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

“Be fearful when others are greedy, and be greedy when others are fearful.” — Warren Buffett

Overnight

Stocks decline in broad retreat on fears of slowdown; chip stocks lead pullback WSJ

Former aide to NYS Gov. Hochul secretly worked for Chinese government, prosecutors say WSJ

Beijing-backed trolls target U.S. voters as election nears WSJ

Kamala Harris to propose expansion of small-business startup tax deduction WSJ

Citadel Securities, Jane Street on track for record revenue haul BBG

Citadel Securities leads fight over payments for market surveillance system FT

Morgan Stanley renews efforts to regain stock trading crown FT

Europe’s top court rebukes competition regulator, curbing powers WSJ

HSBC’s new CEO tells staff to keep an eye on costs in town hall BBG

This once-hot real-estate type is now being offered as office space WSJ

The day Delta’s ‘On-Time Machine’ broke, and the blame game it sparked WSJ

Microsoft spared U.K. antitrust probe over ties to Inflection AI WSJ

Sorrento Therapeutics restructuring chief hosted party for judges who later oversaw its liquidation WSJ

Temu’s parent, a victim of competition or its own success? WSJ

Rise of the pint-size startup is reshaping the U.S. economy WSJ

Religious movies are sweeping Hollywood; rich investors are pouring in millions WSJ

Deadliest Russian missile strike this year highlights Ukraine’s air-defense shortage WSJ

Lebanon’s former central-bank chief arrested on embezzlement charges WSJ

They’re breaking every retirement rule to be off now, not later WSJ

Regional Argentine currency launched to offset Milei’s shock therapy BBG

Brazilians flock to Bluesky after court bans Elon Musk’s X FT

Fancy Feast? There’s a ‘cat-astrophe’ brewing on Downing Street WSJ

Landon Y. Jones, who popularized the term ‘Baby Boomers,’ dies at 80 WSJ

MARKET LEVELS

MORNING INSIGHT

Good morning!

Post-Labor Day, the S&P 500 started September with a -2% decline. This is the worst start since 2015 (-3%) and 5th worst ever since 1928. As many of our clients know, we have flagged this period from July 31 to election day as generally tough (“eek”) and the tribulations of this completed August are a stark reminder of the election-year dynamics. While historical seasonality says stocks should generally struggle between now and election day, the fundamental reality is this “weak seasonality” is in the context of an extremely strong stock market.

We are entering a tricky 8 weeks into election day. Watch the VIX as this signals whether the pain is front-loaded.

Click HERE for more.

TECHNICAL

The post-holiday selling in U.S. Equities during this shortened week seemed to catch many investors off-guard, as VIX and Japanese yen spiked to multi-day highs while Treasury yields plunged. Technically, there wasn’t much of a warning sign for market weakness heading into this week, as SPX managed to close sharply higher into end of day last Friday while five sectors rose to make new all-time-high monthly closes. Given that market breadth remains in good shape and Equal-weighted SPX has recently pushed back to new all-time high territory, we are still inclined to expect a possible SPX rally back to new highs and don’t feel that Tuesday kicked off any sort of major selloff. If/when bullish price action happens into mid-month, there might be a technical case for weakening into October. However, we are skeptical at this time that Tuesday’s decline leads to broad-based market weakness.

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CRYPTO

In our latest video, we explore the risk-off move in crypto, analyze what the ISM Manufacturing report suggests about market risks in the coming months, highlight an under-discussed shift in polling odds, and review key data points this week that could shift market expectations from ‘hard-landing’ back to ‘soft-landing’ pricing.

Click HERE for more.

First News

Fantastic Plastic. When we take care to put that plastic bag or bottle into the recycling bin and not wantonly toss it into the trash, is it going to its just rewards? If you think your plastic is truly being recycled, think again. Only 9% of the plastic ever produced has been recycled, while more than twice as much – 19% – has been incinerated. A whole mess of it reaches the sea – estimates suggest between 8 million and 11 million tons of plastic waste enter the ocean each year. Some forms of it are seaborne in unexpectedly Romantic ways, such as the great Lego spill, when a tremendous winter storm near the coast of Cornwall in 1997 pushed sixty-two containers off the cargo ship Tokio Express proceeding from Rotterdam. One of the containers happened to be filled with nearly five million pieces of Lego.

More than a quarter century later, the whimsically shaped pieces of plastic, their constituent chemistry slowly leeching into the salt water, still turn up on various European shores – in the Channel Islands, France, Belgium and the Netherlands, and as many as 20 miles off the Cornish coast – especially after high spring tides and strong onshore winds. Large sea birds ingest the pieces whole, the feathers and bones of their decayed carcasses eventually revealing the one-time-and-forever contents of their stomachs: macabre miniature graveyard tableaus of indigestible plastic refuse.

The story of the overboard Lego may seem like an enchanted one, given the toy dragons, flowers, life jackets, spear guns, and octopuses regularly found, described, valued, traded, and memed, but the plastic that washes up onto beaches and litters our shores is – if we are to admit the stark reality – a persistent form of polluting manmade debris, most of it pedestrian and quotidian, and not the art project that is the documentation of cute Lego pieces. More cargo spills bring new items to our shores: printer cartridges, detergent bottles, toy wheels, flip flops, sneakers – you name it.

The greed-driven myopia of producing reams of plastic without ensuring that its life cycle works for our environment must be balanced with the fear of polluting our seas and land into an eventuality in which humans unintentionally morph into a hybrid carbon-plastic species. Given how much of our food comes encased in plastic, it shouldn’t be a surprise that, two years ago, researchers in the Netherlands found microplastics in human blood (in almost 80% of test subjects), while Chinese scientists discovered them in the hearts of people undergoing cardiac surgery last year. In a study published in May of this year, they were found in the reproductive systems of men.

With so little of the plastic we discard actually being recycled on land, and enough of it ending up in the ocean, whether via an unintended container slipping overboard or regulations-be-damned, let’s-let-our-refuse-wash-into-the-sea attitudes of industrial polluters, another path forward must be forged.

While many researchers hope to redesign plastics from the ground up to be easily reused, today’s hard-to-recycle plastics are on track to persist being a problem for decades. Scientists used to say that, if we could figure out a way to make those plastics circular, it would be a big deal.

Thanks to a catalytic process developed at the University of California, Berkeley (the work funded by the Department of Energy) the two dominant types of post-consumer plastic waste – polyethylene, the component of most single-use plastic bags; and polypropylene, the stuff of hard plastics, from microwavable dishes to luggage and from laundry soap bottles to milk jugs  – can now be degraded – and efficiently. Once scaled up, the process could help bring about a circular economy for many throwaway plastics: the plastic waste converted back into the monomers used to make polymers, thus reducing the fossil fuels used to make new plastics. 

Says John Hartwig, a UC Berkeley professor of chemistry who led the research. “What we can now do, in principle, is take those objects and bring them back to the starting monomer by chemical reactions we’ve devised that cleave the typically stable carbon-carbon bonds. By doing so, we’ve come closer than anyone to give the same kind of circularity to polyethylene and polypropylene that you have for polyesters in water bottles.”

The scale of the opportunity should not be underestimated. Polyethylene and polypropylene plastics account for roughly two-thirds of post-consumer plastic waste worldwide, with ~80% ending up either in landfills, incinerated, or simply tossed into the streets, eventually shape-shifting into microplastics in the water.

A new process that Prof. Hartwig and team have hit upon makes use of relatively cheap solid catalysts commonly used in the chemical industry for continuous-flow processes that reuse the catalyst. (Crucially, continuous-flow processes are scalable and can therefore handle large volumes of material.) The catalysts are tungsten oxide (an earth-abundant metal already being used in the chemical industry in large scale) on silica, and the hyper-abundant sodium on alumina. The combination is akin to taking two different types of dirt and having them disassemble the whole polymer chain into high yields of propene from ethylene and a combination of propene and isobutylene from polypropylene.

In one of the lab’s latest experiments, the two catalysts together turned a nearly equal mixture of polyethylene and polypropylene into propylene and isobutylene, both gases at room temperature, with an efficiency of nearly 90%. For polyethylene or polypropylene alone, the yield was even higher.

Says Hartwig, “One can argue that we should do away with all polyethylene and polypropylene and use only new circular materials. But the world’s not going to do that for decades and decades. Polyolefins are cheap, and they have good properties, so everybody uses them.” Now, his lab may have finally made them circular. One can start imagining a commercial plant that would make it an industrial-scale reality. UC Berkeley, MCSUK, MIT, Forbes