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

“The greatest wealth of this nation is not only the mergers of giant corporations or the possibility of further globalization of the infrastructure of the world. In the United States, our greatest single source of wealth is the minds and talent of our young people.” ~Isaac Stern

Overnight

Trump survives apparent assassination attempt AP

EU commissioner Thierry Breton, bane of Big Tech, resigns SEM

China finance hub Shanghai braces for potentially devastating typhoon AP

It’s a big week for central banks around the world, with a slew of rate moves on the table CNBC

China Is Risking a Deflationary Spiral WSJ

Bank of Canada governor raises prospect of big rate cuts FT

Report finds ‘no evidence’ Hawaii officials prepared for devastating 2023 Maui wildfire despite warnings AP

Charges coming in alleged Iranian hack-and-leak attack on Trump campaign WP

Sam Bankman-Fried seeks new trial, blaming judge for ridiculing him BBG

European governments offload €16bn of bailed-out bank stocks FT

Floods claim more lives as torrential rain pounds central Europe RT

Boeing’s credit rating risks being cut to junk after Moody’s frets about strike MW

Target to hire 100,000 seasonal workers for holiday season RT

TikTok to begin appeal against being sold or banned in US BBC

Boar’s Head shuts down Virginia plant tied to listeria deaths NYT

Walgreens paying $106.8 million to settle US prescription billing fraud charges RT

U.S. accuses Russian TV network of conducting covert intelligence acts NYT

An asteroid will become Earth’s ‘mini-moon’ for two months GZ

Pink Floyd in talks with Sony over music rights sale FT

Chart of the Day

MORNING INSIGHT

Good morning!

We continue to see equities challenging between now and election day. In our view, the best case remains a range for S&P 500 between 5,350 to 5,700 – though equities probably strengthen this week into Wednesday’s FOMC day.

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TECHNICAL

• Short-term bullish trend ongoing which should reach ST- resistance early this week
• Silver has achieved a 4-month breakout; Grains look to be bottoming after lengthy slide
• GE looks to be attempting yet another breakout following two false attempts since July

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CRYPTO

Crypto assets rallied on Friday with the sharp increase in 50 bp rate-cut probabilities for next week’s FOMC meeting (as implied by Fed Funds futures trading). Meanwhile, a new study highlights the increasing importance of stablecoins in emerging markets, extending beyond their traditional role in crypto trading. 

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First News

Morning brew. Brian Niccol officially began his tenure as CEO of Starbucks last week. On his first day, Niccol released a letter in which announced that “we’re refocusing on what has always set Starbucks apart—a welcoming coffeehouse where  […] we serve the finest coffee.” He acknowledged that the quality of the company’s coffee had become “inconsistent” and announced plans to meet with suppliers and work to improve the company’s supply chain. 

That could be challenging: demand for coffee is skyrocketing, in large part due to increased demand from a growing middle class in traditionally tea-drinking countries like India and China, particularly from the younger demographics. The World Coffee Portal reported in December that China now has more coffee shops than the U.S. While familiar names like Starbucks and Tim Hortons are major players in China, homegrown chains are quickly capturing dominant market share: the largest coffeehouse chain in China, Luckin, has 20,000 locations in Beijing alone (though many are kiosks rather than sit-down cafes.) 

That demand is one reason why coffee prices in global commodity markets hit new highs this year. Another is a new EU law that will take effect in December that bans the sale of beans grown on deforested land. Climate-related shortages have also contributed to a surge in prices: many coffee-growing regions in the world have reported poor harvests in recent years due to weather events – heat waves in Vietnam, flooding in Brazil, drought in Indonesia – the list goes on. And if that weren’t enough, prices are being pressured further upwards due to supply disruptions caused by Houthi terrorists attacking cargo ships in the Red Sea. 

Consumer prices have risen as well. Even in Italy, where raising coffee prices is tantamount to insulting nonna’s cooking, the price of an espresso is now an average EUR 1.20 ($1.33). (That still sounds pretty good, given that the Starbucks near Fundstrat’s Midtown Manhattan office charges $3.65 for a single shot.)

Perhaps coffee-less coffee can be part of the solution? Some startups are trying to reproduce the flavor – and caffeinated kick – of traditional coffee without using any coffee beans. Finnish scientists are trying to culture coffee-bean cells in much the same way animal cells are cultivated to make “lab-grown meat.”

Meanwhile one startup, Atomo (based in Starbucks’ hometown of Seattle), has come up with an alternative that combines ingredients including date seeds, lemon, guava, fenugreek seeds into an alchemical brew that tastes like the real thing, whether brewed as drip coffee or espresso. Its product is being sold in various fancy independent cafes around the U.S., as well as some of the Bluestone Lanes chain’s locations. (BBC, FT, NBC)

Striking resilience. In late 2019 and early 2020, hackers attacked Tulsa-based SolarWinds, compromising the company’s Orion network-monitoring platform and using it to inject malware into the networks of users. Among the victims were numerous local, state, and federal government agencies, including networks operated by the Pentagon; the National Institutes of Health; and the Departments of Homeland Security, State, Commerce, Treasury and Energy – which includes the National Nuclear Security Administration. Non-U.S. victims of the attack included NATO, the European Parliament, and parts of the British government. (The SolarWinds attack is widely believed to have been ordered and possibly carried out by the Russian government.) 

As a direct response to this breach – one of the most devastating cyberattacks in history, the Cybersecurity and Infrastructure Security Agency (CISA) in 2021 chose Crowdstrike as a key provider of endpoint detection and response (EDR) services to federal civilian agencies. The global IT outage caused by a faulty Crowdstrike update on July 19, 2024 therefore caused consternation and alarm in Washington, D.C. Among the federal agencies affected by the outage were the Social Security Administration and U.S. Customs and Border Protection. Many other federal agencies reported less serious, though still worrying, impacts. 

Last week, Sens. Brian Schatz (D-Hawaii) and Peter Welch (D-Vt.) sent an official inquiry to the General Services Administration asking about how the recent CrowdStrike outage affected operations of the federal government, and what the agency has done to limit the impact that a recurrence or similar event will have. A major concern of the senators is the risk posed by using “too few contractors to operate such a large share of the federal government’s IT systems.” 

Members of the House are also looking into the outage, with Adam Meyers, senior vice president of counter adversary operations at CrowdStrike, scheduled to testify before the House Homeland Security cybersecurity subcommittee September 24. “[The CrowdStrike outage] demonstrates the urgency of promoting cyber hygiene and resiliency amid increased threats,” Rep. Mark Green (R-Tenn.), chair of the subcommittee, said recently.

Lawmakers might want to ask about a recent report in which former CrowdStrike employees alleged that “quality control was not really part of our conversation.” In interviews, dozens of former software engineers and other staff at CrowdStrike agreed that the company’s top brass indicated that “speed was the most important thing” and certainly more important than quality. CrowdStrike has characterized the claims as false and made by “disgruntled former employees, some of whom were terminated for clear violations of company policy.” That’s important to keep in mind, but even if that were true, that doesn’t necessarily mean the claims are false. 

In the meantime, Microsoft last Thursday announced planned changes that it hopes will prevent similar faulty cybersecurity updates from causing such devastating impact in the future. The Redmond-based company had said its computers were vulnerable to such outages because cybersecurity software providers accessed Windows’ kernel, the base layer of the operating system. Going forward, Microsoft plans to revise Windows in order to “[provide] more security capabilities to solution providers outside of kernel mode.”