Data, data, data

The Buzz

It’s seems like it’s all about the data this week: ISM, JOLTS, and the icing on the cake comes Friday in form of the all-important August payrolls report.

The S&P 500 and the Nasdaq each slipped about 0.4% on Wednesday, while the DJIA dropped 0.2%. All three indexes had been up earlier in the session. Nvidia fell another 3% after falling 9% on Tuesday. Other tech stocks regained their footing; AMD and Tesla were up 2% and 3% respectively. Meta Platforms, Marvel Technologies and Qualcomm all edged higher.

The yield curve normalized on Wednesday. It had been inverted, with 2-year yields higher than 10-year yields, a common recession indicator. That reversed with 10-year yields closing higher that 2-years; aka the curve ‘steepened.’

sources: CNBC, WSJ, Bloomberg, CME Group

Closing snapshot

source: MarketWatch

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Immigration

The U.S. is experiencing its biggest wave of immigration in generations, driven by millions of people from across the globe seeking economic opportunity, personal freedom, and safety. This surge in immigration has been controversial as most immigrants have not been arriving via regular legal channels. According to the Congressional Budget Office (CBO), less than 30% of the 2.6 million immigrants are considered “lawful permanent residents.”

sources: Bloomberg, WSJ

“Pain nourishes courage. You can’t be brave if you’ve only had wonderful things happen to you.” – Mary Tyler Moore

The best laid plans…

The Biden administration made a big bet on Intel to lead a U.S. chipmaking renaissance but alas, the dream is turning into a nightmare for all involved. Intel’s flagging sales and dour outlook are complicating its plan for government funding. The company is frustrated with what it sees as the White House dragging its feet over the release of the Chips Act funds. Intel faces a dilemma, however, because if it lowers the ambitions of some U.S. projects, its subsidy package would almost certainly change.

sources: Bloomberg, WSJ

China consider relief for borrowers

China is considering cutting interest rates on as much as $5.3 trillion in mortgage debt in an effort to lower borrowing costs from millions of families, while at the same time trying to protect its banks from defaults. Financial regulators have proposed reducing rates by as much as 80 basis points (100 basis points equals 1%), along with accelerating the timeline for when mortgages are eligible to be refinanced.

It’s a delicate balance the country’s regulators are trying to achieve. They are attempting to shore up a battered economy and help consumers without lowering rates so aggressively that they would put additional pressure on banks. China’s banks have already seen profit margins drop to a record low level of 1.54% at the end of June; this is well below the 1.8% margin seen as necessary to ensure reasonable profitability.

sources: Bloomberg, WSJ

Oil

Given the increased tension in the middle east, Ukraine and Russia, one would typically expect an increase in oil prices on supply concerns. But despite all of the geopolitical uncertainty, oil prices remain near lows not seen since before Russia’s invasion of Ukraine. The depressed level of oil prices is an indication of how dramatic the economic slowdown has been; particularly in China.

sources: Bloomberg, WSJ

No Ro

July was all about rotation with money leaving mega-caps like the ‘Magnificent Seven’ and flowing to small caps. Alas, so far, September seems to be different. Money is fleeing equities of all flavors and sectors for safe havens and geopolitical, economic and election uncertainty has caused investors to leave risky assets for safe havens in a flight-to-quality move. According to data from Bank of America, clients have been shedding stocks at tha fastest rate since 2020.

sources: WSJ, Bloomberg

In other news:

• Moody’s and S&P Global were among the firms fined a total of $48 million over failing to keep proper electronic records, in the latest from the U.S. “WhatsApp” investigations. The SEC found that employees of the firms communicated about credit ratings via text messages using mobile devices and other messaging platforms while failing to collect, maintain and preserve records of these conversations.

• On Tuesday, Nvidia received a subpoena from the U.S. Justice Department signalling an escalation of an antitrust probe against the world’s largest chipmaker. The news came Tuesday, the same day that the company lost a record $279 billion in market valuation as investors worried that the AI boom has grown too rapidly to be sustained.

• Citadel and Jane Street, two of the largest market making firms in the U.S. are on track for record annual revenues as they continue to grab market share from banks. First half 2024 revenue rose 81% from the same period last year at Citadel Securities, while Jane Street revenues rose 78%. Both firms are on pace to post all-time high annual revenues.

sources: WSJ, CNBC, Bloomberg, IBD, MarketWatch

The stinger

Disclaimer

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