GURUGRAM, India—When the Trump Organization in April announced another luxury real-estate project in India, Eric Trump gave a shout out to his local partners for helping accelerate the brand’s expansion.
“We’re incredibly excited to launch our second project in Gurgaon,” Eric Trump, who runs day-to-day operations, using the former name for the city near New Delhi. “And even prouder to be doing it once again with our amazing partners.”
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President Trump’s company has said he won’t be involved in day-to-day management. But the president’s personal business and his government role intersected this week when he was heard on a hot mic arranging a meeting between his son Eric, who runs the family company, and Indonesia’s leader.
In the exchange, captured on audio at a Middle East summit, Indonesian President Prabowo Subianto referred to an issue about a region that was “not safe, securitywise” before asking Trump: “Can I meet Eric?”
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With Donald Trump’s legal liabilities growing and a presidential campaign to run, losing control of his company couldn’t have come at a worse time.
After a New York judge ordered the Trump Organization to pay $364 million in penalties and barred the former president from any role in running a business in New York state for three years, Trump now finds himself backed further into a financial corner with fewer options for how to maneuver.
“It will have such an enormous impact on the operation of his business,” said Randy Zelin, a professor of law at Cornell University and a veteran criminal defense attorney with experience in complex financial matters. “But it will also provide a strong basis for an appeal.”
New York Attorney General Letitia James had asked New York State Supreme Court Justice Arthur Engoron to levy a $370 million financial penalty against the Trump Organization and also to ban Trump and his children Ivanka, Donald Jr. and Eric Trump from running any company in the state of New York, where his real-estate empire has long been based.
Engoron’s ruling barred Donald Trump Jr. and Eric Trump from being involved in running any business in the state for two years. The judge also ordered that former U.S. District Court Judge Barbara Jones, who has been serving as an independent monitor of the Trump Organization since 2022, continue in that role with expanded powers for the next three years. The ruling also ordered that an independent compliance officer be appointed within 30 days.
“The Trump Organization shall be required to obtain prior approval — not, as things are now, subsequent review — from Judge Jones before submitting any financial disclosure to a third party, so that such disclosure may be reviewed beforehand for material misrepresentations,” the ruling read.
The outcome of the civil trial sat solely in Engoron’s hands, and in September, he issued a summary judgment essentially ruling in favor of James’s arguments that the Trump Organization had engaged in fraud for years by repeatedly misstating the value of assets to lenders and insurance companies.
The judgment is the latest in a string of legal and financial blows that the former president has faced and that have already had an impact on his presidential campaign.
Trump has incurred $76 million in legal costs over the past two years stemming from the wide array of criminal and civil prosecutions he faces. More than $27 million of the money raised in the last six months of 2023 to support his presidential campaign has instead been used to cover his legal costs, according to campaign-finance filings.
A report by Bloomberg earlier this week suggested that Trump may face a cash crunch caused by his ballooning legal costs as early as this summer, just as the presidential race will be heating up.
Last month, a federal jury ordered Trump to pay $83.3 million in damages for defaming the writer E. Jean Carroll, whom he had attacked online after she had accused him of raping her in a department-store dressing room in the 1990s. He had earlier been hit with a $5 million verdict in a state case on similar charges.
Trump has vowed to appeal the verdicts and denied raping Carroll, but in order to appeal, he will be required to put up bonds for the full award amounts. That means he would need to either get a bank to back him or to pledge collateral — like a real estate asset — to secure the bond.
But without full control of his real-estate empire, Trump will likely find it harder to line up financing or use his assets as freely as before.
Under the terms of Engoron’s ruling, Trump will no longer be able to make any moves involving assets held by the Trump Organization without the approval of the court-appointed monitor.
Even pledging his assets as collateral for the bond that he would be required to post in order to file an appeal would be complicated by the imposition of a monitor.
“When you lose control of your company, you lose control of who is going to be paid and how much they will be paid. All the money will, first and foremost, be used to operate the business, and how much goes to Trump and his children becomes a secondary concern,” Zelin said.
Add to that the mounting legal costs for multiple criminal cases being brought against him — on charges related to Jan. 6 as well as charges of mishandling classified documents, election fraud, racketeering and illegally paying hush money to women who claimed they’d had affairs with him — and Trump finds himself in a worsening financial bind.
So far, the former president has managed to cover many of his legal costs through donations from his political supporters, but that means that money won’t be available to fund his campaign for president. At the end of the year, President Joe Biden’s re-election campaign had about $46 million cash on hand, while Trump’s campaign had $33 million, Federal Election Commission filings show. Some $50 million held by Trump’s political action committees has already been used to cover his legal bills.
Regarding the properties held by the Trump Organization, while Trump has been able to refinance many of the loans underlying his bigger real-estate holdings, pushing their maturity dates back several years, he still has a stake in some high-profile buildings that have debt coming due in the next few years.
With the court-appointed monitor part of the equation, it might now be more difficult for Trump to secure new debt in order to refinance those buildings, and that could even technically trigger defaults, depending on how the loan covenants were written.
Why are mortgage rates still so high?
After a year of mortgage rates near 8%, home buyers are eager for good news. Some forecasters have buoyed their hopes, estimating that the rate on the 30-year mortgage will drop to 6% or lower this year.
But rates have not fallen by much thus far. The 30-year rate is currently averaging 6.64%, according to Freddie Mac. That’s despite the fact that the U.S. Federal Reserve hasn’t raised its benchmark interest rate since July 2023 and signaled in December that it would cut that rate in 2024. Meanwhile, economists in the real-estate sector have been anticipating a drop in mortgage rates since last fall.
“Homebuyers may be feeling like the lower mortgage rates they’ve been promised in 2024 are not materializing,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. In a recent survey of Americans’ feelings about the housing market, 36% of respondents said they expect mortgage rates to fall in the next 12 months.
While the Fed doesn’t set mortgage rates, it can influence them, just as it influences the overall U.S. economy through monetary policy. But even though the central bank has hit the brakes on tightening monetary policy, with the economy giving off mixed signals of strength and weakness, the timing of anticipated cuts to the benchmark rate remains unclear.
That in turn creates uncertainty about when mortgage rates will drop enough to “unfreeze” the housing market. Home buyers are probably going to have to wait until the Fed acts definitively before they see those lower rates.
The strength of the U.S. economy is one reason mortgage rates have not yet fallen much, economists say. The job market is still hot, and inflation remains higher than the Fed’s goal, which is why the latest read on inflation, out Feb. 13, will be so closely watched. The fact that rates haven’t fallen this year is “a result of uncertainty about the economy and the timing of the Fed’s rate cuts,” Sturtevant said.
“The strong job market is good news for the spring buying season, as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, told MarketWatch.
Another reason mortgage rates are still high is that lenders are trying to protect themselves against lower rates in the future, Cris deRitis, deputy chief economist at Moody’s Analytics, told MarketWatch. If rates fall, lenders run the risk that a borrower will pay off a loan early by refinancing. That would limit how much in interest that lender could expect to make.
“In an odd sort of way, then, the expectation that mortgage rates will be lower in the future can lead lenders to increase rates today to compensate for the prepayment risk,” deRitis said.
So when can prospective buyers expect mortgage rates to fall significantly?
“Homebuyers should expect mortgage rates to move lower as we head through 2024,” Sturtevant said. While Fannie Mae expects rates to fall below 6% by the end of the year, other economists, like Fratantoni, expect the 30-year rate to finish the last quarter of 2024 at 6.1%.
But even if rates do fall, that won’t necessarily mean buyers will be better able to afford a home, because a drop in rates could heat up competition for homes even as it boosts buyers’ purchasing power.
“There is still very low inventory in the market, and buyers need to act quickly when they find the right home for them,” Sturtevant said.
For the many homeowners who currently have a mortgage rate below 4%, rates stuck in the 6% range may be leading them to put off plans to sell their home and buy a new one.
But it’s worth noting that since 2000, rates on 30-year mortgages have ranged from a high of about 8.62% to a low of 2.81%, averaging about 5% over that span. And compared with the historical average of the 1970s, which was 7.7%, the current rates in the 6% rage are not that high, deRitis noted.
Nvidia Corp. is raking in billions in cash, but one analyst thinks the chip maker could throw $100 billion more onto the pile if it started to look more like Salesforce Inc.
Nvidia
NVDA,
might unlock even more cash by developing businesses that expand recurring revenue, according to BofA Securities analyst Vivek Arya. The company has suffered some boom-and-bust cycles in recent years, and another bust could be smoothed by developing longer-term software contracts akin to those of Salesforce
CRM,
, Workday Inc.
WDAY,
and ServiceNow Inc.
NOW,
which generate recurring revenue from their customers.
Arya sees a pathway for Nvidia to rake in $100 billion in incremental free cash flow over the next two years if it can bulk up its own recurring-revenue options.
Read: Apple’s stock needs to get ‘unstuck’ — and its innovation rut may not be helping
“While NVDA has a solid lead in AI, hardware-oriented businesses are not valued as highly as visibility tends to be limited,” Arya wrote. Nvidia generates only about $1 billion, or 2%, of its sales from software and subscriptions. Arya doesn’t think the company can get much higher than $5 billion with its software and subscription offerings unless it turns to acquisitions.
Nvidia has shown some openness to deals that would beef up its intellectual property and software offerings, Arya notes, as it tried to buy British chip designer Arm Holdings
ARM,
before facing regulatory pushback.
“We envision [Nvidia] considering more enhanced partnerships/M&A of software companies that are helping traditional enterprise customers deploy, monitor and analyze [generative AI] apps,” he wrote. Nvidia “is already serving them via on-premise hardware and/or its DGX cloud service, but we believe greater direct recurring software/service channel could be more impactful.”
The addition of more recurring-revenue streams could help Nvidia’s “relatively depressed trading multiple,” in Arya’s view. Nvidia shares trade at a 20% to 30% discount to its “Magnificent Seven” peers on the basis of price to earnings as well as enterprise value to free cash flow, even though the company’s compound annual growth rate on the top line is three times what it is for those other tech giants.
The discount is “partly due to uncertainty in [calendar 2025] growth prospects, and partly due to a very hardware-dependent business unlike other large-cap software/internet peers that have recurring-revenue profiles,” he wrote.
Arya has a buy rating and $700 price objective on the stock.
See also: Amazon’s stock could be helped by this secret weapon in 2024, BofA says
(Updated with Friday’s closing prices.)
The 2023 rally for stocks in the U.S. accelerated as more investors bought the idea that the Federal Reserve succeeded in its effort to bring inflation to heel.
The S&P 500
SPX
ended Friday with a 24.2% gain for 2023, following a 19.4% decline in 2022. (All price changes in this article exclude dividends). Among the 500 stocks, 65% were up for 2023. Below is a list of the year’s 20 best performers in the benchmark index.
This article focuses on large-cap stocks. MarketWatch Editor in Chief Mark DeCambre took a broader look at all U.S. stocks of companies with market capitalizations of at least $1 billion, to list 10 with gains ranging from 412% to 1,924%.
The Fed began raising short-term interest rates and pushing long-term rates higher in March 2022 by allowing its bond portfolio to run off. That explains the poor performance for stocks in 2022, as bonds and even bank accounts because more attractive to investors.
The central bank hasn’t raised the federal-funds rate since moving it to the current target range of 5.25% to 5.50% in July, and its economic projections point to three rate cuts in 2024.
Investors are anticipating the return to a low-rate environment by scooping up 10-year U.S. Treasury notes
BX:TMUBMUSD10Y,
whose yield ended the year at 3.88%, down from 4.84% on Oct. 27 — the day of the S&P 500’s low for the second half of 2023.
Read: Treasury yields end mostly higher but little changed on year after wild 2023
Before looking at the list of best-performing stocks of 2023, here’s a summary of how the 11 sectors of the S&P 500 performed, with the full index and three more broad indexes at the bottom:
| Sector or index | 2023 price change | 2022 price change | Price change since end of 2021 | Forward P/E | Forward P/E at end of 2022 | Forward P/E at end of 2023 |
| Information Technology | 56.4% | -28.9% | 11.5% | 26.7 | 20.0 | 28.2 |
| Communication Services | 54.4% | -40.4% | -7.6% | 17.4 | 14.3 | 21.0 |
| Consumer Discretionary | 41.0% | -37.6% | -11.4% | 26.2 | 21.7 | 34.7 |
| Industrials | 16.0% | -7.1% | 8.0% | 20.0 | 18.7 | 22.0 |
| Materials | 10.2% | -14.1% | -4.9% | 19.5 | 15.8 | 16.6 |
| Financials | 9.9% | -12.4% | -3.4% | 14.6 | 13.0 | 16.3 |
| Real Estate | 8.3% | -28.4% | -21.6% | 18.3 | 16.9 | 24.7 |
| Healthcare | 0.3% | -3.6% | -3.3% | 18.2 | 17.7 | 17.3 |
| Consumer Staples | -2.2% | -3.2% | -5.4% | 19.3 | 20.6 | 21.4 |
| Energy | -4.8% | 59.0% | 51.8% | 10.9 | 9.8 | 11.1 |
| Utilities | -10.2% | -1.4% | -11.4% | 15.9 | 18.7 | 20.4 |
|
S&P 500 SPX |
24.2% | -19.4% | 0.4% | 19.7 | 16.8 | 21.6 |
|
Dow Jones Industrial Average DJIA |
13.7% | -8.8% | 3.8% | 17.6 | 16.6 | 18.9 |
|
Nasdaq Composite COMP |
43.4% | -33.1% | -3.5% | 26.9 | 22.6 | 32.0 |
|
Nasdaq-100 NDX |
53.8% | -33.0% | 3.5% | 26.3 | 20.9 | 30.3 |
| Source: FactSet | ||||||
A look at 2023 price action really needs to encompass what took place in 2022 for context. The broad indexes haven’t moved much from their levels at the end of 2022 (again, excluding dividends). We have included current forward price-to-earnings ratios along with those at the end of 2021 and 2022. These valuations have declined a bit, which may provide some comfort for investors wondering how likely it is for stocks to continue to rally in 2024.
Here are the 20 stocks in the S&P 500 whose prices rose the most in 2023:
| Company | Ticker | 2023 price change | 2022 price change | Price change since end of 2021 | Forward P/E | Forward P/E at end of 2022 | Forward P/E at end of 2021 |
| Nvidia Corp. |
NVDA, |
239% | -50% | 68% | 24.9 | 34.4 | 58.0 |
| Meta Platforms Inc. Class A |
META, |
194% | -64% | 5% | 20.2 | 14.7 | 23.5 |
| Royal Caribbean Group |
RCL, |
162% | -36% | 68% | 14.3 | 14.9 | 232.4 |
| Builders FirstSource Inc. |
BLDR, |
157% | -24% | 95% | 14.2 | 10.7 | 13.3 |
| Uber Technologies Inc. |
UBER, |
149% | -41% | 47% | 56.9 | N/A | N/A |
| Carnival Corp. |
CCL, |
130% | -60% | -8% | 18.7 | 41.3 | N/A |
| Advanced Micro Devices Inc. |
AMD, |
128% | -55% | 2% | 39.7 | 17.7 | 43.1 |
| PulteGroup Inc. |
PHM, |
127% | -20% | 81% | 9.1 | 6.3 | 6.2 |
| Palo Alto Networks Inc. |
PANW, |
111% | -25% | 59% | 50.2 | 38.0 | 70.1 |
| Tesla Inc. |
TSLA, |
102% | -65% | -29% | 66.2 | 22.3 | 120.3 |
| Broadcom Inc. |
AVGO, |
100% | -16% | 68% | 23.2 | 13.6 | 19.8 |
| Salesforce Inc. |
CRM, |
98% | -48% | 4% | 28.0 | 23.8 | 53.5 |
| Fair Isaac Corp. |
FICO, |
94% | 38% | 168% | 47.1 | 29.3 | 28.7 |
| Arista Networks Inc. |
ANET, |
94% | -16% | 64% | 32.7 | 22.3 | 41.4 |
| Intel Corp. |
INTC, |
90% | -49% | -2% | 26.6 | 14.6 | 13.9 |
| Jabil Inc. |
JBL, |
87% | -3% | 81% | 13.5 | 7.9 | 10.3 |
| Lam Research Corp. |
LRCX, |
86% | -42% | 9% | 25.2 | 13.5 | 20.2 |
| ServiceNow Inc. |
NOW, |
82% | -40% | 9% | 56.0 | 42.6 | 90.1 |
| Amazon.com Inc. |
AMZN, |
81% | -50% | -9% | 42.0 | 46.7 | 64.9 |
| Monolithic Power Systems Inc. |
MPWR, |
78% | -28% | 28% | 49.1 | 27.3 | 57.9 |
| Source: FactSet | |||||||
Click on the tickers for more about each company.
Don’t miss: Nvidia tops list of Wall Street’s 20 favorite stocks for 2024
In a strange flashback to the demise of Bed Bath & Beyond Inc., WeWork Inc.’s stock soared on its over-the-counter debut this week, just days after the office sharing company filed for chapter 11 bankruptcy protection.
WeWork
WEWKQ,
filed for Chapter 11 in New Jersey on Monday and the beleaguered company’s stock was halted before the open that day. The New York Stock Exchange started the delisting process for WeWork that same day.
Trading resumed over the counter on Wednesday, with WeWork shares ending their first session as an OTC stock up 91.5%.
A similar scenario happened when shares of Bed Bath & Beyond began trading over the counter in May after the Nasdaq started the delisting process for the bankrupt home-goods retailer and sometime meme-stock darling. Despite Bed Bath & Beyond’s well-documented woes, the stock ended its first session as an OTC stock up 30.4%. Bed Bath & Beyond’s shares were canceled in September.
In June Overstock.com acquired Bed Bath & Beyond’s intellectual property, and began operating as Bed Bath & Beyond, before changing its corporate name to Beyond Inc.
BYON,
Like Bed Bath & Beyond, WeWork has continued to attract investor attention even as the company’s problems mounted. In mid-September WeWork’s stock saw a record run-up amid meme stock chatter, just weeks after WeWork warned that it may not be able to stay in business.
Related: WeWork files for bankruptcy, capping a stunning downfall
Users on social media noted the activity in WeWork’s share price this week, with Twitter user @asunapg warning Thursday that the OTC markets are “much more volatile and often a death trap for a lot of companies.”
“Here we go again” tweeted @B2Investor Friday, with popcorn and clown emojis.
WeWork’s stock ended Thursday’s session down 21.3% and the stock is down 12.7% Friday, compared with the S&P 500 index’s
SPX
gain of 1.3%.
Related: Why investors gamble on shares of bankrupt companies — Bed Bath & Beyond, for example
Tom Bruni, head of content at StockTwits, a social platform for investors and traders, told MarketWatch that, from what he is seeing, there doesn’t seem to be broad interest in the stock.
“Unlike Bed Bath & Beyond and others where it seemed possible to restructure and continue operating, the current situation for WeWork is mainly a math equation,” he told MarketWatch. “It’s looking most likely that it’ll be bought out, the question is at what price and how much cash (if anything) does that leave for common shareholders to receive? The consensus right now is that all value from its 52 million shares of common stock will be wiped out.”
Set against this backdrop, short covering could be driving the stock price up in the short term, according to Bruni. “Many market participants don’t want to risk being squeezed by unexpected good news, so they’d rather take their gains than ride it all the way down to zero,” he said. “Should that high short interest start to create sustainable upside momentum (more than a few days), then we’d likely see other traders get involved on the long side.”
“But for now, with earnings season in full swing, there’s plenty of volatility and news elsewhere for investors/traders to focus on,” he added.
Shares of real-estate names plunged Tuesday following a jury ruling that has the potential to shake up the way people purchase homes.
A Missouri jury earlier Tuesday deemed that the National Association of Realtors, HomeServices of America and Keller Williams colluded to inflate or maintain high commission rates. Jefferies analyst John Conaltuoni said in a note to clients that a judge could issue an injunction preventing commission sharing on MLSs, or multiple listing services, which would hurt the buyer-agent business.
Shares of Opendoor Technologies Inc.
OPEN,
plunged 9% on Tuesday, while shares of Zillow Group Inc.
ZG,
Z,
fell 7%, shares of Redfin Corp.
RDFN,
dropped 6% and shares of RE/MAX Holdings Inc.
RMAX,
declined 4%.
Conaltuoni thinks the recent ruling could bring big changes to the Participation Rule, which is an NAR requirement for seller agents to disclose the compensation being offered to buyer agents when they list through an MLS. The Participation Rule could soon get banned or turn optional, in his view.
Such a ban “would cause negotiations about buyer agent commissions to occur when an offer is presented, since there would no longer be an avenue to communicate splits up front,” he wrote. “This would eliminate the seller’s incentive to compensate buyer agents, which would force them to seek compensation directly. Shifting the burden of payment to buyers would likely meaningfully reduce their use of agents given most already struggle to cover closing costs.”
Conaltuoni further commented that were the rule to become optional, the “status quo” likely would continue.
Read: Why aren’t homeowners selling their homes? It’s not just the ‘lock-in effect’
What would these developments mean for Zillow, which reports earnings Wednesday afternoon? He flagged that nearly two-thirds of the company’s revenue comes from its Premier Agent business, which itself is primarily made up of revenue from buyer agents. “[A] reduction in their usage would force [Zillow] to pivot to offering products for seller agents and create near-term headwinds to revenue,” he wrote, while cutting his price target on Zillow’s stock to $48 from $60.
Bernstein’s Nikhil Devnani wrote that Zillow “is NOT part of this case and not directly impacted by the ruling,” but there’s the potential for repercussions down the line.
“Premier Agent is built around buyer commissions,” Devnani said. “And a reduction to commission rates (which could happen if cooperative compensation were outright banned in the worst case scenario) would create challenges for industry revenue growth, in our view. Maintaining the current structure with more transparency would have less impact we believe. It would need a stronger decoupling of who pays for buyer and seller agents.”
While Redfin shares dropped Tuesday along with other names, Chief Executive Glenn Kelman put out a blog post titled: “Change Comes to the Real Estate Industry.”
“The judge may take days or weeks to decide what structural changes the jury’s verdict will entail,” he wrote, and appeals could take years.
But traditional brokers “will undoubtedly now train their agents to welcome conversations about fees, just as Redfin has been doing for years, especially when advising a seller on what fee to offer to buyers’ agents,” he continued. “Rather than saying that a fee for the buyers’ agent of 2% or 3% is customary or recommended, agents will say that a buyers’ agent fee, if one is offered at all, is entirely up to the seller. This is as it should be.”
RBC Capital Markets analyst Brad Erickson wrote after the ruling that just over half of Redfin transactions come from the buyside. Its stock and Zillow’s “partially reflected these risks coming in,” in his view.
Updated Oct. 26, 2023 12:05 am ET
With China’s property bust threatening to sink the country’s economic recovery, Xi Jinping is looking for someone to blame.
After putting the billionaire founder of Evergrande, a heavily indebted property firm, under investigation for possible crimes, Beijing is expanding its probes to include bankers and financial institutions that facilitated developers’ risky behavior, people familiar with the matter say.
Copyright ©2023 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Stock investors are showing some hesitancy for Tuesday, with big signals on the economy coming this week via consumer prices and retail sales. Ahead of that, Apple is expected to tempt consumers with yet another new iPhone on Tuesday.
How much should investors be worrying right now? Our call of the day from Pershing Square Capital Management manager Bill Ackman says that in the near term, we can relax a little, but it isn’t all roses.
Read: Hedge funds have bailed on the U.S. consumer in a big way, Goldman Sachs data finds
He told the Julia La Roche Show in an interview where he felt like he had a “crystal ball of what was going to happen,” starting in January 2020 with the COVID-19 outbreak, and that carried on through interest rates and the economy. Indeed, the manager reportedly made nearly $4 billion on a couple of pandemic-related bets.
“I would say the crystal ball has clouded a bit in the last period. I think these are unusual economic times and perhaps we always say that, but I don’t think this is a pattern that has been repeated…or it hasn’t been for more than 100 years,” he said.
But he remains near-term upbeat. “For two years, people have been saying that recession’s around the corner and you know we’ve had a very different view, and continue to have this view that I think people are coming around to, that the economy is actually still quite strong,” he said.
And while those on lower-income rungs have burned through a lot of COVID savings, he thinks the economy has yet to really see impact from the big fiscal stimulus seen in recent years.
Looking down the road though, Ackman has got a stack of concerns over the economy. He sees about a third of federal debt due to get repriced meaning that over a relatively short period of time, “interest expense will become a much bigger part of the deficit that is not going to be a contributor to the economy.”
And while higher interest rates do help savers, ultimately that will be a big drag on the economy, he said, adding that rising inflation, mortgage rates, car payments and credit card rates, are all set to slow the economy.
“We’re still in the midst of a war and there’s political uncertainty you know with an upcoming election,” he said. That partly explains Pershing Square’s hedge via a short position on the 30-year Treasury bond
BX:TMUBMUSD30Y
that he laid out in a tweet in early August.
For roughly a year, long-term Treasury yields have been trading below short-dated ones, which is known as an inverted yield curve, a phenomenon that’s often seen as a precursor to recession.
“I don’t see inflation getting back to 2% so quickly, if at all, and if in fact we’re in a world of persistent 3% inflation, you know it doesn’t make sense to have a 4.3%, 4.25% Treasury yield,” he said.
Other risks? Ackman remains worried about regional banks following the spring crisis, as many have big fixed-rate portfolios of assets that have gotten less and less valuable as rates rise. “I would say the commercial real estate picture has not gotten better, if anything, you know, you’re going to start seeing real defaults, particularly with office assets,” he said.
“Regional banks have the most exposure to construction loans so they are going to be a lot of construction loans that won’t be able to repaid. There will be a lot of restructurings, so either the investors groups are gonna have to put in a lot more equity or the banks are going to start taking some losses,” he said.
Ackman says investors also face a presidential campaign that could add some stress. The hedge-fund manager said he’s surprised there have not been “more and better alternative candidates” for the 2024 campaign over President Joe Biden and former President Donald Trump.
He’d like to see JPMorgan Chase & Co. CEO Jamie Dimon toss his hat in the ring and believes Biden is “beatable,” by a strong candidate.
Ackman himself said it’s “possible,” he himself could run someday, but he’s more focused on having a better investment track record over Berkshire Hathaway Chairman and CEO Warren Buffett — and needs some 30 years to match the Oracle of Omaha.
Read: Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks
Stock futures
ES00,
NQ00,
are tilting south, led by tech, with Treasury yields
BX:TMUBMUSD02Y
BX:TMUBMUSD10Y
steady to a touch lower and the dollar
DXY
recovering some ground.
Read: Watch this ‘canary in the coal mine’ for signs of trouble in markets, Neuberger Berman CIO says
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
Oracle shares
ORCL,
are down 10% in premarket trading after disappointing guidance from the cloud database group.
Apple’s
AAPL,
big event kicks off at 1 p.m. Eastern, with the launch of the pricier iPhone 15 expected to be on the agenda.
Hot ticket. Arm Holdings’ IPO is already 10 times oversubscribed and bankers will stop taking orders by Tuesday afternoon, Bloomberg reports, citing sources.
Tech’s wild week: How Apple, Google, AI, Arm’s mega IPO could set the agenda for years
Upbeat results are boosting shares of convenience-store operator Casey’s General Stores
CASY,
Packaging giant WestRock
WRK,
and rival Smurfit Kappa
SK3,
have announced a stock and cash tie up. WestRock shares are up 8% in premarket.
Read: U.S. budget deficit will double this year to $2 trillion, excluding student loans
No better than gambling? Amateur investors are piling into 24-hour options.
Demand for oil, coal, gas to peak this decade, IEA chief says
U.S. takes on tech giant Google in landmark case.
Bank of America’s global fund manager survey for September sees investors still bearish, but no longer on the extreme side. Here’s the chart:
Read: Fund managers just made their biggest shift ever into U.S. stocks — and out of emerging markets
These were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern:
| Ticker | Security name |
|
TSLA, |
Tesla |
|
AMC, |
AMC Entertainment |
|
CGC, |
Canopy Growth |
|
NVDA, |
Nvidia |
|
GME, |
GameStop |
|
AAPL, |
Apple |
|
ACB, |
Aurora Cannabis |
|
NIO, |
Nio |
|
MULN, |
Mullen Automotive |
|
AMZN, |
Amazon |
“Worst investment ever.” Brady Bunch fan buys original house for cut-price $3.2 million.
And the house from the “Halloween” slasher films just sold for $1.8 million.
China may ban clothes that hurt people’s feelings.
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The second week of September, as in the NFL, marks a kickoff of sorts for the tech year.
Headlined by Apple Inc.’s
AAPL,
seminal iPhone event on the second Tuesday of the month at Apple Park, and anchored by Salesforce Inc.’s
CRM,
wildly popular Dreamforce conference up the road in San Francisco, these several days set a tempo as well as establish a road map for the industry over the next 12 months. They also open the floodgates on tech conference season, with shows stacked up over the next several weeks for Facebook parent Meta Platforms Inc.
META,
Microsoft Corp.
MSFT,
and Oracle Corp.
ORCL,
Oh, and there’s that initial public offering from Arm Holdings Plc, the chip designer owned by SoftBank Group Corp.
9984,
that is expected to value Arm at $50 billion to $54.5 billion on a fully diluted basis. Another IPO candidate, delivery startup Instacart, also plans a public offering that would value it at $7.5 billion. Both deals could jump-start what has been a somnolent tech IPO market the past few years.
For that reason alone, this jam-packed tech week might hold even more import, and consequences, than previous years. A confluence of legal tussles, macroeconomic conditions, a trade war with China, and regulatory bluster have raised the stakes.
“It’s a tale of two cities with this week’s events highlighting both the issues and opportunities in tech,” Silicon Valley analyst Maribel Lopez said in an interview, assessing the week. “Arm’s IPO showcases the strength of tech and AI at a time when the AI forum and Google-DoJ shine a light on the concern that a few companies are wielding tremendous power for the future of the world.”
Consider: Hours before Apple is expected to unveil a new crop of iPhones more noteworthy for pricing than features, Alphabet Inc.’s
GOOGL,
GOOG,
Google faces off with the Justice Department in a federal court in Washington, D.C.
Justice Department officials argue that Google illegally leveraged agreements with phone makers such as Apple and Samsung Electronics Co.
005930,
and with internet browsers like Mozilla to be the default search engine for their customers, thus preventing smaller rivals from gaining access to that business.
“This is a backwards-looking case at a time of unprecedented innovation, including breakthroughs in AI, new apps and new services, all of which are creating more competition and more options for people than ever before,” Google General Counsel Kent Walker said in a statement.
The following day, Wednesday, Senate Majority Leader Chuck Schumer, D-N.Y., convenes an all-star panel of CEOs from Meta, Microsoft, Google, OpenAI and Palantir Technologies Inc.
PLTR,
As lawmakers ruminate on how to harness AI responsibly, bipartisan legislation is in the works. Sens. Richard Blumenthal, D-Conn., and Josh Hawley, R-Mo., are among those crafting a bill.
Even Apple and Salesforce aren’t immune from recent events: Apple has endured a relatively rough patch of disappointing (for them) revenue and iPhone sales while balancing risk/reward with its huge investment in China, and Salesforce CEO Marc Benioff has threatened to relocate Dreamforce to Las Vegas after more than two decades in his hometown of San Francisco if drug use and homelessness disrupt this year’s event.
The most pressing concern, when all is said and done, is AI — which hovers like the Death Star over the tech landscape.
“The biggest concern is the forum is behind closed doors, which could lead to regulatory capture, where dominant players in the industry help influence the regulations being imposed,” Kimberlee Josephson, associate professor of business administration at Lebanon Valley College (Pa.), said in an interview. “It’s almost as if it puts them in the hot while giving them a seat at the table at the same time.”
“At the very least, it sends the signal that something is being done,” she said. “Antitrust cases are so subjective. What constitutes barriers to entry? DoJ adds a level of seriousness.”
Electric-vehicle startup VinFast Auto Ltd. has seen its market capitalization fall more than $140 billion in less than two weeks, weighed down by a six-day losing streak for the company’s stock.
Shares of VinFast
VFS,
soared last month after the company went public through a special-purpose acquisition company deal, taking its market cap to an eye-watering $231.3 billion on Aug. 25 — easily surpassing established automakers such as Ford Motor Co.
F,
and General Motors Co.
GM,
VinFast is on pace to extend its losing streak to seven days. Shares of the low-float company fell 26.3% Thursday, taking VinFast’s market cap to $85 billion, according to FactSet data. Ford’s market cap is $47.7 billion and GM’s is $44.5 billion, FactSet data show.
Related: This EV company has a bigger market cap than Ford or GM. But you may not have heard of it.
The EV maker is a majority-owned affiliate of Vietnamese conglomerate Vingroup, one of the largest publicly traded companies in Vietnam. VinFast said that as of June 30, 2023, the company has delivered close to 19,000 EVs.
About 99% of VinFast shares are controlled by Vingroup chair and VinFast founder Pham Nhat Vuon, making only a small portion available to investors.
Related: EV startup VinFast may be worth more than Ford or GM, but there’s a catch
VinFast is importing its vehicles into the U.S. and is also ramping up its North American presence. In July, the company broke ground on an electric-vehicle manufacturing site within the Triangle Innovation Point in Chatham County, N.C. The startup says the plant will eventually have the capacity to make 150,000 vehicles a year.
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https://www.barrons.com/articles/stock-market-movers-3fac9192
Shares of Chinese property developers rose sharply Monday, as more major Chinese cities said over the weekend that they would ease mortgage policies in a bid to shore up the real-estate sector.
The Hang Seng Mainland Properties Index rose 8.2%. Hong Kong-listed Longfor Group Holdings
960,
climbed 10% and Seazen Group
1030,
jumped 17%. Shanghai-Listed Gemdale
600383,
added 4.1% and China Vanke
000002,
gained 1.4%.
Major Chinese cities across the country, including Beijing and Shanghai, lowered mortgage requirements for some home buyers late last week, lowering the bar for home purchases.
“This nationwide policy measure marks a significant step in stimulating the property sector, as top policymakers become increasingly worried about the collapse of the property sector, the downward spiral, and a rising number of credit risk events among major developers and financial institutions since mid-August,” Nomura analysts said in a note.
Separately, news reports over the weekend saying that property giant Country Garden Holdings
2007,
received creditor approval to extend a bond also lifted the mood and supported the company’s shares. Country Garden shares were last up 9.0% at 0.97 Hong Kong dollars (12 U.S. cents).
Year to date, Country Garden’s stock has slumped 64% after the company posted its worst loss since going public 16 years ago and missed $22.5 million in interest payments on its dollar bonds in August.
Despite Chinese authorities’ supportive policies and Country Garden’s bond extension, some analysts warned that the extension could just be a near-term reprieve.
“With the lack of an eventual resolution [for Country Garden],” headwinds linger for the Chinese property sector, IG Asia analysts said in a note.
“Persistent earnings weakness will no doubt drive the sector’s leverage higher,” said S&P Global Ratings credit ratings analyst Oscar Chung.
S&P believes industry leaders and real-estate companies with a diverse business mix such as rental and service incomes can better withstand declining development margins.
Write to Bingyan Wang at bingyan.wang@wsj.com
Salesforce Inc. shares rallied in the extended session Wednesday after the customer-relations management software giant’s earnings outlook topped Wall Street expectations two weeks ahead of its annual confab.
Salesforce CRM shares rallied more than 6% after hours, and held steadily in that range during the conference call with analysts, following a 1.5% rise to close the regular session at $215.04.
The…
China’s property developers are under duress again, re-igniting concerns about a debt crisis. But with a faltering economy and diminished confidence among households and companies, China debt watcher Charlene Chu, senior analyst at Autonomous Research, worries the ingredients are there for a broader financial crisis for the first time.
China Evergrande Group
EGRNF,
has sought Chapter 15 bankruptcy protection in New York courts, according to reports Thursday.
China’s second-largest developer earlier this month reported narrowing losses for 2022 as it reined in costs. Evergrande defaulted in late 2021. In recent sessions, investors have worried about another troubled Chinese developer, Country Garden Holdings, whose bonds were downgraded to deteriorating from stable by research company GimmeCredit on Wednesday.
Heavily-indebted Evergrande, which has symbolized China’s property crisis, made its filing amid growing fears that the sector’s troubles will spread to other parts of the country’s economy.
Since mid-2021, companies accounting for 40% of Chinese home sales have defaulted, stoking fears about the resilience of the world’s second-largest economy.
A Chapter 15 bankruptcy is a way for foreign companies with U.S. assets to get access to domestic courts.
Spillover from Evergrande’s 2021 debt woes rattled investors in stocks and spurred a flight to safety in U.S. government bonds. Investors this week have been closely monitoring developments in China’s property markets.
Stocks were headed for another week of losses on Thursday, with the Dow Jones Industrial Average
DJIA
off 2.3% so for the week, the S&P 500 index
SPX
2.1% lower and the Nasdaq Composite Index off 2.4%, according to FactSet. Dow
YM00,
and S&P 500
ES00,
futures fell slightly late Thursday.
Chris Low, FHN Financial’s chief economist, said the “mess in China” was resulting in a flight-to-quality bid for 10-year Treasurys, in a Wednesday note to clients. The 10-year yield
BX:TMUBMUSD10Y
shot up to 4.307% on Thursday, the highest since November 2007, according to FactSet.
U.S. stocks traded lower for a third straight day on Thursday as rising bond yields spurred weakness in some of the so-called Magnificent Seven megacap stocks, helping to drive the Nasdaq to a six-week low.
The Dow and S&P 500 were on track to extend a losing streak to a third straight session as major indexes headed for another week in the red. The S&P 500 hasn’t fallen for three weeks in a row since February, FactSet data show.
Bonds have resumed command of the stock market of late as higher yields lash shares of megacap technology stocks, undermining their status as the undisputed market leaders.
Long-dated Treasury yields continued to rise Thursday, with the 10-year yield
BX:TMUBMUSD10Y
touching its highest level since the 2008 financial crisis, rising north of 4.31%. Bond yields move inversely to prices.
Rising yields helped heap more pressure on shares of some of this year’s highflying tech stocks, including Tesla Inc.
TSLA,
Apple Inc.
AAPL,
and Microsoft Corp.
MSFT,
The elite group of megacap tech stocks which also includes Amazon.com Inc., Meta Platforms Corp.
META,
and Alphabet Inc.’s Class A
GOOGL,
and Class C
GOOG,
shares has been credited with driving much of the Nasdaq Composite’s nearly 30% run-up year-to-date. But their market dominance has faded in recent weeks as investors have favored other cyclical sectors like energy and materials stocks. Those two sectors were the best performers on the S&P 500 on Thursday.
“That’s a theme that’s been bubbling up here over the last three to four weeks, but there’s more of an exclamation point on it now,” said David Keller, chief market strategist at Stockcharts.com, during a phone interview with MarketWatch.
“First you had Microsoft and Apple breaking down a few weeks ago, now you’re getting Meta breaking below its 50-day moving average.”
Keller added that rising bond yields tend to have a bigger impact on growth stocks like technology names, while sectors like energy are more resilient.
“Energy can do just fine in a rising rate environment. energy and materials should probably do better in a relative basis,” he said.
Minutes from the Federal Reserve’s July meeting released Wednesday afternoon were being blamed for the latest leg higher in global bond yields. They showed that Fed policy makers could continue raising interest rates amid concerns that inflation could reaccelerate, potentially pushing bond yields even higher.
“It’s really uncertain where terminal interest rates will land given the economy isn’t giving us a decisive picture of being too strong or too weak. It’s keeping the window open for more rate hikes potentially,” said Mohannad Aama, a portfolio manager at Beam Capital Management, during a phone interview with MarketWatch.
Corporate earnings were also in focus as investors received results from Cisco Systems
CSCO,
and retail giant Walmart Inc.
WMT,
Cisco reported strong quarterly results after Wednesday’s close. Walmart also reported stronger than expected earnings, helping to offset some concerns about the strength of the consumer spurred by Target Corp.’s
TGT,
lackluster earnings and guidance from Wednesday.
Shares of Cisco rose 2.6%, while Walmart shares turned lower, down 1.2%.
Economic updates released Thursday helped support the notion that the U.S. economy is growing at a faster pace than economists had expected, potentially complicating the Fed’s efforts to tamp down inflation.
First-time jobless-benefit claims fell by 11,000 to 239,000 last week, a sign that layoffs in the U.S. labor market remain low. The Philadelphia Fed factory index also shot higher to 12 in August, up from negative 13.5 during the prior month, a sign that manufacturers in the U.S. could be exiting a slump.
Barry DiRaimondo, chief of SteelWave, a West Coast property developer that in the past half-century has partnering with many of the biggest names in commercial real estate, is looking for diamonds in the rough, distressed office properties located in the American city that many have given up on.
Others may be shunning San Francisco while it’s down on its luck, but DiRaimondo sees better days ahead, despite the city’s threat of a growing deficit, its fentanyl crisis, homelessness and a reluctant return of office workers to its financial core.
“Not much is coming up right now,” DiRaimondo said of buying opportunities, while speaking from his office in the heart of San Francisco’s financial district. But he was eager to point out several nearby buildings that could be candidates to buy, at the right price.
“I think over the next 12 to 18 months, you’re going to see a tsunami,” of distressed office properties, DiRaimondo said.
Like in many big cities, a wave of office buildings bought at peak prices before the pandemic now have a pile of debt coming due, at much higher rates. But San Francisco’s financial core only recently has begun to show flickers of hope in its weak recovery post-COVID.
“Whether it’s San Francisco, Oakland or anywhere here, and your debt is rolling, you’re having a conversation with your lender,” DiRaimondo said. “There’s either a restructuring going on or a foreclosure going on.”
A number of high-profile property owners this year surrendered local properties to lenders, including Westfield’s namesake shopping center downtown and a string of well-known hotels, a blow to the city’s comeback efforts.
Still, DiRaimondo expects the bulk of property ownership transfers in this boom-and-bust cycle to take place quietly, behind the scenes, often through a building’s debt changing hands. It’s a familiar playbook for veteran real-estate developers like SteelWave and its partners, especially when San Francisco office property values tumble and new loans remains expensive and hard to come by.
“Office is a nasty word, right now. Especially tech office,” he said. “We are doing something that’s a bit different.”
San Francisco’s history as a boom-and-bust town perhaps is best suited for real-estate developers able to take a bunch of lemons and make lemonade.
That has been SteelWave’s signature move in the notoriously rough-and-tumble commercial real-estate industry, through its ups and downs. It has bought over $17.5 billion in properties and developments in the past five decades, first under the Legacy Partners Commercial brand before it was renamed in 2015.
It has partnered with some of the biggest names in commercial real estate, including with Angelo Gordon & Co. in 2021 on two Silicon Valley office buildings, but also distressed debt titans that include Rialto Capital, and with Chenco, one of the largest Chinese-owned U.S. real-estate investment firms.
Its stronghold is the Bay Area and DiRaimondo is now looking to raise a $500 million fund to buy distressed buildings, including in downtown San Francisco, a place major Wall Street lenders have been backing away from for months.
“It’s hard to raise equity to buy this stuff right now,” he said, but argues his strategy, which includes expanding its reach to potential investors in the U.A.E., Israel and parts of Europe, will pan out.
SteelWave’s model of buying a property includes a final tally of costs often three to four times the initial purchase price, due to extensive overhauls.
“Typically, what we do is buy something, tear it apart, put it back together, lease it, sell it,” DiRaimondo said.
It’s niche in the distressed world that’s already produced overhauls of buildings from Seattle to Colorado to Los Angeles, places the tech industry wants to lease.
In the southern California town of Costa Mesa, that meant partnering with Invesco to turn an old newsroom and printing press for the Los Angeles Times into a creative work campus. An opinion piece in 2022 from the newspaper described the revamp as turning, “the glum newspaper architecture into something inviting.”
“In New York, people rushed back and refilled the apartments, streets, and subways. Restaurants and stores flooded with customers again,” a team from Moody’s analytics wrote in a recent “tale of two cities” report. “San Francisco, on the other end, battled safety concerns, homelessness, and population exodus which existed before but only became more obvious with barren neighborhoods.”
SteelWave thinks the old days of landlords raking in top-dollar commercial rents in San Francisco, while adding little back to office buildings, are a thing of the past.
“You have to have owners who want to create cool work environments to attract people back into the city,” DiRaimondo said of downtown San Francisco’s long slog back from the brink.
That means buying properties at low prices, but also risking putting money down for major improvements. He isn’t a distressed investors looking to become a “rent bandit,” he says, because the strategy will fail to get quality tenants.
Like the Moody’s team, DiRaimondo thinks San Francisco eventually will bounce back, but he thinks not before reality hits older office properties.
Take a “commodity” building downtown, often older and midblock with generic features, that previously might have been worth $750 to $800 a square foot. It now looks worth less than $300 a square foot, he said.
The early stages of fire-sales have begun already, with the 22-story tower at 350 California, nearby to DiRaimondo’s office, reportedly fetching $200 to $225 a square foot.
“San Francisco is not dead,” DiRaimondo said. “I think there are opportunities in San Francisco.”
See: San Francisco’s office market erases all gains since 2017 as prices sag nationally