Wall Street Breakfast: What Moved Markets

- The major averages closed near sessions lows, with the S&P 500 (SP500), -0.8%, logging five straight losing days for the first time since February. News that the U.S. is considering an investigation into Chinese subsidies adding to anxiety during the week over inflationary pressures and the Federal Reserve's plan to pull back on bond purchases later. Even with one fewer day due to the Labor Day holiday, the S&P had its worst week since June, down 1.7%. The Dow (DJI) -0.8% and Nasdaq (COMP.IND) -0.9% also closed negative on the week, down 2.2% and 1.6%, respectively. Oil futures gained for the week after U.S. President Joe Biden and Chinese President Xi Jinping talked in an effort to ease hostilities and ahead of a key OPEC report next week.

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Top News Shutterstock The major averages closed near sessions lows, with the S&P 500 (SP500), -0.8%, logging five straight losing days for the first time since February. News that the U.S. is considering an investigation into Chinese subsidies adding to anxiety during the week over inflationary pressures and the Federal Reserve's plan to pull back on bond purchases later. Even with one fewer day due to the Labor Day holiday, the S&P had its worst week since June, down 1.7%. The Dow (DJI) -0.8% and Nasdaq (COMP.IND) -0.9% also closed negative on the week, down 2.2% and 1.6%, respectively. Oil futures gained for the week after U.S. President Joe Biden and Chinese President Xi Jinping talked in an effort to ease hostilities and ahead of a key OPEC report next week.       Trending Crypto caution Bitcoin (BTC-USD) warnings came from far and wide following a big week that saw El Salvador legalize the crypto as legal tender. Riksbank Governor Stefan Ingves: "Private money usually collapses sooner or later. And sure, you can get rich by trading in Bitcoin, but it's comparable to trading in stamps," he warned at a banking conference in Stockholm. Earlier this year, Ingves said that cryptos as a whole are unlikely to escape regulatory oversight as their popularity grows. "When something becomes large enough, factors such as consumer interests and money laundering enter the picture." Banxico Governor Alejandro Diaz de Leon: "Whoever receives Bitcoin in exchange for a good or service, we believe that [transaction] is more akin to bartering because that person is exchanging a good for a good, but not really money for a good. In our times, money has evolved to be fiat money issued by central banks. People will not want their purchasing power, their salary to go up or down 10% from one day to another. You don't want that volatility for purchasing power. In that sense, it is not a good safeguard of value." Regulation coming? Don't forget the warnings from SEC Chair Gary Gensler earlier this month, who called 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." What exactly the SEC ends up doing is yet to be determined, but the agency did go after Coinbase (NASDAQ:COIN) this week over a product called Lend, which would let users earn interest by lending digital assets. The SEC said the program securitizes crypto via interest passed on to the customer, though the Wells notice caused an uproar in the DeFi community and prompted some charged tweets from Coinbase CEO Brian Armstrong. (73 comments)       Tech Chip shortage Intel (INTC) announced plans to invest up to $95B to build semiconductor production facilities in Europe, another step in the company's plan to become a global foundry player. Intel would start with two factories at a new European site and could expand it further up to an €80B investment over a decade. The plants would cater to heavy demand for semiconductors in computers, cars and electronics. Quote: "This new era of sustained demand for semiconductors needs bold, big thinking," CEO Pat Gelsinger told an auto industry event in Munich. Intel has been meeting with potential chip customers in Europe for months, offering capacity at a time when production slots are short. Back in March, Intel also disclosed plans to invest $20B on new chip facilities in the U.S. to become a global foundry giant. Later in July, the company unveiled its new semiconductor process and packaging technology roadmaps, which was largely shrugged off by analysts. Rivals: The world's largest contract chipmaker, Taiwan Semiconductor Manufacturing (TSM), has said it would spend a record $10B over the next three years to increase silicon capacity. Meanwhile, South Korea's Samsung Electronics (OTC:SSNLF) announced last month it plans to boost investments by one third to more than $205B through 2024. (87 comments)       Energy All in on solar Solar is going to play a massive role in decarbonizing the American power grid, according to a plan released on Wednesday by the U.S. Department of Energy. The Solar Futures Study showed that by 2035, solar energy has the "potential to power 40% of the nation's electricity," before ultimately hitting 45% by 2050. Further modeling indicates that the remainder of a carbon-free grid would be supplied by wind (36%), nuclear (11%-13%), hydroelectric (5%-6%) and biopower/geothermal (1%). How to get there? The U.S. already installed a record amount of solar in 2020 - 15 gigawatts - to total 76 GW, representing 3% of the current electricity supply. In order to accomplish the above-stated goals, the country would need to install an average of 30 GW of solar capacity per year between now and 2025 and 60 GW per year from 2025-2030. Storage will also enable more flexibility and resilience, while advanced tools like grid-forming inverters, forecasting, and microgrids would play a role in maintaining the reliability and performance of a renewable-dominant grid. "This is code red. The nation and the world are in peril," President Biden said on Tuesday while visiting areas slammed by Hurricane Ida. "Climate change poses an existential threat to our lives, to our economy. And the threat is here. It's not going to get any better." Go deeper: The bipartisan Infrastructure Investment and Jobs Act passed by the Senate in August includes billions of dollars for clean energy projects. While several big policies were left out, like extending tax credits, those initiatives could still be included in the $3.5T budget resolution approved by the House. The latest study from the DOE also estimates that the transition to a solar-driven grid could "employ as many as 1.5M people in the process - without raising electricity prices." (624 comments)       Economy Debt limit stalemate Treasury Secretary Janet Yellen appealed to Congress this week to raise the government's borrowing limit, noting that lawmakers in recent years have addressed the subject with broad bipartisan support. She already made a statement on the debt limit on Aug. 9 and sent a letter to Congress about the issue in July, but is now stressing a state of urgency. Yellen estimates the Treasury's coffers could run out of cash in October and the administration is worried about a possible debt default. Quote: "We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States. A delay that calls into question the federal government's ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets." Since Aug. 1, when the debt limit was reinstated, the Treasury started using certain extraordinary measures to finance the government on a temporary basis. Such measures include suspending certain investments in the Civil Service Retirement and Disability Fund, the Postal Service Retiree Health Benefits Fund, and the Government Securities Investment Fund of the Federal Employees' Retirement System Thrift Savings Plan.

Stalemate: House Speaker Nancy Pelosi has said raising the $28.5T debt ceiling won't be included in the $3.5T reconciliation measure that House Democrats hope to pass this fall. Senior congressional Republicans have also pledged not to vote for an increase of the limit, instead urging Democrats to pass it via reconciliation. The political wrangling and failure to increase the limit could prompt a government shutdown, which has occurred three times over the past decade. (101 comments)

     

Covid

Delta Force

The business community in the U.S. is still sizing up the new vaccine mandate unveiled by the Biden administration on Thursday night. The expansive rules will demand that private employers with more than 100 workers require their staff to be vaccinated or test weekly for COVID-19 (affecting about 80M Americans). Government and health care workers (another 17M people) will also be required to get vaccinated - with no option to opt for regular testing - as a rise in Delta cases triggers fresh concerns about the pandemic. The legal basis for the order hangs on the Occupational Safety and Health Administration (OSHA), which has the authority to enforce regulations affecting workers' well-being (expect many legal challenges).

Quote: "President Biden's announcement prompts critical questions that require immediate clarification," said the Consumer Brands Association, which represents makers of packaged goods. "As with other mandates, the devil is in the details. Without additional clarification for the business community, employee anxieties and questions will multiply."

While OSHA is still developing the emergency regulation, some officials say employers could face fines of nearly $14,000 per violation. The mandate also follows more than a year of upheaval, which started as months of lockdowns and new costs for hand sanitizer, face masks and plexiglass barriers. Many businesses are still struggling under safety protocols, and additional compliance costs and verification for the new mandate could hand them a new set of potentially complex requirements.

Go deeper: Following the announcement, companies like General Motors (NYSE:GM) and Delta Air Lines (NYSE:DAL) issued statements describing the efforts they've made to get their employees vaccinated, but didn't announce whether they endorsed Biden's plan. Others, such as Walgreens Boots Alliance (NASDAQ:WBA) and Intel (NASDAQ:INTC), said they were studying it. While many in Corporate America have already required vaccines, including Facebook (NASDAQ:FB), Netflix (NASDAQ:NFLX), Disney (NYSE:DIS), McDonald's (NYSE:MCD) and Tyson Foods (NYSE:TSN), the new mandate also affects small or mid-sized companies that are already dealing with labor shortages. "It wouldn't surprise me if others look for an employer who doesn't have 100 employees - and that's a huge issue for me, especially in this competitive job market," said Jay Baker, president of Jamestown Plastics in Brocton, New York. (250 comments)

     

U.S. Indices
Dow -2.2% to 34,608. S&P 500 -1.7% to 4,459. Nasdaq -1.6% to 15,116. Russell 2000 -2.6% to 2,233. CBOE Volatility Index +27.7% to 20.95.

S&P 500 Sectors
Consumer Staples -1.3%. Utilities -1.6%. Financials -1.3%. Telecom -1.2%. Healthcare -2.7%. Industrials -2.5%. Information Technology -1.8%. Materials -1.7%. Energy -1.8%. Consumer Discretionary -0.3%.

World Indices
London -1.5% to 7,029. France -0.4% to 6,664. Germany -1.1% to 15,610. Japan +4.3% to 30,382. China +3.4% to 3,703. Hong Kong +1.2% to 26,206. India +0.3% to 58,305.

Commodities and Bonds
Crude Oil WTI +0.6% to $69.69/bbl. Gold -2.5% to $1,788.6/oz. Natural Gas +5.3% to 4.961. Ten-Year Treasury Yield -0.7% to 133.14.

Forex and Cryptos
EUR/USD -0.56%. USD/JPY +0.19%. GBP/USD -0.25%. Bitcoin -9.1%. Litecoin -16.7%. Ethereum -15.7%. Ripple -14.4%.

Top Stock Gainers
Hippo Holdings Inc (NYSE:HIPO) +34%. Gevo Inc (NASDAQ:GEVO) +11%. Rocket Lab USA Inc (NASDAQ:RKLB) +61%. Consonance-Hfw Acq Corp (NASDAQ:SRZN) +39%. Monopar Therapeutics Inc (NASDAQ:MNPR) +9%.

Top Stock Losers
Mersana Therapeutics Inc (NASDAQ:MRSN) -41%. Apellis Pharmaceuticals Inc (NASDAQ:APLS) -44%. Virpax Pharmaceuticals Inc (NASDAQ:VRPX) -39%. Impel Neuropharma Inc (NASDAQ:IMPL) -30%. Rxsight Inc (NASDAQ:RXST) -12%.

Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.

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