Continue reading the main story
vistaprint. Now even more ways to use your business card.
Chye New Hork Eimes DealBook With Andrew Ross Sorkin
August 18, 2023
Good morning. In today’s newsletter: Anxiety over interest rate policy causes market jitters; the global fight to control metal
supply chains; and Hawaiian Electric teeters after the Maui wildfire disaster. (Was this newsletter forwarded to you? Sign up
Tech investors head for cover.Brendan McDermid/Reuters
In the span of a month, the bottom has dropped out of the bull-market rally as investors have come to grips with the prospect of
“higher for longer” interest rates worldwide. The sell-off in global stocks and bonds picked up steam yesterday. And weary market
watchers will be looking for more hints on the Fed’s view at next week’s Jackson Hole summit of central bankers and policymakers.
Technology stocks have been hit particularly hard. The high-flying FANG+ Index — which comprises the largest tech stocks by market
capitalization, including Apple, Nvidia, Tesla and Meta — fell into correction territory yesterday. The group of Nasdaq
heavyweights is down nearly 11 percent since July 18.
FANG Index 8,200 8,000 7,800 7,600 7,400 1 1 1 1 23 30 6 13 July August Source: Intercontinental Exchange Inc. By The New York
High-growth tech stocks tend to be sensitive to rising interest rates and bond yields. They rallied earlier in the year on
investors’ belief that the Fed was pivoting to a more dovish rates policy, which could inspire a rebound in tech spending.
(Investors’ voracious appetite for stocks that could benefit from the boom in artificial intelligence also fueled the tech rally.)
Just a month ago, Wall Street was hailing the so-called “magnificent seven” for driving the gains this year in the S&P 500. As
MarketWatch notes, four of the seven (Apple, Nvidia, Meta, and Microsoft) have fallen at least 10 percent from their highs in
July. Tesla, the worst of the bunch, has tumbled more than 25 percent in that period, putting it in bear territory.
Continue reading the main story
Rising bond yields have investors on edge. Yesterday, alarm bells sounded on both sides of the Atlantic as investors sold
government bonds en masse, sending yields to multiyear highs. The 10-year Treasury note climbed to a height it last hit in the
early days of the global financial crisis in 2008.
This sentiment trickled down to stocks and crypto. Bitcoin and Ethereum, the largest cryptocurrencies, plunged overnight, with
Bitcoin sinking to a two-month low below $26,500. The Wall Street Journal’s report that SpaceX, Elon Musk’s rocket company, wrote
down the value of its Bitcoin stake over the past two years and sold some of it hasn’t improved sentiment around the highly
volatile asset class.
China’s woes are also weighing on global markets. The Hang Seng Index in Hong Kong fell into a bear market this morning as
investors pulled back on Chinese stocks with the economy slowing and a property-market crisis brewing. This morning, analysts at
Nomura were the latest to lower their forecast for China’s growth. Adding to the jitters, the renminbi hit a 16-year low against
the dollar this morning, prompting emergency moves to prop up the currency. That did little to soothe investors’ nerves.
HERE’S WHAT’S HAPPENING
The Chinese property giant Evergrande files for bankruptcy in the United States. The company defaulted on its bonds in 2021,
spurring a crisis across a sector that is a crucial driver of Chinese growth, and is pursuing a restructuring agreement with
creditors. Country Garden, another developer, missed international debt payments this month amid a wider economic slowdown in
Continue reading the main story
Bras perfected for small busts PEPPER P SHOP NOW Natural, flattering lift for AA-B cups
Instacart is reportedly planning an I.P.O. as early as next month. The country’s largest online grocery delivery company is
pursuing a traditional listing on Nasdaq after considering a direct listing, according to Bloomberg. Separately, Arm, the chip
designer owned by SoftBank, has lined up 28 banks to underwrite an I.P.O. that could be the biggest this year, Bloomberg reported.
Mortgage rates hit a 21-year high. The lending giant Freddie Mac said yesterday that the average rate on a 30-year mortgage, the
most common home loan in America, surpassed 7 percent this week; a year ago it was at 5.19 percent. Ballooning rates for financing
and a tight supply of homes are pricing an increasing number of Americans out of the housing market.
The Southwest braces for Hurricane Hilary. The Category 4 storm is expected to make landfall in Baja California on Saturday and
then head inland over the Mexican border into California, where it will weaken to a tropical storm. A flood watch has been issued
for Los Angeles and Ventura counties.
A FULL-METAL FIGHT
A cornerstone of President Biden’s effort to counter China is to secure access to the commodities critical to supply-chain
security. An emerging bidding war for U.S. Steel could test that ambition in a sector dominated by Chinese rivals.
Continue reading the main story
PERIGOLD o Shop the Best of Luxury Design and Enjoy Free Delivery Wyndham Hand-Tufted Wool TerracottaOlive GreenLight BlueCream
Area Rug $56.00 SHOP NOW
But a brewing geopolitical fight on the other side of the world could have even longer-term consequences for the economy and the
Biden administration’s plans to power an energy transition.
Cleveland-Cliffs started the bidding for U.S. Steel with a $10 billion offer. A successful bid would add to consolidation of a
U.S. industry that has dwindled to four major companies: Cleveland-Cliffs, U.S. Steel, Nucor and Steel Dynamics. China is the
world’s biggest producer by far, accounting for about half of global production; the United States ranks fourth.
U.S. Steel publicly rejected the initial offer. The company called the Cleveland-Cliffs terms “unreasonable” and announced a
formal review process. The United Steelworkers supported Cleveland-Cliffs’ bid, but manufacturers worry that more consolidation
would give steel makers outsized power to raise prices and squeeze customers.
Another major metals fight worth watching is unfolding in Indonesia. The country has the world’s biggest reserves of nickel, a
mineral used in electric vehicle batteries — and a key material in the green economy. The Biden administration has offered
billions of dollars in subsidies to spur EV manufacturing, and the energy transition is a crucial aspect of the Inflation
But Indonesia’s nickel industry relies on Chinese companies for investment and technology. That is complicating Jakarta’s efforts
to build ties with global companies that want to get access to the country’s reserves and to American tax credits via the I.R.A.
The Indonesian government had been wooing Tesla to build a factory, but the company set up its Southeast Asian headquarters in
That may give China another opening. Indonesian officials are considering other options, including stepping up efforts to convince
BYD, China’s largest EV maker, to set up shop. “We are aiming basically to the United States,” Luhut Binsar Pandjaitan, one of
Indonesia’s most powerful ministers, told The Times’s Peter Goodman. “But if the Americans finally say, ‘We don’t want to take
it,’ fine, we’ll look for some other places to go.”
— The amount Spotify could add in profits by steering listeners away from white noise podcasts, according to Bloomberg. The
company’s algorithm pushed users looking for “talk” content to shows that broadcast everything from whale noises to bird song on
repeat. But those users typically remain on the free, ad-supported version of the platform instead of opting for the subscription
shows that are more lucrative for Spotify. The company considered directing listeners to shows that made more money, but didn’t
put the plan into action.
WHAT’S NEXT FOR HAWAIIAN ELECTRIC?
The death toll from the wildfires that have ripped across Maui stands at 111, and focus is turning to what led the blaze to become
one of the country’s worst natural disasters in decades. Maui’s emergency management chief resigned last night as questions
swirled over the decision not to use outdoor alert sirens. Hawaiian Electric, the state’s largest utility, is also facing major
It could take months for officials to assess the company’s role — if any — in the blaze. But markets fear the worst. Hawaiian
Electric shares have fallen by more than 65 percent since Aug. 7, the day before the wildfire started. This morning, Moody’s was
the latest credit ratings firm to downgrade Hawaiian Electric as potential liabilities mount.
A big question is whether the company will be forced to follow a similar path to Pacific Gas and Electric, the California-based
utility company that filed for bankruptcy in 2019 under the burden of wildfire liabilities.
The factors to watch include whether insurance can cover Hawaiian Electric’s massive rebuilding costs, and the size of its
potential liabilities. At least four lawsuits have already been filed, contending the company was negligent in operating and
Evidence is building. Videos and photos posted from Maui appear to show power lines starting fires. In addition, data from Whisker
Labs, a company that monitors electrical grids for fire hazards, seems to identify faults on power lines in the area where the
There’s an important difference between Hawaiian Electric and PG&E. California has inverse indemnification laws, which makes it
easier to hold public utility companies like PG&E liable. Hawaii has no such regulations, meaning litigants will have the higher
bar of proving management is to blame.
Would Hawaii allow the company to file for bankruptcy? Regardless of how bad Hawaiian Electric’s financial situation becomes,
Hawaii may not want to allow its largest utility to go bankrupt. That could delay rebuilding on the island.
The state has been through big bankruptcies before, including those of Hawaiian Airlines in 2008 and Liberty House, its largest
retailer, in 1998. Working to keep the company out of bankruptcy could be seen as a more politically fraught option, versus
handing over questions about its future to a judge.
Enjoy all of The New York Times in one subscription — the original reporting and analysis, plus puzzles from Games, recipes from
Cooking, product reviews from Wirecutter and sports journalism from The Athletic. Experience it all with a New York Times All
THE SPEED READ
* Soho House is teaming up with Michael Milken to open the fourth outlet of The Ned, its high-end social club, in Washington.
* Ford and a group of South Korean companies have teamed up on an $887 million battery plant in Canada. (Reuters)
* The SPAC seeking to merge with Donald Trump’s social media platform delayed closing the deal again. The new date to watch is
Sept. 5. (NYT)
* The German discount retailer Aldi is buying 400 Winn-Dixie and Harveys Supermarket stores in the United States. (NYT)
* The S.E.C. is reportedly close to greenlighting an exchange-traded fund based on Ether futures. (Bloomberg)
* Lab-grown meat producers are hiring lobbyists to vie for funding in the farm bill. (Politico)
* New York will rezone parts of Midtown Manhattan to turn offices into housing. (NYT)
Best of the rest
* The wealthiest 10 percent of U.S. households are responsible for 40 percent of the country’s greenhouse gas emissions, new
research finds. (WaPo)
* “Why Child-Care Prices Are Rising at Nearly Twice the Overall Inflation Rate” (WSJ)
* Who’s in line to lead LVMH when Bernard Arnault steps down? (Bloomberg)
* How India’s failure to bring more women into the work force is holding back its economic ambitions. (WSJ)
Thanks for reading! We’ll see you tomorrow.
We’d like your feedback. Please email thoughts and suggestions to [email protected]
Continue reading the main story
Andrew Ross Sorkin, Founder/Editor-at-Large, New York @andrewrsorkinRavi Mattu, Managing Editor, London @ravmattuBernhard Warner,
Senior Editor, Rome @BernhardWarnerSarah Kessler, Deputy Editor, Chicago @sarahfkesslerMichael J. de la Merced, Reporter, London
@m_delamercedLauren Hirsch, Reporter, New York @LaurenSHirschEphrat Livni, Reporter, Washington D.C. @el72champs
Need help? Review our newsletter help page or contact us for assistance.
You received this email because you signed up for DealBook from The New York Times.
To stop receiving DealBook, . To opt out of other promotional emails from The Times, including those regarding The Athletic,
manage your email settings. To opt out of updates and offers sent from The Athletic, submit a request.
Connect with us on:
Change Your EmailContact UsCalifornia Notices
Ads powered by Livelntent AdChoices Logo AdChoices
The New York Times Company. 620 Eighth Avenue New York, NY 10018