September 13, 2023

U.S. Stocks Are Facing a Triple Threat That Could Lead to Losses

📰 News Organizations

  • U.S. Stocks Are Facing a Triple Threat. U.S. stocks are facing a triple threat from a stronger U.S. dollar, rising Treasury yields, and higher oil prices that could further erode gains accrued by the main indexes since the start of 2023, analysts warn.

  • Home Prices Rose 2.5% In July, But Fell In 11 Western States. On a month-over-month basis, home prices rose by 0.4%. CoreLogic expects home prices nationwide to rise by 3.5% by July 2024. The 11 states were in the West, and Idaho led the charge, falling by 5.7%.

  • WWE, UFC Combined Company Makes Market Debut. TKO began trading Tuesday with the aim of making more content, including UFC fights, available via streaming services in the future, with high-profile rights deals with entertainment companies including Fox, Disney, and Comcast.

  • TSMC to Invest up to $100 million in Arm IPO. In its prospectus, Arm said that technology companies including Nvidia, Apple, TSMC, and others were interested in purchasing up to $735 million worth of shares in the IPO.

  • Amazon Is Betting on Oil Giant Oxy’s Carbon Removal Project. Amazon will purchase 250,000 metric tons of carbon removal services over 10 years from Oxy. Its carbon-removal subsidiary, 1PointFive, is building a massive plant designed to pull carbon from the atmosphere.

  • Apple Unveils The iPhone 15. The company unveiled four new models: the iPhone 15, 15 Plus, 15 Pro, and 15 Pro Max, as it contends with sluggish demand for smartphones. Apple is banking on new materials, camera upgrades and improved performance.

🐦 Twitter

  • Home builders in the Southwest and N. California noting monster August YOY sales per community growth at +81% and +72%, respectively. Low bar on year ago comps. However, even after factoring that in, the underlying pace of sales looks solid. Source.

  • US commercial banks lost $71.2 billion in deposits last week. If this was 2008, that would've been the 3rd largest outflow during the entire Great Financial Crisis. Since the March 2023 banking panic, it's only the 8th largest. Source.

  • Build times for single-family homes are basically back to normal at 183 days (~8-9 mos) from permit to close. A big improvement from '22, when builders reported an average cycle time of 216 days (~10-11 mos). Supply chain kinks (labor + materials) are mostly worked out now. Source.

  • There’s something of a flywheel between home equity levels/home values, consumption, and employment, which doesn’t necessarily mean a boom but makes a bust very difficult given the surge in home values over the past 3 years. Source.

  • Oil's rally is making some analysts worried. They've seen this movie before and it can be highly disruptive, from pushing Fed policy tighter to limiting discretionary spending. Source.

  • As of 2Q23, household net worth was 775% of disposable personal income, a rebound from prior quarter but still down from all-time high of 839% last year. Source.

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Dharmesh Shah

📓 Online Publications

  • Oracle Comes Up Short On Revenue But Touts AI Cloud Contracts. Oracle fell short on license and hardware revenue in the fiscal first quarter. Quarterly revenue guidance was also weaker than expected but announced new database hardware and AI software features.

  • Interest Payments on the National Debt are Exploding Higher. The national debt is growing, and the interest payments on that debt are rising. This is due to factors, including the rising federal budget deficit, the rising interest rates, and the aging population, which could impact the economy.

  • Closed Sales Down Year-over-year in August. Closed sales in August were mostly for contracts signed in June and July. Since 30-year fixed mortgage rates were in the 6.7% range in June, and 6.8% in July, compared to the mid-5% range the previous year, closed sales were down in August.

  • Charter-Disney Winners and Losers. Tech emerges victorious in the Charter-Disney competition as video transitions to apps, with tech's distribution and customer acquisition capabilities taking center stage despite the valuable channels of pay-TV providers like Charter.

  • Divvy Homes Letting 95 Employees Go, Including Senior Managers. The third round of layoffs in the last 12 months takes effect Nov. 7 and affects employees in 21 states, including Divvy's chief legal officer, vice president of compliance, and head of design.

🎧 Podcasts

  • Norway's $1.4tn Oil Fund Becomes Top UBS Shareholder. Norges Bank Investment Management runs the world’s biggest sovereign wealth fund with a whopping $1.4tn in assets. It’s been a part of UBS for the past two decades. But now it’s upped the stake to more than 5 percent. Source(0:46)

  • Euro Suffers Eight-Week Losing Streak As Economy Falters. This is largely because the economic data out of Europe has been consistently poor and worse than people expected, particularly in Germany, which is the eurozone’s traditional growth engine. Source(5:02)

  • Smucker to Buy Twinkies Maker Hostess Brands for $5.6 Billion. Jelly company J.M. Smucker is buying the purveyor of plastic-wrapped cakes, Hostess Brands, for $5.6 billion. Set to close by the end of January, the deal is worth roughly $2 billion more than Hostess’s market value. Source(2:00)

  • A.I. Goes to Washington. We are going to hear more about AI this week. There are three Senate hearings that will focus on AI regulations. Plans include licensing AI and creating a Federal office to oversee the technology. Big figures like Elon Musk, Bill Gates, and Sam Alman are coming. Source(12:20)

  • Fed's Debt Issuance Raises Market Concerns. The Fed's increased debt issuance is causing market concerns as bond yields detach from economic indicators. Their strategy includes stimulating inflation reduction by monetizing interest payments and cutting interest rates as unemployment rises. Source(9:43)