Cover:
-President Donald Trump's desire for a simple solution to interest rates is likely to be achieved under the next Federal Reserve chair. The candidates running for the position are proposing significant changes to the central bank's fundamental mission, rethinking its approach to inflation and interest rates, cutting staff, and reorganizing or reducing the number of regional reserve banks. These changes are expected to amplify the economic uncertainty that has characterized the second Trump presidency, and economists and investors will be in for something different. The new Fed chair could begin rewiring the institution in just a matter of months, with the president's support, a supportive Senate, and buoyant markets. Kevin Warsh, one of the prominent candidates to replace Powell, emphasized that rate cuts are not the only solution.
Interview:
-No update
Tech Trader:
-Big Tech companies Alphabet, Amazon.com, Apple, Meta Platforms, and Microsoft all reported second-quarter earnings in the past two weeks, beating Wall Street's consensus estimates for earnings per share and revenue. On average, they exceeded EPS projections by 14% and sales by 4%. Meta Platforms was the standout, with revenue up 22% on the year and EPS up 38%. The company also beat expectations for its key ad growth metrics. Meta shares closed up 11.3% on the day after its earnings release. Apple had its first solid quarter in some time, with revenue growing nearly 10% year over year, its best performance in over three years. iPhone sales were up 13% from 2024, while Mac sales were up 15% and the high-margin services segment was up 13%.
The Trader:
-The stock market experienced its worst week since May, with the S&P 500 down 2.4%, the Dow Jones Industrial Average down 2.9%, and the Nasdaq Composite 2.2% in the red. The decline was surprising as the largest US companies, including Microsoft, Meta Platforms, and Apple, all posted strong second-quarter earnings. However, these stocks are now more like outliers than bellwethers, and the economy is looking shaky. U.S. payrolls grew by anemic 73,000 in July, and the government revised the prior two months down by 258,000 jobs. Fewer jobs were added over the past three months than in any three-month period since June 2020, during the Covid crash. Following the release of the July jobs report, President Donald Trump ordered the firing of the commissioner of the Bureau of Labor Statistics. The private sector added just 4,000 jobs in July, and investors expect more weakness ahead as layoffs accelerate for federal workers following a Supreme Court decision that sided with Trump.
-Some utilities, like Ohio-based American Electric Power (AEP) and Louisiana's Entergy, are making money from data centers while pushing the cost of new generation and transmission onto tech companies. Entergy plans to power one of the largest data-center campuses in the world for Meta Platforms in Louisiana, building three massive natural-gas power plants. Entergy also has a deal with Amazon.com for a major data center campus in Mississippi. AEP, operating in 11 states, has seen booming demand from tech companies wanting to operate data centers in its service territory, enough to double the total electricity load in central Ohio by 2030. To accommodate these customers without piling costs onto existing electricity users, AEP convinced the Ohio public utilities commission to sign off on a special rate structure. Data-center operators would need to pay for at least 85% of the energy they're expected to use, even if they don't use it in a given month.
Features:
-Kohl's, the largest department store chain in the US, has seen nearly 40% of its 112 million shares sold short as of July 29. This is due to concerns about the company's declining sales, shrinking profitability, and management turmoil. The stock has fallen about 70% since 2021 and recently traded for $10.70. Meme-stock traders often target heavily shorted stocks and try to "squeeze" short sellers by bidding up the price, which spurs them to buy back shares to limit losses. Kohl's operates over 1,100 midprice stores in 49 states and the Kohls.com e-commerce business. The company has struggled since the Covid-19 pandemic, with the growing popularity of online shopping causing a strain on its business model.
-Graham, a small-scale version of Berkshire Hathaway, owns a variety of businesses including a for-profit education company, TV stations, healthcare services firms, auto dealerships, manufacturing businesses, a picture-framing company, and restaurants in Washington, D.C. The company also has an investment portfolio and ample cash for deals. Graham's stock trades at a fraction of the value of the conglomerate's diverse businesses, but potential catalysts include a possible TV station spinoff, narrowing losses at smaller businesses, and increased attention on fast-growing healthcare businesses. Graham also has an overfunded pension fund, which is a valuable and underappreciated asset. The company's shares have an estimated asset value of over $1,500, far more than their current price of $950.
Europe:
-Adidas's Q2 earnings exceeded Wall Street's expectations, but investors were disappointed due to a sales miss and the company's decision not to raise its full-year financial guidance due to new tariff costs. Adjusted earnings were €2.03 ($2.33) a share, but revenue fell short of Street projections. Adidas' shares fell 10% in Germany. The company reiterated its fiscal year outlook, citing uncertain economic conditions and an additional €200M impact from tariffs on US imports in 2H25.
Emerging Markets:
-Emerging markets have seen a significant rebound in the past year, according to portfolio manager Lewis Kaufman of the $4.2 billion Artisan Developing World fund. The outlook is compelling as local currencies strengthen against a weaker U.S. dollar, enhancing local companies' buying power. Emerging market central banks are cutting interest rates, lowering borrowing costs. Kaufman targets companies selling modern-economy goods and services that people living in big cities are buying, believing that these modern population clusters have the propensity to consume faster and realize the promise of low penetration and scale in emerging markets. The fund has seen a 36.3% increase in one-year returns, ranking in the top 1% of its Morningstar peers. Kaufman seeks companies with scalable business models that can hold for long periods, preferring financially sound companies with high gross margins to produce "disproportionate equity outcomes."
Commodities:
-Copper experienced its worst day ever, with the Trump administration's tariffs on the metal causing a major selloff by investors who had been stockpiling copper in the US. The levies were not as broad as many feared, covering semifinished products like copper sheet and wires, but excluding input materials and copper scrap. Prices for front-month Comex copper contracts tumbled 22% to $4.33 per pound, the metal's largest one-day percentage decline on record since 1968. Copper mining stocks have also been hit hard, with Southern Copper down nearly 7% this week and Freeport-McMoRan down 11%. Some market watchers took the declines in stride, arguing they offer a healthy corrective to prices that had recently gotten out of whack.
Streetwise:
-no update