Morning Reads

Morning Reads

Todays Open Interest Change



With generative AI poised to reshape the publishing industry, companies are scrambling to take positions on the latest technology. What does it mean for their operations? How will it impact their workforce? And when can they begin to expect to benefit from, or be harmed by, the new developments? These questions have rattled publishers in nearly every sector of the media industry, from online content and the printed word to movies and even music.

Snapshot: The knee-jerk reaction of many firms was to band together to stave off any threats to their bottom line. Hollywood actors and writers have gone on strike in part over fear that they might lose or share revenue with machines, with the walkout now going on for more than 100 days. Publishers like The New York Times (NYT), Wall Street Journal's News Corp. (NWS) and Dotdash Meredith owner IAC (IAC) also started talks to establish a united front against Google (GOOG) (GOOGL) and Microsoft (MSFT). The coalition explored suing Big Tech over "content scraping" and training their AI models on data produced by the organizations, but the NYT has reportedly dropped out of the group, suggesting that they might reach separate deals with tech giants that wield tremendous power over distribution and visibility. Check out recent subscriber numbers for the NYT and News Corp. in charts.

While corporations are debating their cash flow streams, the non-profit sector is having an easier time making decisions. In July, the Associated Press reached a two-year deal with OpenAI, the parent company of ChatGPT, by declaring the first official news-sharing agreement with an artificial intelligence firm. That direction could benefit others as they scale their offerings and revenue, such as News Corp Australia (NWS), which is using a team of four staff to produce 3,000 articles per week using generative AI. The items cover daily topics like local weather, fuel prices, and traffic conditions, and have driven a surge in subscriptions and the subsidiary's best year in a decade.

Outlook: Consumers are also debating what artificial intelligence means for their media consumption. Should they be informed whether a robot wrote an article, or is the creative process continuing to evolve in a similar fashion to what algo-generated tunes and CGI did to the music and movie industries? Things get even more complicated if generative AI is only used to conduct research or help write an article, or prompt topics that enhance value and quality. Trust also plays a role here, but those lines might be lost or could one day be strengthened, depending on the future of brands and their audiences. Take the WSB survey.

Steely rejection

Cleveland-Cliffs (CLF) and U.S. Steel (X) wouldn't make a great alloy at current cast prices, according to the latter company, which just sent a $7B merger proposal to the furnace. U.S. Steel is still entertaining offers after rejecting the takeover, sending shares up 22% premarket, and invited Cliffs - whose stock melted 6% in response - to participate in its review process. A tie-up would create the largest steel company in North America and would profoundly reshape the industry. The developments come after U.S. Steel posted a 20% drop in Q2 sales, hurt by lower average realized prices, though CEO David Burritt said he "couldn't be more bullish" on the sector thanks to the Inflation Reduction Act. (133 comments)

Maui devastation

The impact of the devastating wildfires in Maui is still being calculated, with the death toll reaching 96 as of Monday. The destruction of tourist and residential areas has also hit certain stocks, with TD Cowen warning that Maui's recovery could take years and resort destinations are likely to disappear in the foreseeable future. Hawaiian Holdings (HA) fell 8.5% over the past week due in part to the airline having the highest exposure of flights to Maui. Host Hotels & Resorts (HST) also closed at a six-week low on Friday, while Hawaiian Electric Industries (HE), which shed 13.2% last week, has warned affected customers to plan for extended outages. (43 comments)

Tech outperformance?

The tech rally has cooled, with the Nasdaq 100 (NDX:IND) (QQQ) up 5% in the second half of the year, but BMO strategist Brian Belski says Info Tech (XLK) stocks can still outperform the broader market over the rest of 2023. Investors will have to be more selective, though. Belski screened for names with growth at a reasonable price, including Cisco (CSCO), Intel (INTC) and (IBM), but the full list includes over 30 stocks. "Earnings growth improvement was the basis for our upgrade and trends since then have only been better," he noted. "Elevated valuation could be a sticking point for some investors, but we would point out that it has been a horrible predictor of future performance for Technology." (13 comments)

Today's Markets

In Asia, Japan -1.2%. Hong Kong -1.4%. China -0.3%. India +0.1%.
In Europe, at midday, London -0.4%. Paris +0.2%. Frankfurt +0.4%.
Futures at 7:00, Dow +0.2%. S&P +0.3%. Nasdaq +0.4%. Crude -0.3% to $82.91. Gold flat at $1,946.30. Bitcoin flat at $29,377.
Ten-year Treasury Yield -2 bps to 4.15%.

Today's Economic Calendar

No events scheduled

Companies reporting earnings today »

What else is happening...

Student loan repayments start up in October - Will it spark a recession?

U.S. grid operators warn EPA proposal could cause power shortages.

SoftBank in talks to buy 25% stake in Arm (ARMHF) from Vision Fund.

AI beauty firm Oddity Tech (ODD) shines, with room for more growth.

Pharma under threat from bill to expand drug price negotiations.

Illumina (ILMN) under SEC investigation over GRAIL acquisition.

EV price war: Tesla (TSLA) trims some Model Y prices in China.

U.S. judge revokes Sam Bankman-Fried's $250M bail package.

AMC (AMC) slides, APEs jump as new conversion plan cleared.

Deep dive into COVID-19 vaccine makers: Hope vs. hype.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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