A daily market update from FS Insight — what you need to know ahead of opening bell

“Problems can be experienced as… a chance for renewal rather than stress.” — Marilyn Ferguson

Overnight

S&P 500, bond yields jump after jobless claims numbers released WSJ

S&P 500 notches its best day since 2022 on Thursday as Wall Street claws its way back from Monday’s rout CNBC

Mortgage rates drop to 15-month low WSJ

Fewer Americans filed for jobless benefits last week, but applications remain slightly elevated AP

Fed rate-cut fervor is gripping Wall Street again MW

Bank of Mexico cuts benchmark interest rate in split decision WSJ

India’s Central Bank holds policy rate steady, as expected WSJ

U.S. defense-tech startup Anduril raises $1.5bn at $14bn valuation FT

Rheinmetall amasses record orders amid Ukraine and Gaza wars FT

Sweetgreen sells more salads, loses less money; the stock jumps Barron’s

Warner Bros Discovery writes down value of its traditional television networks by $9bn FT

Paramount takes $6 billion charge for shrinking value of cable business Barron’s

Eli Lilly raises outlook on bumper sales of diabetes and weight-loss drugs FT

Wednesday was the busiest day of the year for corporate bond sales; Meta’s $10.5 billion issuance was its largest ever BBG

How turmoil at a $94bn U.S. pension fund hit home for Ohio teachers FT

Yeti sales up despite ‘cautious-consumer’ bromide MW

Barclays becomes first U.K. bank to scrap E.U. bonus cap FT

Goldman Sachs is giving select clients access to one of its hottest businesses WSJ

Private equity builds $722 billion war chest in hunt for deals BBG

Big Pharma cuts R&D, sending shudders through industry WSJ

Coca-Cola raises €1bn to help pay potential tax charges FT

Office loans are toxic, but apartment loans are in bad shape, too WSJ

Wall Street’s latest gizmo: futures options on index-based options index BBG

Wall Street bonus watcher says some payouts will jump up to 35% BBG

Google and Meta struck secret ads deal to target teenagers FT

Advertising initiative shuts down following X lawsuit over spending pullback WSJ

The silver lining of a slowing economy: cheaper gas WSJ

Amazon’s $4 billion investment in AI startup Anthropic comes under U.K. scrutiny WSJ

TSMC finds out that what works in Taiwan doesn’t always in Arizona NYT

U.S. lawmakers move to restrict trade provision favored by China’s e-commerce giants WSJ

Intel CEO Pat Gelsinger buys stock near multiyear low Barron’s

Charlie Penner, who steered a tiny investor to a successful board challenge at Exxon in 2021, launches Ananym Capital, an activist hedge fund, with P2 alum Alex Silver Semafor

Football’s most unstoppable play has crashed the Olympics – and it might win a gold medal WSJ

Former Mozambique Finance Minister found guilty in bribery scandal WSJ

U.S. warns Iran of ‘serious risk’ if it conducts major attack on Israel WSJ

Battles rage in Russia as Kyiv advances in war’s largest counter-incursion FT

Last year, the Kremlin swallowed up the local subsidiaries of Danone and Carlsberg’s Baltika Breweries; now it rejects Budweiser owner AB InBev’s plan to exit Russia FT

Those in Russia now need a VPN to keep using YouTube – the last Western social media platform available before a pall of benightedness claimed the country TR

Power grab by architect of October 7 cements Hamas-Iran ties WSJ

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

We are now done with Day 3 post “Tokyo Black Monday” and equity markets managed their best close this week with S&P 500, Nasdaq 100 and Russell 2000 gaining +2.3%, 3.1% and 2.4%, respectively. Our base case remains that the carnage from last week aas largely a “growth scare” rather than the start of a “bear market/recession” and, as we noted earlier this week, evidence continues to mount that the worst is behind us.

The positive equity market reaction to this week’s surprisingly low jobless claims (233k vs Street’s 240k and vs 250k last week) is the strongest evidence the “growth scare” is a primary culprit in 3 days of equity carnage. A low jobless-claims number blunts the notion that the U.S. labor market is caught in a contractionary dynamic.

Click HERE for more.

TECHNICAL

Look for a replay of Mark Newton’s appearance on FOX BUSINESS NEWS with Maria Bartiromo this morning (Friday 8/9).

The early-week stabilization looks to be a work in progress, and choppy consolidation might very well continue in the days ahead before a rally gets underway back to highs. At present, despite Thursday’s abnormally high-volume, positive-breadth rally, more progress will be needed to turn trends and momentum more positive. As discussed in recent days, we feel that lows are likely in place for now, after this sharp decline from mid-July. Equal-weighted S&P 500 and Equal-weighted QQQ remain in much better shape, following a scant 3% decline from all-time highs in recent weeks. U.S. Dollar and U.S. Treasury yields should be ready to turn back lower; SPX should turn up in a more direct fashion after August expiration. Bottom line: the risk/reward favors a return to growth and Technology bounce after the recent pullback to support. However, make no mistake: some technical work is needed to surpass the current downtrend from mid-July, and we expect this to give way as U.S. indices work back higher into the back half of August and into September.

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CRYPTO

In our latest video, we discuss how more promising data this week suggests a rally into CPI. The market has benefited from a dovish signal from the BOJ and stronger-than-expected jobless claims data. Sentiment has shifted from recession fears to a more balanced “Goldilocks” scenario. Notable continued strength has been observed in SOL and HNT.

Click HERE for more.

First News

The Widening Gyre? Today the St. Louis Fed updates its barometer of financial stress in the economy, offering the first sign of central bankers’ take on whether the week’s market gyrations have darkened the economic picture. The measure has been historically low, but it’s been rising for the past few months. A significant jump today might buttress the case for quicker, deeper cuts to interest rates. Semafor

The Venal Bear It Away. On certain West Texas days this spring natural gas prices plummeted to an unprecedented –$4.60 per million BTUs. This phenomenon of negative pricing, where drilling companies essentially pay utilities and other gas consumers to take their product, is becoming increasingly frequent in the Permian Basin.

The root cause of the issue lies in the rapid growth of gas production, which has outpaced the expansion of pipeline infrastructure and storage facilities. The imbalance forces producers to offload excess gas, even at a loss, to avoid shutting down wells or facing regulatory penalties for flaring. There has been a significant increase in gas production during the Biden administration. In fact, some industry executives argue that the surge in production has been excessive, leading to these market distortions. NYT

Lender’s Domain. JPMorgan’s recent handling of Carrier’s fire-prevention business sale points to a growing trend in corporate finance. While potential buyers were granted access to the company’s financial data, their usual lenders were excluded from the process. JPMorgan instead promoted its own loan fund for financing. Goldman Sachs has employed a similar strategy in the ongoing auction of Honeywell’s medical-gear division, effectively sidelining external lenders. It’s popular with other banks as well.

These moves reflect an intensifying battle for control in the $1 trillion lending market. Private credit funds, flush with capital, have been encroaching on traditional banking territory. Banks are starting to give back as good as they get, particularly as buyout activity slows and their loans become more competitively priced compared to private credit offerings.

Industry insiders offer differing explanations for this shift. Bankers claim it’s to maintain bid confidentiality by preventing individual private-credit firms from backing multiple bidders in the early stages of an auction. Naturally, private credit entities like Blackstone, Ares, and Blue Owl suspect banks are motivated by the substantial fees associated with buyout financing, which often surpass those earned from being merely advisors.

Regardless of the underlying reasons, the evolving dynamic in corporate-debt markets is that private lenders have gained prominence in buyout financing on the back of their ability to offer riskier loans, compared to heavily regulated banks. In response, major banks have established their own loan funds, primarily by attracting external investors rather than tapping customer deposits.

Bloomberg reports that JPMorgan reportedly raised up to $3 billion earlier this year for this strategy. Wells Fargo collected $2 billion last year from Middle Eastern and Canadian pension funds. With a long-standing, outsized presence in this arena, Goldman Sachs aims to double its private credit assets to $300 billion.

The approach echoes the ‘stapled financing’ practice common among investment banks during M&A auctions in the 2000s. Bankers would offer their own loan packages to potential buyers, first physically attached to deal-information packets, later figuratively so. While the practice fell out of favor in public company takeovers following Delaware court objections a decade ago, it persists in private-equity sales. Bankers, controlling access to company data, effectively serve as gatekeepers.

Naturally, buyers will ultimately secure financing from their preferred sources. Nevertheless, banks’ attempts to maintain their position in this lucrative market are only understandable. Semafor