Wall Street Breakfast: iEvent

iEvent - Investors and techies alike will tune into Apple's (AAPL) "California streaming" launch event today, which starts at 10 a.m. PDT. Industry watchers expect the company to debut its so-called iPhone 13 lineup, handsets that follow the launch of the first 5G iPhones last year and the resulting supercycle. The event will be the "biggest day of the year for hardware," said Loup Ventures analyst Gene Munster in a research note released last week. Munster also expects a second launch day in October, with the new models announced at both events "accounting for about 40-50% of the company's revenue over the next 12 months." What to expect: Reports and leaks have suggested the iPhone 13 family will include a faster A15 processor, an improved 5G modem and a smaller display notch. Camera upgrades will be the headline improvements with a video version of Portrait mode, better low-light performance and a new ultrawide lens on the Pro models. The new iPhones are expected to come in the same sizes as the iPhone 12 lineup from last year: 5.4-inch and 6.1-inch base models and 6.1-inch and 6.7-inch Pro models. Pricing could come in a bit higher than the $799 to $1,099 iPhone 12 range if Apple decides to pass on the higher production costs of foundry partner TSMC (TSM) amid the ongoing global semiconductor shortage. "From an investor's standpoint, the trajectory of the iPhone business over the next year has less to do about specs and pricing, and more to do with the age of the phone," continued Munster. "Last year, we estimated the pool of iPhones three years or older to be 420M. That base will drive iPhone revenue growth in FY21 of about 40%, compared to a typical year of low single-digit growth." Wall Street is looking for 5% growth and 260M units for next year, though Munster sees potential upside to that growth rate due to the size of the existing iPhone population. "The larger the upgrade pool, the bigger the potential tailwind." Performance: Some anticipate today's event could provide more upside to the largest stock in America, while others see a case of "buy the rumor, sell the news." AAPL shares closed slightly higher on Monday, but remain 5% below a record high set before last week's Epic Games ruling. The company still commands a whopping $2.5T valuation and is worth 6% of the S&P 500 (though its shares have lagged the benchmark index by 6 percentage points in 2021). (61 comments)

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Top News iEvent Shutterstock Investors and techies alike will tune into Apple's (AAPL) "California streaming" launch event today, which starts at 10 a.m. PDT. Industry watchers expect the company to debut its so-called iPhone 13 lineup, handsets that follow the launch of the first 5G iPhones last year and the resulting supercycle. The event will be the "biggest day of the year for hardware," said Loup Ventures analyst Gene Munster in a research note released last week. Munster also expects a second launch day in October, with the new models announced at both events "accounting for about 40-50% of the company's revenue over the next 12 months." What to expect: Reports and leaks have suggested the iPhone 13 family will include a faster A15 processor, an improved 5G modem and a smaller display notch. Camera upgrades will be the headline improvements with a video version of Portrait mode, better low-light performance and a new ultrawide lens on the Pro models. The new iPhones are expected to come in the same sizes as the iPhone 12 lineup from last year: 5.4-inch and 6.1-inch base models and 6.1-inch and 6.7-inch Pro models. Pricing could come in a bit higher than the $799 to $1,099 iPhone 12 range if Apple decides to pass on the higher production costs of foundry partner TSMC (TSM) amid the ongoing global semiconductor shortage. "From an investor's standpoint, the trajectory of the iPhone business over the next year has less to do about specs and pricing, and more to do with the age of the phone," continued Munster. "Last year, we estimated the pool of iPhones three years or older to be 420M. That base will drive iPhone revenue growth in FY21 of about 40%, compared to a typical year of low single-digit growth." Wall Street is looking for 5% growth and 260M units for next year, though Munster sees potential upside to that growth rate due to the size of the existing iPhone population. "The larger the upgrade pool, the bigger the potential tailwind." Performance: Some anticipate today's event could provide more upside to the largest stock in America, while others see a case of "buy the rumor, sell the news." AAPL shares closed slightly higher on Monday, but remain 5% below a record high set before last week's Epic Games ruling. The company still commands a whopping $2.5T valuation and is worth 6% of the S&P 500 (though its shares have lagged the benchmark index by 6 percentage points in 2021). (61 comments)       Data High CPI Another dose of inflation data will be released this morning, which has the potential to set the tone for the market before next week's Fed meeting. While the central bank has maintained that price pressures will be "transitory," the Consumer Price Index today is expected to show a 5% pace for the fourth straight month. Stronger inflation could also pose a problem in passing President Biden's social spending package and its massive $3.5T price tag. By the numbers: The CPI is forecast to have risen 0.4% month-over-month in August, translating into a year-over-year basis of 5.4%. That would be the same hot pace seen in July, which was among the fastest rates seen since 2008. Excluding food and energy, today's CPI is expected to rise 0.3%, or 4.2% on an annualized basis. "If it's hotter than expected, I think the stock market's going to continue to be soft. I think investors are trying to decide whether there's more to this worry, than not," noted CFRA chief investment strategist Sam Stovall. Go deeper: If inflation comes in stronger than anticipated, taper expectations could also shift from November to December. Some analysts have already pushed back their expectations after the August jobs report showed a gain of just 235K, about half a million less than expected. A number of Fed officials still believe the central bank should start paring back its $120B a month bond purchases sooner rather than later, but Fed Chair Jerome Powell wants to see more strong employment reports before making an announcement. (4 comments)       Sponsored By Northern Trust The Tax Policy Resource Center Prepare your portfolio and wealth plan for change with research-based insights on the likelihood of proposed tax policy changes and cutting-edge wealth planning strategies for managing complex wealth from The Northern Trust Institute. Ready for Reform? Cryptocurrency Gensler grilling Prepare to see some headlines about crypto regulation today as SEC Chairman Gary Gensler heads before the Senate Banking Committee for a grilling. Lawmakers are expected to show frustration over the lack of supervision in crypto markets and why it has taken so long to support them. He might also have to explain why the SEC seems averse to approving various crypto assets (Bitcoin ETFs?), as well as stablecoins and other digital assets. Backdrop: In recent weeks, Gensler seemed to be more vocal about regulation, calling crypto the "Wild West." It's "rife with fraud, scams, and abuse in certain applications. If we don't address these issues, I worry a lot of people will be hurt," the SEC Chair said in a speech at the Aspen Security Forum. He's also called for Congress to magnify the SEC's power in order for it to be effective at managing the $2T digital currency market. "We just don't have enough investor protection in crypto finance, issuance, trading, or lending," Gensler said in his prepared testimony. "Frankly, at this time, it's more like the old world of 'buyer beware' that existed before the securities laws were enacted. We can do better." The SEC is also working with the Commodity Futures Trading Commission, Federal Reserve, Department of Treasury, and Office of the Comptroller of the Currency with respect to investor protection in crypto markets. Elsewhere: Speaking of a loose crypto framework and related volatility, Litecoin (LTC-USD) gave up a 20% surge on Monday following a fake press release sent out by GlobeNewswire. The announcement referenced a partnership with Walmart (WMT), saying the retailer would start letting its customers pay with the cryptocurrency. Walmart spokesman Randy Hargrove confirmed that the PR was not authentic, while the SEC said it does not comment on such matters. (55 comments)

     

Infrastructure

Tax hikes

House Democrats spelled out a series of proposed tax increases on Monday, attempting to piece together enough votes for a sweeping spending package at the heart of President Biden's economic agenda. Under the proposal, tax increases and enforcement would offset up to $3.5T in spending on the social safety net, like Medicare, childcare and a national paid-leave program. Also known as the "human infrastructure" side of a broader infrastructure proposal, the package would increase renewable energy tax breaks and establish a broader climate change policy.

What's in the bill? The proposal would increase the top corporate tax rate to 26.5% (from 21%) and the top individual rate to 39.6% (from 37%), respectively. Meanwhile, the top federal rate on capital-gains taxes would be raised to 25% (from 20%), and - added to an existing 3.8% surtax on net investment income - the total tax bite would be 28.8%. The bill would also impose a 3-percentage-point surtax on people making over $5M and provide $78.9B in funding to the IRS to bolster tax enforcement for taxpayers earning more than $400K a year.

Getting to $3.5T... According to the Joint Committee on Taxation, the plan includes about $1T of tax increases on high-income households and about $1T on corporations. Democrats intend to generate another $120B from tougher tax enforcement and $700B from drug-pricing policy changes. The legislation also assumes another $600B in revenue from faster economic growth.

Outlook: The release of the tax details was the last major missing piece in the Democratic economic plan and will accelerate lawmakers' negotiations over new spending. Republicans are expected to mount unanimous opposition to the proposal (which would reverse the 2017 tax cuts), while Democrats have few votes to spare in the House and none in the Senate. Just last week, Sen. Joe Manchin (D., W.Va.), an influential moderate vote, penned an op-ed questioning the spending package's effect on inflation rates, budget deficits and overall debt levels. (24 comments)

     

Today's Markets

In Asia, Japan +0.6%. Hong Kong -1.2%. China -1.4%. India +0.1%.
In Europe, at midday, London -0.3%. Paris -0.6%. Frankfurt flat.
Futures at 6:20, Dow flat. S&P +0.1%. Nasdaq flat. Crude +0.5% at $70.83. Gold -0.3% at $1788.70. Bitcoin +3.1% at $45871.
Ten-year Treasury Yield +1 bps to 1.34%

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:30 Consumer Price Index
8:55 Redbook Chain Store Sales

Companies reporting earnings today »

What else is happening...

Natural gas surges nearly 6% as demand stays strong.

Corpus Christi refineries, terminals brace for tropical storm hit.

Oracle (NYSE:ORCL) posts soft revenues after ramping up cloud investment.

Intuit (NASDAQ:INTU) agrees to buy Mailchimp for about $12B.

Moderna (NASDAQ:MRNA) jab shows highest vaccine efficacy based on ER visits.

ViacomCBS (NASDAQ:VIAC) confirms Robbins to lead restructured Paramount Pictures.

Restaurant-tech company Toast (TOST) seeks $16B valuation in IPO.

Uber (NYSE:UBER) drivers are employees, not gig workers, rules Dutch Court.

Virgin Galactic (NYSE:SPCE) delays first commercial research space mission.

Bitcoin (BTC-USD) could reach $100K; Ether (ETH-USD) to $5K? - Bloomberg Crypto Outlook.

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