It Girl Identity: Issue 13

It Girl Identity Newsletter

Grab your iced chai latte and read what's moving markets this week, learn about what interest rates are and what’s currently happening with them, and enjoy our curated It Girl Identity recommendations!

What’s Moving Markets

The Dow, S&P 500, and Nasdaq finished last Friday mixed. Meanwhile, gold prices saw a decline, oil prices remained steady, and the possibility of interest rate cuts were influenced by recent economic data.

What’s Up

• Tesla (TSLA): Tesla shares have increased dramatically this month with a stock price increase of 33%. This prompted its market value to increase by $209bn in just the first eight trading days of August.

• EOG Resources (EOG): Gained 2.5% on August 26, driven by strong earnings and positive market sentiment regarding its production outlook.

• Jack Henry & Associates (JKHY): Rose 2.6% following the announcement of a regular quarterly dividend.

• Dayforce Inc. (DAY): Over the past week, Dayforce's stock performed strongly, gaining 4% on the 26th. This surge was fueled by the launch of a new AI-enabled employee training tool, which is expected to enhance the efficiency of learning processes. The company also reported better-than-expected quarterly earnings, driven by robust demand for its payroll and human capital management services.

• Chip Stocks: At the beginning of last week, we saw Chip Stocks decline Nvidia's shares fell 2.3% ahead of its earnings report, leading a broader downturn in semiconductor stocks like Broadcom, AMD, and Micron Technology, which also experienced notable losses.

• Top S&P 500 Gainers: Starbucks (SBUX) +26%, Super Micro Computer (SMCI) +24%, NVIDIA (NVDA) +19%, Ulta Beauty (ULTA) +17%, Micron Technology (MU) +16%.

What’s Down  

• Super Micro Computer (SMCI): On Wednesday, the company announced that they would delay the filing of their annual 10-K report. Hindenburg Research also issued a new short report on the company, both of which sent the stock down 23%.

• Chipotle Mexican Grill (CMG): Over the past week, Chipotle Mexican Grill's stock has experienced a downward trend. The stock price fell from approximately $2,125 to $2,025, reflecting a decline of around 4.71%.

• P&G Hygiene (PGHH): A division of Procter & Gamble focused on personal and home care products, P&G Hygiene faced a decline in its stock price by 4.35%, possibly due to shifts in consumer spending or market dynamics.

• Varun Beverages (VBL): A key bottling partner for PepsiCo, Varun Beverages saw its stock fall amidst market fluctuations.

• Siemens (SIEMENS): The technology and engineering company, which specializes in areas like automation and digitalization, experienced a decrease in its stock price of just over 7%, potentially due to market conditions affecting the industrial sector.

• Top S&P 500 Losers: Chipotle Mexican Grill (CMG) -6%, The Hershey Company (HSY) -4%, Charter Communications (CHTR) -3%, Albemarle (ALB) -3%, Baxter International (BAX) -3%.

Markets and Economy

• AI Demand:

  • Nvidia reported earnings this week, showing the reality of the AI craze as quarterly revenue more than doubled and Nvidia announced a $50 billion share buyback policy. However, as the firm failed to meet the highest expectations, the stock is still down 7.9% for the week.

  • Apple, Microsoft, and Nvidia, the three most valuable tech companies, are discussing investing in ChatGPT founder OpenAI. Thrive Capital leads this funding round that would value the startup over $100 billion.

  • Intel is exploring options like splitting its foundry business and quitting their factory projects as they struggle to improve their business after strong losses. CEO Pat Gelsinger has admitted an expected halt in expansion plans, and overall the stock is down 24.1% for the month.

• New Private Equity Policies: Private equity firms can now invest in NFL teams and own up to 10% of a franchise for at least six years. Several firms are pre-approved, including Arctos Partners, Ares Management, Sixth Street, and a consortium of Blackstone, Carlyle, CVC Capital Partners, Dynasty Equity, and Ludis. This policy creates an exclusive market and increases scarcity value for NFL teams, as other leagues permit PE firms to own up to 30%.

• Brazil Blocks X: Brazil’s Supreme Court blocked the social media platform X after Elon Musk refused to comply with court orders to suspend certain accounts. The Court also froze Musk’s finances related to SpaceX’s Starlink internet service to collect $3 million in fines. Brazilians using X through a VPN could face fines of up to $9,000 daily.

• $1T Club: Warren Buffett’s Berkshire Hathaway reached a $1 trillion market cap this week, becoming the first non-tech company to achieve this milestone and the 9th globally. Shares have gained 31% this year, up 9% following their earnings report.

• Interest Rate Expectations: Core PCE, excluding volatile food and energy items, rose 0.2% from the previous month. On a three-month basis, inflation increased 1.7%, the slowest of the year. Q2 GDP growth was revised up to 3%, reflecting increased consumer spending and supporting a potential September rate cut. Conversely, options investors have purchased call spreads on the Volatility Index worth over $9 million, anticipating the VIX will return to its August 9th levels after markets recovered from a sharp sell-off.

IPOs & Mergers and Acquisitions

• NAGA Group and CAPEX.com Merger: The NAGA Group AG (ETR), a social trading-focused broker, has merged with Key Way Group Ltd., which operates the CAPEX.com trading platform. The merger forms one of the world’s leading neo-brokers, with around 1.5 million users across more than 100 countries. The efficiency gains from the user migration from CAPEX.com to the NAGA platform are expected to save up to $9.8 million annually and positively impact EBITDA by $4.4 million.

• Hungarian Consortium Withdraws Talgo Bid: The Hungarian consortium Ganz-Mavag, a prominent railway equipment manufacturer, has withdrawn its €600 million bid for the Spanish trainmaker Talgo, known globally for its high-speed trains. The withdrawal came after the Spanish government blocked the acquisition on national security grounds. Despite this setback, Ganz-Mavag intends to pursue legal action against the decision but remains open to future collaboration with Talgo.

• John Wood Group Asset Sale: UK engineering firm John Wood Group sold stakes in EthosEnergy and CEC Controls for $165 million to streamline operations. John Wood Group provides energy and industrial solutions; EthosEnergy offers power plant services, and CEC Controls specializes in industrial automation. This move refocuses the company after two failed takeover bids and is expected to generate $125 million in net cash and include a $42 million loan to EthosEnergy. Following an $899 million loss and a nearly 40% drop in shares, CEO Ken Gilmartin is focused on reducing debt and increasing cash flow by 2025 to restore investor confidence.

Earnings Calendar

This Week's Major U.S. Economic Reports & Fed Speakers

Here is a quick breakdown of this week’s Fed Speaker events and economic indicators, what they mean, and their forecasts!

Tuesday, September 3

• Construction Spending (July): Amount of money spent on new private and public construction. When there is an increase in construction spending, it means that there is higher confidence in the economy as it is more favorable for investments. Forecast: -0.1% (Previous: -0.3%).

• ISM Manufacturing (August): Measures the change in production levels across the U.S. economy. Forecast: 47.9% (Previous: 46.8%).

• S&P Final U.S. Manufacturing PMI (August): Final data on U.S. manufacturing sector. (Previous: 48.0).

• Multivariate Core Trend Inflation (July): Measures inflation across 17 core sectors of the personal consumption expenditures index. (Previous: 2.1%).

Wednesday, September 4

• Trade Balance (July): Measures U.S. trade deficit. Forecast: $79B (Previous: -$73.1B).

• JOLTS (July): Counts job openings and labor turnover. Job openings forecast: 8.1 million (Previous: 8.18 million).

• Manufacturing, Shipment, and Orders (July): Forecast: 4.9% (Previous: -3.3%).

Thursday, September 5

• ADP Employment (July): Tracks the level of U.S. nonfarm private employment. (Previous: 122,000).

• Initial Jobless Claims (August 31): Number of people filing for unemployment benefits for the first time. Forecast: 225,000 claims (Previous: 231,000).

• U.S. Productivity and Costs (Revised, Q2): Forecast: 2.4% (Previous: 2.3%).

• S&P Final U.S. Services PMI (August): Measures the service sector including new business orders, prices, business expectations, and more. (Previous: 55.2).

• ISM Services (August): Measures the performance of the service sector. Forecast: 51% (Previous: 51.4%).

Friday, September 6

Speakers: New York Fed President John Williams, Fed Governor Christopher Waller

Sources: Yahoo Finance, Nasdaq, FX News Group, The Financial Times, Investopedia, Alice Blue, MarketWatch, New York Fed

Explaining Interest Rates:

This week we decided to switch up our financial advice section and explain what interest rates are, what’s currently going on with them, and why they are important!

What Are Interest Rates? Interest rates are the cost of borrowing money or the reward for saving money. When you take out a loan, the interest rate is what the lender charges you for borrowing. When you deposit money in a savings account, the interest rate is what the bank pays you for keeping your money there.

Why Are They Important? Interest rates affect how much it costs to borrow money and how much you earn on savings. They influence consumer spending, business investment, and overall economic growth. High interest rates can make borrowing expensive and saving more attractive, while low interest rates make borrowing cheaper and saving less rewarding.

What Happens When They Change?

• When Interest Rates Increase:

  • Borrowing Costs Rise: Loans, like mortgages and car loans, become more expensive.

  • Consumer Spending Drops: Higher costs can lead to less spending on goods and services.

  • Savings Earn More: You might earn more interest on savings accounts and fixed deposits.

  • Economic Slowdown: Higher borrowing costs can slow down economic growth as both consumers and businesses spend less.

• When Interest Rates Decrease:

  • Borrowing Costs Fall: Loans become cheaper, which can encourage borrowing and spending.

  • Consumer Spending Rises: Lower costs can lead to increased spending on goods and services.

  • Savings Earn Less: You might earn less interest on savings accounts and fixed deposits.

  • Economic Growth: Lower borrowing costs can stimulate economic growth as more spending and investment occur.

Current Situation: The Federal Reserve (Fed) is expected to cut interest rates in a series of steps this year. Analysts predict a 25-basis point cut in both September and November, followed by a larger reduction in December. This gradual approach is seen as a way to manage the economy without causing too much disruption.

• Current Rate: The Fed's interest rate is currently between 5.25% and 5.50%.

• Future Expectations: By the end of 2025, the Fed’s target rate might be reduced to between 3% and 3.25%.

This shift in rates is aimed at stimulating economic growth and managing inflation, but opinions vary on whether these cuts will be too aggressive or just right.

Disclaimer: Information shared here is for educational purposes only. Consult a financial advisor for personalized advice.

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See you next Monday, It Girls!

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It Girl Identity