US FINANCIAL MARKET
Stocks, Bonds Rebound Trimmed as Walkouts Spread: Markets Wrap – Bloomberg, 9/29/2023
- US stocks and Treasuries trimmed an advance as plans for auto plant strikes were expanded.
- The S&P 500 was up 0.5%, while the Nasdaq 100 pared back from a 1.4% jump after the Federal Reserve’s preferred measure of inflation increased at a slower-than-expected pace.
- The Dow Jones Industrial Average rose 0.1%.
- Ford Motor and General Motors turned negative on plans from the United Auto Workers to extend a walkout to three more plants.
- US equities climbed after core personal consumption expenditures price index, which strips out volatile food and energy, rose 0.1% in August, less than economists were expecting.
- Investors are looking for signs that pricing pressures are moderating and the central bank can eventually pivot from its high-rate regime.
- Treasury two-year yields, which are more sensitive to imminent policy moves, fell to 5.04%.
- The yield on 10-year Treasuries declined five basis points to 4.52%.
- A slump in the dollar eased. The Bloomberg Dollar Spot Index fell 0.2%.
- High rates around the globe have kept a lid on stocks of late.
- The July-September quarter has been the worst for MSCI’s all-country index since December, as surging oil prices fanned fears over inflation and economic growth.
- Oil declined for the second day after WTI rallied above $94 a barrel earlier this week, crude is headed for its biggest quarterly gain since March 2022.
- The Stoxx Europe 600 rose 0.8%.
- Gold futures fell 0.1% to $1,876.30 an ounce.
Nike Jumps as Profit, Inventory Results Ease Demand Fears – Bloomberg, 9/29/2023
- Nike shares jumped after surprise quarterly results indicated that demand for the sportswear giant’s goods is strong — and growing — despite a challenging consumer environment.
- Revenue of $12.9 billion for the quarter through August was just short of Wall Street’s average estimate.
- In Nike’s home market of North America, revenue fell 2%, just missing expectations.
- Sales in the Greater China region cooled as well, with growth of 4.8% coming in short of estimates.
- Executives said Nike is still gaining market share in China.
- Though revenue in China fell short of analyst expectations, executives expressed confidence that business in the region is poised for a rebound.
- Inventory fell 10% to $8.7 billion, a bigger decline than analysts expected and a sign Nike is making progress in moving out older merchandise for newer, more-profitable items.
- And gross margin, a key gauge of profitability, was higher than expected.
- Earnings of 94 cents a share exceeded expectations.
- Nike also reiterated its guidance for the full year.
- Revenue is seen rising in the mid-single digits, with margins up as much as 160 basis points.
- “Our top franchises are driving strong full-price sales,” Chief Financial Officer Matt Friend said on the analyst call.
- The company reported high-single digit to low-double digital growth with its retail partners, including Dick’s Sporting Goods in North America.
- It’s currently undergoing a “reset” with longtime partner Foot Locker, with sales expected to decline in the near-term, Friend said.
Carnival Earnings Outlook Misses While Fuel Costs Near 15-Year High – Bloomberg, 9/29/2023
- Carnival posted a profit for the first time since 2020 but issued a fourth quarter earnings outlook that missed Wall Streets’ expectations as higher fuel and currency costs weigh on its operations.
- Adjusted earnings before interest, tax, depreciation and amortization costs will be $800 million to $900 million in the fourth quarter, Carnival said in a statement Friday morning.
- Analysts had expected $950 million on average.
- The hit from currency headwinds and higher gas prices — which are expected to spike by 20% in the upcoming quarter — could hit the company’s full year outlook by as much as $130 million, Weinsten said.
- Carnival maintained its 2023 view for EBITDA of $4.1 billion to $4.2 billion.
UAW announces new strikes at GM and Ford plants, spares Stellantis citing ‘momentum’ in talks – CNBC, 9/29/2023
- The United Auto Workers union will expand strikes against General Motors and Ford Motor to two Midwest U.S. assembly plants at noon ET, UAW President Shawn Fain said Friday.
- The additional strikes will target Ford’s Chicago Assembly in Illinois, which produces the Ford Explorer and Lincoln Aviator SUVs, and GM’s Lansing Delta Township plant in mid-Michigan that produces the Buick Enclave and Chevrolet Traverse crossovers.
- Fain said Chrysler-parent Stellantis was spared from additional strikes because of recent progress in negotiations with that company, particularly around the right to strike over plant closures and cost-of-living adjustments, among other issues.
- “We are excited about this momentum at Stellantis and hope it continues,” Fain said.
- Fain said about 7,000 autoworkers will take part in the latest wave of work stoppages, joining roughly 18,300 workers who are currently on strike for the union.
- The Friday announcement was delayed by nearly 30 minutes because the union received a “flurry of interest” from the automakers, Fain said.
- GM and Stellantis in particular have grown increasingly frustrated by a lack of participation from Fain and what they say are delays in receiving counterproposals from the union, people familiar with the negotiations told CNBC.
UAW Aims For At Least 30% Wage Bump to Woo New Members – Bloomberg, 9/29/2023
- The United Auto Workers union wants to emerge from its strike against Detroit’s three major automakers with at least a 30% pay raise, according to people familiar with the matter.
- That’s the level — which is lower than the around 40% hike it initially proposed to Ford Motor, General Motors and Stellantis — that the union believes will allow it to satisfy existing members and organize non-union plants.
- It takes into account a cost-of-living allowance, or COLA, and a general wage increase, according to the people, who asked not to be named because the talks are private.
- If the COLA formula gives workers additional raises, it represents a smaller gap between the two sides on pay.
- A UAW source said the union submitted a counterproposal to Stellantis on Thursday.
SEC’s WhatsApp Fines Spread Further Across Wall Street – Wall Street Journal, 9/29/2023
- A group of 10 brokerage firms and money managers became the latest Wall Street firms to face fines over their employees’ use of banned messaging apps, paying a total of $99 million to regulators.
- Interactive Brokers, Perella Weinberg Partners, Baird and William Blair were among the firms that settled enforcement actions on Friday.
- The Securities and Exchange Commission and the Commodity Futures Trading Commission have imposed similar fines on three-dozen brokerage firms and money managers over multiple rounds of enforcement actions.
- The crackdown was meant to stop traders from texting about their business on apps that their compliance departments didn’t monitor.
- SEC officials have said they can’t conduct proper oversight if brokers communicate on encrypted tools such as WhatsApp and iMessage, whose records regulators might not be able to obtain.
- Friday’s fines were announced on one of the last days of the SEC’s fiscal year, when the agency typically pushes to finalize cases that can be included in its yearly enforcement statistics.
- The SEC set a record last year by imposing over $6 billion in penalties.
- The CFTC levied a $20 million penalty against Interactive Brokers, an online broker used by active traders.
- Interactive Brokers agreed to pay $35 million to the SEC.
Uber, DoorDash, Grubhub Must Pay $18 an Hour to NYC Couriers – Bloomberg, 9/29/2023
- Uber Technologies, DoorDash and Grubhub must pay food delivery workers at least $17.96 an hour after they lost an attempt to block the New York City minimum, a victory for the city as it seeks to rein in the now-ubiquitous services.
- New York State Supreme Court Justice Nicholas Moyne on Thursday declined to bar the city from implementing the rule, which forces companies to either pay couriers the flat hourly rate or pay per delivery at about 50 cents a minute.
- The three companies joined forces this year to fight the rule, which would have gone into effect on July 12.
- The case is one of several that delivery companies have launched in recent years to stymie efforts by New York to regulate their operations.
- Those include a 2021 challenge to a cap on commissions the apps can collect from restaurants and an attempt last year to strike down a requirement that they share customer data with the eateries they serve.
- The new law also provides for a second raise to almost $20 an hour in April 2025 for app delivery workers. The city’s minimum wage is $15 an hour.
- There are an estimated 60,000 delivery workers in New York who are paid about $11 an hour after tips and expenses, according to the city.
- Many of those are migrants, said Worker’s Justice Project, an advocacy group that backed the rule.
Tesla Sued for Race Discrimination by US Civil Rights Agency – Bloomberg, 9/29/2023
- Tesla was sued by the US Equal Employment Opportunity Commission, which alleges it created a hostile work environment for racial minorities at its California factory.
- The agency, formed to protect civil rights in the workplace, said in a lawsuit filed Thursday the electric-vehicle maker subjected Black workers “to severe or pervasive racial harassment.”
- It also alleged Tesla unfairly retaliated against workers who complained.
- In Thursday’s suit, the EEOC claimed Tesla’s mistreatment of Black workers at the Fremont facility started as early as 2015.
- The agency said non-Black employees repeatedly used racial slurs and made monkey noises, while managers at times “addressed Black employees individually and collectively as N-Words.”
- Additionally, workers also encountered racist graffiti, including nooses and swastikas, on desks, elevators and vehicles rolling off the production line.
- Tesla and the EEOC engaged in “mandatory mediation” in June 2023, but didn’t resolve the issues.
Google Search Is Like ‘Cigarettes or Drugs,’ Executive Said – Bloomberg, 9/29/2023
- A senior Google executive once likened the company’s search advertising business to selling drugs, calling it “one of the world’s greatest business models ever created” since the company can “ignore” users and focus on generating revenue from advertising.
- Michael Roszak, vice president for finance at Alphabet Inc.’s Google, wrote the notes during a July 2017 training Google offered on communications.
- “Search advertising is one of the world’s greatest business models ever created,” Roszak wrote, adding that there were only “illicit businesses (cigarettes or drugs) that could rival these economics.”
- Google’s business can effectively “ignore one of the fundamental laws of economics,” Roszak wrote, supply and demand.
- This allowed the company to “ignore the demand side of the equation (users and queries) and only focus on supply side of advertisers.”
- Because Google “made smart marketing/distribution investments to get our product everywhere,” Roszak wrote, “we could essentially tear the economics textbook in half.”
SEC Charges Newell Brands, Former CEO With Misleading Investors – Wall Street Journal, 9/29/2023
- The Securities and Exchange Commission charged Newell Brands as well as its former chief executive officer with misleading investors over financial-accounting practices.
- The maker of Sharpie markers and Rubbermaid containers agreed to pay $12.5 million in civil penalties to settle the charges.
- Michael Polk, who was CEO of Newell from 2011 to 2019, agreed to pay $110,000.
- The Wall Street Journal reported in 2020 that the SEC was investigating sales and accounting practices at the consumer-products maker.
- In 2016 and 2017, Newell and Polk boosted the company’s publicly disclosed core sales growth in ways that were out of step with Newell’s actual but undisclosed sales trends, the SEC said.
- The agency said Newell announced “strong” or “solid” results in quarters it internally described as disappointing due to shortfalls in sales.
- Newell pulled sales forward into earlier quarters without adequate disclosure and engaged in accounting practices that were inconsistent with generally accepted accounting principles, according to the SEC.
- “Today’s order finds that Newell’s former CEO issued an instruction to ‘scrub’ the company’s accruals after he learned that the company was projecting a ‘massive’ and ‘disappointing’ miss for the quarter,” said Mark Cave, associate director of the SEC’s division of enforcement.
Albemarle to Pay Over $218 Million to Settle Bribery Investigation – Wall Street Journal, 9/29/2023
- Albemarle has agreed to pay more than $218 million to settle an investigation into bribes paid by third-party sales representatives.
- The Charlotte, N.C.-based supplier of lithium and other materials said it voluntarily disclosed the payments to the Justice Department and Securities and Exchange Commission in 2018. The SEC said the payments violated the Foreign Corrupt Practices Act.
- From 2009 to 2017, Albemarle’s third-party sales agents and employees of its subsidiaries conspired to pay bribes to government officials to obtain and retain chemical catalyst business with state-owned oil refineries in Vietnam, Indonesia and India, the Justice Department said.
- Albemarle netted about $98.5 million in profit as a result of the scheme.
- “The actions taken by a limited number of former employees and third-party sales representatives happened years ago,” Albemarle said.
- “Those responsible for these past actions were held to account and separated years ago.”
US ECONOMY & POLITICS
US Core PCE Prices Post Smallest Monthly Rise Since Late 2020 – Bloomberg, 9/29/2023
- The Federal Reserve’s preferred measure of underlying inflation rose at the slowest monthly pace since late 2020, helping to lay the groundwork for policymakers to forgo an interest-rate hike at their next meeting.
- The core personal consumption expenditures price index, which strips out the volatile food and energy components, climbed 0.1% in August, according to the Bureau of Economic Analysis report out Friday.
- Inflation-adjusted consumer spending rose 0.1% last month.
- On a nominal basis, personal outlays increased 0.4%.
- Services inflation excluding housing and energy rose 0.1%, according to the BEA.
- The overall PCE price index, meanwhile, jumped 0.4% on a pickup in energy costs.
- The report showed inflation-adjusted spending on services rose 0.2%, helped by a pickup in outlays on transportation and recreation.
- Spending on merchandise fell 0.2%, the first drop since March, as purchases of motor vehicles and home furnishings declined.
- While wages and salaries growth accelerated, real disposable income, the main support to consumer spending, declined 0.2% for a second month.
Consumer sentiment improves slightly ahead of possible government shutdown – Market Watch, 9/29/2023
- Consumer sentiment improved slightly at the end of September, but Americans were unsure about the future of the economy.
- The final reading of the sentiment survey rose to 68.1 from 67.7 earlier in the month, the University of Michigan said Friday.
- Higher gas prices and rising interest rates are pinching households more than they were earlier in the year.
- A gauge that measures what consumers think about the current state of the economy rose to 71.4 from 69.8 in early September.
- A measurement of expectations for the next six months dipped to 66.0 from a preliminary 66.3.
- Americans think inflation will average 3.2% in the next year, down from 3.5% in the prior month.
- The official rate of inflation is 3.7%, using the consumer-price index.
Kevin McCarthy Wins Three, Loses One in Late-Night Spending Votes – Wall Street Journal, 9/29/2023
- House Republicans largely succeeded in passing a series of annual spending bills late Thursday night, trying to show that the often fractured conference can stay united on legislation headed into any last-gasp negotiations with Democrats to avert a government shutdown this weekend.
- As the clock ticked toward midnight, the House passed the GOP’s annual State Department and foreign aid appropriations bill, then the yearlong Defense Department and Homeland Security measures, with only a handful of defections in the three votes.
- But the final bill of the evening—funding the Agriculture Department—failed, with more than two dozen Republicans joining Democrats in opposition.
- The votes came as Speaker Kevin McCarthy (R., Calif.) is embracing border security as a possible way to break a congressional impasse over funding the government, saying it could be a key ingredient in any deal.
- Leaders from both parties in the House and Senate are hoping to strike a short-term funding deal to keep the government open for a matter of weeks or months while efforts to pass full-year legislation continue.
- The next step in the House comes Friday, when McCarthy plans a vote on a short-term spending patch, but some conservatives have said they plan to oppose the measure—and it has no pathway in the Senate in any case.
Biden OK’s Limited Offshore Drilling, Relenting on Campaign Promise – Wall Street Journal, 9/29/2023
- The Biden administration plans to schedule three oil and gas lease sales in the Gulf of Mexico over the next five years, a reversal of the president’s campaign promise to stop all new offshore drilling under his administration.
- The Interior Department, which oversees oil leases, said the sales are necessary because of last year’s clean-energy legislation, the Inflation Reduction Act.
- The agency said the law mandated that millions of acres of oil and gas leases needed to be offered by the administration in exchange for the expansion of offshore wind projects.
- The five-year program will be the fewest oil and gas lease sales in U.S. history and will allow the Biden administration to “support the growing offshore wind industry,” Interior Secretary Deb Haaland said.
Dianne Feinstein, Longest-Serving Female Senator, Dies at 90 – Bloomberg, 9/29/2023
- Dianne Feinstein, whose 30-plus-year tenure as a US senator was the longest in history by a woman and was distinguished by the battles she took on against gunmakers and the US intelligence community, has died.
- She was 90.
- She died on Thursday night at her home in Washington, according to a statement from her chief of staff, James Sauls.
- “There is much to say about who she was and what she did, but for now, we are going to grieve the passing of our beloved boss, mentor and friend,” he said.
- Amid questions about her age and fitness to keep serving, Feinstein had announced in February that she wouldn’t run for a seventh term in 2024.
EUROPE & WORLD
Euro-Zone Core Inflation Hits 1-Year Low, Backing ECB Pause – Bloomberg, 9/29/2023
- Euro-area core inflation eased to its slowest pace in a year, supporting expectations that the European Central Bank will keep interest rates on hold to gauge the impact of its unprecedented campaign of hikes.
- Underlying price gains, which strip out energy and food costs, came in at 4.5% in September, Eurostat said Friday.
- That’s down from 5.3% in August and much less than the 4.8% median estimate in a Bloomberg survey of economists.
- Headline inflation moderated to 4.3% from 5.2%, an almost two-year low that was also below expectations, led by a drop in energy costs but with services also slowing sharply.
- France’s central bank chief, Francois Villeroy de Galhau, said the current level of borrowing costs is “appropriate” as Friday’s euro-area data increase confidence that the ECB can get inflation back to target.
- “It’s probably the case that we are done with interest-rate increases,” Slovenian central bank head Bostjan Vasle told a panel discussion earlier.
- “We’re seeing some signs of inflation going down, also some first signs of sustainability of this trend. But on the other hand, there are still many uncertainties.”
- Bloomberg Economics’ nowcast model, which correctly predicted September’s inflation number, points to an October reading of 3.1%.
China’s Economy Improves in September, Satellite Data Show – Bloomberg, 9/29/2023v
- China’s economy showed signs of a stronger recovery in September, according to several early indicators and a firm analyzing the global economy using satellite data.
- Activity around Chinese shopping malls remained at relatively high levels in September following an increase in August, according to SpaceKnow, a US company that analyzes satellite images.
- A pickup in cement manufacturing, which began in June, was also sustained through this month, the data show.
- “We are in the ‘early signs of recovery’ team,” said Jan Pintera, an economist at SpaceKnow.
- He said satellite imagery showed a “positive direction for the Chinese construction sector” and “renewed consumer confidence.”
- Supporting the recovery story, traffic congestion in China surged in the week to September 27, reaching the highest level recorded for any week in 2022 and 2023, according to analysis of data from Baidu by Bloomberg New Energy Finance.
- The traffic gauge has been rising steadily since the start of August.
- Other indicators suggest China’s economy gained momentum in recent weeks. World Economics’s all sector Sales Growth Index for China increased to 53.1 in September, a six-month high.
- The Emerging Industries PMI, which some economists see as a leading indicator for China’s official manufacturing PMI, increased to 54 in September from 48.1 the previous month.
LVMH Billionaire Bernard Arnault Probed Over Possible Money Laundering – Bloomberg, 9/29/2023
- French billionaire Bernard Arnault’s dealings with a Russian businessman are being investigated for possible money laundering, the Paris public prosecutor’s office said Friday.
- The investigation into Arnault and Nikolai Sarkisov involves transactions related to property in the exclusive ski resort of Courchevel, according to Le Monde newspaper.
- The French daily reported that Sarkisov bought a series of properties in 2018 in Courchevel through intermediary companies but the end-buyer turned out to be Arnault.
- The chief executive officer of LVMH Moet Hennessy Louis Vuitton is alleged to have paid Sarkisov about €20 million ($21.2 million) to own the assets, while Sarkisov allegedly made a profit of around €2 million from the deals.
- The transactions appeared to mask the origin of the funds and the identity of the ultimate buyer, Arnault, investigators said, according to Le Monde.
Apple’s Latest China Challenge: A Crackdown That Could Shrink Its App Store – Wall Street Journal, 9/29/2023
- Apple staff met with Chinese officials in recent months to discuss concerns over new rules that will restrict the tech giant from offering many foreign apps currently available on its iPhone app store in China.
- Officials told Apple that it must strictly implement rules banning unregistered foreign apps, people familiar with the discussions said.
- Apple employees expressed concern over how the rules would be implemented and affect its users.
- China’s move to restrict the apps would close a loophole in the Great Firewall that allows Chinese iPhone users to download popular Western social-media apps such as Instagram, X (formerly Twitter), Facebook, YouTube and WhatsApp.
- While China has for years blocked web access to those sites, iPhone users who download the services’ apps can engage on the platforms if they log on through a virtual private network, or VPN, that connects them to an internet server outside the country.
- Many users, especially younger people, do this even though China bans the use of unauthorized VPNs.
- By July, Apple will no longer be able to offer such apps in its China app store unless the app operators are registered with the government, under new rules issued by China’s Ministry of Industry and Information Technology two months ago.
Nvidia Linked to Dawn Raid by French Competition Regulators – Bloomberg, 9/29/2023
- French antitrust enforcers raided the offices of a business suspected of engaging in “anticompetitive practices in the graphics cards sector,” targeting a company that the Wall Street Journal identified as Nvidia.
- “Raids do not presuppose the existence of a breach of the law,” France’s competition authority said in a statement on its website, “which only a full investigation into the merits of the case could establish, if appropriate.”
- The agency didn’t cite Nvidia by name, and the Santa Clara, California-based company declined to comment on the matter.
- The dawn raid was authorized by a liberty and custody judge, France’s competition authority said in its statement.
- The move followed a report by the agency on competition in the cloud computing market that was published on June 29.
U.S., China Talks Gain Momentum, Paving Way for Xi-Biden Summit – Wall Street Journal, 9/29/2023
- Beijing and Washington are paving the way for Chinese leader Xi Jinping to visit the U.S., moving ahead with high-level official exchanges and taking other steps to improve the tone of their turbulent relations.
- Both sides are discussing a trip to Washington by Xi’s top economic-policy aide, Vice Premier He Lifeng, according to people briefed on the matter.
- He would be the most-senior official to travel to the U.S. since President Biden took office.
- Meantime, planning is also under way for Foreign Minister Wang Yi to visit Washington in October to prepare for a Xi summit with Biden, the people said.
- China facilitated the transfer this week of an American soldier from North Korean custody, U.S. officials said.
- National security adviser Jake Sullivan had raised the soldier’s case in a meeting 10 days ago with Wang, the officials said.
- Beyond that gathering, Beijing is seeking a separate high-profile summit with Biden, something both governments see as a potential boost to the months of tentative efforts to stabilize ties.
China Blocks Executive at U.S. Firm Kroll From Leaving the Mainland – Wall Street Journal, 9/29/2023
- A senior executive at U.S. risk advisory firm Kroll has been barred from leaving mainland China for the past two months, heightening concerns about the risks foreign companies face when doing business in the country.
- Chinese authorities have taken an increasingly tough stance on foreign businesses this year.
- Authorities have raided the offices of due-diligence firm Mintz Group, questioned the staff of U.S. consulting firm Bain, and implemented strict new data rules.
- These moves have damaged American businesses’ confidence in China, which is at its lowest level in decades.
- Kroll operates a similar business model to some of the foreign firms targeted earlier this year, offering corporate investigations and due-diligence checks, as well as advising on restructurings and insolvencies.
- Michael Chan, a Hong Kong-based managing director at the company who specializes in corporate restructuring, traveled to the mainland in July and subsequently informed his employer that he cannot leave, according to people familiar with the matter.
- A Hong Kong passport holder, Chan can move freely in mainland China and is still working.
- King Richard II became the first English monarch to abdicate his throne. – 1399
- Sir Robert Peel’s police force, the “bobbies,” began operations at Scotland Yard. – 1829
- John Paul I died one month after becoming pope. – 1978
- Seven people died after taking Extra-Strength Tylenol capsules laced with cyanide. This led to the use of safety seals on most consumer products. – 1982
- The space shuttle Discovery was launched, the first American staffed space flight since the Challenger disaster. – 1988
- Former South Vietnam president Nguyen Van Thieu died. – 2001