded funds to complex derivatives.
- The new SEC rules would apply to funds with trillions of dollars in assets combined.
- In addition to ESG, they would impact thematic investment strategies with labels like “growth” or “value.”
- The agency also would bolster its long-existing requirements that a fund generally invest 80% of its assets in line with the stated focus.
EUROPE & WORLD
BOE Rate Hike Hangs in the Balance for Market as Inflation Slows – Bloomberg, 9/20/2023
- Traders are betting on an imminent end to the Bank of England’s string of interest-rate increases after inflation unexpectedly slowed to the lowest level in 18 months.
- The Consumer Prices Index rose 6.7% from a year ago in August, less than the 6.8% gain the month before, the Office for National Statistics said Wednesday.
- Economists had expected a rise to 7%.
- Investors reacted by paring bets on further tightening aggressively, driving the pound to the weakest level since May and spurring a rally in government bonds.
- The market is pricing a 50% chance of a quarter-point hike by the BOE when it sets policy next on Thursday.
- A core measure of prices stripping out food and fuel fell sharply to 6.2% from 6.9%.
- Services inflation eased to 6.8% from 7.4%.
- Those will relieve concerns at the BOE that upward pressure on wages is making price pressures more persistent.
- Compared with a year earlier, the cost of fuel and raw materials fell 2.3%, while the price of goods leaving factory gates declined 0.4%.
Ukrainian Tactics Put Russia on the Defensive in the Black Sea – Wall Street Journal, 9/20/2023
- Commercial vessels have resumed using Ukraine’s main port of Odesa without asking permission from Russia for the first time since the war began—showing just how much the balance of power has changed in the Black Sea.
- By imposing an asymmetrical war that relies on domestically produced naval drones and missiles, and that targets Russians ships in their own home bases, Ukraine has eroded much of Russia’s vaunted naval superiority.
- “To ensure our security, now and in the future, we must start the defense of our shore on the shore of the enemy,” the commander of the Ukrainian navy, Vice Adm. Oleksiy Neizhpapa, said in an interview.
- “This is an approach that we’re trying to implement little by little.”
- Outnumbered 12 to one by the Russian Black Sea Fleet, the Ukrainian Navy wasn’t considered a meaningful force when Russia invaded in February 2022.
- Today, Russian warships no longer dare to venture into the northwestern part of the Black Sea, deterred by Ukrainian coastal missiles and extensive minefields.
- Victor Emmanuel II, the first king of modern Italy, seized the Papal States from the French. – 1870
- Chester A. Arthur was sworn in as the 21st president of the United States, succeeding James A. Garfield, who had been assassinated. – 1881
- Billie Jean King beat Bobby Riggs in a battle of the sexes tennis match. – 1973
- Independent Counsel Robert Ray announced the end of the Whitewater investigation, saying there was insufficient evidence to charge President Clinton and his wife, Hillary. – 2000
- President George W. Bush addressed the nation and a joint session of Congress about terrorism. He also named Tom Ridge as head of the new Office of Homeland Security. – 2001