Dow dropped 103, advancers over decliners 5-4 & NAZ added 8. The MLP index crawled up 1+ to the 286s & the REIT index was steady in the 436s. Junk bond funds edged higher & Treasuries had a little selling which raised yields. Oil rose in the 68s & gold pulled back 14 to 2653.
Dow Jones Industrials
Tense geopolitical relations between the US & China have increasingly exposed American companies operating out of the east Asian nation to high levels of risk. In a report, New York-based company Strategy Risks has dived deep into 250 of the US's largest publicly traded companies by their levels of Chinese exposure, finding that based on open-source information collected from 2023, Ford, Carrier, Apple, Tesla & Coca-Cola were at the top of the list. "American consumers, regulators, investors and the companies themselves need to have a really good understanding of U.S. business exposure to China," Isaac Stone Fish, CEO and founder of Strategy Risks said FOX Business. "We have so much transparency in other parts of the corporate world, but this area has long been a black box. "We think it's really important from a business intelligence perspective, but also from a public interest perspective, for there to be a lot more awareness of these issues," he added. While some companies like Ford, which said in 2023 it would look to scale back its investments in China, have moved to reduce their vulnerabilities, other companies like Coca-Cola have opted not to reduce its dealings in the increasingly volatile region. The report detailed that increased exposure makes a company more vulnerable to risks relating to economics, supply chain and even reputational risks "during periods of heightened geopolitical tensions," while having a lower score meant a company was better insulated from the negative repercussions felt amid escalated tensions between Beijing & DC.
US companies with high China exposure face more risks
As thousands of dockworkers are preparing to strike should a deal not be reached by the end of today, a business leader is questioning the union's demand for a total ban on automation. Intl Longshoremen's Association (ILA) said its 85K members, along with "tens of thousands of dockworkers and maritime workers around the world," will hit the picket lines today" & strike at all Atlantic & Gulf Coast ports from Maine to Texas. The union is demanding higher wages & a total ban on the automation at ports regarding cranes, gates & moving containers in the loading & unloading of freight. Benchmark Capital's Bill Gurley reacted on social media to the union's demands, writing that the federal gov should step in if the union seeks a total ban on automation. "Outlawing the effective use of technology will unquestionably doom our nation," Gurley wrote. "We will become globally uncompetitive." The ILA & United States Maritime Alliance (USMX), which represents employers at the 36 seaports that could be affected by the strike, have been at an impasse over issues including wages & automation at ports. "United States Maritime Alliance (USMX) refuses to address a half-century of wage subjugation where Ocean Carriers profits skyrocketed from millions to mega-billion dollars, while ILA longshore wages remained flat," the ILA said yesterday. A potential port strike would disrupt a variety of export & import shipments from East Coast & Gulf Coast ports. An analysis by JPMorgan estimated a strike would cost the US economy up to $5B per day.
Port strike will bring another hit to farmers, says former Trump official
Volkswagen cut its annual outlook for the 2nd time in less than 3 months, citing a weaker-than-expected performance at its passenger car division as pressure on Europe's top automaker continues to rise.he lowered outlook is the latest from Germany's car giants, with Mercedes-Benz & BMW downgrading their annual forecasts earlier this month as a result of weakening demand in China, the world's biggest car market. It also comes 2 days after Volkswagen kicked off crucial talks with IG Metall, Germany's most powerful union, over pay & job protection, a historic conflict that could lead to the first German factory closures in the carmaker's history. Volkswagen now expects a profit margin of around 5.6% in 2024, down from 6.5-7% previously & below the 6.5% estimate, while sales are expected to fall by 0.7% to €320B ($357B) after the company had initially expected an increase of up to 5%. Volkswagen said it was cutting its outlook “in light of a challenging market environment and developments that have fallen short of original expectations, particularly at the brands Volkswagen Passenger Cars, Volkswagen Commercial Vehicles and Tech. Components” The German carmaker, which owns majority stakes in Porsche & truck giant Traton, also cut its outlook for global deliveries to around 9M, down from a prior forecast of a rise of up to 3% from 9.24M vehicles in 2023. Porsche, the holding company of the Porsche & Piech families that holds most of the voting rights in Volkswagen & is the carmaker's single biggest shareholder, also cut its own outlook in the wake of Volkswagen's downgrade.
Volkswagen cuts 2024 outlook as car demand falters
Investors are now bracing for the Sep jobs report on Fri which is seen as posing an important test for the recent rally. The pressing question is just how quickly the labor market is slowing as the market weighs whether the Fed has acted aggressively to protect a healthy economy or to help a flailing one. Fed Chair Powell's comments on the outlook for the economy later today could help settle that debate.
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