Closing Stock Market SummaryVix is up, +4.61% and S&P is upThe stock market had another strong showing today due to carryover upside momentum to build on recent gains. The major indices saw choppy action, but held onto decent gains for the entirety of today's session. There's a bit of trepidation in play ahead of the much-anticipated August CPI release tomorrow at 8:30 a.m. ET. Buying efforts were also supported by a weakening dollar.
The US Dollar Index was down 0.6% to 108.35 as the EUR/USD rose 0.7% to 1.0116.
Apple's (AAPL 163.43, +6.06, +3.9%) big upside move today was another support factor for the broader market after JP Morgan suggested the company is seeing strong demand for its new iPhone following last week's product announcements. The stock broke above its 200-day moving average on higher than average volume.
Mega caps had a slight performance edge over their peers as the Vanguard Mega Cap Growth ETF (MGK) (+1.4%) outpaced the broader market, but the general positive disposition left many stocks higher. The Invesco S&P 500 Equal Weight ETF (RSP) (+0.9%) and the S&P 500 (+1.1%) both closed with sizable gains.
Market breadth reflected the broad nature of today's rally. Advancers led decliners by a greater than 3-to-1 margin at the NYSE and a 3-to-2 margin at the Nasdaq.
All 11 S&P 500 sectors closed in the green with gains ranging from 0.4% (consumer staples) to 1.8% (energy).
Energy was boosted by rising energy complex prices. WTI crude oil futures rose 1.7% to $87.84/bbl and natural gas futures rose 3.5% to $8.31/mmbtu.
Semiconductors underperformed the market today following reports that the White House is expected to tighten restrictions on chip exports to China. The PHLX Semiconductor Index was up 0.3%.
Today's $32 billion 10-yr note auction was met with relatively weak demand. The high yield of 3.33% tailed the when-issued yield of 3.303%. Following the auction, selling pressure picked up in the Treasury market. The 10-yr note yield, which sat at 3.27% before today's open, settled the session at 3.36%. Despite the pickup in yield, stocks held their ground, tracking sideways, but holding the bulk of today's gains, after the auction.
The 2-yr note yield settled down one basis point to 3.56%.
There was no U.S. economic data of note, but a series of investment conferences started today involving the technology, health care, and financials sectors.
Looking ahead to Tuesday, market participants will receive the anticipated August CPI ( consensus -0.1%; prior 0.0%) and core CPI (consensus +0.3%; prior +0.3%) at 8:30 a.m. ET. Other economic data includes the August NFIB Small Business Optimism (prior 89.9) at 6:00 a.m. ET and the August Treasury Budget (prior -$211.1 billion) at 2:00 p.m. ET.
Dow Jones Industrial Average: -10.9% YTD
S&P 400: -11.2% YTD
S&P 500: -13.8% YTD
Russell 2000: -15.1% YTD
Nasdaq Composite: -21.6% YTD
Hedge funds: Och will not be the last to challenge pay in tough sector
A deteriorating macroeconomic backdrop has drawn out a historic number of first-time activists
Carl Icahn softened his image as a ruthless corporate raider to challenge McDonald’s on animal welfare. Following his lead, hedge fund magnate Daniel Och has also been trying activism for size. Last month he accused the chief executive of the fund manager he founded, Sculptor Capital, of extracting “ever-escalating pay packages” despite what he called “less than mediocre performance”.
Dabbling in shareholder activism is all the rage. Investment bank Lazard recorded 126 new activist campaigns in the first half of 2022, a 34 per cent increase from the same period last year. A deteriorating macroeconomic backdrop has drawn out a historic number of first-time activists.
Och, who holds a 14.4 per cent stake in Sculptor, has requested access to records relating to the board’s decision to award Sculptor CEO James Levin $145.8mn in 2021, in a lawsuit filed at Delaware Chancery Court. Sculptor called the filing “misleading and full of falsehoods that present a grossly distorted view of board governance at the company”.
It is ironic that Och is claiming Levin’s pay has become excessive. Och used money out of his own pocket to award Levin a $280mn pay package in 2017, setting a precedent for years of lofty remuneration to follow.
Sculptor’s share price has tumbled 25 per cent since Levin took the helm, shedding more than half their value this year. Assets, which once exceeded $50bn, have dwindled to $36.9bn. Levin blamed underperformance on a laundry list of inflation, rising interest rates, supply chain disruptions and the War in Ukraine in a call with investors earlier this month.
Levin’s bloated pay is a symptom of a broader malaise. He does not stand out among hedge fund managers for taking home about four times as much as the bosses of Goldman Sachs and JPMorgan Chase last year.
Och is an unlikely advocate for pay restraint. He may not be a lone voice for long. The hedge fund industry is headed for one of its worst years in recent history.
Germany outlines aim to take up leading military role in Europe
Defence minister says Berlin must use its ‘heft’ as Russia’s invasion of Ukraine changes strategic thinking
Defence minister Christine Lambrecht said Germans had got used to seeing the nation’s military as just a kind of disaster relief agency, but ‘those times are over’ © Thomas Niedermueller/Getty Images
Germany must assume a leading military role in Europe, the country’s defence minister has said, underscoring how Russia’s war in Ukraine has transformed Berlin’s strategic thinking.
Christine Lambrecht made her comments as Ukraine pressed on with its counter-offensive in the east of the country and Russia vowed to continue with the invasion until all its military goals are met.
The war has increased pressure on Germany to step up its contribution to the western alliance, despite historic reservations over playing a bigger role after the second world war. Lambrecht argued Berlin was doing so for reasons “to do with our size, our geographical location, our economic power, in short with our heft”.
In comments to the German Council on Foreign Relations she added: “That makes us a leading power whether we like it or not — in the military sense, too.”
Lambrecht said the US would remain Europe’s main protector and there could be “no substitute for the American nuclear deterrent for the foreseeable future”.
The UK and France, both nuclear powers, have been Europe’s strongest military forces for more than 70 years.
But she argued the rise in tensions between Washington and Beijing over Taiwan and a US pivot to the Asia-Pacific region meant “we are called on to do more than before for Europe”. She added: “Germany is prepared to make a decisive contribution to fair burden-sharing.”
Lambrecht acknowledged that Germany’s Nazi-era crimes and the “war of destruction” waged by its army in Europe between 1939 and 1945 had turned “scepticism about the military into a kind of virtue”.
But she said Germany could only guarantee peace and freedom for its people if it abandoned its “old self-image” and defined security as “the central task of this country”.
Echoing a landmark speech this year by Chancellor Olaf Scholz, the defence minister said Germany had to meet the Nato target of spending 2 per cent of gross domestic product on defence “over the long term”, not just for the next couple of years.
“We must avoid a situation where, in a few years, we cannot afford to maintain the equipment we are purchasing now,” she said, reiterating plans to set up three combat-ready army divisions by the early 2030s.
The success of the Ukrainian counteroffensive, which has reclaimed more than 3,000 square kilometres of terrain in the east, has also increased expectations the west will step up weapons deliveries to Kyiv. Ukraine’s southern operations command on Monday said it had also liberated about 500 sq km of territory from Russia’s forces.
“The tone has shifted, without a doubt,” said a senior European diplomat. “You won’t really hear anyone talking against more weapons now, just a chorus of supporters and one or two staying silent.”
But some allies accuse Berlin of less than wholehearted support for Kyiv.
Claudia Major, a military analyst at the German Institute for International and Security Affairs, said many in central and eastern Europe felt Berlin’s aid to date had been “too slow, hesitant and small-scale”.
Lambrecht rejected such accusations while reiterating that Berlin had no intention of acceding to a request from Kyiv for battle tanks. She added no country had so far “delivered western-built infantry fighting vehicles or main battle tanks”.
The defence minister also called for strict rules on military exports to be relaxed to allow Germany to take part in European defence projects. “What partner is going to co-invest with us in projects when he or she will always worry that we’ll prevent the export [of the weapons]?”
Her speech came less than two weeks after Scholz’s cabinet formally announced the start of work on a national security strategy, the first in Germany’s history, which will redefine its foreign and defence policy.
Lambrecht said the west must “draw the necessary conclusions” from Russia’s invasion of Ukraine — that “we ourselves need strong, combat-ready troops so we can defend ourselves and our alliance if we have to”.
She said Germans had become accustomed to seeing the Bundeswehr as a kind of disaster relief agency that helped with pandemics, floods and forest fires and took part in missions to places such as Afghanistan and Mali. “But those times are over,” she added.
UK trade deficit widens while exports to the EU hit record high
ONS data shows increase to £27bn as energy imports surge because of war in Ukraine
The UK trade gap widened to a near all-time high in the three months to July as a result of surging energy imports following the war in Ukraine and weak export performance, according to new data on Monday.
The war also resulted in exports to the EU rising to the highest level on record, as the UK increased its gas flows from other countries to the bloc after Russia cut energy supplies to Europe.
Data from the Office for National Statistics showed that trade in goods and services’ deficit, excluding precious metals, widened by £1.2bn to £27bn in the three months to July compared with the previous quarter, a near-record since comparable data was first collected in 1997.
William Bain, head of trade policy at the British Chambers of Commerce, a business association, said the overall trade picture was “concerning”. He added that the data “demonstrate the case for the UK government to refresh its export strategy to prioritise export-led growth as a greater proportion of UK economic growth”.
The widening was caused by the surging value of imports, reflecting rising energy prices because of Russia’s invasion of Ukraine and a weak export market.
The UK is a net energy importer and gas prices reached a new high in August, which will probably boost the value of imports further. Exports are also likely to continue to struggle as external demand from key trading partners softens and Brexit trade frictions remain.
“The trade deficit will reach enormous proportions over the coming months,” said Gabriella Dickens, economist at Pantheon Macroeconomics, a consultancy.
Dickens added that she expected the trade deficit to grow to a record 7.5 per cent of GDP in the final quarter, from 4.7 per cent in Q2, “making sterling even more sensitive than usual to changes in overseas investors’ sentiment”.
The figures come after prime minister Liz Truss last week announced policy measures aimed at making the UK a net energy exporter by 2040, including lifting a three-year ban on fracking in England.
Following Russia’s cut in energy flows to Europe, the UK is processing large volumes of liquefied natural gas arriving at its ports from countries such as the US and Qatar. It then regasifies it for export to the EU via subsea pipelines from Bacton in Norfolk to Belgium and the Netherlands.
This trend was captured in the trade data by a rise between June and July of 7.9 per cent in UK goods exports to the EU to £17.4bn, the highest since records began in January 1997.
UK fuel exports accounted for £800mn of July’s £1.3bn goods export increase to the EU. UK fuel exports to the bloc more than doubled compared with July last year, while exports to non-EU countries remained unchanged.
In July, the UK exported about £900mn worth of gas to the EU, about three times higher than in the same month last year, despite some reduction in UK gas trade owing to pipelines operating at overcapacity.
As a result, the UK exported £50.3bn worth of goods to the EU in the three months to July, more than £2bn more than exports to non-EU countries. This is in contrast with 2019, when goods exports to non-EU countries was larger than to the bloc
“Trade in fuels played a significant role in the uplift in UK exports to the EU,” said the BCC’s Bain.
Gapping down
Select biotech/pharma names showing early weakness following ESMO:
- APGN -8%, LYEL -4.9%, AMGN -4%, IMGN -2%
Other news:
- RLAY -8% (announces underwritten offering of $300 mln in common stock)
- VRM -2.8% (files for $300 mln mixed securities shelf offering)
- MSTR -2.7% (enters into a Sales Agreement related to offering of up to $500 mln of common stock)
- MSGS -2.4% (President and CEO to step down at end of year; also names David Hopkinson as COO, effective immediately)
- ATEN -2.3% (purchased an aggregate of 3.5 mln of its shares from Summit)
- ALLK -2.2% (Initiation of Phase 2b Clinical Trial of Subcutaneous Lirentelimab in Chronic Spontaneous Urticaria)
- ALNY -2% (commences offering of $900 mln of convertible senior notes due 2027) SHOP -0.9% (files mixed securities shelf offering) .
Analyst comments:
- OSH -1.9% (downgraded to Neutral from Buy at Goldman)
- ADBE -1.2% (downgraded to Neutral from Buy at Mizuho)
Lapping up
Select biotech/pharma names showing strength following ESMO:
- CLVS +11.3%, CRDF +9%, IMTX +8.3%, IDYA +8%, LYRA +5.7%, PNT +5.7%, EWTX +4.7%, CNCE +3.6%, DCPH +3.2%, VCYT +2.6%, SWTX +2.3%, IMAB +2.3%, PBYI +1.8%, AZN +1.1%, NVS +0.9%, MRK +0.8%, EXAS +0.8%, BGNE +0.8%, .
Other news:
- SPPI +15.8% (receives FDA approval for ROLVEDON injection; expects to launch product in Q4)
- BMY +8.1% (receives FDA approval for Sotyktu)
- XL +5.1% (completes transformational acquisition of Spruce Power)
- EGLX +4.7% (signed a media sponsorship deal with Hulu + Live TV the premium streaming destination as the first official media sponsor of NFL Tuesday Night Gaming)
- CNTA +4.5% (Announces Non-Human Primate Pharmacokinetic and Safety Data for LB101)
- FSM +2.8% (extends gold mineralization at Sunbird and identifies new regional prospects at Séguéla)
- ACAD +2.6% (receives acceptance from FDA for NDA of Trofinetide)
- OXY +1.7% (Berkshire Hathaway discloses 26.8% stake up from 20.28% previously)
- LTH +1.4% (closes on $200 million in sale-leaseback transactions)
- CSSE +1% (files for 7745453 share common stock offering by selling shareholders relates to warrants)
Analyst comments:
- APA +2.7% (upgraded to Buy from Neutral at Citigroup)
- CNI +2% (upgraded to Buy from Neutral at BofA Securities)
- UNP +1.9% (upgraded to Buy from Neutral at BofA Securities)
- CP +1.5% (upgraded to Buy from Neutral at BofA Securities)
Early premarket gappers
- Gapping up:
- SPPI +19.7%, CLVS +14.8%, CRDF +9.3%, IMTX +8.3%, BMY +6.9%, IDYA +5.9%, APGN +5.8%, PNT +5.7%, EWTX +4.7%, CSSE +4.3%, IMAB +4%, FSM +3.2%, MSTR +3.1%, VGR +3%, OXY +2.1%, NVS +1.9%, AZN +1.2%, MRK +0.7%
- Gapping down:
- LYEL -4.9%, VCYT -3.9%, SWTX -3.4%, EXAS -3%, VRM -2.8%, MSGS -2.4%, ATEN -2.3%, AMGN -2.1%, RLAY -2.1%, IMGN -2%, SHOP -1.8%, TWTR -0.9%
- Rio Tinto (RIO1 TH) +3.1%
- Iron Ore Holds Weekly Gain Amid Peak China Construction Season
- Berkeley (42BB TH) +2.4%
- Berenberg Cuts 7 UK Builders on Tougher Operating Environment
- Vodafone (VODI TH) +2.4%
- Vodafone, DT May Win Customers From German Rivals: BI Survey
- Porsche SE (PAH3 TH) +1.6%
- Reuters: ICYMI: Porsche is speeding towards an IPO and will only backtrack in the case of severe geopolitical problems
- Thyssenkrupp (TKA TH) +1.5%
- Thyssenkrupp Cash Burn Continues, Yet 4Q May Be a Turning Point
- GSK (GS71 TH) +1.4%
- Fresenius SE (FRE TH) +1.4%
- Imperial Brands (ITB TH) +1.4%
- Uniper (UN01 TH) +1.4%
- Getinge (GTN TH) +1.3%
- Henkel (HEN3 TH) -0.5%
- Philips (PHI1 TH) -0.6%
- Investor Group VEB Holds Philips Liable for EU16b on Recall
- Lufthansa (LHA TH) -0.7%
- Lufthansa Summer Earnings Gains at Risk as Winter Chills Travel
- HelloFresh (HFG TH) -0.7%
- Wolters Kluwer (WOSB TH) -0.8%
- EDF (E2F TH) -0.9%
- Ferrari (2FE TH) -0.9%
- Nel (D7G TH) -1.6%
- Pernod Ricard (PER TH) -1.6%
- Pernod Ricard Cut to Hold at Deutsche Bank; PT 198 euros
- Bank of Ireland (BIRG TH) -1.7%
DAX:
- Porsche SE (PAH3 TH) +1.7%
- Fresenius SE (FRE TH) +1.6%
- Zalando (ZAL TH) +1.4%
- BMW (BMW TH) +1.1%
- Vonovia (VNA TH) +1%
- Hannover Re (HNR1 TH) +0.2%
- Hannover Re Expects Further Price Increases Next Year
MDAX:
- Thyssenkrupp (TKA TH) +2.3%
- Uniper (UN01 TH) +1.8%
- Commerzbank (CBK TH) +1.6%
- Cancom (COK TH) +1.2%
- Talanx (TLX TH) +1.2%
SDAX:
- Heidelberger Druck (HDD TH) +4.3%
- PVA TePla (TPE TH) +2.6%
- Grenke (GLJ TH) +2.1%
- SAF-Holland SE (SFQ TH) +2.1%
- Deutsche PBB (PBB TH) +1.6%
- Ceconomy (CEC TH) -0.4%
- BayWa (BYW6 TH) -0.6%
- PNE AG (PNE3 TH) -0.8%
- MorphoSys (MOR TH) -1.5%