CWS Market Review – September 24, 2024
Posted by Eddy Elfenbein on September 24th, 2024 at 5:52 pm

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The Federal Reserve Cuts By 0.5%

Last week, the Federal Reserve voted to lower interest rates by 0.5%, although I think it’s more accurate to say that the Fed undid some of the historically aggressive rate hikes it deployed in 2022 and 2023.

Over a 16-month period, the Fed hiked short-term interest rates a total of 525 basis points. The aggressive rate hikes were intended to combat a nasty bout of inflation. At one point, inflation was running at more than 9%.

Now, more than a year after the last Fed hike, and with inflation trending below 3%, the central bank decided to slash rates by 0.5%.

I admit I didn’t think the Fed would go through with a rate cut that large. So far, Wall Street seems quite pleased with the move. Today the S&P 500 closed at another all-time high, its 41st of the year. The Nasdaq was up as well but it’s still below its high from more than two months ago.

Overall, this has been a good year for the stock market. The S&P 500 Total Return Index, which includes dividends, is up 21% this year. We’re about to close out Q3, and the S&P 500 is on track for its fourth quarterly gain in a row.

It looks like this will only be the first in a long series of rate cuts. For the November meeting, traders are evenly split on whether the Fed will cut by 0.25% or by 0.50%. That meeting will be shortly after the election.

While the exact plans are in doubt, the overall strategy is clear: the Fed is leaning towards cutting rates. Over the next four meetings, traders expect the Fed to cut interest rates by a total of 1.5%. That makes sense if you believe that inflation has been whipped.

Still, this is an unusual rate cut because it’s happening while unemployment is still low (but rising) and the stock market is strong. I have my doubts that we can easily settle back into the economic environment we had before the last bout of inflation.

It’s also unusual that the financial markets are seemingly unbothered even though there’s more evidence that Americans are apprehensive about the future. A good example is that earlier today, shares of Lowe’s (LOW) and Home Depot (HD) both reached new all-time highs. I highlight the home improvement duo because they’re a good indicator of what the economy is doing at the ground level.

Other industrial stocks like 3M (MMM), Caterpillar (CAT), Sherwin-Williams (SHW) and Carrier Global (CARR) also hit new highs.

What’s Next for the Fed?

In last week’s Fed decision, the only dissenting vote came from Michelle Bowman. What makes her dissent noteworthy is that Bowman is a Fed Governor, not a regional bank president. Typically, Fed Governors vote in line with the Fed chair. Bowman’s dissent is the first for a Fed governor in nearly 20 years. She believes that the Fed should be cutting by only 0.25%.

Earlier today, Bowman spoke before a group of bankers in Kentucky where she had a chance to explain her decision. She said that the Fed’s big cut “could be interpreted as a premature declaration of victory on our price-stability mandate.”

There’s also a basic thought that inflation, however you want to measure it, is still not at the Fed’s target rate of 2%. The rate cut assumed that inflation will safely glide itself into port. Bowman also believes that a cut of 0.5% would signal to the market that the economy is in greater peril than it truly is.

The two-year Treasury yield has a decent track record of running just ahead of the Fed on interest rates. Right now, there’s a big divergence between the two. Even after the rate cut, the Fed funds rate is still 1.2% above the 2-year yield. That’s a good sign that more cuts are coming.

Indeed, there are still worrying signs about the economy. Earlier today, the Conference Board said that its measure of consumer confidence dropped from 105.6 in August to 98.7 for September.

That was the biggest drop since August 2021, and it was below Wall Street’s expectations for 104. For context, before Covid, consumer confidence reached 132.6 in February 2020. Of the economic subgroups, the largest drop in confidence came among those making less than $50,000. Stocks are happy while consumers are tapped out.

Another good example of this was today’s Case-Shiller report which showed that home values hit another new high, but housing affordability, which adjusts for mortgages costs, is near the lowest on record.

Another troubling sign is that the price of gold has been rallying strongly. Typically, this is a crisis asset that investors flock to during turbulent times. Reuters reports that most banks expect gold’s run to last into next year. On Tuesday, the Midas metal got as high as $2,639.95 per ounce. Gold is having a great year.

On Thursday, the government will offer its second revision to the Q2 GDP report. The last report said the economy grew at a real, annualized rate of 3% during the second three months of the year. I’m curious how well the economy did during Q3. For now, Wall Street is sounding optimistic. The Atlanta Fed’s GDPNow model estimates the economy grew at a 2.9% rate for Q3. Goldman Sachs said it expects growth of 3.0%.

Typically, as the economy gets weaker and the Fed lowers rates, we can expect that defensive stocks will do well. Over the summer, many defensive stocks started to perk up and outgained the rest of the stock market.

Here’s a chart of the S&P 500 Consumer Staples ETF (XLP) and the S&P 500 Healthcare ETF (XLV) divided by the S&P 500 ETF (SPY).

You can see how the market changed its mind. At one point, no one wanted anything to do with defensive stocks, but this summer, they got hot again (although they’ve been slipping back down lately).

I think this trend has more room to run. Defensive stocks offer more stability and often higher dividends than the rest of the market. Also, many defensive areas of the market have fallen to favorable valuation metrics.

On our Buy List, this means stocks like Hershey (HSY) or Stryker (SYK). For income investors, that means utilities like American Water Works (AWK).

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Morning News: September 24, 2024
Posted by Eddy Elfenbein on September 24th, 2024 at 7:00 am

Climate Change is So Bad, Even the Arctic is On Fire

Europe’s Refinery Cutbacks Show a Fading Industry

The U.S. Is Mining for Uranium

If There’s a Nuclear Renaissance, Here are the Stocks to Watch, Says UBS

China Is Striking Deals to Cement Its Role as Asia’s Trade Hub

China Unleashes Stimulus Package to Revive Economy, Markets

BOJ Governor’s Cautious Comments Damp Speculation of October Hike

German Recession Angst Mounts as Companies Grow More Pessimistic

UBS Ahead of Schedule on Cost Savings, CEO Says

World Bank’s IFC Investments Hit Record $56 Billion in FY 2024, Managing Director Says

World Leaders to Kick Off Money Fight With Renewable Goal Update

Bond Anomaly That Twisted Yields From US to Germany Is No More

Trump Dangles So Many Tax Breaks Even Some Advisers Are Confused

How Amateur Investors Can Maximize Their Returns

The Commercial-Property Market Is Coming Back to Life

A Looming East Coast Port Strike Could Shake the Economy

A Private-Equity Executive Pushes for Workers’ Stake in U.S. Companies

Boeing Union Balks at Sweetened Pay Offer to Workers

Rethinking ‘Checks and Balances’ for the A.I. Age

Don’t Count on a Megadeal to Save Intel

Intel Doesn’t Need a Takeover. It Needs a Turnaround.

Huawei’s 3-in-1 Smartphone Hits Limits of Foldable Engineering

Regional Airlines Are Doing Terribly. They Need a Recession.

After Years of Warnings, Telegram Founder Cedes to Police Requests About Users

Spurned by Social Media, Publishers Chase Readers on WhatsApp

TikTok to Shut Down its Music Streaming Business in November

Illegal Streaming of Live Sports Has Gone Mainstream. Can Anything Be Done?

Restaurant Portions Are About to Get Smaller. Are Americans Ready?

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Morning News: September 23, 2024
Posted by Eddy Elfenbein on September 23rd, 2024 at 7:06 am

The Game Isn’t Over for China But It Is ‘Garbage Time’

China Stimulus Hopes Rise as PBOC Cuts Rate, Plans Briefing

Argentina Dollar Deposits Spike by $8 Billion Under Milei

Eurozone Faces Contraction as Soft-Landing Doubts Mount

Euro Zone’s Teetering Economy Fuels Bets on Faster ECB Rate Cuts

European Banks Are Factoring Climate Risks Into Loans, ECB Says

The UK Is Nearly Done Burning Coal. Is Gas Next?

London’s Ultra-Rich Flee the Threat of Rising Taxes

Rightmove to Consider REA’s Sweetened $8 Billion Bid

America’s Ambitious Climate Plan Is Faltering

America’s Fiscal Exceptionalism Is All Too Real

How Trump Could Upend Taxation in America

Here’s What Happens to Markets When Interest Rates Fall, in Charts

UniCredit Boosts Commerzbank Stake Despite Berlin Opposition

BNP Paribas Signs Deal to Buy HSBC Private Banking Unit in Germany

Palantir’s CEO and Wall Street Annoy Each Other Straight to the Bank

Apollo to Offer Multibillion-Dollar Investment in Intel

3 Reasons Why There is ZERO Chance of a Qualcomm, Intel Merger

Siemens to Carve Out eMobility Electric Vehicle Charging Unit

EVs Are Cleaner Than Gas Cars, But a Growing Share of Americans Don’t Believe It

AstraZeneca and Daiichi Suffer New Setback With Mixed Breast Cancer Drug Results

Ozempic and Wegovy Sales Will Soon Pay for $68 Billion of Novo R&D

Boar’s Head Shutdown Deals a Hard Blow to a Battered Corner of Virginia

Tempur Sealy to Sell Sleep Outfitters, Mattress Firm Stores

They’ve Got a Plan to Fight Global Warming. It Could Alter the Oceans

Tourism’s Next Battlefront: Water

Meet the Birkin Bag of the Book World: Collectible, Covetable and Priced to Match

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Morning News: September 20, 2024
Posted by Eddy Elfenbein on September 20th, 2024 at 7:01 am

Africa Floods Spread Misery Where 55 Million Already Face Hunger

Brazil’s Online Gambling Craze May Be Hitting Consumer Spending

China Budget Spending Slide Deepens in Worrying Sign for Economy

China Leaves Benchmark Lending Rates Unchanged, Defying Expectations

China Says It Will ‘Gradually’ Resume Imports of Japanese Seafood

Japan Gears Up for More Than $3 Billion of IPOs in October

China Weight Removing Major Homebuying Curbs to Boost Demand

Sanctions on Russia’s Oil Tankers Lack Bite

EU Plans New €35 Billion Loan for Ukraine Under G-7 Plan

Pope Francis Tells Catholic Cardinals He Wants ‘Zero Deficit’ Agenda

The UK May Be Your Best Bet For the Next Decade

Treasury Yields Move Lower as Investors Digest Unemployment Data After Fed Cut

Now That Rates Are Falling, Let’s Turn to Other Matters

The Fed Risks a Political Backlash by Spurring Economy Close to Election

Americans Are Desperate for Relief. The Rate Cut Is a Glimmer of Hope.

Jerome Powell Says the Fed Can Cut Rates But It Can’t Fix the Housing Crisis

Biden Awards $3 Billion to Boost Domestic Battery Production

Microsoft’s AI Power Needs Prompt Revival of Three Mile Island Nuclear Plant

Amazon Is Trying to Kill the Meeting Before the Meeting

Amazon Fire TV Stick Sales in Germany at Risk After Court Ruling

Boeing Girds for Long Strike as Gig Economy Gives Workers Clout

What Happened to 23andMe?

Nike Has Gone and Done It

Nike Replaces CEO With Veteran Executive Hill in Revival Bid

Tupperware (the Brand) May Fail. Tupperware (the Word) Will Survive.

Is Your Bag Luxurious Enough for a Government Lawsuit?

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Morning News: September 19, 2024
Posted by Eddy Elfenbein on September 19th, 2024 at 7:05 am

The Indian Apartment Behind Russian Efforts to Break US Gas Sanctions

A Record Gold Price Offers Miners a Shot at Investor Redemption

Chinese Automakers’ Answer to E.U. Tariffs: Build in Europe

Spain Hails China as Strategic Partner Ahead of EV Tariffs Vote

Avoiding Apocalyptic Satellite Crashes Comes Down to China Checking Its Email

Xi Unleashes a Crisis for Millions of China’s Best-Paid Workers

Taiwan Central Bank Leaves Key Interest Rates Unchanged

Bank of England Holds Off on Rate Cut After Fed Goes Big

BOE to Slash Bond Portfolio by £100 Billion Over Next Year

Markets Got Powell’s Message — Smaller for Longer

Nasdaq Futures Jump 2% as Big Fed Cut Spurs Rally

The Fed Has Significantly Improved the Odds of a Soft Landing

America’s Inflation Fight Is Ending, but It’s Leaving a Legacy

In a Major Shift, the U.S. Government Explores Giving Renters Cash, Not Vouchers

US Bank Stocks Rise as Jumbo Rate Cut Eases Default Risk, Cost Concerns

UniCredit’s Orcel Takes Aim at Europe’s Banking Borders with Commerzbank Bet

Apple Gets EU Warning to Open Up iPhone Operating System

Salesforce Is a Dark Horse in the AI Race

Startup Founded by Ex-Google Exec to Use AI to Forecast Weather

Lazard Follows Goldman in Setting Up Mideast HQ in Saudi Arabia

Company Says It Is Investigating Radios Targeted in Lebanon Blasts

Saudi Arabia Agrees to Build Golf Venues With Topgolf Callaway

Axel Springer Strikes Deal With KKR to Split Up Publishing Giant

Amazon’s New ‘Shark Tank’-Style Show Gives Winners Top Billing in Its Store

Darden Strikes Uber Deal to Deliver Olive Garden Breadsticks and Pasta

Tucker Carlson, Taking Aim at Zyn, Plans New Nicotine-Pouch Brand

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Morning News: September 18, 2024
Posted by Eddy Elfenbein on September 18th, 2024 at 7:06 am

UK Gas Plants Are Hardly Running as Renewable Power Floods Grid

Gold-Rich Sudan Talks Mining With Russia as War Alliances Shift

US Decision on Nippon Bid for US Steel Pushed Back to After Nov Election

Cleaning Up Grids in the Developing World Is a Daunting Task

ECB Must Remain Patient to Fully Reach 2% Price Goal, Nagel Says

Brazil’s Tinkering to Meet Fiscal Target Threatens to Dent Credibility

Bank of Japan Expected to Stand Pat; All Eyes for Clues on Timing of Next Hike

Indonesia’s Central Bank Kicks Off Easing Cycle

Why Uncertainty Still Hangs Over the Fed’s Big Decision

The Fed Is a Poor Guide for Stock Investors

Traders Lock In Fed Bets as Rate-Cut Size Debate to Finally End

A Fed Rate Cut Would Cap a Winning Streak for Biden and Harris on Prices

Hedge Fund Titans Breed a $14 Billion Pack of Startup Cubs

Dalio Sees ‘Real Issues’ in China, Keeps Small Exposure

JPMorgan CEO Jamie Dimon to Visit Africa in Growth Push

US Faces a Deficit of 6 Million Workers in Less Than a Decade

The Unemployment Measure You’ve Never Heard is Flashing a Recession Warning

Amazon’s Andy Jassy Ordered a Full-Time Return to the Office—but Research Says He’ll Backtrack Next Year

Foldables Are Becoming Good Enough to Be Your Next Smartphone

G.M. Electric Vehicles Gain Access to Tesla Chargers

UAW Clashes With Jeep Maker Stellantis, Threatening Strike

How $90,000 Jeeps Made a Fool Out of Me

Craigslist Founder Pledges $100 Million to Boost U.S. Cybersecurity

Tupperware Files for Bankruptcy as Turnaround Effort Fails

How a Tariff Rule Aimed at China Could Affect U.S. Ad Spending

Messi Fuels a Wealth Boom in US Soccer That Risks Unraveling Once He’s Gone

South Korean Role Model’s Reputation at Stake in Kakao Trial

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Morning News: September 17, 2024
Posted by Eddy Elfenbein on September 17th, 2024 at 7:05 am

Japan Halts Removal of Melted Fuel at Fukushima on Camera Outage

Biden Struggles to Refill Oil Reserve on the Cheap

US Allies Struggle to Break China’s Dominance of Rare Earths

China’s ‘Silver Economy’ Is Thriving as Birthrate Plunges

German Economic Expectations Darken Further

DP World Teams With Nedbank to Finance More Africa Trade

Workforce Dropouts Make UK ‘Sick Man of Europe,’ Report Says

Banking’s New Era of Capital Puts Watchdogs on the Spot

Bank Mergers May Get Tougher to Do

Banking Deal Oversight Expected to Get a Major Revamp

Hong Kong’s Biggest Listing in Years Lures Back Global Investors

Bets Are In, But the Fed’s Still Running the Casino

Markets Hinge on Powell Emulating Greenspan’s Soft Landing

Will Lower Rates Unleash a Business Boom? It’s Complicated.

What Fed Rate Cuts Will Mean for Five Areas of Your Financial Life

Trump’s Banker Brawls With Whistleblowers, Marxists and Shorts

Business Schools Are Undergoing Unusual Change

A Decade After ‘Lean In,’ Progress for Women Isn’t Trickling Down

Biggest Question from Kroger-Albertsons Trials: What’s a Grocery Store?

Kroger Antitrust Case Could Open Up New Bag of M&A Possibilities

Microsoft Plans New $60 Billion Buyback, Raises Dividend 10%

Amazon’s Five-Day Office Mandate Isn’t as Strict as it Sounds

Meta Plans to Bar the Russian TV Network RT From Its Apps

Instagram, Facing Pressure Over Child Safety Online, Unveils Sweeping Changes

Instagram’s New ‘Teen Accounts’: What Parents and Kids Need to Know

Sony Is Rethinking the Console Business Model With PS5 Pro

Universal Music Banks on Subscriptions, Partnerships to Drive Revenue Growth Through 2028

PGA Tour’s Saudi Deal Drags On With Players Arguing Over Pay

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Morning News: September 16, 2024
Posted by Eddy Elfenbein on September 16th, 2024 at 7:03 am

UK Targets London Outpost of Iran Oil Kingpin ‘Hector’

Why Washington and Big Oil Are Investing Billions in Ammonia

The Power Grid Has Withstood the Heat, but Electric Supplies Are Tight

Big Energy Issue in Pennsylvania Is Low Natural Gas Prices. Not Fracking

Saipem Shares Rise on $4 Billion Contract From QatarEnergy

Nigeria Set to Pause Rates as Inflation Slows to Six-Month Low

Why Europe Is Embracing the New American Growth Model

Fed Ready to Unshackle US Economy With Soft Landing at Stake

Fed Enters Tricky Terrain: Rate Cuts in a Decent Economy

The Fed Is Still Banking on a Labor Market Miracle

Bill Dudley: The Fed Should Go Big Now. I Think It Will

S&P 500 Is Surviving Big Tech’s Slide as ‘Other 493’ Catch Up

Ten Money Managers Exit Eisler as Hedge Fund’s Gains Stall

Hedge Funds Switch to Buying Banks, Insurance and Trading Firms, Says Goldman Sachs

UniCredit, Commerzbank Merger Could Add Shareholder Value, Orcel Tells Paper

Private Equity’s Insurance Bets Raise Risks, BIS Researchers Say

A $33,000-a-Year Child Care Burden Vexes Harris, Trump Campaigns

TikTok Fights US ‘Sale-or-Ban’ Law in Key Appeals Court Faceoff

China Claims Chipmaking Gear Advance Despite Tightening US Curbs

AI Boom Is Driving a Surprise Resurgence of US Gas-Fired Power

Waymo Sets Its Sights on ‘Premium’ Robotaxi Passengers

After Layoffs, Tesla’s Supercharger Expansion Slows

‘Buy America’ Feud Risks 200 Mile-an-Hour Rail From Vegas to LA

Tencent’s Pony Ma Reclaims Title of China’s Richest Person

These Millionaires Can Afford Their Dream Home. They’re Renting Instead

Rupert Murdoch is Set to Face His Kids in Court, with Fox News’ Fate in the Balance

The Customized Drink Is Out of Control

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Morning News: September 13, 2024
Posted by Eddy Elfenbein on September 13th, 2024 at 7:02 am

UK’s Approval of First Coal Mine in Three Decades Unlawful, Court Rules

The Hague Is World’s First City to Ban Oil and Air Travel Ads

Truck Maker Volvo Delays Construction of Battery Plant in Sweden

Stoppage at China Lithium Mine Won’t Be Enough to Ease Supply Glut

China Internal Passport Revamp Could Fuel New China Growth

U.S. Moves to Block a Popular Tariff-Free Path for Chinese Goods

Dejected Social Media Users Call ‘Garbage Time’ Over China’s Ailing Economy

China Is Risking a Deflationary Spiral

Russia Hikes Key Rate, Might Do So Again as War Fuels Price Rises

Fed to Pursue Three Quarter-Point Cuts This Year, Economists Say

The Fed Has No Choice But to Assume the Worst

Behind the Trump Crypto Project Is a Self-Described ‘Dirtbag of the Internet’

HSBC Said in Talks to Sell South African Unit to FirstRand

US Driving and Congestion Rates Are Higher Than Ever

US Housing Market Awaits Boost After Worst Key Season in Years

China Fines PwC $62 Million for Botching Its Work for Evergrande

China’s First Retirement Age Hike Since 1978 Triggers Discontent

Stranded in the CrowdStrike Meltdown: ‘No Hotel, No Food, No Assistance’

Boeing’s Seattle Workers Walk Out in First Strike Since 2008

United Airlines Taps Elon Musk’s Starlink for In-Flight Wi-Fi

Inside Elon Musk’s Mushrooming Security Apparatus

Intel Needs to Rethink What Leadership Means in New Chip World

Future of Murdoch Empire Comes Down to a Court in Nevada

AstraZeneca’s CEO Isn’t Distracted by the Race to Tackle Obesity

Luxury Brands’ New Snag? Handbag Arbitrage

A Stake in the Miami Dolphins Is Back on the Block

College Football Players Learn an Ugly Truth About Getting Paid

The Vegas Sphere’s First Live Sporting Event Will Be an Expensive One

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Morning News: September 12, 2024
Posted by Eddy Elfenbein on September 12th, 2024 at 7:07 am

Pakistan Cuts Rates To Revive Economy as Inflation Cools

Hawkish BOJ Board Member Says Rates Should Be Raised to at Least 1%

Bank of England Eyes Growth with Lighter Bank Capital Reforms for UK Lenders

ECB Cuts Interest Rates for Second Time in Three Months

Germany Lobbies EU to Help More Industries With Power Bills

Broken Blades, Angry Fishermen and Rising Costs Slow Offshore Wind

Wall Street Quietly Turns Tail on Its Sustainability Commitments

From Fed to Elections, FX Turbulence Buffets Dollar Investors

JPMorgan to Cap Junior Banker Hours, BofA Monitors Workloads

Mastercard to Acquire Insight Partners’ Recorded Future for $2.65 Billion

Inflation Numbers Resolve What the Debate Couldn’t

Layoffs Are Low. That Doesn’t Mean the Labor Market Is Strong.

Young Chinese Émigrés Confront America’s Brutal Visa Lottery

How America Became a Republic of Distrust

Homebuyers Hit by Price Surge, Supply Crunch Rock 2024 Election

Madison Realty Capital Closes $2 Billion Property Debt Fund

What US and EU Crackdowns on Big Tech Mean for Apple, Google, X

OpenAI Aims for a $150 Billion Valuation

Intel Has Only Tough Options After Its Long and Stinging Fall From Grace

How the Election Is Sinking a $15 Billion Business Deal

Stellantis to Suspend e-Fiat 500 Output on Poor Europe Demand

G.M. and Hyundai Plan to Work Together on New Vehicles

Boeing Workers Cast Crucial Strike Vote Amid Contract Backlash

SpaceX Astronauts Conduct Spacewalk, Putting New Spacesuits to Test

Norfolk Southern’s CEO Survived an Activist Attack. Then Came Talk of an Affair

General Mills to Sell North American Yogurt Business for $2.1 Billion

Ozempic Is Selling So Well an Insurer Wants $1 Million in Payments Back

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