The long month of September is finally drawing to a close. It’s often a poor month for stocks, and this year was no exception.
Here’s a few figures that can quantify the pain.
6%. That’s how much the Nasdaq Composite has dropped in September, a second straight month of declines. It’s on track for the worst two-month performance since the same period last year. And we all remember what 2022 was like.
The S&P 500 and the Dow are also down in September, but the Nasdaq has absorbed the biggest hit. Blame technology stocks. The S&P’s information technology index fell more than 7% this month, making it one of the worst performing sectors.
4.6%. That’s how high the yield on the 10-year Treasury reached by the end of the month–the 10-year yield climbed about twice as much as the 2-year over the past 30 days. That reflects the repricing toward higher-for-longer Federal Reserve interest rates, and goes hand in hand with high-growth tech stocks taking a beating.
Traders haven’t changed their expectations for the peak in Fed rates much, but they do expect fewer cuts down the road than they did at the start of the month. On the plus side, it means that the yield curve inversion–often seen as a recession signal–has narrowed.
14 Years. The yield on inflation-protected 10-year government bonds is around the highest since 2009. That shows investors are willing to pay up for protection and that inflation could be sticky.
7. Here’s the good news. The S&P 500 has gained in seven of the past 10 years in October, suggesting that if September is a poor season for stocks, it gets better the following month.
Maybe Thursday’s late rally was the start of a turnaround.
—Brian Swint
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Tesla Faces Federal Lawsuit Over EEOC Racial Harassment Claims
The government sued electric vehicle maker
Tesla
for tolerating racial harassment of Black employees at its California assembly plant, including retaliation for workers who opposed the harassment. The Equal Employment Opportunity Commission filed the suit in California federal court.
- The EEOC said the alleged conduct dates back to 2015 for Black employees at Tesla’s Fremont, Calif., plant, including racial abuse, stereotyping, hostility and slurs. Tesla didn’t respond to a request for comment, but has said it opposes all forms of discrimination and harassment.
- Tesla disclosed it faced an investigation by the EEOC in April 2022. There is a separate lawsuit by California’s civil rights agency, which said the EV maker ignored years of complaints from Black workers at the Fremont facility.
- The EEOC said its investigation found that people who raised objections to racial hostility received various forms of retaliation, including terminations, changes in job duties, transfers, and other “adverse” job actions.
- Earlier this year a jury ordered Tesla to pay $3 million in a racial harassment case. But that amount was reduced from an earlier jury award in the same case of $137 million in damages for a former Fremont plant elevator operator.
What’s Next: The EEOC said it attempted to reach a settlement with Tesla before filing the lawsuit. It wants compensatory and punitive damages and back pay for affected employees, and it wants to see changes to Tesla’s employment practices.
—Liz Moyer
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Actors Will Return to Bargaining Table Monday in Hollywood Strike
Actors striking in Hollywood plan to return to the negotiating table on Monday, resuming talks with studios after the Writers Guild of America reached a new contract and ended their 148-day walkout. The union, SAG-AFTRA, said entertainment executives will attend the contract talks.
- Network late-night shows also return on Monday, including NBC’s “The Tonight Show Starring Jimmy Fallon” and “Late Night with Seth Meyers,” and ABC’s “Jimmy Kimmel Live.” The hosts had worked together on a podcast called “Strike Force Five” during the walkout.
-
Walt Disney
CEO Bob Iger and
Netflix
co-CEO Ted Sarandos met with WGA negotiators over the summer. WGA members will vote on their new tentative contract next week, and it could lay the groundwork for a quick resolution to the actors’ strike. - Rich Greenfield, co-founder of research firm LightShed Partners, said higher costs for creating content could lead to less content being produced in 2024 and beyond. He also wonders how disrupted the 2024 theatrical slate will be.
- SAG-AFTRA members walked out on July 14, joining writers about two months after they began striking. It said it is reviewing the writers’ tentative agreement and reaffirmed a commitment to a “fair and just” deal for its members.
What’s Next: SAG-AFTRA members have voted to authorize a strike against 10 videogame companies. Its last strike against the gaming industry was in 2016-17 and lasted 183 days, according to Deadline.
—Liz Moyer and Connor Smith
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China to Ease Cross-Border Data Rules to Boost Business
Beijing proposed easing rules on cross-border data flows Friday which boosted technology and electric-vehicle stocks.
- The Cyberspace Administration of China’s proposal would mean that data transfers relating to international trade, global manufacturing and marketing activities that don’t contain personal data no longer need to go through a security review, The Wall Street Journal reported.
- “Over the past two years, the PIPL (Personal Information Protection Law) and the cross-border rules have posed tremendous challenges for businesses. These carve-outs will come as a huge relief to them,” Angela Zhang, a law professor at the University of Hong Kong, said in a post on X.
- Alibaba stock closed 3.1% higher in Hong Kong trading Friday, while JD.com rose 3.6%, and XPeng jumped 8.4%. The companies’ American depositary receipts were also higher early Friday.
What’s Next: The cyberspace regulator’s proposal is being seen as a move to boost business activity in the world’s second-largest economy. It is particularly good news for China’s multinational companies.
—Callum Keown
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Nike Reports Lower Inventory, Higher China Sales
Nike
‘s fiscal first-quarter revenue was below expectations but investors focused on lower inventory levels, which should help profit margins, and rising sales in China, which is one of the apparel maker’s largest markets.
- Overall, revenue rose 2% from a year ago, and earnings per share of 94 cents easily topped expectations for 76 cents a share. CFO Matthew Friend said the results show “staying on the offense” in the past fiscal year was boosting performance.
- Inventories fell 10% from last year. One year ago, Nike said gross margins would come under pressure because it was holding too many sneakers and other apparel. This quarter, gross margins fell 0.1 percentage point, driven by higher production costs and foreign exchange rates.
- In China, sales rose 5% from a year earlier. Heading into the report, analysts worried that China’s sputtering economic recovery would weigh on results. The actual sales figure of $1.74 billion was still below estimates for $1.84 billion.
-
North America sales beat expectations but fell 2%, lending credence to concerns that the region may be headed for a broader pullback in consumer spending.
Foot Locker
and
Dick’s Sporting Goods
both cut their full-year outlooks after lackluster second-quarter results.
What’s Next: For the full year, Nike continues to expect revenue to grow in the mid-single digits. Analysts are currently forecasting 4% revenue growth. Gross margins are still expected to expand 1.4 to 1.6 percentage points, the company said.
—Sabrina Escobar
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Costco
Members Snap Up Gold Bars Sold Online
Costco Wholesale
is a go-to place for shoppers who want rotisserie chickens and giant packages of toilet paper, but the retailer has discovered another hot commodity: 24-karat gold bars. They’ve been selling out quickly on its website. The wholesale club’s members can’t get enough.
- Costco limits member purchases to two, one-ounce bars, at recent prices just under $2,000 a bar. The company may test sales in a few of its stores in the near future, a representative told Barron’s. Bars are currently sold out.
-
The bars are made by South Africa’s Rand Refinery and Pamp Suisse, a Swiss precious metals refiner. Big-box retail competitor
Walmart
is also selling gold bars from Pamp. Costco’s website said the items are not refundable, and Walmart’s says they aren’t returnable. - Costco CFO Richard Galanti even brought the gold bars up on a conference call discussing earnings with analysts this week, saying he’s gotten a few calls about it, and the bars are typically gone within a few hours of appearing for sale on the site.
- Gold tends to perform well in periods of economic uncertainty, and is often used as a hedge against inflation and as a store of value. Gold came close to its record high above $2,000 an ounce earlier this year and currently trades around $1,880 an ounce.
What’s Next: More Millennial investors have a built a holding in gold than other generations, at 17%, according to State Street’s chief gold strategist George Milling-Stanley. That compares to about 10% of Baby Boomers and Generation X. Millennials also tend to like investing in gold through exchange-traded funds, he said.
—Liz Moyer and Sabrina Escobar
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Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to [email protected].
1. The Writers Guild of America voted to return to work on Wednesday, Sept. 27, after ending a strike against Hollywood studios and streaming companies. How long did their strike last?
a. 128 days
b. 138 days
c. 148 days
d. 158 days
2.
Amazon
is investing up to $4 billion in Anthropic, an artificial intelligence research firm that’s a rival to OpenAI’s ChatGPT. Which of Amazon’s competitors in cloud computing also invested this year in Anthropic?
a. Google
b.
Microsoft
c.
Oracle
d. None of the above
3. Airlines are among the many industries that could be disrupted by a federal government shutdown this weekend if Congress can’t approve a funding extension. The U.S. Travel Association estimates a shutdown could cost the travel industry how much?
a. $120 million a day
b. $140 million a day
c. $120 million a week
d. $140 million a week
4. The United Auto Workers have threatened to expand strikes a second time if they don’t make progress in labor contract negotiations with which two auto makers?
a.
Ford Motor
and
Stellantis
b. Ford Motor and
Toyota
c.
General Motors
and Stellantis
d.
Honda
and General Motors
5. Oil prices are on a tear. Brent crude reached $97 a barrel, and West Texas Intermediate touched $95 a barrel this week, the highest price since when?
a. August 2022
b. June 2022
c. February 2022
d. November 2021
Answers: 1(c); 2(a); 3(b); 4(c); 5(a)
—Barron’s Staff
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—Newsletter edited by Liz Moyer, Rupert Steiner, Callum Keown
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