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Apple is in talks with JPMorgan for bank to take over card from Goldman Sachs

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Apple CEO Tim Cook introduces the Apple Card during a launch event at Apple headquarters in Cupertino, California, on March 25, 2019.

Noah Berger | AFP | Getty Images

Apple is in discussions with JPMorgan Chase for the bank to take over the tech giant’s flagship credit card program from Goldman Sachs, a person with knowledge of the negotiations said.

The discussions are still early and key elements of a deal — such as price and whether JPMorgan would continue certain features of the Apple Card — are yet to be decided, said the person, who requested anonymity to discuss the nature of the potential deal. The talks could fall apart over these or other matters in the coming months, this person said.

But the move shows the extent to which Apple’s choices were limited when Goldman Sachs decided to pivot from its ill-fated retail banking strategy. There are only a few card issuers in the U.S. with the scale and appetite to take over the Apple Card program, which had saddled Goldman with losses and regulatory scrutiny.

JPMorgan is the country’s biggest credit card issuer by purchase volume, according to the Nilson Report, an industry newsletter.

The bank is seeking to pay less than face value for the roughly $17 billion in loans on the Apple Card because of elevated losses on the cards, the person familiar with the matter said. Sources close to Goldman argued that higher-than-average delinquencies and defaults on the Apple Card portfolio were mostly because the users were new accounts. Those losses were supposed to ease over time.

But questions around credit quality have made the portfolio less attractive to issuers at a time when there are concerns the U.S. economy could be headed for a slowdown.

JPMorgan is also seeking to do away with a key Apple Card feature known as calendar-based billing, which means that all customers get statements at the start of the month rather than staggered throughout the period, the person familiar with the matter said. The feature, while appealing to customers, means service personnel are flooded with calls at the same time every month.

Apple and JPMorgan declined to comment on the negotiations, which were reported earlier by The Wall Street Journal.

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September 17, 2024

CNBC Daily Open: Rate cuts might not benefit tech the most

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The sun rises behind the skyline of lower Manhattan and One World Trade Center as people walk along the Hudson River on September 14, 2024, in Jersey City, New Jersey.

Gary Hershorn | Corbis News | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Record close for Dow
The S&P 500 and Dow Jones Industrial Average rose on Monday, with the Dow notching a record close. But the Nasdaq Composite fell. Asia-Pacific stocks were mixed. Japan’s Nikkei 225 fell 1.03% as the Japanese yen strengthened to 140.54 against the U.S. dollar. Hong Kong’s Hang Seng index climbed 1.15% as Midea Group shares jumped over 9% in their Hong Kong debut.

Next move for the BOJ
The Bank of Japan won’t be raising interest rates at its September meeting, according to a CNBC survey of 32 analysts. However, the outlook for its October and December meetings is less certain. Almost 20% think an October hike is likely, while 25% said the bank’s next hike will be in December.

India’s slowing deposit growth
Reserve Bank of India Governor Shaktikanta Das told CNBC in an exclusive interview that slowing growth in deposits is not a cause for concern currently, and said banks are “coming out with new products for deposit mobilization.”

Intel forges new path for foundry
Intel shares popped around 8% in extended trading on news the chipmaker plans to structure its foundry business as an independent unit with its own board and ability to raise outside funding. It might even spin off the business as a public company, according to a person with knowledge of the matter. Separately, the Biden administration on Monday awarded Intel up to $3 billion under the CHIPS Act.

[PRO] “Golden age of fixed income”
The U.S. Federal Reserve is poised to cut interest rates this week. Benchmark rates affect borrowing costs. This means bond yields will go down as the Fed lowers rates. Rick Rieder, BlackRock’s global chief investment officer of fixed income, thinks now’s the time for investors to take advantage of this “golden age of fixed income.”

The bottom line

Technology stocks benefit the most from low interest rates, conventional market wisdom says.

That’s because tech companies tend to promise future profit in exchange for present money. When rates are low, that proposition appears attractive because returns are low elsewhere. But when rates are high, those promises don’t seem as attractive as less risky returns from assets such as Treasurys.

The past two years have demolished this narrative. Tech has soared even as interest rates have been at 23-year highs, thanks to enthusiasm over artificial intelligence’s promise of new and explosive revenue streams.

Nvidia, the lynchpin of AI, has soared nearly 136% just this year. Meta, which has its own AI model named Llama, is up about 51%.

With the market pricing in a 67% chance — up from 30% last week — that the U.S. Federal Reserve will make a larger-than-usual cut of 50 basis points, according to the CME FedWatch Tool, it stands to reason tech will pop further.

The sector, however, has been rocky in recent weeks. The VanEck Semiconductor ETF, for instance, fell 1.31% Monday, while Nvidia slipped 1.95%.

The tech-heavy Nasdaq Composite fell 0.52%, while the S&P 500 inched up 0.13% and the Dow Jones Industrial Average added 0.55% to close at a new record.

This implies investors have been moving out of tech to other sectors that might experience tailwinds amid lower rates. Case in point: the financial and energy sectors rose more than 1% on Monday, performing better than the broader market.

Goldman Sachs noted hedge funds’ weekly purchases last week of financial stocks were the highest since June 2023.

“Other areas of the market are starting to perk up, and a lot of that has to do with the future rate cuts that are coming into play,” said Christopher Barto, senior investment analyst at Fort Pitt Capital.

That doesn’t mean tech’s out of favor. It’s likely to continue driving the market. But other sectors might show up for the ride.

– CNBC’s Hakyung Kim, Pia Singh and Yun Li contributed to this story.

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September 17, 2024

CNBC Daily Open: Tech might not be the biggest beneficiary of rate cuts

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The sun rises behind the skyline of lower Manhattan and One World Trade Center on September 14, 2024, in Jersey City, New Jersey.

Gary Hershorn | Corbis News | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Record close for Dow
U.S. markets were mixed on Monday. The S&P 500 and Dow Jones Industrial Average rose, with the Dow notching a record close. But the Nasdaq Composite fell. The pan-European Stoxx 600 index lost 0.16%. U.K.’s FTSE 100 ended flat. The Bank of England will meet Thursday for its latest monetary policy decision.

Intel forges new path for foundry
Intel shares popped around 8% in extended trading on news the chipmaker plans to structure its foundry business as an independent unit with its own board and ability to raise outside funding. It might even spin off the business as a public company, according to a person with knowledge of the matter. Separately, the Biden administration on Monday awarded Intel up to $3 billion under the CHIPS Act.

Blemished Apple
Apple shares slid 2.78% after TF Securities analyst Ming-Chi Kuo reported demand for Apple’s new iPhone 16 was down 12% year on year compared with the iPhone 15’s first-weekend sales. Kuo also said consumers weren’t enthused because Apple Intelligence wasn’t available with the iPhone at launch, and as competition from Chinese manufacturers dents iPhone demand.

Choppy flight
Boeing is implementing a hiring freeze amid plans to cut costs, such as pausing nonessential staff travel. Just this year, Boeing has had to deal with: a 737 MAX door panel blowing out in midair; its Starliner spacecraft returning to Earth without its two planned passengers; and a strike by more than 30,000 workers.

[PRO] Short-lived record?
The S&P 500 is less than 1% away from its record high set in July. The upcoming Federal Open Market Committee meeting, at which the U.S. Federal Reserve is expected to cut interest rates by at least 25 basis points, might lift the S&P to new heights. But analysts warn the new high might be short lived.

The bottom line

Technology stocks benefit the most from low interest rates, conventional market wisdom says.

That’s because tech companies tend to promise future profit in exchange for present money. When rates are low, that proposition appears attractive because returns are low elsewhere. But when rates are high, those promises don’t seem as attractive as less risky returns from assets such as Treasurys.

The past two years have demolished this narrative. Tech has soared even as interest rates have been at 23-year highs, thanks to enthusiasm over artificial intelligence’s promise of new and explosive revenue streams.

Nvidia, the lynchpin of AI, has soared nearly 136% just this year. Meta, which has its own AI model named Llama, is up about 51%.

With the market pricing in a 62% chance — up from 30% last week — that the U.S. Federal Reserve will make a larger-than-usual cut of 50 basis points, according to the CME FedWatch Tool, it stands to reason tech will pop further.

The sector, however, has been rocky in recent weeks. The VanEck Semiconductor ETF, for instance, fell 1.31% Monday, while Nvidia slipped 1.95%.

The tech-heavy Nasdaq Composite fell 0.52%, while the S&P 500 inched up 0.13% and the Dow Jones Industrial Average added 0.55% to close at a new record.

This implies investors have been moving out of tech to other sectors that might experience tailwinds amid lower rates. Case in point: the financial and energy sectors rose more than 1% on Monday, performing better than the broader market.

Goldman Sachs noted hedge funds’ weekly purchases last week of financial stocks were the highest since June 2023.

“Other areas of the market are starting to perk up, and a lot of that has to do with the future rate cuts that are coming into play,” said Christopher Barto, senior investment analyst at Fort Pitt Capital.

That doesn’t mean tech’s out of favor. It’s likely to continue driving the market. But other sectors might show up for the ride.

– CNBC’s Hakyung Kim, Pia Singh and Yun Li contributed to this story.

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September 16, 2024

Solar stocks are winners from the presidential debate and we’ve got one primed to run

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September 11, 2024

Why a Wall Street downgrade of Costco is not a reason to sell the stock

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September 10, 2024

JPMorgan Chase shares drop 5% after bank tempers guidance on interest income and expenses

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Daniel Pinto, president and chief operating officer of JPMorgan Chase, speaks during the Semafor 2024 World Economy Summit in Washington, DC, on April 18, 2024.

Saul Loeb | AFP | Getty Images

JPMorgan Chase shares fell 5% on Tuesday after the bank’s president told analysts that expectations for net interest income and expenses in 2025 were too optimistic.

While the bank expects to be in the “ballpark” of the 2024 target for NII of about $91.5 billion, the current estimate for next year of about $90 billion “is not very reasonable” because the Federal Reserve will cut interest rates, JPMorgan President Daniel Pinto said at a financial conference.

“I think that that number will be lower,” Pinto said. He declined to give a specific figure.

Shares of the New York-based bank dropped more than 7% earlier in the session for the worst decline since June 2020, according to FactSet.

JPMorgan, the biggest U.S. bank by assets, has been a winner among lenders in recent years, benefiting from better-than-expected growth in NII as the bank gathered more deposits and made more loans than expected. But skittish investors are now concerned about the outlook for a bellwether banking stock, along with broader concerns about slowing U.S. economic growth.

NII, one of the main ways banks make money, is the difference in the cost of a bank’s deposits and what it earns by lending money or investing it in securities. When interest rates decline, new loans made by the bank and new bonds it purchases will yield less.

Falling rates can help banks in the sense that customers will slow the rotation out of checking accounts and into higher-yielding instruments like CDs or money market funds. But they also make new assets lower yielding, which complicates the picture.

“Clearly, as rates go lower, you have less pressure on repricing of deposits,” Pinto said. “But as you know, we are quite asset sensitive.”

When it comes to expenses, the analyst estimate for next year of roughly $94 billion “is also a bit too optimistic” because of lingering inflation and new investments the firm is making, Pinto said.

“There are a bunch of components that tell us that probably the number on expenses will be a bit higher than what is expected at the moment,” Pinto said.

When it comes to trading, JPMorgan said it expects third-quarter revenue to be flat to up about 2% from a year ago, while investment banking fees are headed for a 15% jump.

The trading slowdown tracks with Goldman Sachs, which said Monday that trading revenue for the quarter was headed for a 10% drop because of a tough year-over-year comparison and difficult trading conditions in August.

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September 10, 2024

CNBC Daily Open: Did Apple’s shiny new things improve market sentiment?

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New models of the Apple iPhone 16 are displayed after Apple’s “It’s Glowtime” event in Cupertino, California, September 9, 2024.

Nic Coury | AFP | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Broad rebound
U.S. stocks rebounded on Monday after posting huge losses last week. It was a broad rally across assets: Oil prices gained 1% and bitcoin rose 4.42%. Asia-Pacific stocks were mixed Tuesday. The Hang Seng index added 0.42%, with Alibaba shares rising more than 5% after the company was added to Stock Connect. The scheme allows investors in mainland China and Hong Kong to trade and settle shares with each other’s market.

Export growth in China
China’s exports in August rose 8.7% year on year, in U.S. dollar terms, beating Reuters’ estimates of a 6.5% rise. Exports to the EU grew 13% from a year earlier, the most among China’s major trading partners, according to CNBC calculations of official data. Imports growth at 0.5% fell short of analysts’ expectations.

New iPhones
Apple unveiled lots of new products on Monday night. Highlights: the iPhone 16 Pro and Pro Max get larger screens, while their non-pro siblings finally get the Pro’s “action” button; the freshly redesigned Apple Watch Series 10; AirPods 4 earbuds. Apple’s AI features will launch in beta on the new iPhones — investors will monitor if they push up flagging iPhone sales.

$400 million hit to Goldman
Goldman Sachs will post a roughly $400 million pretax hit to its third-quarter results, said CEO David Solomon at a conference on Monday, as the bank winds down its ill-fated foray into consumer banking. Those ventures include Goldman’s GM Card business and a separate portfolio of loans.

[PRO] Stocks to ride out shaky September
September is historically the worst month for stocks. It’s the only month during which markets fell for four consecutive years. The volatility we’ve experienced at the start of the month seems to continue this unwelcome trend. Still, there are some steady stocks investors can consider to ride out September’s roller coaster.

The bottom line

Maybe all it takes are shiny new things to lift our mood and take our minds off recession fears.

I’m jesting — but just partially.

Apple on Monday launched sleek new iPhones, watches and earphones. The excitement of the event and the prospect of having something look forward to may have lifted market sentiment.

Detractors who think that’s a far-fetched assertion should remember Apple dominates more than half of smartphone shipments in the U.S., according to Counterpoint Research. Further, a 2023 Bloomberg survey found 79% of Gen Zers prefer iPhones over other smartphones, implying that Apple’s market share could grow more as that demographic gains earning power.

True, post-event, Apple shares just crawled up 0.04%. But, as CNBC’s Kelly Evans points out, the Cupertino-headquartered company’s stock tends to fall after product announcements.

This reversal of the trend offers a glimmer of hope that Apple’s plans to integrate AI into its phones will rejuvenate iPhone sales, which have been slumping amid increased competition from Chinese brands.

And when the S&P 500’s biggest constituent is experiencing favorable winds, other stocks will also benefit from its slipstream.

Nvidia jumped 3.5% after falling 14% last week. Broader markets rose as well. Both the S&P and the Nasdaq Composite climbed 1.16%, while the Dow Jones Industrial Average gained 1.2%.

Apart from Apple’s announcement, there wasn’t any other material news that would have impacted markets.

Of course, Apple’s event is not the sole reason markets rose yesterday. Last week’s broad sell-off presents investors with opportunities to pick up stocks at a relatively cheaper price, which would induce a rebound rally.

Markets are still largely driven by sentiment, as mentioned yesterday.

That said, the consumer and producer price index reports coming out Wednesday and Thursday, respectively, are concrete pieces of data that have the potential to affect markets dramatically.

They’ll also let us know if we can afford those shiny new things that Apple’s dangling in front of us.

– CNBC’s Pia Singh and Lisa Kailai Han contributed to this story.

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September 9, 2024

CNBC Daily Open: Did Apple’s shiny new things uplift markets?

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Attendees inspect the new iPhone 16 Pro and 16 Pro Max during an Apple special event at Apple headquarters on September 09, 2024 in Cupertino, California.

Justin Sullivan | Getty Images News | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Broad rebound
U.S. stocks rebounded on Monday after posting huge losses last week. It was a broad rally across assets: Oil prices gained 1% and bitcoin rose 4.42%. Europe’s Stoxx 600 index added 0.82%, its first positive movement in days. While the rally was quite broad, fashion houses fell out of favor with shares of Burberry, Hugo Boss and Kering retreating.

New iPhones
Apple unveiled lots of new products on Monday night. Highlights: the iPhone 16 Pro and Pro Max get larger screens, while their non-pro siblings finally get the Pro’s “action” button; the freshly redesigned Apple Watch Series 10; AirPods 4 earbuds. Apple’s AI features will launch in beta on the new iPhones — investors will monitor if they push up flagging iPhone sales.

Debate over rate cuts
Economists such as George Lagarias of Forvis Mazars think a 50-basis-points rate cut “might send a wrong message to markets.” Michael Yoshikami, CEO of Destination Wealth Management, however, thinks it would be “a very positive sign,” echoing Nobel Prize winner Joseph Stiglitz’s opinion that a 50-point cut should be on the table.

$400 million hit to Goldman
Goldman Sachs will post a roughly $400 million pretax hit to its third-quarter results, said CEO David Solomon at a conference on Monday, as the bank winds down its ill-fated foray into consumer banking. Those ventures include Goldman’s GM Card business and a separate portfolio of loans.

[PRO] Macro factors don’t sway Buffett
In recent weeks, markets have gyrated because of concerns over the U.S. economy’s health, the state of the labor market, the trajectory of rate cuts, among many other factors. To Warren Buffett, however, none of those macroeconomic factors matters when he invests.