It wasn’t clear Tuesday if Rep. Jim Jordan would be successful in his push to become the next speaker of the U.S. House of Representatives, with a floor vote drawing near and the Ohio Republican needing the support of a majority of the chamber.
The narrowly divided chamber is expected to vote in the early afternoon to select a speaker, with the move coming after former Speaker Kevin McCarthy was ousted two weeks ago and after No. 2 House Republican Steve Scalise ended his bid for the post last Thursday.
While Jordan racked up significant endorsements Monday, more than four House Republicans are on record as being against him and others are leaning toward “no” votes, as shown in the chart below that comes from a CNN producer.
McCarthy needed 15 rounds of voting in January to secure the speakership. The California congressman repeatedly saw around 20 fellow Republicans vote against him before finally prevailing.
There are “plenty of reasons to think” House Judiciary Committee Chairman Jordan will “be able to grind it out once people are on record,” but the situation is still “unsettled,” said Liam Donovan, a former GOP operative who is now a principal at law and lobbying firm Bracewell, in a post on X.
One possible key is whether support for Jordan declines or not in a second round of voting, according to Matt Glassman, a senior fellow at Georgetown University’s Government Affairs Institute. He made that point in his post below.
Analysts have been discussing whether a Jordan speakership could mean a greater likelihood of a government shutdown that weighs on markets SPX
in mid-November, when funding is due to run out from last month’s continuing resolution, or CR.
“Jordan voted against the CR a few weeks ago and has opposed most government spending bills in the past, so some people think he would be comfortable with a government shutdown next month. That view has some merit, however, as speaker, Jordan would be responsible for helping vulnerable House Republicans who represent competitive districts,” said Brian Gardner, Stifel’s chief Washington policy strategist, in a note.
“His new role could put Mr. Jordan in the position of having to make compromises with Democrats — new territory for him. The more likely outcome is that, if elected speaker, Jordan will support an extension of the CR.”
COMP
were advancing Tuesday, helped by encouraging earnings from big banks. Investors also are weighing rising geopolitical risks and better-than expected retail sales.
The numbers: Sales at U.S. retailers jumped a bigger-than-expected 0.7% in September in a sign households have enough buying power to keep the economy expanding.
The increase was spurred by strong demand at auto dealers and Internet stores. Higher gas prices also played a role, however.
Economists polled by The Wall Street Journal had forecast a 0.2% increase in sales.
Retail sales represent about one-third of all consumer spending and usually offer clues on the strength of the economy.
Yet September also falls between the busy back-to-school and holiday-shopping seasons and tends to reveal less about how consumers are doing.
Key details: Auto dealers posted a 1% gain in sales and helped to inflate the headline number. Auto sales account for about 20% of all retail sales.
Receipts at gas stations also rose nearly 1%, but that largely reflected higher gas prices. That’s not a good thing for households.
Retail sales advanced a still-robust 0.6% when car dealers and gas stations are set aside, which gives a better idea of consumer demand.
Sales at internet retailers stayed on a hot streak. They rose 1.1%.
Sales climbed 0.9%% at bars and restaurants. Restaurant sales tend to rise when the economy is healthy and Americans feel secure in their jobs. Sales decline during times of economic stress.
Over the past year, restaurant sales have surged 9.2% — more than twice as fast as inflation.
On the negative side of the ledger, sales fell at big-box electronics stores, clothing stores and home centers such as Home Depot HD, +1.85%
and Lowe’s LOW, +1.28%.
Sales in August were also revised up to show a 0.8% increase instead of 0.6%.
Big picture: The retail sales report is the latest to suggest the economy is still expanding at solid pace and perhaps not decelerating as much as the Federal Reserve would like to help slow the rate of inflation.
Consumer spending has stayed fairly healthy because of rising wages and the lowest unemployment rate in decades. What’s more, incomes are finally increasing faster than inflation for the first time in a few years.
Yet higher interest rates are pinching households and businesses and are bound to slow the economy in the months ahead. If so, retail spending is also likely to soften.
Looking ahead: “Consumer spending shows little sign of flagging, especially when purchases increased on everything from durable goods, such as autos, to the least durable goods, food and drink at bars and restaurants,” said Robert Frick, corporate economist at Navy Federal Credit Union.
“As long as the jobs market remains healthy, consumers should have the cash and confidence to maintain spending.”
Market reaction: Before the markets opened, the Dow Jones Industrial Average DJIA
and S&P 500 SPX
were set to open lower in Tuesday trades.
Drugstore chain Rite Aid Corp. filed for bankruptcy Sunday, as it faces billions of dollars of debt related to opioid lawsuits.
In a statement Sunday night, Rite Aid RAD, -16.81%
said it will close some “underperforming” stores and announced Jeffrey Stein as its new chief executive and chief restructuring officer. Interim CEO Elizabeth Burr will remain on the company’s board.
The bankruptcy filing had been expected for months, and the Wall Street Journal reported in August that Rite Aid was more than $3.3 billion in debt, due largely to hundreds of lawsuits related to its distribution of opioid painkillers. The bankruptcy filing stays pending litigation against the company.
Earlier this month, the New York Stock Exchange warned Rite Aid that it was “no longer in compliance” with the exchange’s minimum pricing and valuation standards, and gave it six months for the stock to regain compliance. Rite Aid shares have plunged about 80% year to date.
Rite Aid said Sunday that lenders will provide $3.45 billion in financing for the chain to continue operating through the chapter 11 bankruptcy process.
“With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives and accelerating the execution of our turnaround strategy,” Stein said in a statement. “In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on — now and into the future.”
Rite Aid said it would work to minimize the effect of store closures on its customers so there is no disruption of services, and will transfer affected workers to different locations when possible.
Rite Aid has about 2,100 stores and employs around 47,000 people. It has closed more than 200 stores in the past couple of years.
Rite Aid also said it had reached a deal for pharmacy benefit-solutions company MedImpact Healthcare Systems Inc. to acquire its Elixer Solutions business. A price for the transaction was not disclosed.
Drugstore chain Rite Aid Corp. filed for bankruptcy Sunday, as it faces billions of dollars of debt related to opioid lawsuits.
In a statement Sunday night, Rite Aid RAD, -16.81%
said it will close some “underperforming” stores and announced Jeffrey Stein as its new chief executive and chief restructuring officer. Interim CEO Elizabeth Burr will remain on the company’s board.
The bankruptcy filing had been expected for months, and the Wall Street Journal reported in August that Rite Aid was more than $3.3 billion in debt, due largely to hundreds of lawsuits related to its distribution of opioid painkillers. The bankruptcy filing stays pending litigation against the company.
Earlier this month, the New York Stock Exchange warned Rite Aid that it was “no longer in compliance” with the exchange’s minimum pricing and valuation standards, and gave it six months for the stock to regain compliance. Rite Aid shares have plunged about 80% year to date.
Rite Aid said Sunday that lenders will provide $3.45 billion in financing for the chain to continue operating through the chapter 11 bankruptcy process.
“With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives and accelerating the execution of our turnaround strategy,” Stein said in a statement. “In doing so, we will be even better able to deliver the healthcare products and services our customers and their families rely on — now and into the future.”
Rite Aid said it would work to minimize the effect of store closures on its customers so there is no disruption of services, and will transfer affected workers to different locations when possible.
Rite Aid has about 2,100 stores and employs around 47,000 people. It has closed more than 200 stores in the past couple of years.
Rite Aid also said it had reached a deal for pharmacy benefit-solutions company MedImpact Healthcare Systems Inc. to acquire its Elixer Solutions business. A price for the transaction was not disclosed.
U.S. homes may be wildly unaffordable for first-time buyers, but mortgage bonds backed by those same properties could be dirt cheap.
Shocks from the Federal Reserve’s dramatic rate increases have walloped the $8.9 trillion agency mortgage-bond market, the main artery of U.S. housing finance for almost the past two decades.
Spreads, or compensation for investors, have hit historically wide levels, even through the sector is underpinned by home loans that adhere to the stricter government standards set in the wake of the subprime-mortgage crisis.
Bond prices also have tumbled, sinking from a peak above 106 cents on the dollar to below 98, despite guarantees that mean investors will be fully repaid at 100 cents on the dollar.
From $106 to $98 cents, agency mortgage-bond prices are falling.
Bloomberg, Goldman Sachs Global Investment Research
“It’s really, really struggled,” Nick Childs, portfolio manager at Janus Henderson Investors, said of the agency mortgage-bond market during a Thursday talk on the firm’s fixed-income outlook.
Yet Childs and other investors also see big opportunities brewing. While mortgage bonds have gotten cheaper with the sector’s two anchor investors on the sidelines, the stalled housing market should breed scarcity in the bonds, which could help lift the sector out of a roughly two-year slump.
Prices have tumbled since rate shocks hit, but also since the Fed continued winding down its large footprint in the sector by letting bonds it accumulated to help shore up the economy roll off its balance sheet.
“Banks have been not only absent, but selling,” said Childs, who helps oversee the Janus Henderson Mortgage-Backed Securities exchange-traded fund JMBS,
an actively managed $2 billion fund focused on highly rated securities with minimal credit risk.
“But we’re moving into an environment where supply continues to dwindle,” he said, given anemic refinancing activity and the dearth of new home loans being originated since 30-year fixed mortgage rates topped 7%.
The bulk of all U.S. mortgage bonds created in the past two decades have come from housing giants Freddie Mac FMCC, +0.66%,
Fannie Mae FNMA, +1.09%
and Ginnie Mae, with government guarantees, making the sector akin to the $25 trillion Treasury market. But unlike investors in Treasurys, investors in mortgage bonds also earn a spread, or extra compensation above the risk-free rate, to help offset its biggest risk: early repayments.
While homeowners typically take out 30-year loans, most also refinanced during the pandemic rush to lock in ultralow rates, instead of continuing to make three decades of payments on more expensive mortgages. If someone refinances, sells or defaults on a home, it leads to repayment uncertainty for bond investors.
“To put this another way, the biggest risk to mortgages is now off the table, yet spreads are at or near historic wides,” said Sam Dunlap, chief investment officer, Angel Oak Capital Advisors, in a new client note.
That spread is now far above the long-term average, topping levels offered by relatively low-risk investment-grade corporate bonds.
Agency mortgage bonds are offering far more spread that investment-grade corporate bonds. But these mortgage bonds will fully repay if borrowers default.
Janus Henderson Investors
Agency mortgage bonds typically are included in low-risk bond funds and can be found in exchange-traded funds. While they have been hard hit by the sharp selloff in long-dated Treasury bonds BX:TMUBMUSD10Y
BX:TMUBMUSD30Y,
there has also been hope that the worst of the storm could be nearly over.
Goldman Sachs credit analysts recently said they favored the sector but warned in a weekly client note that it still faces “high rate volatility and a dearth of institutional demand.”
As evidence of the U.S. bond selloff, the popular iShares 20+ Year Treasury Bond ETF TLT
recently sank to its lowest level in more than a decade. It also was on pace for a negative 10% total return on the year so far, according to FactSet. Janus Henderson’s JMBS ETF was on pace for a negative 2.7% total return on the year through Friday.
“Frankly, why they fit portfolios so well is that because the government backs agency mortgages, there is no credit risk,” Childs said. “So if a borrower defaults, you get par back on that. It just comes through as a typical payment.”
The NCAA started allowing college athletes to make money from their name, image and likeness in 2021, after decades of student-athletes saying it wasn’t fair that they didn’t receive any money while the games they played in generated millions of dollars — especially football and basketball contests. And today, many of these athletes are not just making some extra cash on the side — they’re making millions.
These NIL deals are negotiated by college athletes and their representation, and typically involve leveraging an athlete’s brand and influence through promotional means. For example, a car dealership near a university campus may ask the college’s high-profile quarterback to do a commercial for them in exchange for a monetary payment or a car. Similarly, an athlete can make money from social media, depending on how big their following is.
Football players are among the college athletes who make the most money from NIL deals, followed by men’s basketball, women’s volleyball and women’s basketball. That’s because college football and basketball have multibillion-dollar TV contracts to broadcast games, while most other sports generally have lower visibility.
With that in mind, here are the college athletes who make the most money from NIL deals according to On3’s proprietary NIL algorithm, which is based on NIL-deal data, performance, influence and exposure
10. J.J. McCarthy, $1.3 million
J.J. McCarthy of the Michigan Wolverines in action against the Georgia Bulldogs.
Getty Images
As the junior quarterback for the Michigan Wolverines football team, McCarthy is one of the six college football QBs in the top 10 of NIL earners.
McCarthy sports 276,000 followers across his social-media platforms, and has deals with Alo, Bose and Bowman.
Tie-8. Bo Nix, $1.4 million
Bo Nix of the Oregon Ducks throws a pass against the Stanford Cardinals.
Getty Images
The senior QB for the Oregon Ducks has led his team to a perfect 5-0 start this season.
Nix has 219,000 followers on social media and NIL deals with 7-Eleven, Bojangles and Celsius. Nix is considered one of the top players in the nation and has the third-best betting odds to win college football’s Heisman Trophy on DraftKings DKNG, -2.52%
sportsbook.
Tie-8. Spencer Rattler, $1.4 million
Spencer Rattler of the South Carolina Gamecocks warms up before a game against the Tennessee Volunteers.
Getty Images
The South Carolina Gamecocks senior QB has one of the more robust NIL profiles in the nation. He has deals with Mercedes-Benz MBG, -1.23%,
Leaf trading cards and Raising Canes.
Rattler also has 578,000 followers across TikTok, Instagram META, -0.71%
and X, the platform formerly known as Twitter.
7. Angel Reese, $1.7 million
Angel Reese of the LSU Lady Tigers during the 2023 NCAA Women’s Basketball Tournament championship game.
Getty Images
Reese was one of the breakout stars of the women’s March Madness basketball tournament this year. The Louisiana State University hooper led her team to the 2023 title and famously flashed a “you can’t see me” gesture in the title game.
Reese has brand deals with Airbnb, PlayStation and Intuit TurboTax INTU, -0.50%
and has appeared in ads for Amazon AMZN, +0.01%
and Pepsi Co.’s PEP, +0.59%
Starry. She also has 5.2 million followers across her social-media platforms.
During LSU’s magical title run last season, Reese set an NCAA single-season record with her 34th double-double against the Iowa Hawkeyes and was named the most outstanding player of the Final Four.
Reese is one of just two female athletes inside the top 10 in On3’s NIL valuation tracker, and the top college basketball player on the list.
6. Travis Hunter, $2.3 million
Travis Hunter of the Colorado Buffaloes signals first down after a catch against the TCU Horned Frogs.
Getty Images
Hunter was one of the college football players who transferred to the University of Colorado from Jackson State last season to follow coach Deion Sanders.
Hunter, a five-star sophomore prospect, plays on both offense and defense — as a wide receiver and a cornerback — a rarity in a high-level college program. He has 1.9 million followers on social media, a successful YouTube GOOG, -0.08%
channel, and endorsements with Celsius Energy Drink and 7-Eleven.
Hunter entered the 2023 college season as the most highly touted NFL prospect at Colorado, and Deion Sanders contends rival schools have attempted to poach him via lucrative NIL deals.
“People offered Travis Hunter a bag — about $1.5 million to try to lure him and buy him out of the transfer portal,” coach Sanders told 247Sports over the summer. “But Travis is not the kind of guy that can be bought. He isn’t built like that. Travis is a relational young man that is built on relationships and stability. And that’s what he wanted and desired. That is why he decided to ride and stay with us.”
If and when Hunter decides to declare for the NFL draft, he will likely have a multimillion-dollar contract as a rookie that could dwarf his collegiate NIL earnings.
5. Caleb Williams, $2.7 million
Caleb Williams of the USC Trojans warms up before a game against the Arizona State Sun Devils.
Getty Images
The University of Southern California QB is seen as a generational NFL prospect and the presumptive No. 1 overall pick in the 2024 NFL draft, but he isn’t the top NIL earner.
Williams has 347,000 followers on social media, and brand deals with United Airlines UAL, -1.24%,
Alo and Beats by Dre.
Once the USC junior QB declares for the draft, his rookie contract will likely be set above $37 million, per Spotrac’s estimates.
4. Arch Manning, $2.8 million
Arch Manning of the Texas Longhorns warms up prior to a game against the Alabama Crimson Tide.
Getty Images
The Texas Longhorns freshman QB is one of several top NIL earners whose family plays a role in their fame. Arch Manning is the nephew of Super Bowl champion QBs Peyton and Eli Manning, and the grandson of former NFL QB Archie Manning.
Despite being a backup quarterback with no recorded statistics, the younger Manning has 277,000 followers on social media and has a brand deal with Panini. That deal involved him autographing an extremely rare one-of-one Prizm Black card that was auctioned off for $102,500, which was later donated to charity.
Manning was a standout high school recruit, ranked No. 5 in the nation in the 2023 class, and could have an NFL future.
3. Livvy Dunne, $3.2 million
Olivia Dunne of LSU looks on during a PAC-12 meet against Utah.
Getty Images
Dunne is the only college athlete in the top 10 of NIL earners who doesn’t play basketball or football. The junior LSU gymnast is the top female NIL earner in the nation and has brand deals with Vuori clothing, Body Armor KO, +0.62%
and American Eagle Outfitters.
Dunne is the second most-followed college athlete on social media with 12.1 million followers on Instagram, TikTok and X combined.
For many years Dunne was seen as the poster child for NIL deals, and she said earlier this year that she could make as much as $500,000 from a single post.
“What I love with certain brands is getting long-term brand deals,” Dunne said on the Full Send podcast in June. “Those are probably the best because you build a relationship with the brand and they want you year after year.”
2. Shedeur Sanders, $4.8 million
Shedeur Sanders of the Colorado Buffaloes celebrates as he walks off the field following an NCAAF game against the Arizona State Sun Devils.
Getty Images
University of Colorado’s Shedeur Sanders has become a phenomenon in the sports world. The 21-year-old junior made headlines after throwing for 510 yards and four touchdowns in Colorado’s season-opening shocker against No. 17–ranked Texas Christian.
Colorado has become the center of the football world since Shedeur’s father Deion took over as coach. Coach Prime’s team is currently 4-2 — the team was 1-11 last season, good for last place in its conference.
The quarterback has more than 2.3 million followers on social media, and has already inked several deals with big brands, including with yogurt producer Oikos 0KFX, -1.13%,
Gatorade and Mercedes-Benz. He has shown fans some of his new Mercedes cars on social media, too.
Overall, Shedeur Sanders’s NIL value currently sits at $4.8 million, according to On3, up from $1.5 million at the beginning of the year — that’s the highest value in all of college football. For context, that’s nearly twice the average NFL player’s salary.
1. Bronny James, $5.9 million
Bronny James playing at his high school, Sierra Canyon.
Getty Images
James has perhaps the most famous family member of any person on this list. He is the son of NBA legend LeBron James, and is currently set to begin his freshman basketball season at USC.
The younger James has yet to play a game at his new school, but will immediately be one of the most well-known players in college athletics. James has 13.5 million social media followers, the most of any college athlete, and has brand deals with Nike NKE, +1.10%
and Beats by Dre AAPL, -0.06%,
two brands his dad is also repped by.
Bronny James suffered cardiac arrest in July during a basketball practice and had to be taken to the hospital. But he’s on the road to recovery, and hopes to play basketball this season.
“Bronny is doing extremely well,” the older James said last week. “He has begun his rehab process to get back on the floor this season with his teammates at USC. (With) the successful surgery that he had, he’s on the up-and-up. It’s definitely a whirlwind, a lot of emotions for our family this summer. But the best thing we have is each other.”
Stock futures posted modest gains Thursday ahead of a report likely to show that
U.S. inflation fell in September as gasoline price growth slowed and used-car costs declined.
Family Dollar voluntarily recalled dozens of over-the-counter drugs, products and medical devices sold at its stores because they had been stored at improper temperatures, according to the Food and Drug Administration late Tuesday.
On the FDA’s website, the regulator said products affected by the recall were stored “outside of labeled temperature requirements by Family Dollar and inadvertently shipped to certain stores on or around June 1, 2023 through September 21, 2023.”
The items were sold at stores in Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Idaho, Kansas, Louisiana, Mississippi, Montana, North Dakota, Nebraska, New Mexico, Nevada, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington and Wyoming, between June 1 and Oct. 4, the FDA said.
Retail sales growth in the U.K. slowed in September despite a fall in inflation as the high cost of living continues to put households’ budget under pressure, according to the latest sales-monitor report from the British Retail Consortium published on Tuesday.
Total retail sales for the five weeks to Sept. 30 increased by 2.7% compared with the prior month, when it saw growth of 4.1%, and was at the same level as the three-month average growth, the report said. In September last year, retail sales were up 2.2%.
Food sales rose 7.4% over the three months to September, while non-food sales further decreased 1.2%.
“Big ticket items such as furniture and electricals performed poorly as consumers limited spending in the face of higher housing, rental and fuel costs. The Indian summer also meant sales of autumnal clothing, knitwear and coats, have yet to materialize,” BRC Chief Executive Helen Dickinson said in a note.
Looking ahead, retailers are getting ready for the ‘Golden Quarter’ amid fierce competition that is likely to bring earlier and abundant promotions ahead of Christmas, KPMG U.K. Head of retail Paul Martin said.
“Consumers will continue to seek out good deals, with price driving purchasing decisions. This is likely to be one of the most important golden quarters that we have seen in years, as for some in the sector, it could very much determine their future,” he adds.
Dickinson highlighted that retailers’ efforts might be challenged by the 400 million pounds ($489.6 million) increase in business rates expected next year, and urged Chancellor Jeremy Hunt to scrap the rates rise in the upcoming budget statement.
U.S. stocks closed higher Friday, with the S&P 500 eking out a modest weekly gain, as investors assessed a monthly jobs report that showed both a blockbuster surge in jobs created along with a slowdown in wage pressures.
How stock indexes traded
The Dow Jones Industrial Average DJIA
rose 288.01 points, or 0.9%, to close at 33,407.58.
The S&P 500 SPX
gained 50.31 points, or 1.2%, to finish at 4,308.50.
The Nasdaq Composite COMP
climbed 211.51 points, or 1.6%, to end at 13,431.34.
For the week, the Dow slipped 0.3% while the S&P 500 edged up 0.5% and the Nasdaq gained 1.6%. The Dow fell for a third straight week, while the S&P 500 snapped a four-week losing streak and the Nasdaq saw back-to-back weekly gains, according to Dow Jones Market Data.
What drove markets
U.S. stocks climbed Friday, after reversing course from their slide earlier in the session as investors parsed a U.S. employment report that was stronger than forecast.
“Wages slowed down,” said José Torres, senior economist at Interactive Brokers, in a phone interview Friday. “That was a great development” as the Federal Reserve aims to bring down inflation through monetary tightening.
Investors have worried that a hot labor market will keep wage growth elevated, adding to inflationary pressures that could see the Fed keep interest rates higher for longer or potentially hike its benchmark rate one more time this year.
A report Friday from the Bureau of Labor Statistics showed the U.S. economy created 336,000 jobs in September, far surpassing economists’ expectations for 170,000 new jobs. Also, the report said job gains in August and July were revised higher.
But other details from the report were slightly more favorable in terms of monetary policy concerns.
For example, average hourly wages rose a mild 0.2% in September, bringing the 12-month rate of change through September to 4.2%, a slower pace than the prior month’s year-over-year rate of 4.3%.
“Even though the headline number was 2.5 times what Wall Street had anticipated, the more important detail below the surface was that wage inflation actually cooled,” said Sam Stovall, chief investment strategist at CFRA, during a phone interview with MarketWatch.
Renaissance Macro Research’s Neil Dutta said in a note that the jobs report was consistent with a soft landing for the economy and the Fed’s objective to lower the inflation rate back to 2%.
“The strong labor market gives credence to the base case still being a soft landing,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management, in a phone interview Friday. But that soft-landing narrative is “somewhat fragile and data dependent,” he said.
Investors will be watching for data scheduled to be released next week on September inflation from the consumer-price index and producer-price index.
Meanwhile, economists from Goldman Sachs Group said in a note Friday that “the continued rebalancing of the labor market” is consistent with their expectation that the Fed is done raising rates this year, despite senior Fed officials projecting another hike in their latest batch of forecasts, released last month.
Federal-funds-futures traders are expecting the Fed will keep its benchmark rate at the current range of 5.25% to 5.5% at its policy meetings in November and December, according to the CME FedWatch Tool.
“I’m of the belief that the Fed will not hike again this year,” BMO’s Ma said. “I don’t think it needs to.”
Meanwhile, the yield on the 10-year Treasury note BX:TMUBMUSD10Y
climbed 6.8 basis points to 4.783%, rising for five straight weeks, according to Dow Jones Market Data.
Rising Treasury yields, particularly on the long end of the yield curve, have been blamed for a selloff in stocks over the past couple months. But the S&P 500 is now up so far in October, with a small gain of 0.5%, according to FactSet data.
The U.K.’s communications regulator has referred the cloud market to the country’s competition watchdog for an investigation, alleging that certain features by market leaders Amazon and Microsoft could limit competition.
The Office of Communications regulator said Thursday that a market study found that high fees for transferring data, committed spend discounts and technical restrictions could make it difficult for customers to switch cloud provider or to use multiple providers.
“Some U.K. businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well. So, we’re referring the market to the [Competition and Markets Authority] for further scrutiny, to make sure business customers continue to benefit from cloud services,” Ofcom’s director responsible for the market study, Fergal Farragher, said.
The regulator said Amazon Web Services (AWS) and Microsoft had a combined market share in the U.K. of 70% to 80% in 2022.
The CMA will now start an independent investigation to decide whether there is an impact on competition.
Neither Amazon nor Microsoft were immediately available for comment.
Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.
First we will show how the sectors of the S&P 500
have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.
Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.
Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc. GOOGL
and Meta Platforms Inc. META,
which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.
On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.
Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.
The yield on 10-year U.S. Treasury notes
jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds
rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.
The Treasury yield curve is still inverted, with 3-month T-bills
yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.
Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”
Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:
Odeon Capital Group, Bloomberg
Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.
This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.
We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.
Screening for lower valuations and high ratings
A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.
Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:
Sector or index
Current P/E to 5-year average
Current P/E to 10-year average
Current P/E to 15-year average
Forward P/E
5-year average P/E
10-year average P/E
15-year average P/E
Utilities
82%
86%
95%
14.99
18.30
17.40
15.82
Real Estate
76%
80%
81%
15.19
19.86
18.89
18.72
Consumer Staples
93%
96%
105%
18.61
19.92
19.30
17.64
Healthcare
103%
104%
115%
16.99
16.46
16.34
14.72
Financials
88%
92%
97%
12.90
14.65
14.08
13.26
Materials
100%
103%
111%
16.91
16.98
16.42
15.27
Industrials
88%
96%
105%
17.38
19.84
18.16
16.56
Energy
106%
63%
73%
11.78
11.17
18.80
16.23
Consumer Discretionary
79%
95%
109%
24.09
30.41
25.39
22.10
Information Technology
109%
130%
146%
24.20
22.17
18.55
16.54
Communication Services
86%
86%
94%
16.41
19.09
19.00
17.43
S&P 500
94%
101%
112%
17.94
19.01
17.76
16.04
DJ Industrial Average
93%
98%
107%
16.25
17.49
16.54
15.17
Nasdaq Composite Index
92%
102%
102%
24.62
26.71
24.18
24.18
Nasdaq-100 Index
97%
110%
126%
24.40
25.23
22.14
19.43
There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.
If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.
Your own opinions, along with the pricing for some sectors, might drive some investment choices.
A broader screen of the S&P 500 might point to companies for you to research further.
We narrowed the S&P 500 as follows:
Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.
“Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.
Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.
There is too much data for one table, so first we will show the P/E information:
Boohoo Group has downgraded its fiscal 2024 revenue targets on slower-than-expected sales volume recovery, and reported a widened pretax loss for the first half.
The London-listed online fashion retailer said Tuesday that it expects revenue for the year ending Feb. 28 to decline by 12% to 17%, compared with previous guidance of flat growth or a fall of up to 5%.
Despite the revenue slip, the company continues to expect adjusted earnings before interest, taxes, depreciation and amortization–which strips out exceptional and other one-off items–margins to be between 4% and 4.5%, given the progress made on gross margin and cost control.
Boohoo backed its adjusted Ebitda target of between 58 million pounds to 70 million pounds ($70.1 million and $84.6 million), while capital expenditure is expected to be around GBP75 million.
The company also reported a pretax loss for the six months ended Aug. 31 of GBP26.4 million, compared with a loss of GBP15.2 million for the same period a year ago.
Revenue fell to GBP729.1 million from GBP882.4 million, with U.K. sales down 19% and international sales down 15%.
The drop was driven by a 10% revenue fall in core brands, consistent with guidance as the group targeted more profitable sales.
Boohoo added that inventory significantly reduced, down GBP94 million, or 35%, on year.
“Our confidence in the medium-term prospects for the group remains unchanged as we execute on our key priorities where we see a clear path to improved profitability and getting back to growth,” Chief Executive John Lyttle said.
Shares of GameStop Corp. fell 6.9% Monday and are trading at $15.33, putting the stock on pace for its lowest close since Feb. 23, 2021, when it closed at $11.24, FactSet data show.
The stock, which is down for four of the last five days, is on pace for its largest percent decrease since June 8, 2023, when it fell 17.89%, according to FactSet.
Activist investor Ryan Cohen was named CEO of GameStop GME, -6.59%
last week, marking the latest chapter in his attempt to breathe new life into the video-game retailer and original meme-stock company.
Cohen, the co-founder and former CEO of Chewy Inc. CHWY, +1.92%,
made his first investment in GameStop in August 2020 via his investment firm RC Ventures. News of Cohen’s 9% stake in the gaming retailer sent its stock surging. The activist investor quickly began pushing for an overhaul of GameStop, with a focus on digital sales, and he joined the company’s board in January 2021. He consolidated his power at GameStop when he became the company’s chairman in June 2021.
In its statement announcing Cohen’s election as CEO, GameStop confirmed that he will not receive compensation for serving as the company’s president, chief executive and chairman.
The video game retailer reported better-than-expected second-quarter results last month, boosted by international sales and what the company described as “a significant software release.” GameStop is also ramping up its efforts to control costs.
Nike Inc. on Thursday reported a fiscal first-quarter profit that beat expectations, although revenue came up just shy of Wall Street’s estimates, amid a drop in sales for Converse sneakers.
The athletic-gear giant reported fiscal first-quarter net income of $1.45 billion, or 94 cents a share, compared with $1.47 billion, or 93 cents a share, in the same quarter last year. Revenue crept higher to $12.94 billion, compared with $12.69 billion in the prior-year quarter.
Analysts polled by FactSet expected Nike to report earnings per share of 76 cents, on revenue of $13 billion.
Gross margin fell 10 basis points to 44.2%, weighed by higher product costs and a tougher foreign-exchange backdrop, and offset by “strategic pricing actions.” The company’s inventories fell 10%, as Wall Street seeks progress on efforts by businesses to narrow down their stockpiles of unsold goods.
Sales for Converse shoes were $588 million, down 9%, amid weaker demand in North America. Growth in Asia, however, acted as a counterweight to that decline.
Shares of GameStop Corp. surged Thursday, after the consumer electronics retailer named Ryan Cohen as it president and chief executive officer, effective immediately.
The move, which wasn’t unexpected, comes a few months after the company fired then-CEO Matthew Furlong, and elected activist investor Ryan Cohen as executive chairman. At that time, Cohen said in a tweet, “Not for long.”
Cohen will relinquish his role as executive chairman when he is appointed chairman.
GameStop’s stock GME shot up 9.9% in premarket trading, putting it on track to open at a three-week high.
Cohen, who previously founded and was CEO Chewy Inc. CHWY, -0.06%,
is the manager of RC Ventures, which in June disclosed a 36.85 million-share, or 12.1% stake in GameStop.
“In connection with his appointment, Mr. Cohen will assume the role of principal executive officer from Mark H. Robinson effective immediately and his responsibilities will include the oversight of all other executive officers, including Mr. Robinson,” the company said in a statement.
The company said Cohen will not receive any compensation for his roles as president, CEO and chairman, and will “continue to engage in various business activities and pursuits outside of the company.”
GameStop’s stock, which was one of the original “meme” stocks, has tumbled 37.2% over the past 12 months, while the S&P 500 index GME, +2.21%
has gained 14.9%.
Costco Wholesale Corp. sells lots of things you wouldn’t expect from a big-box retailer: caskets, caviar, six-pound tubs of Nutella. Add to that list one-ounce bars of gold, which the company on Tuesday said were selling out within a matter of hours.
“I’ve gotten a couple of calls that people have seen online that we’ve been selling one-ounce gold bars,” Chief Financial Officer Richard Galanti said on Costco’s COST, +2.45%
quarterly earnings call on Tuesday. “Yes, but when we load them on the site, they’re typically gone within a few hours, and we limit two per member.”
Costco did not immediately respond to a request for more information about the types of gold bars it sells, how much they cost or the factors behind the demand. On Wednesday, the site showed a price of $1979.99 per ounce for the bars. Shares of Costco were up 1.3% on Wednesday.
Gold is generally seen as a safe-haven investment and a hedge against inflation. Buying by central banks, lingering worries about a deceleration in the economy and jewelry purchases have helped prop up prices, according to data tracker Goldhub. But higher interest rates have acted as a counterweight, and some analysts have wondered whether more volatility is on the horizon for gold prices.
Costco’s quarterly results, reported Tuesday, topped expectations. Analysts have said the retail chain remains attractive to customers who are looking for a break from higher prices.
Shares of the company are up 23.8% so far this year. The S&P 500 Index SPX
is up 11.4% over that period.
