Gapping down
In reaction to earnings/guidance:
- DNUT -8.1%, PLCE -5.6%, JKHY -4.7%, TGT -1.8%, ADI -1.4%, TJX -1.4%
Other news:
- ASLE -13.5% (selling shareholders to offer 4.25 mln shares in secondary offering)
- OPCH -6.9% (OPCH announces 11 mln share offering by WBA)
- SNY -5.2% (is discontinuing the global clinical development program of amcenestrant, an investigational oral selective estrogen receptor degrader)
- IMAB -4.5% (IMAB amends license and collaboration agreement with ABBV)
- BE -4.5% (priced its underwritten public offering of 13 mln shares of Class A common stock at $26.00/share)
- OSH -3.4% (files for stock offering by selling shareholders)
- GSK -2.5% (FDA accepts New Drug Application for GSK's momelotinib for the treatment of myelofibrosis)
- NOVA -2.1% (pricing of upsized offering of $500 million of 2.625% convertible senior notes)
- DDOG -2% (announces expanded monitoring for Microsoft SQL Server and Microsoft Azure database platforms)
- VRDN -2% (announces the pricing of an upsized underwritten public offering with gross proceeds of ~$270 mln)
- FSM -1.5% (announces the voluntary resignation of Paul Criddle from the position of Chief Operating Officer - West Africa effective September 30, 2022)
- HYZN -1.3% (to delay 10-Q filing)
- SHEL -1.2% (to shut Gulf of Mexico crude pipelines, Odyssey and Delta, for two weeks, according to Reuters)
Gapping up
In reaction to earnings/guidance:
- A +5.6%, PFGC +3%, LOW +1.2%,
M&A news:
- HIL +62.1% (to be acquired by Global Infrastructure Solutions Inc. for $2.85/share), MANU +5% (Elon Musk says he was joking about buying MANU)
Other news:
- BBBY +42.5% (FCM BBBY Holdings LLC files amended 13G; no longer holds any shares of BBBY (prior filing showed a 6.21% stake))
- SAVA +19% (discloses two insider purchases)
- QTRX +4.8% (discloses insider purchases)
- CCRN +3.1% (authorizes new $100 mln share repurchase program)
- ICPT +2.9% (ICPT settles patent litigation with RDY)
Dior and Chanel Run Their Own Beauty Lines. Why Not Gucci Too?
Kering’s rumoured plan to someday bring its largest brand’s beauty business in house may take years to pull off, but is already sending shockwaves throughout the industry.
Kering has FOMO.
Rumours are percolating that the French luxury conglomerate is looking to take at least some of its beauty business in-house. Kering has long maintained tight control over the fashion businesses of its brands, which include Gucci, Bottega Veneta and Saint Laurent. But it’s relied on licencing deals to manufacture, market and sell fragrance, makeup and skin care (Coty for Gucci and Bottega Veneta, L’Oréal for Saint Laurent.)
There’s nothing unusual about a luxury fashion house outsourcing beauty. There are exceptions though: Dior and Chanel own and operate their beauty divisions. Both are thriving, especially in fragrance: the two companies sell more perfume than any other brands in the world.
It makes sense that Kering would want a similar setup. The company wants to build Gucci, which drives just over 50 percent of the group’s revenue and two thirds of profits, into a brand with €15 billion in annual sales. Category expansion, including a new emphasis on beauty, with Kering keeping all of the revenue, is one way to do that (the company is making similar moves in fashion, steering more Gucci sales to its own stores and away from third-party retailers).
This would be a cataclysmic loss for Coty, however.
Gucci is one of the most lucrative brands in Coty’s portfolio, which includes Chloé, Burberry, Marc Jacobs Perfume, Bottega Veneta and Calvin Klein. In May, Sue Nabi, Coty’s chief executive officer, called Gucci’s Flora Gorgeous Gardenia a “fantastic success,” listing it as one of three of the company’s leading fragrances, alongside Burberry Hero and Hugo Boss The Scent.
It’s mostly just industry gossip for now. WWD reported last week that buzz around Kering’s “potential entry into beauty keeps amplifying,” following the group’s earnings call last month and its dissatisfaction with how Coty handled Gucci’s beauty business (which was expressed prior to Nabi’s appointment).
In July, Kering hinted that its beauty business could follow in the footsteps of eyewear, a category it brought in-house through a partnership with Richemont.
“Our success with Kering Eyewear demonstrates that we can create a lot of value for the brands on the one side and as a consequence for the group by taking some disruptive and innovative approaches,” Jean-Francois Palus, Kering’s group managing director, said in a conference call. “So beauty is definitely an area where we could contemplate some in the future and all options are open.”
Kering and Coty declined to comment.
There’s a reason luxury brands that oversee every tiny detail of their fashion businesses typically opt to license their beauty lines, however. Perfume or lipstick costs less than a handbag or shoes, but margins are high and beauty is effective as a way to acquire new customers. Companies like Coty and L’Oréal have the infrastructure to make and sell fragrance, makeup and skin care products, expertise that doesn’t always come naturally to luxury fashion brands.
When it comes to licencing, fragrance is probably the most competitive of the beauty categories with a handful companies — led by Coty and L’Oréal — vying to control the largest brands in the category.
A single fragrance could yield hundreds of millions of dollars in sales per year for one of these companies. It’s rare for a lipstick or moisturiser to do that sort of volume. Typically, a brand launches one big scent per year, spending millions of dollars in marketing, including celebrity ambassadors; TV, outdoor and print ads; in-store activations, influencer campaigns and more.
The pressure to perform is enormous. Once, a president at a multibillion-dollar beauty conglomerate texted me pleading for “front page” placement in WWD for a fragrance launch, the company’s first in a new licencing deal with an iconic luxury brand.
It was an unusual display, but I understand why the executive felt the need to beg for a cover story: If that year’s scent is a dud, or underperforms, the brand’s fragrance ranking tanks. And if the licencing agreement isn’t performing to the brand’s liking, the brand will walk — and either sign another licencing deal with a competitor or take their beauty in-house.
The good news is that Coty has some time to work things out with Kering. Coty confirmed that “no major license [is] up for renewal in [the] next five years” in an investor update last spring, which means the earliest that Kering can bring beauty in-house, if it decides to do so, is in 2026.
Four years is a lot of time, and Coty is working fast to diversify its portfolio. Of course, four years is also enough time for Kering to build a beauty division of its own, too.
Research Calls
- Upgrades:
- Apple (AAPL) upgraded to Outperform from Neutral at Credit Suisse; tgt $201
- Westlake Corporation (WLK) upgraded to Overweight from Neutral at JP Morgan; tgt $135
- Downgrades:
- Rockwell Automation (ROK) downgraded to Mkt Perform from Outperform at Bernstein; tgt $290
- Stanley Black & Decker (SWK) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $111
- Others:
- 3D Systems (DDD) initiated with an Underperform at Credit Suisse; tgt $8
- 3M (MMM) resumed with a Mkt Perform at Bernstein; tgt $155
- Altair Engineering (ALTR) initiated with an Outperform at Wolfe Research; tgt $70
- ANSYS (ANSS) initiated with an Outperform at Wolfe Research; tgt $320
- AppLovin (APP) initiated with an Outperform at Wolfe Research; tgt $40
- Aspen Tech (AZPN) initiated with a Peer Perform at Wolfe Research
- Autodesk (ADSK) initiated with an Outperform at Wolfe Research; tgt $270
- Bentley Systems (BSY) initiated with an Outperform at Wolfe Research; tgt $48
- C3.ai (AI) initiated with a Peer Perform at Wolfe Research
- Cadence Design (CDNS) initiated with an Outperform at Wolfe Research; tgt $210
- CDW (CDW) initiated with an Outperform at Credit Suisse; tgt $202
- CME Group (CME) initiated with a Sell at Rosenblatt; tgt $171
- Corning (GLW) initiated with a Neutral at Credit Suisse; tgt $36
- Danaher (DHR) resumed with an Outperform at Bernstein; tgt raised to $340
- Dell (DELL) initiated with an Outperform at Credit Suisse; tgt $60
- Desktop Metal (DM) initiated with a Neutral at Credit Suisse; tgt $2.80
- Emerson (EMR) assumed with a Mkt Perform at Bernstein; tgt lowered to $100
- Flex (FLEX) initiated with an Outperform at Credit Suisse; tgt $24
- General Electric (GE) resumed with an Outperform at Bernstein; tgt lowered to $100
- Hewlett Packard Enterprise (HPE) initiated with an Outperform at Credit Suisse; tgt $18
- HP Inc. (HPQ) initiated with an Outperform at Credit Suisse; tgt $39
- IBM (IBM) assumed with an Outperform at Credit Suisse; tgt raised to $163
- Intercontinental Exchange (ICE) initiated with a Buy at Rosenblatt; tgt $164
- ironSource (IS) initiated with a Peer Perform at Wolfe Research
- Jabil (JBL) initiated with an Outperform at Credit Suisse; tgt $74
- Markforged Holding Corp. (MKFG) initiated with a Neutral at Credit Suisse; tgt $2.70
- Matterport (MTTR) initiated with a Peer Perform at Wolfe Research
- NASDAQ (NDAQ) initiated with a Buy at Rosenblatt; tgt $241
- NetApp (NTAP) initiated with an Outperform at Credit Suisse; tgt $87
- Procore Technologies (PCOR) initiated with a Peer Perform at Wolfe Research
- Pure Storage (PSTG) initiated with an Outperform at Credit Suisse; tgt $36
- PTC (PTC) initiated with an Outperform at Wolfe Research; tgt $155
- Roblox (RBLX) initiated with a Peer Perform at Wolfe Research
- Roper (ROP) initiated with a Mkt Perform at Bernstein; tgt lowered to $490
- Seagate Tech (STX) initiated with a Neutral at Credit Suisse; tgt $80
- Stratasys (SSYS) initiated with an Outperform at Credit Suisse; tgt $24
- Synopsys (SNPS) initiated with an Outperform at Wolfe Research; tgt $440
- TD Synnex (SNX) initiated with a Neutral at Credit Suisse; tgt $115
- The Trade Desk (TTD) initiated with a Peer Perform at Wolfe Research
- Tradeweb Markets (TW) initiated with a Buy at Rosenblatt; tgt $91
- Trimble (TRMB) initiated with a Peer Perform at Wolfe Research
- Unity Software (U) initiated with an Outperform at Wolfe Research; tgt $70
- Velo3D (VLD) initiated with a Neutral at Credit Suisse; tgt $5.40
- Western Digital (WDC) initiated with a Neutral at Credit Suisse; tgt $52
- Xerox (XRX) initiated with an Underperform at Credit Suisse; tgt $14
Early premarket gappers
- Gapping up:
- HIL +62.6%, SAVA +20.3%, A +6.6%, QTRX +3.6%, CCRN +3.1%, ICPT +2.9%, MANU +2.8%, LOW +1.8%
- Gapping down:
- ASLE -10%, DNUT -8.7%, SNY -5.7%, PLCE -5.6%, OPCH -5.1%, JKHY -4.7%, IMAB -3.5%, TGT -3.4%, OSH -3.3%, BE -2.9%, ADI -2.8%, GSK -2.1%, VRDN -2%, FSM -1.5%, HYZN -1.3%
Ally/Warren Buffett: auto loan stake signals confidence in consumer credit
The world’s most famous investor clearly does not think the good times are over
It does not have quite the same lustre as the Golden Age of Athens. But 2020-21 will be remembered as halcyon days by US used car merchants if no one else.
Warren Buffett does not think the good times are quite over. Filings show Berkshire Hathaway tripled its stake in Ally Financial, an auto lending mainstay, to $1bn during the second quarter.
The world’s most famous investor evidently believes lending margins will remain robust and default rates low in consumer credit.
In the two pandemic years, shares in Ally rallied 57 per cent. The stock was buoyed by consumers flush with cash flocking to buy used vehicles. Auto manufacturers were unable to meet demand for new cars.
Ally shares, have fallen by a quarter so far in 2022. Wall Street is worried about the finances of the US consumer as well as a normalisation in the auto market. Ally says those worries remain overstated, a view that now has the implicit endorsement of a legendary investor.
Between the end of the 2019 and the start of 2022, the Manheim Used Vehicle Value Index increased by a vertiginous 70 per cent. Higher used car prices supported bigger loans at a time when there were virtually no concerns about immediate credit losses.
Net interest revenue increased substantially in the current quarter, compared with 2021. However, Ally was forced to accrue credit loss provisions so big that pre-tax income fell 40 per cent year on year. The company insists those provisions are simply a natural reversion to ordinary levels.
Ally’s internal models forecast used car prices falling by 30 per cent over the next couple of years. Still, lower prices are not a death knell and could lead to even steeper volumes of sales to buyers sidelined by elevated prices, according to Ally.
The company’s share price has fallen far enough to trade at near book value. This must have grabbed Berkshire’s attention. Buffett’s bet is a vote of confidence in consumer banking broadly, as well as auto loans.
>>> Up
* Eurocash Raised to Neutral at Citi; PT 12.70 zloty
>>> Down
>>> Initiation
* CME Group Rated New Sell at Rosenblatt Securities Inc; PT $171
* Dassault Systemes Rated New Underperform at Wolfe; PT 38 euros
* ICE US Rated New Buy at Rosenblatt Securities Inc; PT $164
* Nasdaq Inc. Rated New Buy at Rosenblatt Securities Inc; PT $241
* Petershill Rated New Buy at Peel Hunt; PT 310 pence
* Tradeweb Rated New Buy at Rosenblatt Securities Inc; PT $91
>>> Call
Stocks in Asia came off session highs on Wednesday, hampered by worries about a darkening economic outlook amid high inflation and tightening monetary policy. MSCI Inc.’s Asia-Pacific share index rose less than 0.5%, spanning a climb in Japan and a drop in China. S&P 500 and Nasdaq 100 futures fluctuated while European contracts edged higher. The US stock market had posted a small gain on Tuesday, helped by robust earnings from Walmart Inc. and Home Depot Inc. Company profits have encouraged an equity rebound from June lows but are at risk of weakening as monetary settings tighten to fight price pressures. Oil stabilized but was still in sight of a more than six-month low, underlining some of those concerns over the economic growth outlook. Treasury yieldsand the dollar were steady, while gold and Bitcoinwavered. In New Zealand, the central bank raised borrowing costs by a half-point as expected and said it remains appropriate to continue tightening at pace to curb inflation. The local currency strengthened. The revival in stocks from bear-market lows is in part a contentious bet that inflation and central bank hawkishness are peaking, making a recession less likely. The latest Federal Reserve minutes Wednesday will shed more light on whether those wagers are right. he latest US data were patchy. Home construction fell more than expected, while factory output increased in July for the first time in three months. In China, where challenges from a property-sector slump and Covid curbs are multiplying, Premier Li Keqiang asked local officials from six key provinces that account for 40% of the economy to bolster pro-growth measures. US After Hours A +6.4% higher on earnings; SAVA +21% higher on two insider purchases; JKHY -4.8% lower on earnings.
Nikkei +0,81% Hang Seng +0,78% CSI +0,67% Shanghai +0,32% Shenzen +0,47%
Eur$ 1,0173 CNH 6,7939 CNY 6,7843 JPY 134,15 GBP 1,2107 CHF 0,9494 RUB 61,1105 TRY 17,9510 WTI$ 87,10 Gold 1,775,61 BTC 24,040 ETH 1,896,60
S&P -0,04% Nasdaq -0,11% EuroStoxx +0,26% FTSE +0,21% Dax +0,21% SMI
Macro :
- US Gas Jumps to 14-Year High on Winter Concern, Europe Crisis
Keep an eye on :
- O5G GY : CPI Property Group Acquires 79.2% of S Immo at Purchase Tender
- CCL LN : Carnival Gains After Aug. 15 Bookings Update; Peers Follow
- EQNR NO : Venezuela Ends Offshore Gas License for Total, Equinor: Gazette
- IMPW SW : Implenia-Led JV Gets Gotthard Road Tunnel Order Worth CHF467M
- KOMN SW : Komax 1H Revenue Beats Estimates
- LULU US : Lulu’s Fashion Rises on In-Line Revenue and Reaffirmed Outlook
- MEKKO FH : Marimekko 2Q Adjusted EPS Beats Estimates
- NHY NO : Norsk Hydro Says 665 Hydro Sunndal Employees to Go on Strike
- NOVN SW : Novartis Granted FDA Orphan Drug Status for Sotuletinib
- SWTQ SW : Schweiter 1H Ebitda CHF57.0M Vs. CHF77.8M Y/y
- SLHN SW : Swiss Life 1H Net Income CHF636M Vs. CHF613M Y/y
- TECN SW : Tecan Sees FY Ebitda Margin About 20%
- TSLA US : Musk: Trying to Reduce Tesla Car Delivery Times Quickly
- UN01 GY : Germany Says Electricity Stability Stress-Test Ongoing
- WAWI NO : Wallenius Wilhelmsen 2Q Ebitda Beats Estimates
Shock the market’: Wall Street’s original ‘Dr Doom’ tells Fed to toughen up
Forecaster of 1982 bull market Henry Kaufman says US central bank has ‘long way to go’ on inflation
Forty years ago today, former Salomon Brothers economist Henry Kaufman helped start one of history’s great bull markets. Known then as “Dr Doom” for his bearish views, he roused investors by changing his stance and forecasting a fall in interest rates after a punishing Federal Reserve campaign to tame inflation.
Now 94, Kaufman remains focused on financial affairs and in a recent interview was sufficiently spry to hold forth at length on his book of last year, The Day the Markets Roared, which recounts his fateful rate call on August 17 1982. Asked how he was doing, he answered cheekily: “So far, so good.”
His views on US monetary policy are less sanguine. He fears that today’s Fed under Jay Powell is failing to combat inflation with the resolve displayed by Paul Volcker, who aggressively hiked interest rates while leading the central bank in the 1970s and 1980s.
“I am still waiting for him to act boldly — ‘boldly’ means he has to shock the market,” Kaufman said of Powell. “If you want to change someone’s view, if you want to change someone’s action, you can’t slap them on the hand, you have to hit them in the face.”
Kaufman said the Fed chair erred after he made his pivot on inflation last November. Months passed between the time Powell warned of “persistently higher inflation” and the start of Fed interest rate increases in March.
“His forecast was right, his inaction was wrong,” Kaufman said.
As a result, markets are facing a far different situation than they were when Kaufman distributed his legendary Salomon memo predicting that interest rates would head lower.
“Today, the inflation rate is higher than interest rates. Back then, interest rates were higher than inflation rates. It’s quite a juxtaposition,” he said. “We have a long way to go. Inflation has to come down or interest rates will go higher.”
Interest rates had already started falling before Kaufman issued his celebrated 1982 forecast, but it was his prediction of a sustained decline that moved the markets. His impact stemmed from his status as the late-20th century equivalent of a social media influencer. Kaufman was so renowned for his pessimism that once investors learned of his new view, stocks soared.
Having touched a cyclical bottom only days before, the Dow Jones Industrial Average rose 38.81 points, or 4.9 per cent, to 831.24, its biggest point gain in history at that time. The 1980s bull market followed and — with several notable interruptions — stocks have climbed higher in the decades since. The Dow closed on Tuesday at 34,152.01.
“I had bearish views for a long time . . . When I changed my mind, it induced a reaction,” Kaufman said, adding it was hard to imagine a private-sector forecaster having that kind of impact today. “There were not many economists around. That gave me a distinct advantage.”
Looking ahead, Kaufman’s inflation concerns make it harder for him to be as certain as he was in August 1982.
“I wouldn’t say I’m bearish,” he said, noting that US equity prices “are not really far away” from their peak of last year and could be buoyed by further progress in the global fight against Covid-19. Rather, he said, it was difficult to make predictions in such “diffuse” circumstances.
“Today, monetary policy is somewhat behind the curve,” Kaufman said. “Back then, monetary policy under Paul Volcker was ahead of the curve . . . He was in the process of turning around market expectations.”
US chipmakers hit by sudden downturn after pandemic boom
Intel and Micron set to slash billions of dollars off capital spending despite Washington passing landmark law to increase production
After dealing with booming demand and global shortages since the start of the pandemic, the semiconductor industry is facing a sudden downturn.
But even for an industry accustomed to frequent cyclical slumps, this one has defied easy analysis and left researchers struggling to predict how the setback will play out.
The sudden glut in memory chips, PC processors and some other semiconductors has come at a time when manufacturers in many automotive and industrial markets still lack a reliable supply of chips.
It has also forced some of the biggest US chipmakers to slash billions of dollars off planned capital spending, at the very moment that Washington has passed a long-awaited law to subsidise a massive increase in domestic chip manufacturing capacity.
The speed of the turn, and the conflicting forces at work, have been unprecedented, said Dan Hutcheson, the veteran chief executive of VLSI Research who has analysed chip cycles since the 1980s.
“I’ve never seen a time when we had excessive inventory and we had shortages,” he said.
The immediate cause has been a rapid build-up in inventory in the chip supply chain since early this year. Compared with February, when there were enough chips on hand to support around 1.2 months of production, global inventory levels jumped to 1.4 months in June and then 1.7 months in July, according to VLSI Research.
Tumbling PC sales and weaker smartphone demand have been the main causes, as consumers retrench. But with fears rising of an economic slowdown, manufacturers of a wide range of equipment, which had been building inventory to make themselves more resilient to supply pressures, have reversed course. Meanwhile, it is unclear how much weakening chip sales reflect supply chain problems, rather than any fall-off in demand.
The suddenness of the turn has ricocheted through the sector since late July, when Intel stunned Wall Street with the news that revenue in its latest quarter had fallen $2.6bn, or 15 per cent, short of expectations. Chief executive Pat Gelsinger blamed it on the kind of inventory adjustment that only hits once in a decade, although Intel also admitted to errors of its own.
Nvidia, the biggest maker of graphics processing units, or GPUs, used in video graphics and machine learning systems, last week pre-announced an even bigger revenue miss, as sales of its gaming chips fell 44 per cent from the preceding quarter. And Micron, one of the largest makers of memory chips, said its free cash flow was likely to turn negative in the next three months, after averaging $1bn in recent quarters.
The stresses have also been felt through Asia. Late last week, the chief executive of Chinese chipmaker Semiconductor Manufacturing International Corporation said demand had slowed from smartphone and other consumer electronics markers, with some stopping orders altogether. A month before, Taiwan Semiconductor Manufacturing Company said it was expecting an inventory correction that would last until late next year.
The abrupt slide has left chipmakers in the US trying to manage a decline at the very moment that they were laying the ground for a massive increase in production because of the $52bn in government support provided by this month’s Chips Act.
On the same day that Congress passed the law, Intel, which is expected to be the biggest beneficiary of government grants, sliced $4bn from its capital spending plans for the rest of this year, although it said that it was still committed to a “strong and growing dividend” for its shareholders.
Meanwhile, Micron, which celebrated President Joe Biden’s signing of the legislation last week with the announcement that it planned to invest $40bn in the US by the end of the decade, was forced just a day later to say it would cut its capital spending “meaningfully” next year because of the downturn.
For now, most chip supply chain experts predict a relatively shallow downturn, provided that the global economy is heading for a soft landing. But the speed with which things have turned has left them scrambling to understand the complex dynamics at work.
Gartner, which had been expecting the growth in global chip sales this year to halve from 2021’s 26 per cent, took its forecast down further to 7 per cent, and is now predicting a 2.5 per cent contraction in 2023 to $623bn.
For now, Wall Street has taken the news in its stride. The Philadelphia semiconductor index, which comprises the 30 largest US companies involved in the design, manufacture and sale of semiconductors, fell back nearly 40 per cent as the stock market corrected this year after rising three-fold following the early pandemic stock market slump. But since early July, despite mounting evidence of the chip slowdown, the index has rebounded 24 per cent.
On Monday, Nvidia’s shares climbed back above the level they were trading at before its earnings disappointment, even though it disclosed a savage 17 per cent shortfall in revenue compared to earlier expectations.
But after the severe inventory and supply chain stresses of the past two years, few analysts are confident that they can judge how an economic slowdown will feed through the industry. Hopes that the slide would be largely restricted to the PC and smartphone markets have already been dashed.
While a collapse in demand in the gaming market was the main cause for Nvidia’s earnings disappointment, the US chipmaker also said its sales of data centre chips had only risen 1 per cent from the preceding three months, compared to Wall Street expectations of closer to 10 per cent. It blamed supply shortages rather than falling demand, although other indications, including a fall-off at Intel, have fed the suspicion that the booming cloud computing market has cooled rapidly.
In recent days, the signs of retrenchment have broadened. Micron finance chief Mark Murphy said last week that industrial and automotive customers were the latest to cut their chip purchases.
“It’s a very recent development,” he added, making it too early to tell whether these customers are simply making an adjustment after a rapid inventory build-up, or whether they are responding to falling demand from their own customers.
Either way, according to Murphy, the result has been the same: “We’re seeing clear signs of weakness in those markets.”