A Win for Trump, a Win for Cook, a Push to End Quarterly Reports
Let's sort out the Fed's setup, look at a proposal for semester-style reporting, and touch on Tesla, Alphabet and TikTok.
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On Monday night, the Senate confirmed Pres. Trump's nominee Stephen Miran to the Federal Reserve Board of Governors in a 48-47 vote that largely ran along party lines. Miran, who was just confirmed as chair of the president's Council of Economic Advisers in March, will fill the seat on the Fed's Board vacated suddenly last month when Adriana Kugler resigned from her position. That term will end in January.
For that reason, Miran has stayed his intention to take an unpaid leave from his job in the administration while serving at the central bank. That technically makes Miran the first executive branch official to serve at the Fed's Board of Governors since 1935. Miran has stated that he will resign his White House position should he be nominated to serve at the Fed beyond January.
Miran will participate in the Federal Open Market Committee policy meeting that begins later this morning. There are some expectations that Miran may or may not dissent in favor of a larger rate cut should the committee reduce the target range for the Fed Funds Rate on Wednesday afternoon by the expected quarter-percentage point. Perhaps more importantly for now, Miran will be able to impact the Fed's quarterly economic projections, which despite consistent accuracy, do impact forward looking market expectations for policy.
A Win for Cook
On Monday evening, the U.S. Court of Appeals for the District of Columbia, in a 2-to-1 split vote, upheld a lower court's decision and ruled that Fed Gov. Lisa Cook would be able to continue to serve as a member of the central bank's Board of Governors as that case moves forward. Cook will participate in the two-day FOMC policy meeting that will begin later this morning and culminate tomorrow (Wednesday) afternoon.
The majority statement noted Cook's right to due process and stated, "For that reason - and because of the myriad unique features of this case as compared to other recent challenges to presidential removals - I vote to deny the government's emergency request for a stay pending appeal." This majority included Circuit Judges Bradley N. Garcia and Michelle Childs.
The order adds, "Given these unique circumstances, and Cook's strong likelihood of success on at least her due process claim, the government's request for relief is rightly denied."
Circuit Judge Gregory G. Katsas dissented in favor of the Department of Justice.
A Good Idea, Sort of...
On Monday, Pres. Trump posted to social media his support for the idea that public companies should report their financial results every six months rather than every quarter. This is something that the Long-Term Stock Exchange or LTSE, which many readers likely have not heard of, has announced its plans to petition the Securities and Exchange Commission in support of. Few public companies are actually listed at the LTSE.
Advocates for reducing how frequently publicly traded companies must report will cite the time consuming and costly clerical and administrative work required to release pertinent data and hold an earnings call for investors and analysts four times a year. Advocates will also cite problems created as C-Suite leadership at many firms have appeared to focus on short-term goals rather than doing what might be better for their firms over a longer time frame.
Opponents of changing the reporting requirements will cite the transparency offered up by having to release data so often and by holding earnings calls for investors and analysts. Long-time readers may recall that this is something that I had long ago argued for publicly both on-air and in-print and had largely given up on anyone else ever taking up the cause.
My idea that had been largely scoffed at more than a decade ago, was to go from quarters to trimesters. Six months is too long in my opinion. I don't believe a move from reporting every three months to every four months would negatively impact transparency to any significant degree. It would, however, notably impact in a positive way, the costs and efforts associated with putting on a regularly scheduled dog and pony show. An extra month in between reports would also give C-Suite executives more time to focus on their actual function, and implement corporate strategies as opposed to constantly having to prioritize pleasing Wall Street.
Marketplace
Markets were more active on a pre-FOMC meeting Monday than I would have expected. Growth stocks were back in focus as Tesla TSLA CEO Elon Musk invested more than $1 billion of his own dough in the company and as Alphabet GOOGL became the fourth U.S. company to achieve a market cap of $3 trillion. Alphabet's 4.5% run on Monday was spurred on by news that Google's Gemini chatbot had overtaken OpenAI's ChatGPT as the most downloaded free app over the weekend.
Treasury yields were pressured on Monday ahead of this week's Fed policy meeting as was the U.S. dollar vs. its reserve currency fiat peers. This also happened while trade talks with China proceeded in Madrid and according to the president were going "very well." Markets also had to traverse a surprisingly weak Empire State Manufacturing Index, released by the New York Fed for the month of September.
The Nasdaq Composite rallied for a gain of 0.94%. This was good enough for a sixth consecutive record high close for that index. The S&P 500 closed up 0.47%, which also achieved a record high close. The Nasdaq Composite and Nasdaq 100 (+0.84%) were supported by tech. The Dow Jones US Software Index gained 1.08% for the day as the Philadelphia Semiconductor Index added 0.97%. Though administratively part of Communication Services and not part of Tech, the Dow Jones U.S. Internet Index gained 3.05% for the session.
The Dow Industrials, Dow Transports, KBW Banks and all of the small- to mid-cap indexes stayed close to where they had closed on Friday and did not enjoy the positivity on Monday experienced by the major equity indexes. Five of the 11 S&P sector SPDR exchange-traded funds closed out the Monday session in the green. As alluded to above, growth led the way. Communication Services (XLC) added 1.41% while Tech (XLK) gained 0.9%. The Defensives underperformed with the Staples (XLP) and Health Care (XLV) closing down 1.15% and 0.85% respectively.
Winners beat losers by a rough 5-to-4 margin at the NYSE and by slightly less than 5 to 4 at the Nasdaq. That said, advancing volume took a 63.9% share of composite Nasdaq-listed trade and a 59.8% share of composite NYSE-listed activity. Aggregate trade was higher on a day over day basis across both the listings of the NYSE and the membership of the S&P 500. That surprised me. Aggregate trade did ebb slightly day over day across Nasdaq-listed securities.
Everyone's Watching It, but I Don't Care ...
The Emmys? Oh, I don't care about that, either, but I was talking about TikTok. I know at least a few readers care about that social media app. U.S. and Chinese officials meeting in Madrid may have decided to kick several cans down the road including such truly important issues as export controls, and tariffs, but for TikTok, an apparent solution has been found.
Treasury Sec. Scott Bessent announced on Monday that the U.S. and China had reached a commercial agreement that would leave TikTok in U.S. hands. The app, currently used by ByteDance, is used by 170 million Americans, so its reach is broad and potentially quite valuable. I know, I am usually quite the hawk when it comes to national security, but if TikTok was a national security issue for the first Trump administration and for all four years of the Biden administration, would it still have never been shut down in this country?
Details are, of course, scarce. Whether any investment includes the potentially harmful but very effective ByteDance algorithm matters as does what concessions the U.S. may have made in return. The deal requires a sign-off by both presidents. Trump and Xi are scheduled to speak this Friday.
RIP
Former New York Ranger goaltender Eddie Giacomin passed away on Monday at the age of 86. Giacomin was your author's favorite hockey player as a child, won the Vezina Trophy in 1971 with backup Gilles Villemure back when that was a team award. Giacomin, who led the Blueshirts to the 1972 Stanley Cup finals, was inducted to the Hockey Hall of Fame in 1987 and had his famous "number 1" sweater retired by the team in 1989. I was fortunate enough to meet the man long after he retired from the game, doing promotional work for the NHL at the New York Stock Exchange. I have met several heads of state, and more politicians and celebrities than I could possibly ever remember, but meeting Ed Giacomin... made me as nervous as a school kid.
Economics
(All Times Eastern)
08:30 - Retail Sales (Aug): Expecting 0.3% m/m, Last 0.5% m/m.
08:30 - Core Retail Sales (Aug): Expecting 0.3% m/m, Last 0.3% m/m.
08:30 - Export Prices (Aug): Expecting -0.2% m/m, Last 0.1% m/m.
08:30 - Import Prices (Aug): Expecting -0.2% m/m, Last 0.4% m/m.
08:55 - Redbook (Weekly): Last 6.6% y/y.
08:30 - Industrial Production (Aug): Expecting 0.0% m/m, Last -0.1% m/m.
08:30 - Capacity Utilization (Aug): Expecting 77.4%, Last 77.5%.
10:00 - Business Inventories (Jul): Expecting 0.2% m/m, Last 0.2% m/m.
10:00 - NAHB Housing Market Index (Sep): Expecting 33, Last 32.
1:00 p.m. - Twenty-Year Bond Auction: $13B.
4:30 p.m. - API Oil Inventories (Weekly): Last +1.25M.
The Fed
(All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: FERG (3.01)
At the time of publication, Guilfoyle had no position in any security mentioned.
