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International banks to support nuclear power to hit carbon neutrality target. (0:16) Microsoft sees a rare downgrade. (3:37) Does McDonald’s Big Arch deliver? (3:56)
This is an abridged transcript of the podcast.
Our top story so far. Fourteen of the world’s biggest banks and financial institutions will pledge increased support for nuclear energy in a bid to unlock financing for the industry.
The FT says institutions including Bank of America (BAC), Barclays (BCS), Citi (C), Morgan Stanley (MS), and Goldman Sachs (NYSE:GS) support the COP28 goal to triple the world’s nuclear energy capacity by 2025.
Experts have opined that a public show of support has been long-awaited, given the critical role nuclear energy can play in the overall transition to low-carbon energy to mitigate the impact of climate change.
Historically, banks have been divided on the prospects of nuclear energy due to project financing complexities and risks and questions over such investments complying with organizational environmental, social, and governance standards.
BNP Paribas (OTCQX:BNPQF) said there was “no scenario” in which the world could achieve carbon neutrality by 2050 without nuclear power, citing the UN’s Intergovernmental Panel on Climate Change. Barclays says nuclear power could be a solution to wind and solar energy’s intermittency.
On the economic front, the S&P Global U.S. PMI Composite edged down to 54.4 in September’s preliminary estimate vs. 54.3 consensus, from 54.6 in August.
Further expansion in the services sector contrasted with a second straight month of modest contraction in manufacturing output.
Pantheon macroeconomist Samuel Tombs says the “PMI data are best seen as a guide to business sentiment, and while the headline index was broadly unchanged in September, the 6.6-point drop in the future activity index to 59.9 — its lowest level since October 2022 — indicates that businesses are becoming nervous about the outlook.”
“This loss of confidence resulted in slightly more businesses reducing employment than increasing it for a second straight month, consistent with another sluggish increase in overall payrolls.”
Meanwhile, Fed speakers are back with the markets split on whether a cut at the next meeting in November will be another 50 basis points or 25.
Minneapolis Fed President Neel Kashkari wrote in a post that while “there remain mixed signals about the underlying strength of the U.S. economy and I remain uncertain just how tight policy is, I do believe policy remains tight today.”
He said he supported 50 basis points as the first cut, but said on CNBC that “on balance, we will probably take smaller steps unless the data changes materially.”
Atlanta Fed President Raphael Bostic said a quarter-point cut last week “would belie growing uncertainty about the trajectory of the labor market that I have already noted.”
But he added that he does “not believe that labor markets have dangerously weakened. That is not what the data show, nor what business leaders tell us.”
Among active stocks today, Raymond James downgraded Palantir Technologies (PLTR) to Market Perform from Outperform. Analyst Brian Gesuale said “shares need to consolidate stellar gains over the last couple of years and grow into its rich valuation.”
J.P. Morgan placed Nike (NKE) on its Negative Catalyst Watch ahead of its October 1 earnings.
Analyst Matthew Boss and his team lowered the FQ1 EPS estimate on Nike to $0.48 from $0.52 consensus due to recent headwinds shown in channel checks. He said they “see an elongated timeline for NKE to re-accelerate revenue growth in the midst of a franchise product lifecycle transition with the global macro backdrop (notably headwinds in Greater China & EMEA) further complicating the path forward.”
And Microsoft (MSFT) caught a rare downgrade as DA Davidson cut the stock to Neutral from Buy.
Analyst Gil Luria, who kept his $475 price target, says: “We believe that Microsoft’s lead is now diminished in both the cloud business and code generation business, which will make it hard for MSFT to continue to outperform.”
In other news of note, the McDonald’s (MCD) Big Arch sandwich is anticipated to be a substantial addition to the company’s menu and a potential threat to hamburger chain rivals such as Burger King (QSR), Hardee’s, Wendy’s (WEN), Jack in the Box (JACK), and Shake Shack (SHAK).
The Big Arch features two quarter-pound patties and three slices of cheese, with crispy onions, slivered onions, pickles, lettuce, and a new sauce. Notably, the Big Arch sandwich is nearly double the size of the Big Mac.
The nutritional scorecard for the Big Arch indicates that it has 1030 calories, 52 grams of protein, total fat of 66 grams, trans fat of 2 grams, and 1980 milligrams of sodium. It‘s currently available in select international markets like Canada and Portugal.
TD Cowen analyst Andrew Charles tested the Big Arch McDonald’s in Toronto, saying, “We were most impressed by the Big Arch sauce that tasted of Dijon mustard with a mayonnaise consistency that offered a hint of garlic, as well as the poppy and sesame seed bun that invoked the taste, though not the texture, of an everything bagel.”
The Big Arch sandwich costs CAD$11.29 ($8.31) in Toronto, which is near the midpoint of a single and double ShackBurger in the region.
And in the Wall Street Research Corner, circling back to interest rates, Wells Fargo looked at S&P 500 sector returns 12 months after policymakers start easing cycles.
Among the median changes around the start of the last six FOMC easing cycles, the S&P’s total return a year out was 16.2%.
The relative returns by sectors versus the S&P in the 12 months after easing-cycles begin are:
Information Technology (XLK) +8.3%
Consumer Discretionary (XLY) +7.6%
Health Care (XLV) +6.4%
Consumer Staples (XLP) +3.1%
Materials (XLB) +2.6%
Industrials (XLI) +0.9%
Communication Services (XLC) +0.6%
Energy (XLE) -3.1%
Financials (XLF) -6.8%
Utilities (XLU) -9.6%
Real Estate (XLRE) -10.8% (Real Estate medians are only for the start of the last three easing cycles.)
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
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