The Dow Jones Industrial Average traded around the 42,000 level and closed at a record high to cap a winning week after the first interest rate cut by the Fed in four years. The Dow finished the day on Friday up 0.05%, while the S&P 500 and the Nasdaq fell 0.2% and 0.3% respectively.
DJIA
sources: Bloomberg, CNBC
Closing snapshot
source: MarketWatch
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BOJ cautious about the global economy
The Japanese central bank left its short-term policy rate unchanged at 0.25% as widely expected. What wasn’t expected was BOJ Governor Kazuo Ueda’s warning about the global economy that caused the yen to weaken sharply. Ueda stated that its base scenario remains a soft landing for the U.S. but cautioned that risks surrounding that view have risen due to economic indicators pointing to a slowdown. Following the governor’s remarks, the yen weakened to 143.90 versus the U.S. dollar after rallying to 141.70 earlier on Friday. The yield on 10-year Japanese government bonds fell 2.0 basis points to 0.83%.
Ueda did say that the BOJ would continue to raise interest rates if the economy and prices remain in line with the central bank’s projections, though he acknowledged economic uncertainties outside of Japan. Recently, the BOJ’s pledge to consider additional rate increases, in spite of concerns about the outlook for the U.S. economy have caused wild swings in the markets.
source: Bloomberg, WSJ
“The art of living is more like wrestling than dancing, because an artful life requires being prepared to meet and withstand sudden and unexpected attacks.” – Marcus Aurelius
MicroStrategy raises $1 billion to buy Bitcoin
Continuing its aggressive crypto strategy, MicroStrategy, led by Michael Saylor, raised $1.01 billion via a convertible senior note offering. The proceeds will fund debt repayment and Bitcoin purchases. $500 million of secured notes will be redeemed, which will free up 69,080 $BTC used as collateral. The remainder of the funds raised will be used to purchase Bitcoin. As of September 2024, the company held 244,800 $BTC.
source: Milkroad
That’s how you do it.
Trading 101
In a disclosure filed last Thursday, Warren Buffett’s Berkshire Hathaway revealed it sold $896 million of Bank of America Corp. shares. This means that total proceeds from share sales since mid-July combined with dividends earned since 2011 have surpassed the $14.6 billion the Berkshires spent to build its stake in BofA. Buffett’s remaining stake of more that $34 billion is pure profit. source: Bloomberg
Gold continues to soar
Gold rose above $2,600 on Friday for the first time, boosted by expectations of continuing rate cuts from the Fed and escalating tensions in the Middle East. In addition to the boost from the “jumbo” rate cut, safe haven assets continue to rally in 2024, up 26% as investors seek hedges against prolonged geopolitical uncertainty.
Tesla slowdown
Once the undisputed leader of the EV industry, Tesla’s profits are down for the last four consecutive quarters. The company’s earnings per share (EPS) was 40% lower in the first two quarters of 2024 compared to 2023’s first half as the firm delivered fewer vehicles and cut prices globally as competition in the electric vehicle industry increased. China-based BYD now manufactures more EVS than Tesla and a series of management mishaps at Musk’s company are troubling investors. One sore spot has been the Cybertruck. It’s been plagued by manufacturing issues and delays. Though it began shipping last year as promised, fewer than 20,000 units have been delivered. In its short existence, it has been recalled four times and videos of manufacturing failures have gone viral.
sources: Forbes, FactSet
Two Sigma is in settlement talks with the SEC
According to the Wall Street Journal, hedge fund Two Sigma is likely to pay as much as $100 million to settle a SEC investigation involving a trading scandal at the firm. Two Sigma is facing scrutiny over how it oversaw an ex-employee who allegedly adjusted trading models without authorization. In an effort to boost his compensation, the researcher adjusted the hedge fund’s investing models without authorization, leading to losses in some fundsm and gains in others. The changes resulted in a total of $620 million in unexpected gains and losses according to sources and investor letters. Two Sigma is a quantitative trading giant with $60 billion in assets and approximately 2,000 employees. Its trading models consists of thousands of lines of code that ingest massive amounts of data to generate algorithmic predictions that generate trading decisions.
source: WSJ
Is Spotify breaking out?
After a period of consolidation, Spotify shared are holding above a consolidation. It will be interesting to see if the shares can maintain momentum above 359 and support around 350.
source: IBD
In other news:
Intel shares jumped 8% on a report that Qualcomm approached the company in recent days about a possible takeover. If the deal were to happen, it would be one of the largest tech mergers in years. Intel has a market cap of approximately $96 billion though its stock is down 53% this year as investors express doubts about its plans to design and manufacture chips.
Nike shares surged more than 8% on Friday after the company announced that Chief Executive John Donahoe will step down and, longtime company veteran Elliott Hill will return to fill his shoes.
FedEx plunged 13% after the company reported weaker than expected results and cut its full-year outlook.
Mercedes-Benz Group also lowered its full-year outlook in a shift that the company said was triggered by further deterioration of the macroeconomic environment. Mercedes shares fell 8.4% following the announcement and are down 12% on the year.
China, who has been struggling with a slowing economy, unexpectedly kept its benchmark rates unchanged. The central bank was expected to follow the U.S. Federal Reserve’s lead in cutting rates. In other central bank news, Taiwan’s central bank held interest rates steady as did Norway’s.
Ripple announced that it is planning to launch its ow stablecoin as it seeks to join the high-margin industry. The stablecoin space is starting to get a little crowded as traditional crypto firms, fin-tech companies and others are developing their own stable offerings.
sources: WSJ, CNBC, Bloomberg, Forbes, Sherwood Media
The stinger
Disclaimer
This letter is not offering investment, trading, or investment advice nor is based on any individual portfolio or business operation. We are are not a registered investment, stock nor commodity advisor. One should consult with their own registered advisor to discuss investment strategies that are appropriate for their business or personal goals, risk tolerance and financial situation. Information in this report and on any website is derived from a variety of source believed to be reliable however no representation is made that the information is accurate, complete or correct. These lessons, newsletter and site content is not intended nor shall not constitute or be construed as an offer or recommendation to “buy”, “sell”, “trade” or invest in any securities, commodities, futures, options or other asset referred to in said lessons, reports or newsletters. Rather, this research is intended to identify situations and circumstances that those in the trading community should be aware of to better help assess and improve their own risk management skills.
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