MARKET MOVERS
- The stock market rallied after the Fed raises rates by 0.75. The S&P 500 rose 2.6%, and the Nasdaq surged 4.1%. Fed Chair Jerome Powell acknowledged that the central bank’s actions were causing some slowing in the economy as did the Fed statement. Powell also said the fed funds rate could be at 3.25% to 3.5% by year-end, as Fed officials have projected in their September forecast.
- Meta lost $2.8 billion on its virtual reality ambitions during Q2. The substantial sum is the latest sign that CEO Mark Zuckerberg and Meta continue to spend heavily to pivot the social media giant to the so-called “metaverse.” Meta plans to release more advanced goggles later this year that will use cameras on the front of the device to “pass-through” the real world to the user inside the headset. Read more here.
- Spirit terminates the Frontier merger deal and talks to JetBlue. The announcement ends a protracted battle over the budget airline known for its bare-bones service and low fares. The termination of the Spirit-Frontier deal makes it easier to get to a takeover deal done with JetBlue, which is seeking to buy the budget airline outright for about $3.7 billion. A JetBlue takeover would create the country’s fifth-largest airline.
- Walmart issues a profit warning as soaring inflation hits customers. On top of that, a leading index of US consumer confidence fell for the third month in a row because of higher fuel and food prices. We are seeing a message coming out of a lot of the consumer goods companies and the retailers who stock their products that consumers, particularly those more price-sensitive consumers, are starting to trade down. Source(3:09)
- Spotify adds subscribers and ad revenue despite fears of U.S. economic malaise. For the second quarter, Spotify reported 433 million monthly active users, a 19% lift from a year ago, topping the company’s expectations. In an investor presentation, Spotify pointed to successful marketing campaigns, reactivations in Europe, and strength among Gen Z listeners in Latin America.
- Activist Elliott Management reportedly holds a stake in PayPal. The size of Elliott’s stake and its intentions couldn’t be learned. PayPal has roughly $8 billion of cash and short-term investments and not much more debt; activists are frequently drawn to companies they say could allocate capital more aggressively. PayPal is a sizable target, with a market value of roughly $89 billion even after a significant downdraft in its shares. Read more here.
WHAT TO WATCH
- Analysts are starting to predict when the Fed will stop shrinking its balance sheet. Analysts from Barclays & others are seeing that happen in early 2023. It's worth noting that the Fed's assets haven't shrunk all that much since tapering began, falling $66 billion from the high to $8.9 trillion.
- The FTC sues Meta to block an acquisition. The Federal Trade Commission sued to block Facebook-owner Meta from buying virtual reality fitness app maker Within Unlimited on Wednesday. The action is one of the first examples of the FTC living up to its progressive agenda on tech antitrust under Chair Lina Khan. It comes after the FTC gained a tie-breaking vote with the confirmation of Democratic Commissioner Alvaro Bedoya.
- Overall margin debt levels could be a sign of a market correction. Overall margin debt levels typically surge just before every crash. When it recedes, it could indicate that the market is starting to recover. Margin levels have declined but maybe not enough. Based on the most recent data from FINRA, margin debt has dropped 27% from its peak in October 2021. While this is a sign of a healing market, it might also mean more pain ahead. Read more here.
- Cathie Wood scoops up $50 million of Shopify on the dip and sells a chunk of Coinbase after SEC probe news. Combined, these purchases cost more than $55.7 million based on Shopify’s closing price of $31.55 Tuesday. Meanwhile, Wood sold 1.13 million shares of Coinbase in her ARKK Tuesday, marking the first time the fund has reduced its holding in the crypto name this year. Read more here.
