Closing Stock Market SummaryThe stock market had a decent showing to start the day but gave way to steady selling pressure that began around 11:00 a.m. ET. Economic slowdown and rate-hike concerns weighed on investor sentiment. In addition, market participants were contending with another weak session from Apple (AAPL 138.20, -4.28, -3.0%), a disconcerting inventory build reported by Dow component Nike (NKE 83.12, -12.21, -12.8%), and an uptick in the August Core PCE Price Index. Treasury yields started to rise in the afternoon, adding fuel to the sell-off in stocks. The S&P 500 closed below the 3,600 level, and settled at a new low for 2022 (3586.47).
Nike reported a huge inventory increase (+44% yr/yr) and gross margin pressure for its fiscal Q1 and warned of continued gross margin pressure for fiscal Q2. This stoked slowdown concerns while a year-over-year increase in the August Core PCE Price Index (to 4.9% from 4.7%) fed into worries that the Fed will continue with its unfavorable monetary policy.
The 10-yr note yield, which was at 3.70% earlier, settled the session up four basis points to 3.79%. The 2-yr note yield, which was at 4.13% earlier, settled the session up three basis points to 4.20%.
The upward drift in Treasury yields and losses in the mega cap stocks, especially Apple, weighed down index level performance as the session progressed. The Vanguard Mega Cap Growth ETF (MGK) closed down 1.8% versus a 1.1% loss in the Invesco S&P 500 and a 1.5% loss in the S&P 500.
Most issues pulled back in the afternoon trade. Declining issues outpaced advancing issues by a 4-to-3 margin at both the NYSE and the Nasdaq, reversing an earlier position where advancers led decliners.
Ten of the 11 S&P 500 sectors closed in the red with losses ranging from 0.4% (materials) to 2.0% (utilities). Real estate (+1.0%) was the lone holdout in positive territory.
One bright spot in the market today was Micron (MU 50.10, +0.09, +0.2%), albeit closing well off the session high. It squeezed out a modest gain after reporting better-than-expected fiscal Q4 earnings and warning of an earnings shortfall for fiscal Q2.
Energy complex futures settled the session lower. WTI crude oil futures fell 2.5% to $2.02/bbl and natural gas futures fell 0.6% to $6.82/mmbtu.
Looking ahead to Monday, market participants will receive the September final IHS Markit Manufacturing PMI reading (prior 51.8) at 9:45 a.m. ET. The September ISM Manufacturing Index (prior 52.8%) and the August Construction Spending report (prior -0.4%) are out at 10:00 a.m. ET.
Reviewing today's economic data:
- Personal income increased 0.3% month-over-month in August (consensus 0.3%) in after a revised 0.3% increase (from 0.2%) in July. Personal spending rose 0.4% month-over-month in August (consensus 0.2%) after a revised 0.2% decrease (from +0.1%) in July.
- The key takeaway from the report is that the inflation the Fed says it can control (i.e. core inflation) did not move in a friendly direction in August; therefore, market participants can continue to expect the Fed not to be their friend with monetary policy.
- Final September University of Michigan Consumer Sentiment reading came in at 58.6 ( consensus 59.5) after the prior reading of 59.5.
- The key takeaway from the report is that the decline in consumer sentiment across the income distribution (low to high) has been consistent for the past six months, underscoring the shared concerns about inflation pressures.
- September Chicago PMI came in at 45.7 ( consensus 51.9) after the prior reading of 52.2.
Dow Jones Industrial Average: -21.0% YTD
S&P Midcap 400: -22.5% YTD
S&P 500: -24.8% YTD
Russell 2000: -25.9% YTD
Nasdaq Composite: -32.4% YTD
down
Gapping down
In reaction to earnings/guidance:
- RCII -18.1% (lowers Q3 guidance, says external economic conditions have continued to deteriorate; also CFO steps down, names Fahmi Karam as CFO), NKE -10.6%
Other news:
- ATER -9.1% (announces pricing of $20 million registered direct offering)
- AAN -4.9% (in sympathy with RCII guidance)
- LULU -3.6% (in sympathy with NKE earnings)
- FL -3.4% (in sympathy with NKE earnings)
- DKS -3.1% (in sympathy with NKE earnings)
- MNSO -2.4% (Chairman to purchase up to $5 mln worth of shares)
- ASML -2.3% (semi equipment names weak on MU decision to cut wafer fab equipment capex 50% yr/yr)
- LRCX -1.9% (semi equipment names weak on MU decision to cut wafer fab equipment capex 50% yr/yr)
- AMAT -1.6% (semi equipment names weak on MU decision to cut wafer fab equipment capex 50% yr/yr)
- KLAC -1.5% (to build new R&D center in UK includes $100+ mln capital investment)
- CTVA -1.4% (FTC files suit against company according to FTC website)
Analyst comments:
- CENX -5.4% (downgraded to Underperform from Peer Perform at Wolfe Research)
Gapping up
In reaction to earnings/guidance:
- CMTL +2.1%, MU +1.5%
Other news:
- AMLX +9.3% (receives FDA approval for Relyvrio)
- RC +4.9% (increases share buyback authorization by $25 mln)
- APRN +2.5% (CFO to resign)
- FLR +2.3% (US Dept of Energy extends Fluor-led Savannah River contract)
- IMRX +1.6% (receives FDA clearance of IND application for Phase 1/2a Clinical Trial of IMM-1-104)
- TSE +1.4% (considering closing its styrene monomer production site in Germany)
- KGC +1.1% (Toronto Stock Exchange accepts notice to increase max shares KGC can repurchase)
- BMRN +1% (resubmits BLA to FDA for its investigational AAV gene therapy)
- PLTK +1% (provides update on shares tendered to date in its tender offer for its common stock)
Analyst comments:
- NOV +1.8% (upgraded to Buy from Neutral at BofA Securities)
- CBOE +1.2% (upgraded to Neutral from Sell at Goldman)
Axe
Early premarket gappers
- Gapping up:
- AMLX +7.3%, XOS +6.3%, RC +4.9%, MU +2.9%, CMTL +2.6%, KGC +2.5%, FLR +2.3%, ILMN +1.8%, BTI +1.4%, APRN +1.1%, BMRN +1%, EQNR +1%, PLTK +1%, BCS +0.9%, BA +0.6%
- Gapping down:
- RCII -16.3%, NKE -9.3%, AAN -4.9%, FL -4%, LULU -2.9%, MNSO -2.4%, TSE -2.2%, TUP -2.1%, ASML -1.7%, DKS -1.6%, CTVA -1.2%, AMKR -1.1%, VTNR -0.9%, LRCX -0.7%
Japan grants Micron $320mn in deepening US chip alliance
Washington and Tokyo are working to diversify semiconductor production away from China
US chipmaker Micron will receive up to $320mn in Japanese government subsidies, marking the first of an expected series of deals to fortify supply chains against the disruptive threat from China.
Beijing does not currently compete with Washington and Tokyo in the most advanced segment of semiconductor technology. But Covid-19 disruptions have underscored supply chain fragility, while Russia’s invasion of Ukraine has intensified fears that China could invade Taiwan, the global centre of cutting-edge chip production.
The Micron deal announced on Friday followed months of negotiations between the US and Japan to expand co-operation in semiconductor production, with the goal of reducing heavy dependence on Taiwanese chipmaker TSMC.
The notice came within 48 hours of a meeting in Tokyo between US vice-president Kamala Harris and senior executives of more than a dozen Japanese technology groups to discuss the Chips and Science Act passed by the US Congress in July, which offers $52bn in grants to support advanced semiconductor manufacturing in the US.
“We have to diversify our reliance on essential supplies, Japan, the United States and the world. We also understand, on this issue, that no one country can satisfy the globe’s demand,” said Harris at the start of the meeting on Wednesday.
Micron, which acquired Japan’s Elpida Memory in 2012, said it would use the investment to develop new Dram memory chips at its plant in Hiroshima.
Rahm Emanuel, US ambassador to Japan, said the Micron deal symbolised “the investment and integration of our two economies and supply chains. And that will only accelerate from here forward.”
In July, Japan’s Ministry of Economy, Trade and Industry (Meti) announced that it would give a grant of up to ¥92.9bn ($644mn) to Western Digital, the US manufacturing partner of Japanese chipmaker Kioxia, to expand production in Japan.
Last year, TSMC said it would build a $7bn chip manufacturing plant in Japan with Sony, with half the investment to be subsidised by Meti.
The Japanese investments in Micron and TSMC are not intended to support development of the most advanced chip technology, but an industry executive close to the negotiations said Japan and the US were discussing co-operation in that area with IBM.
“The talks with IBM are really about cutting edge technology, and progress is being made,” the person said.
IBM did not immediately respond to a request for comment.
Twitter Co-Founder Dorsey Tried to Smooth the Way for Musk, Agrawal, Messages Show
‘At least it became clear that you can’t work together,’ Dorsey told Musk after a call, according to texts made public in court filings
Twitter Inc. co-founder Jack Dorsey tried to facilitate Elon Musk’s relationship with Twitter’s chief executive officer a day after the social-media platform accepted the billionaire’s $44 billion takeover bid, according to text messages made public Thursday.
The messages, disclosed as part of a lawsuit in Delaware Chancery Court over Mr. Musk’s stalled deal to take the social-media company private, show Mr. Dorsey praising CEO Parag Agrawal ahead of a proposed meeting at the end of April.
“I want to make sure Parag is doing everything possible to build towards your goals until close” Mr. Dorsey wrote in a message to Mr. Musk dated April 26. “He is really great at getting things done when tasked with specific direction.”
The text messages also show that Mr. Dorsey tried to get Mr. Musk on the Twitter board before the Tesla Inc. CEO’s acquiring a significant stake in the company earlier this year. In a text exchange from the end of March, Mr. Dorsey wrote to Mr. Musk: “I tried my hardest to get you on our board, and board said no. That’s about the time I decided I needed to work to leave, as hard as it was for me.”
Mr. Dorsey stepped down as Twitter’s CEO at the end of November and left the board in May.
The Wall Street Journal previously reported that Mr. Dorsey had been part of a shadow crew that was encouraging Mr. Musk’s takeover of the company behind the scenes. The texts disclosed Thursday provide more details of Mr. Musk and Mr. Dorsey’s thinking about the future of the platform and Mr. Musk’s possible takeover.
Twitter didn’t immediately respond to a request for comment. Representatives of Mr. Musk and Mr. Dorsey didn’t immediately respond to requests for comment.
Mr. Dorsey’s efforts to smooth a relationship between Mr. Musk and Mr. Agrawal appear to have been short-lived, according to the texts made public Thursday. Mr. Dorsey, identified in the filing as “jackjack,” offered to set up a phone call between Mr. Musk and Mr. Agrawal “to discuss next steps and get really clear on what’s needed.”
Mr. Agrawal “would be able to move fast and clear then. Everyone is aligned and this will help even more,” Mr. Dorsey wrote, according to the court documents.
After the call, Mr. Musk texted Mr. Dorsey: “Parag is just moving far too slowly and trying to please people who will not be happy no matter what he does.”
Mr. Dorsey responded: “At least it became clear that you can’t work together. That was clarifying.”
In May, Mr. Musk tweeted that the deal was temporarily on hold amid concerns over the number of fake and spam accounts on the platform. Mr. Agrawal posted his own series of tweets explaining how the company handles spam and bots.
Mr. Musk responded with multiple tweets, including one that was solely a poop emoji.
Mr. Dorsey has publicly shared his support for Mr. Musk’s ownership of Twitter. Hours after Mr. Musk’s agreement was announced, he framed it as a liberation from the grip of public ownership and advertising.
“Twitter as a company has always been my sole issue and my biggest regret. It has been owned by Wall Street and the ad model,” Mr. Dorsey tweeted on April 25. “Taking it back from Wall Street is the correct first step.”
“Solving for the problem of it being a company however, Elon is the singular solution I trust,” Mr. Dorsey wrote. “I trust his mission to extend the light of consciousness.”
Cheating accusation tips chess world into turmoil
World champion Magnus Carlsen’s dispute with a teenage rival has sparked wild rumours of dirty tricks
US teenager Hans Niemann’s shock victory over world chess champion Magnus Carlsen this month might have been celebrated as the big-league arrival of a new force in the ancient game of strategy.
Instead the match, which ended a 53-game unbeaten streak for the Norwegian who is regarded as the greatest player of all time, has sparked bitter accusations of cheating, protests, legal threats and wild conspiracy theories amplified by Tesla’s Elon Musk involving insertable sex toys.
The furore began when Carlsen, 31, withdrew from the tournament in St Louis after his loss and tweeted a video of football manager José Mourinho saying: “If I speak, I’m in big trouble, and I don’t want to be in big trouble.”
The chess world took the hint. On social media, livestreams and blogs, it was widely assumed that Carlsen was accusing his 19-year old opponent of cheating.
“This got spicy really fast,” said Hikaru Nakamura, a top US player, on his popular stream, adding: “Am I suggesting that something happened? I’m saying Magnus is suspicious.” Ian Nepomniachtchi, a Russian grandmaster, called Niemann’s win “more than impressive”.
In an emotional interview after his win, Niemann admitted cheating in online games when he was 12 and again a few years later in an effort, he said, to grow his livestream audience. He called it the “single biggest mistake of my life”, but denied ever cheating in an over-the-board game.
“To see my absolute hero try to ruin my reputation, ruin my chess career and to do it in such a frivolous way is really disappointing,” Niemann said of Carlsen.
As the rumour mill went into overdrive, Chess.com issued a statement saying it had evidence that “contradicts [Niemann’s] statements regarding the amount and seriousness of his cheating”. The site acquired Carlsen’s company, Play Magnus, in an $82mn deal this summer.
Then last week, as Carlsen and Niemann faced off in an online rematch, the Norwegian again shocked his fans by resigning after just one move in an apparent act of protest. On Tuesday, he accused the American directly: “I believe that Niemann has cheated more — and more recently — than he has publicly admitted.”
“I had the impression that he wasn’t tense or even fully concentrating” during their game in St Louis, Carlsen continued, as he called cheating an “existential threat to the game”.
It was the latest in a run of recent statements that have sown havoc just as Carlsen’s decade atop the game comes to an end. In July, he announced he would not be defending his world title, saying he was “not motivated to play another match”.
Speaking on CNN, Susan Polgar, a former women’s world champion, said cheating had been a “serious problem in chess for many years” and discussed the various ways it could be done, such as hidden mobile phones and schemes involving signals from co-conspirators.
Niemann currently ranks 40th in the world. In late 2020, after he stopped playing online as HansCoolNiemann, he began a feverish spree of in-person play that led to his rating climbing quickly. But his rapid ascent has also raised suspicion.
There is no evidence of cheating in the St Louis match. One farcical theory, which evolved from a post of the popular Reddit online forum, was that he used artificially intelligent “anal beads” to provide illicit, vibrating assistance. Tesla founder Musk picked up on it, tweeting to his 107mn followers: “Talent hits a target no one else can hit, genius hits a target no one can see (cause it’s in ur butt)”.
The internet has fuelled chess’s popularity via the growth of online streaming, which has made it a highly watchable e-sport. But technology has also sowed the seeds of the game’s destruction. A free mobile phone app could easily beat the strongest human player of all time, and hints from a machine, at crucial moments, could turn a hobbyist into an instant grandmaster.
In the wake of the cheating row, amateur investigators have pored over Niemann’s moves in an attempt to ascertain whether his game against Carlsen was too perfect, too robotic. One statistical analysis claimed to show no signs of cheating; another said it indicated strong signs of it.
But the resultant pile-on, with a crowdsourced mob cryptically joined by the most powerful man in chess, has left many in the normally staid world of chess feeling uneasy.
“It makes me feel dirty,” said Levy Rozman, an international master and commentator on the popular GothamChess stream. “This hurts me on a human level.” Representatives for Carlsen and Niemann did not respond to the requests for comment from the Financial Times.
Fide, chess’s international governing body, has weighed in on what it called “the Carlsen-Niemann polemic” by vowing to stop cheating from becoming a “plague”. It also criticised Carlsen, an “ambassador for the game” with a “moral responsibility”: “We strongly believe that there were better ways to handle this situation.”
Niemann has not commented publicly since the flurry of defiant tweets in the wake of the St Louis showdown. Then he asked: “If there was any real evidence, why not show it? Is anyone going to take accountability for the damage they’ve done?”