Apple Scraps iPhone Production Hike

MARKET MOVERS

• Apple stock slumps on report it scrapped production hike. The company reportedly reversed plans to boost iPhone 14 production later this year after an expected surge in demand failed to materialize. One of the key questions for Apple investors is whether or not the installed base of iPhone customers would show enthusiasm for the iPhone 14, the latest generation of the company’s flagship product.
  
  
• U.S. dollar hits a 20-year high. The Greenback Has ‘Gone Ballistic.’ Major global currencies continued to depreciate against the greenback—yet another macro factor that is a headwind for the stock market. The U.S. Dollar Index rose about 0.5% to above 114.50 on Wednesday, having briefly gone as high as 114.75. The dollar is now at its strongest since early 2002 and has surged 20% this year.

• Amazon announces the new Kindle Scribe, the first Kindle you can write on. It has a 10.2-inch display with a pen that allows you to take notes, make to-do lists, and write directly on the pages of the book you’re reading. You can use Scribe to mark up PDFs and other documents. It can last weeks and weeks without a charge. Preorders start today and will ship in time for the holidays. Scribe is priced at $339.99. Read more here.

• Intel introduces video game graphics chips to challenge Nvidia. The company plans to start selling graphics chips for video gamers next month, slated to be available on Oct. 12, aiming to get a piece of a lucrative market. Intel’s pitch, Mr. Gelsinger said, would be to gamers tired of paying sky-high prices for the fastest, most advanced graphics chips. Intel’s cards will start at $329. Read more here.

• Pending home sales decreased 2.0% in August. Pending home sales sagged for the third straight month in August, according to the National Association of REALTORS®. Three out of four major regions experienced month-over-month decreases in transactions, however, the West saw a modest gain. The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 2.0% to 88.4 in August.

• U.S. new home sales surge 28.8% in August. U.S. new home sales surged 28.8% to a seasonally-adjusted annual rate of 685,000 in August, from a revised 532,000 in the prior month, the Commerce Department reported Tuesday. That’s the second-biggest jump on record for new home sales. The pace of sales is a sharp reversal of a drop of 8.6% in July. The gain might reflect homebuyers rushing to complete purchases before mortgage rates move any higher.

WHAT TO WATCH

• The pace of rent increases continues to slow. The Owners’ Equivalent Rent (OER) was up 6.3% YoY in August, from 5.8% YoY in July  Rents are still increasing, and we should expect this to continue to spill over into measures of inflation. But the suspicion is rent increases will slow further over the coming months as the pace of household formation slows, and more supply comes onto the market.
  
  
• Morgan Stanley reiterated support for Boeing and sees an 80% rise. Morgan Stanley sees a strong "737 MAX order book" at Boeing, with enough orders coming in to support an accelerated production rate (and therefore accelerated sales) for Boeing. According to the analyst, the revenue and profits this could generate for Boeing imply a stock price 80% higher than where Boeing trades today -- about $233 per share within 12 months. Read more here.
  
  
• Goldman Sachs predicts the bottom for Europe stocks. The Euro Stoxx 600 is expected to fall by nearly 8% by the end of this year, the investment bank said in a report to clients. The research note said that interest rate hikes by the European Central Bank and the Bank of England, along with soaring energy costs due to the reduced flow of gas from Russia, will lead to a “moderate” recession in the coming months.
  
  
• Stanley Druckenmiller sees a ‘hard landing’ in 2023 with a possible deeper recession. Druckenmiller believes the extraordinary quantitative easing and zero interest rates over the past decade created an asset bubble. The investor said the Fed made a policy error when it came up with a “ridiculous theory of transitory,” thinking inflation was driven by supply chain and demand factors largely associated with the pandemic.