Cover:
-Deregulation has transformed firms like Morgan Stanley and Bank of America into behemoths, while financial entrepreneurs have created companies like Blackstone, Bridgewater Associates, and Andreessen Horowitz. However, a new wave of digital-first powerhouses, driven by the explosive growth of technology in finance, is emerging. This trend is driven by the growth of technology in finance, leading to companies like Interactive Brokers Group, Susquehanna International, Jane Street, and Citadel, a burgeoning Wall Street empire controlled by billionaire Ken Griffin. Citadel consists of Citadel LLC, a $68B hedge fund operation, and Citadel Securities, a market maker that facilitates and engages in stock, derivatives, and bonds trading.
Interview:
-Stephen Miran, currently chair of the Council of Economic Advisers, is set to be the nominee for a temporary open seat on the Federal Reserve's board of governors. The administration wants the Senate to vote on his candidacy before the Fed's next policy committee meeting on Sept. 16-17. Trump is also considering Miran for the longer-term seat held by Governor Lisa Cook, who Trump fired.
Miran discusses Trump's recent decision to convert loans and grants to Intel into a 10% equity stake, which some White House economists described as a "down payment on a sovereign-wealth fund." Debate continues over Trump's other high-profile interventions in the economy, including tariffs and firing the head of the Bureau of Labor Statistics. Miran, a Harvard-trained economist, has been at the center of this debate since his Senate confirmation in March.
Tech Trader:
-Nvidia has reported a 56% increase in revenue for the July second fiscal quarter to $46.7B, ahead of expectations. The company's revenue forecast range for the current quarter ending in October was above analysts' consensus of $53.4B. However, Nvidia shares initially fell modestly after the results, possibly due to profit-taking after the stock rose about 35% over the previous three months. Uncertainty over its business in China may have been another factor. China remains Nvidia's biggest problem, as analysts had hoped for a quick rebound in sales of its China-specific H20 graphics processing unit (GPU). Nvidia has not assumed any H20 shipments to China in its guidance for the current quarter.
The Trader:
-Salesforce has experienced a significant drop in shares, dropping over 25% this year and making it the second-biggest laggard in the Dow Jones Industrial Average. However, some fund managers and Wall Street analysts believe that the worst may be over for the customer relationship management services leader. Concerns about artificial intelligence affecting revenue streams and profit margins for corporate software companies have hit the entire software sector, with Salesforce facing an undeniable threat from AI. Salesforce is currently trading at 22 times earnings estimates for this year, a 10-year low and well under its average forward price/earnings ratio of 54.
-The Russell 2000 has seen a 7.5% increase in August, more than double the return on the Dow Jones Industrial Average and nearly triple that of the S&P 500. This rally in small-company stocks was triggered by Fed Chair Jerome Powell's dovish speech, and the talk is now about how small can outperform large for the foreseeable future. The odds of a September interest-rate cut have increased, and lower rates could support the US economy, benefiting smaller companies with higher levels of floating-rate debt. Fiscal stimulus from the White House and Congress should also help.
Features:
-Kyivstar Group, Ukraine's largest mobile and broadband operator, has boosted its NASDAQ opening bell after a delegation of business elites from the war-torn country visited New York to raise interest on Wall Street. Western investors believe that Ukrainian assets are undervalued, and the stock has risen 0.3% since the SPAC merger. Kyivstar's shares soared 32% in their first two trading sessions earlier this month, possibly due to investors' hopes for peace talks. However, the stock's overall performance has flattened since then.
-Financial markets are expecting the Federal Reserve to cut interest rates several times over the next few months, potentially leading to disappointment for investors. The Federal Reserve is expected to lower its benchmark interest rate at its Sept. 16-17 meeting, and recent data indicates slow economic growth. The federal-funds futures market is pricing in a 90% probability of a September cut, which has led to the S&P 500 reaching new highs this year. However, markets also anticipate more rate cuts beyond September, potentially leading to a stock market dip. Futures pricing also reflects an 86% probability of a second cut by December. Historical data shows that fed-funds futures often overestimate interest rate movements in either direction. The actual fed-funds rate today is at a target range of 4.25% to 4.5%.
Europe:
-Denmark has reduced its annual growth outlook to 1.4%, down from 3%, and blamed the slowdown on sweeping US tariffs. The Danish krone slid 0.1% against the dollar, and Copenhagen's flagship OMX stock-market index dropped 0.9%. The ministry blamed the slowdown on the bursting of the obesity-drug bubble, which has dragged down Denmark's exports to countries like the US, which in turn has weighed on growth. Novo Nordisk, the company behind the guidance cut, has not immediately responded to a request for comment from Barron's. Demand for Novo's flagship products Wegovy and Ozempic has faltered this year, dragged down Denmark's exports to countries like the US, which in turn has weighed on growth.
Emerging Markets:
-No update
Commodities:
-Mexico has vast potential petroleum resources to replace the dwindling elephant fields it struck last century. These resources are either in deep water in the Gulf of Mexico or in a belt of shale reserves south from the US border. Exploiting either will require capital and expertise from private oil giants outside Mexico. Mexico's previous president, Enrique Peña Nieto, opened the door to collaboration in 2013-14, with promising results. However, President Lopez Obrador shut it down in 2018, citing a perverse energy reform approved for looting and theft. He also reined in Pemex's exploration in deep water and shale. Sheinbaum suggests a more moderate tack, floating "mixed public-private contracts," but this would be insufficient to attract big market participants. Additionally, Lopez Obrador's "judicial reform" further damaged Mexico's attractiveness for investment, as it allows for the replacement of all the country's judges by 2027.
Streetwise:
-No update