Weekly Update 09/19/2023
Fed Rate Hike?
Wall Street Braces for Fed Meeting!!
ARM IPO: The Next AI Winner?
Hollywood in Shambles as Strike Continues
UAW Strike: GM threatens to send 2000 workers home, Ford cuts 600 jobs
Weekly Meetings:
INVESTMENT CLUB THURSDAYS 6 PM (BPC188)
INVESTMENT FUND THURSDAYS 7 PM (BPC188)
Upcoming Events:
Bank of America Merrill Lynch Recruiting Workshop: Wed, September 27, 2-4 PM CCB 140
—Market Madness—
Fed may pause interest rate hikes, but likely to keep rates ‘pretty elevated,’ analyst says
Stocks finish flat as Wall Street braces for Fed meeting: Stock market news today
Stocks closed almost right where they started Monday as Wall Street prepares for an upcoming Federal Reserve meeting where the central bank will issue its next interest rate decision. The meeting follows new economic data that showed easing core inflation and a cooling labor market, setting the stage for what the market and the broader public should expect for the Fed’s interest rate policy for the rest of the year and beyond.
At the end of the trading day the S&P 500 (^GSPC) gained about 0.07% while the Dow Jones Industrial Average (^DJI) rose 0.02%, or 6 points. The Nasdaq Composite (^IXIC) finished just above the flat line, increasing 0.01%.
The Fed is scheduled to meet on Tuesday and Wednesday, with the central bank planning to release its latest policy decision on Wednesday at 2:00 p.m. ET, followed by a press conference where Fed Chair Jerome Powell will take questions. Investors expect the Federal Open Market Committee to hold its benchmark interest rate steady in a range of 5.25%-5.5%.
The expectation of an interest rate hold has
solidified in recent days. According to the CME FedWatch Tool, the probability that the Fed will pause its rate hikes next rose to 99% on Monday, up from 92% a week ago.
Last week, as Fed officials entered their “quiet period” leading up to the policy meeting, investors lost ground as sentiment turned to skittishness. Only the Dow posted weekly gains, while the S&P and the Nasdaq ended the week worse off.
The slight rise in August consumer prices won’t be enough to force the Fed to raise rates at this week’s meeting, many economists have noted. But fresh rounds of data that show stronger than expected signs keep the possibility open for future rate hikes and interest rates that stay elevated for longer.
Arm’s stock already draws a bearish call: ‘It is too soon to declare them an AI winner’
Typically investors need to wait a few weeks to get stock coverage of a company that recently went public, but an analyst at Bernstein, which didn’t help underwrite the initial public offering, has already weighed in with a bearish rating on shares of Arm Holdings PLC.
“While expectations that Arm will be a beneficiary from AI growth may be adding a
premium to the share price, we believe it is too soon to declare them an AI winner,” Bernstein’s Sara Russo wrote in a Monday note to clients. “In addition, we remain more conservative on their ability to deliver increased royalty rates at the pace management is guiding.”
U.S.-listed shares of Arm ARM, -4.53% began trading Thursday, and they closed Friday at $60.75, 19% above their $51 IPO price. The stock is off more than 3% in Monday’s premarket trading.
Russo said she sees room for downside on shares of the chip designer, initiating coverage with an underperform rating and $46 target price.
She expressed caution about the longer-term royalty picture for Arm. “While [Arm’s management is] signaling reaching 5% royalties by FY26, we anticipate it takes longer to reach that,” she wrote. “We expect them to be approaching ~4% by FY27 and see [room for a] modest increase after that.”
Russo said she is also concerned about RISC-V, an open-source rival to Arm’s technology.
“Open source software has proved a successful model, with Linux as an example of an open-source alternative that grew into a sizable commercial success,” Russo wrote.
She wrote that she views RISC-V as a Linux for the hardware market, and expects that companies could establish themselves as specialists in the technology, helping others capitalize.
“Much like Red Hat was able to develop a very successful commercial operation enabling enterprises to take advantage of all the benefits of open-source in a scalable way, we believe that the plethora of RISC-V specialists are likely to breed a number of ‘Red Hats’ that are able to make a commercial success of basing their designs on RISC-V,” she continued.
UAW strike, Day 4: GM threatens to send 2,000 workers home, Ford cuts 600 jobs
As the autoworkers strike enters Day 4, the two sides are digging in.
On one side are United Auto Workers members, who say record corporate profits should yield a record contract.
“We went backwards roughly $10 an hour in wages over the last six years,” UAW President Shawn Fain told NPR. “At the same time, in the last decade, these companies have made a quarter-trillion dollars in profits.”
On the other are the Big Three automakers — General Motors, Ford and Stellantis — which say they have put historically generous offers on the table, while also emphasizing that there are limits.
“Our goal is to secure a sustainable future that provides all our UAW-represented employees with an opportunity to thrive in a company that will be competitive during the automotive industry’s historic transformation,” Stellantis said in a statement.
Fain told Morning Edition on Monday that the union had “minimal conversations” with all three companies over the weekend and that the ball is still in their court.
Fain said the union wanted to start substantively bargaining two months ago, but the companies waited until just before their contracts expired last week to “actually start really talking.”
“We have a long way to go,” he said. “And if the company does not respect the demands of our workers, then we will escalate action.”
In the meantime, the ripple effects have already started.
—REAL ESTATE WORLD—
Airbnb listings in NYC plunge 77% after city crackdown: Report
More than 75% of Airbnb’s short-term rentals have vanished from the Big Apple following a tough city crackdown on the home-sharing site, according to a report.
The fast-evaporating listings have left thousands of visitors planning to spend the holidays in Manhattan in limbo – and is expected to provide a boon to the city’s hotel industry.
The controversial regulations for Airbnb’s largest market – which went into effect on Sept. 5 – limit all short-term rentals to just two guests and require the hosts to be present for stays of less than 30 days.
Hosts who have not registered their units and received approval from the city can face fines of up to $5,000 for skirting the new rules.
Airbnb faces similar fines, leading the San Francisco-based company to block the calendars of its short-term rental hosts who have not provided a city registration number.
Existing short-term rental reservations made prior to Sept. 5 are being honored through Dec. 1.
The clampdown has reduced the number of short-term rentals since the rules went into effect by 77% – to 4,600 as of Sept. 10, from 22,500 three months ago, according to travel industry website Skift, citing data from AirDNA.