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- Amazon Used Secret ‘Project Nessie’ Algorithm to Raise Prices
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Open Interest Changes
The ouster of Kevin McCarthy as U.S. House speaker, a result of escalating infighting within the Republican majority, has renewed concerns that a federal government shutdown could happen next month. This marks the first time in history that the House has removed its leader, and underscores the growing governance challenges that threaten the sovereign rating of the U.S.
Backdrop: The House of Representatives on Tuesday voted to oust McCarthy as speaker just three days after a bipartisan stopgap spending bill was passed to avert a government shutdown. A small number of Republicans, who had sought deeper cuts to the federal budget, succeeded in removing him from the leadership role. Representative Patrick McHenry has taken over as acting speaker, and the House will hold speaker elections on October 11. The House will not conduct votes on pending FY2024 spending bills till a new speaker is chosen, although House committees can continue to conduct business.
Shutdown risk: Goldman Sachs said the ouster heightens the risk of a government shutdown next month, adding that McCarthy's successor will face even more pressure to avoid a temporary spending package or additional funding for Ukraine. "The near-term concern is that the House's paralysis will further complicate the already complicated calculus surrounding the forthcoming funding fight," said BTIG's Isaac Boltansky, forecasting a government shutdown in Q4. "Over the longer term, ousting the Speaker in this manner is wholly consistent with broader structural concerns regarding political dysfunction and the country's debt trajectory."
SA commentary: Prior to McCarthy's ouster, Franklin Templeton had weighed in on the long-term challenges facing the U.S. government. "Last weekend's last-minute compromise offers little comfort that a shutdown later this year or in 2024 can be avoided," they said. "Intransigence in Washington remains its defining characteristic, and will remain so at least until the 2024 elections. Importantly, as much as investors may welcome bi-partisan outcomes, they can also destabilize internal party politics." (21 comments)
In the landmark antitrust lawsuit against Amazon (AMZN), the Federal Trade Commission has accused the e-commerce giant of secretly developing an algorithm that would examine how much it could raise prices so that competitors would follow. The algorithm - codenamed Project Nessie - helped Amazon boost its profits. And because of Amazon's dominance, this led competitors to boost their prices as well. Amazon, which stopped using the algorithm in 2019, is being sued by the FTC and 17 U.S. states for allegedly being a monopolist. Despite Amazon's stock pullback since the lawsuit, SA analyst Tradevestor has listed nine reasons why they are adding to their position. (77 comments)
Wells Fargo expects the separation between mega caps and the rest of the stock market to begin narrowing soon, with macro pressures raising the odds of a possible "catching down" for Wall Street's marquee names. "We expect recent outperformance of larger cap names to eventually correct, either by the top names ‘catching down’ to the average stock or the average stock catching up to the top names," it said. The average stock will likely continue struggling as Wells Fargo sees a recession on the horizon. Seven mega cap tech names drove the majority of market returns as of last month. Investing Group Leader Lance Roberts explains why traders are chasing mega caps "with reckless abandon". (133 comments)
Netflix (NFLX) may look at raising prices a few months after the ongoing actors' strike ends, a development that may be imminent as the actors' union restarts talks with studios today. Meanwhile, Warner Bros. Discovery (WBD) hiked the price of its discovery+ streaming service for the first time since its 2021 launch. Netflix has been the only big streaming company not to raise prices over the past year, as services look to pivot to a profit focus after fighting over market share. Next week brings the previously announced price hikes for ad-free service on Disney (DIS) streaming platforms, while Amazon (AMZN) is adding ads and an ad-free tier to its Prime Video service next year. (23 comments)
In Asia, Japan -2.3%. Hong Kong -0.8%. China closed. India -0.4%.
In Europe, at midday, London +0.1%. Paris +0.4%. Frankfurt +0.2%.
Futures at 6:30, Dow +0.1%. S&P flat. Nasdaq -0.1%. Crude -2% to $87.42. Gold -0.2% at $1,837.90. Bitcoin -0.2% to $27,546.
Ten-year Treasury Yield +2 bps to 4.82%.
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Composite Final
10:00 Factory Orders
10:00 ISM Service Index
10:00 Fed's Paese's Speech
10:05 Fed's Schmid's Speech
10:25 Fed's Bowman: "The Role of Research, Data and Analysis in Banking Reforms"
10:30 Fed's Goolsbee's Speech
10:30 EIA Petroleum Inventories
3:00 PM Fed's Goolsbee's Speech
Companies reporting earnings today »
What else is happening...
Will the U.S. 10-Year Treasury yield (US10Y) reach 5% by year end?
Meta (META) could lay off employees at Reality Labs silicon unit today.
Google (GOOG, GOOGL)-backed Anthropic to raise $2B in latest funding.
Job openings unexpectedly climb in August, snapping downward trend.
Palantir (PLTR) set to win UK NHS contract amid data privacy concerns.
Bearish Citi analysts see crude oil tumbling toward low $70s next year.
Spotify (SPOT) Premium users will soon get free access to audiobooks.
Court throws out $223.8M talc verdict against Johnson & Johnson (JNJ).
Texas grid operator seeks more power reserves to avoid winter shortages.
Apple (AAPL) downgraded on stretched valuation, slowing U.S. sales.