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

“Champions are champions not because they do anything extraordinary but because they do the ordinary things better than anyone else.” ~ Chuck Noll

Overnight

Boeing factory workers strike for first time since 2008 after overwhelmingly rejecting contract CNBC

US locks in steep China tariff hikes, many to start Sept. 27 RT

Mortgage rates fall to lowest level since February 2023 ahead of Fed rate decision YF

US household net worth climbs to record on home values, stocks BBG

US consumer loan delinquencies starting to plateau, bankers say RT

ECB cuts rates again as inflation fades and economy stumbles BBG

Wholesale prices rose 0.2% in August, in line with expectations CNBC

China to raise retirement age for first time since 1978 FT

Russia hikes key rate, might do so again as war fuels price rises WSJ

Pro-Russian hackers reportedly crashed Taiwan Stock Exchange website on Thursday, local media reports CNBC

New OpenAI model ‘capable of reason’ SE

India probe finds Amazon, Walmart’s Flipkart breached antitrust laws RT

OpenAI, Anthropic and Google execs meet with White House to talk AI, energy, and data centers CNBC

Wells Fargo stock drops after US regulator issues enforcement action for money laundering CNN

Fortinet confirms data breach after hacker claims to steal 440GB of files BC

China hands PwC a 6-month ban and $62M fine over audit of the collapsed developer Evergrande AP

Biden targets Shein, Temu with new rules to curb alleged ‘abuse’ of U.S. trade loophole CNBC

Gilead’s twice-yearly shot cut HIV infections by 96% in trial CNBC

GM in talks to buy EV batteries built with Chinese tech in US, source says RT

American Airlines flight attendants ratify contract, avert strike AP

California fires hit air quality as 64 blazes burn in U.S. West AX

First private spacewalk a success BBC

Chart of the Day

MORNING INSIGHT

Good morning!

We see positive tailwinds supportive for stocks into next week and post-FOMC rate decision (Wed).  But we cannot also shake the peculiar seasonality of September.

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TECHNICAL

• Short-term bullish trend should help SPX and QQQ push higher to test triangle resistance
• EEM looks to underperform SPY further following a relative breakdown to new lows
• Gold mining stocks should be favored following Gold’s push to new all-time highs

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CRYPTO

• This week’s price action reaffirms our view that while the election could positively impact crypto prices through a “Trump Premium,” it is unlikely to negatively impact prices via a sustained “Harris discount.” 
• We remain optimistic about the outlook for crypto as we approach year-end, viewing a market leaning toward a soft landing as constructive for prices. However, (1) the absence of near-term catalysts, (2) the lack of market confidence around a soft landing, and (3) continued negative seasonality render it appropriate to keep some dry powder on hand.

Click HERE for more.

First News

High into headwinds. Boeing (BA) has grabbed headlines this year – mostly negative – regarding its safety record, manufacturing quality, and company culture in general. And now it is confronting its first strike since 2008 after a tentative labor agreement negotiated with union leaders proved unpopular with rank-and-file union members (see “Overnight”). Yet Boeing’s largest competitor, Airbus, has displayed no public schadenfreude – not even subtly. 

Odds are, this is partly because Airbus has a backlog of 8,600 unfilled orders to worry about, so it is hardly in a position to take advantage of Boeing’s misfortunes. Yet there is another possible reason: the European aerospace giant’s leaders are surely aware that many of the same factors that contributed to Boeing’s fall from grace are also present in its own business. Airbus confronts the same, serious challenges – labor shortages, long and costly R&D processes, and, tellingly, the same suppliers and supply chain-related issues. 

Take, for example, the disastrous mid-flight door-panel blowout on a Boeing 737 Max 9 jet owned by Alaska Airlines on January 5, 2024. The door panel and fuselage were supplied by a third party, Spirit AeroSystems. Similarly, an Airbus A350 experienced problems in a third party-supplied component when a Rolls Royce-made engine caught fire in midair during a recent Cathay Pacific flight. (Spirit AeroSystems also supplies fuselages for some Airbus’s planes, while Rolls Royce engines are also used in some Boeing airliners.) 

That’s not the only outsourced engine giving Airbus problems.The company this summer reduced its 2024 delivery targets, blaming delays in deliveries of LEAP engines built by CFM, a joint venture between GE Aerospace and France’s Safran. (LEAP engines also propel the Boeing 737 MAX.) 

Also, recent reports indicate that Delta Airlines and Air Canada are unhappy with the engine durability of Airbus’s smaller A220 models, which use Pratt & Whitney engines. The issue appears to be flawed turbofans that are falling far short of the anticipated 20,000 flight-cycle durability, with some encountering problems in as few as 600 flight cycles. (WSJ, AP, SCMP)

Morale contrasts. Several major banks have reportedly taken steps to address the problem of overworked associates. The Wall Street Journal reported that JPMorgan Chase has instituted an 80-hour work week with guaranteed work-free Friday evenings and one protected full weekend every three months – barring exceptions for extenuating circumstances. Bank of America also has a cap of 80 hours a week, and it recently updated its rules to require young bankers to not just log their hours, but list the deals they are working on and which senior bankers are overseeing them.. 

Bank of America came under scrutiny in May after the death of Leo Lukenas III, a 35-year-old Bank of America associate, in May. Lukenas, a former Green Beret, had worked multiple 100-hour weeks on a major deal before succumbing to a blood clot that had formed in a coronary artery. The bank had previously instituted caps on how many hours associates were allowed to work following the 2013 death of a London-based 21-year-old intern. However, after Lukenas’s death, it reportedly discovered young bankers being told to lie about their hours worked. 

While acknowledging the tragedy of Lukenas’s passing, a Bank of America spokesperson noted that demand for jobs such as his remained high – 500,000 applications for entry-level positions over the past four years, and a low turnover rate of just 10%. 

That is in sharp contrast to the perceived desirability of banking jobs in China, brought into focus in July during the commencement ceremony for new graduates of Shanghai Jiao Tong University’s Advanced Institute of Finance. In a speech given during the ceremony, the school’s deputy dean said, “Some of our alumni have even developed a sense of shame about their profession” before arguing that the new grads should instead feel “deeply proud” of the profession they were about to enter. 

Finance had been well-respected in China, but its image had tarnished in recent years as authorities in Beijing chose instead to praise jobs in the “real economy” such as tech and manufacturing. China’s targeting of the financial sector likely did not help: Well-known financiers such as Bao Fan, a legendary dealmaker and head of China Renaissance, have disappeared with no warning, widely believed to have been detained by authorities. Investment firms have been pressured by regulators to express more bullish sentiments about China’s economy and Chinese businesses. And Beijing has also introduced salary caps for finance professionals at state-backed/state-owned institutions – with retroactive clawback requirements for those whose compensation had exceeded those limits in previous years. Policies like this have served to demoralize young financial professionals in China while causing students to pursue other fields. (FT, WSJ, The Diplomat, EC)