Coming into this week the S&P was already taking a peak at fresh all-time highs as the debate raged over whether the Fed should cut by 25 for 50 bps on Wednesday. The US dollar remained weak while rates were largely on hold. The US economic data leading up to the FOMC decision was solid with Sept Empire manufacturing surging along with a rebound in new orders. Retail sales topped expectations and were consistent with 3% GDP growth while housing starts touched the highest level since Feb. Chinese economic data remained decidedly weak leading to another round of speculative stories regarding new potential government stimulus plans. Signals coming out of Germany remained soft as well. The Sept Zew survey fell to the lowest level since May of 2020. Mercedes Benz cut their FY outlook on Friday leading to speculation the German government has considered additional support for their auto manufactures. Separately, Canada CPI missed estimates with the annual price gains falling back to the central bank's 2% target. WTI crude held near $70/barrel after many hundreds of Hezbollah fighters were wounded after their pager communication devices simultaneously exploded across Lebanon. It was confirmed to be a well-planned and choreographed Isreali operation that raised the risk of an all-out war with Lebanon.
Wednesday the Fed went ahead and cut by the 50 bps the futures had been pricing in, citing recent data points including benchmark payroll revisions and the Beige Book. Updated dot plot projections indicated most Fed members now expect 100 bps of cuts for both 2024 and 2025. Importantly, SEP projections for unemployment did rise, but not to a level that suggested a soft landing isn’t achievable. Chairman Powell couched the move as an attempt calibrate policy to where the puck is going with a commitment to "not fall behind" the curve while emphasizing, as always, the data will guide how quickly they need to get policy to a level consistent with a neutral rate. Nevertheless, the bold move opened him and the Fed up to a broad array of criticism. Longer-dated UST yields moved up and the curve steeped considerably and by Thursday’s NY open the S&P 500 forcefully broke out to a new all-time high above 5700 as investors cheered the Fed’s clear intent to move to a more neutral monetary policy. Friday’s session saw only marginal profit taking into options expiration for stocks while the UST curve continued to steepen after the Fed’s Waller said he would be amiable to another 50 bps cut if inflation data continues to surprise to the downside. For the week the Dow gained 1.6%, S&P rose 1.4% and NASDAQ added 1.5%.
Apple shares began trade this week under modest pressure following early reports new iPhone orders have underwhelmed. Amazon CEO Jassy informed staff that they will required to return to the office for a traditional 5 day work week in 2025. Boeing announced plans to conserve cash including hiring freeze and furloughs while the machinists remain on strike. Darden Restaurants and General Mills reported results and both noted a challenging macro environment remains a headwind. Mercedes Benz and Skechers warned that deterioration in China has been worse than anticipated, resulting in the need to reset of short run expectations. Nike veteran Elliott Hill will return as President/CEO after John Donahoe steps down next month. FedEx waylaid the Transports on Friday after missing Q1 estimates and cutting FY outlook citing a shift away from US domestic priority package business. Constellation Energy reached an agreement to provide power from a restored Three Mile Island nuclear facility to Microsoft sending power generation and nuclear related names higher on Friday too.
MON 9/16
AAPL TF International analyst Ming-Chi Kuo: iPhone 16 first weekend pre-order analysis: estimated total sales of about 37M units -12.7% y/y; The key factor is the lower-than-expected demand for the iPhone 16 Pro series
(RU) Reportedly Russia's options to retaliate if the West lets Ukraine use its long-range missiles to strike deep in Russia could include conducting a nuclear test (its 1st one since 1990) - press citing analysts
COF Reports Aug net charge-offs 5.82% v 5.79% m/m; Domestic Card delinquencies: 4.35% v 4.28% m/m
(US) Former NY Fed Pres Dudley: Fed should go big now and I think it will; An aggressive 50bps reduction in interest rates makes sense - media interview
1211.HK Acquires 10% stake in Denza venture with Mercedes-Benz - press
BA CEO Memo: Provides details on steps to conserve cash including hiring freeze - CNBC's LeBeau
AMZN CEO memo: Tells staff to return to the office for traditional five day work week; Increasing ratio of individual contributors to managers by at least 15% by end of Q1 FY25; Having fewer managers will remove layers
INTC Intel and AWS expand strategic collaboration; Intel to produce an AI fabric chip for AWS on Intel 18A, the company’s most advanced process node. Intel to also produce a custom Xeon 6 chip on Intel 3
INTC CEO: Plans to turn its Foundry business into an independent unit with its own board and the potential to raise outside capital; More than halfway to workforce reduction target of around 15K by year end; To reduce or exit two-thirds of our real estate globally by year end - press
MSFT Raises Quarterly dividend 10.7% to $0.83 from $0.75 (indicated yield 0.77%); Announces new $60B buyback program (~2% of market cap)
TUES 9/17
(EU) Commission Pres Von Der Leyen outlines new EU Commission structure: New commission will not have vice presidents
(DE) GERMANY SEPT ZEW CURRENT SITUATION SURVEY: -84.5 V -80.0E (lowest since May 2020); EXPECTATIONS SURVEY: 3.6 V 17.0E (lowest since Oct 2023)
(US) Reportedly Democratic majority at board of the F.D.I.C. is likely to vote in favor to adopt more stringent guidelines for evaluating deals in the banking sector - NYT
RYA.IE CEO: In Aug and Sept, we have seen better momentum in bookings; Need to discount less in Sept-Nov
CRM Introduces Agentforce Partner Network, the world’s first agent ecosystem; Partners like Amazon Web Services, Google Cloud, IBM, and Workday will extend Agentforce with new agent actions, pre-built agent templates, and partner agents
(UR) Reportedly some of Ukraine’s allies are starting to talk about how the fight against Russia’s invasion might end; As part of their discussions of strategy for the next year, officials are more seriously discussing potential ceasefire - press
(US) AUG ADVANCE RETAIL SALES M/M: +0.1% V -0.2%E; RETAIL SALES (EX-AUTO) M/M: 0.1% V 0.2%E
(US) Mid-Sep Manheim wholesale used vehicle Index: 203.6 v 203.9 prior; -0.2% m/m; -5.0% y/y
(US) Atlanta Fed GDPNow: Raises Q3 GDP forecast from 2.5% to 3.0%
(IL) Lebanon's Hezbollah says Israel is to blame; Israel will get 'its fair punishment'
JPM Reportedly in discussions to take over Apple credit card from Goldman Sachs - press
(US) Fox News' Edward Lawrence: President Biden will not use a Federal Law to break the strike if dockworkers on East Cost & along Gulf of Mexico don’t ratify a new contract Oct 1st and decide to strike.
CRM Salesforce and NVIDIA Forge Strategic Collaboration to Advance AI Agent Innovation
WED 9/18
(UK) AUG CPI M/M: 0.3% V 0.3%E; Y/Y: 2.2% V 2.2%E
(GR) Greece plans to buy 40 F-35 fighter jets from US and three frigates from France in 'multi-billion' 10-year purchasing plan - press
(EU) EURO ZONE AUG FINAL CPI Y/Y: 2.2% V 2.2%E; CORE CPI Y/Y: 2.8% V 2.8%E
GIS Reports Q1 $1.07 v $1.05e, Rev $4.85B v $4.78Be; Notes continued uncertain macroeconomic backdrop for consumers across its core markets
GIS Affirms FY25 Capex ~3.5% of Net Sales; Notes input cost inflation is stable but somewhat elevated versus long-term historical averages; We’re starting to see improvement in our competitiveness across our business - prepared remarks
MAERSKB.DK Asia Market Update: Seeing more balanced supply demand into Q4, although the overall situation is still fragile with potential disruptions from a looming U.S. port strike and the continued Red Sea situation
(US) AUG HOUSING STARTS: 1.356M V 1.318ME (highest since Feb 2024); BUILDING PERMITS: 1.475M V 1.410ME
LGF.A Reportedly reaches deal with start-up Runaway for generative AI use; Expects to be able to save "millions and millions of dollars" from using the new model and plans to initially use the new AI tool for internal purposes like storyboarding - press
(US) Atlanta Fed GDPNow: Cuts Q3 GDP forecast from 3.0% to 2.9%
TMUS CEO: Expects to return up to $50B through dividends and buybacks through 2027; Forecasts core adj EBITDA $38-39B by 2027
(US) NY Fed takes $305.8B (prior: $256.3B) in RRP program at 5.30%; 63 participating and accepted counterparties [First repo above $300B in 10 days]
*(US) FOMC CUTS TARGET RANGE BY 50BPS BPS TO 4.75-5.00%; Dot plot projects 100bps of cuts in FY24 and FY25; Vote was not unanimous
(US) FOMC SUMMARY OF ECONOMIC PROJECTIONS (SEP) FOR SEPT: RAISES MEDIAN FORECAST PROJECTION TO 100 BPS OF RATE CUTS IN 2024 (PRIOR: 25BPS)
(US) Fed Chair Powell: We will go meeting-by-meeting on decisions; Upside risks to inflation have diminished and downside risks to labor market have risen - FOMC press conference
THRS 09/19
(IL) Hezbollah leader Nasrallah: Israel violated red lines by detonating thousands of pagers; View it as declaration of war - TV address
(JP) BANK OF JAPAN (BOJ) LEAVES TARGET RATE UNCHANGED AT 0.25%; AS EXPECTED
(JP) JAPAN AUG NATIONAL CPI Y/Y: 3.0% V 3.0%E; CPI EX FRESH FOOD (CORE) Y/Y: 2.8% V 2.8%E
(UK) BOE Gov Bailey: Rates on gradual path down, more evidence needed; Services inflation in UK still elevated - press interview
(US) BOFA INSTITUTE: WEEK-TO-SEPT 14TH TOTAL CARD SPENDING +1.4% Y/Y V +0.9% AVERAGE IN AUG; Within sectors, entertainment saw the biggest increase since last week followed by department stores & furniture
(UK) BANK OF ENGLAND (BOE) LEAVES BANK RATE UNCHANGED AT 5.00%; AS EXPECTED
(US) INITIAL JOBLESS CLAIMS: 219K V 230KE (lowest since late May); CONTINUING CLAIMS: 1.83M V 1.85ME
(US) Redfin: Mortgage applications are rising, but pending sales have yet to improve; Home prices are still rising, and Redfin agents report that some would-be buyers are waiting for mortgage rates to fall more
(US) SEPT PHILADELPHIA FED BUSINESS OUTLOOK: 1.7 V 0.0E
(US) WEEKLY EIA NATURAL GAS INVENTORIES: +58 BCF VS. +55 BCF TO +57 BCF INDICATED RANGE
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) CUTS INTEREST RATES BY 25BPS TO 8.00%; AS EXPECTED; DECISION WAS UNANIMOUS
AAPL Reportedly set to be warned by the EU to open up its iPhone operating system to rival technologies, or eventually risk significant fines under EU's Digital Markets Act (DMA) – press
DRI TTN Summary Earnings Call: Trends improved in August, resulting in flat same restaurant sales [v -1.1% y/y in Q1]; First 3 weeks of Sept have further improved resulting in positive same restaurant sales QTD, except for Fine Dining segment
DRI Reports Q1 $1.75 v $1.81e, Rev $2.76B v $2.80Be; Sales trends have improved since July
FDX Reports Q1 $3.60 v $4.82e, Rev $21.6B v $22.1Be; Cuts FY24 outlook noting lower US domestic priority package volume; Plans to purchase additional $1.5B under existing buyback program (2% of market cap)
FDX TTN Summary Q1 Earnings Call: We implemented significant new pricing actions relating to demand and fuel surcharges which will benefit us in coming quarters; Potential port disruptions may favor air freight demand, warranting close monitoring
LEN Reports Q3 $3.90 ex-items v $3.62e, Rev $9.42B v $9.29Be; "Fully expect an even stronger, and more broad-based demand cycle, as rates move lower"
M Prepares to hire >31.5K seasonal positions (v 38K hires y/y)
NKE Nike veteran Elliott Hill to return as President/CEO; John Donahoe to retire, effective Nov 14th
Reportedly cost of insuring a ship through the Red Sea has more than doubled from 0.7% to up to 2% of the value of vessel since the start of Sept after the attack on the Greek operated Sounion tanker – press
SKX TTN Summary Wells Fargo conf: Consumer discretionary pressures in China are worse than anticipated, impacting short-term growth
WMT Plans instant bank payments, cutting out card networks; Partners with with Fiserv to upgrade pay-by-bank option – press
X Guides Q3 $0.46 v $0.36e; Notes challenging pricing dynamics being offset in part by the benefits of balanced and diverse order books in the North American Flat-Rolled segment; Sees more resilient and higher FCF generative future at U. S. Steel
FRI 09/20
CEG Signs 20-yrs power purchase agreement with Microsoft, to restore Three Miles Island (TMI) Nuclear Unit 1 in Pennsylvania to service and keep it online for decades; Constellation to invest $1.6B to restart dormant reactor and pursue license renewal that will extend plant operations to at least 2054; The CCEC is expected to be online in 2028; Notes restarting a nuclear reactor requires U.S. Nuclear Regulatory Commission approval
CVS FTC sues CVS, Cigna and United Health for allegedly unfairly excluding lower cost insulin products from lists of drugs covered by insurers
LEN Exec: Homebuyer incentives rose in Q3; Raises slightly FY24 homes delivered 80.5-81K (prior: 80K) Demand remains very strong - conf call comments
(JP) BOJ Gov Ueda: To continue adjusting the degree of easing (aka raise rates) if outlook is realized; Not yet possible to determine neutral rate; Upside inflation risks have eased - post rate decision press conference
(US) Fed's Waller (voter): 50 bps was right move, want to keep economy strong; Inflation data in blackout period pushed me to 50 bps camp - CNBC
(US) Fed's Harker (non-voter): Fed has done good job navigating the economy
(US) Tier1 week-to-Sept 19th US Truckload Demand Indicator at 52.8 v 53.3 prior (below 54 avg freight recession level); Consumer Products Shipper noted capacity may tighten and rates may rise due to potential East Coast port strike on Oct 1st
QCOM Reportedly Qualcomm has approached Intel about a potential take over; Details were not disclosed - press