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Member Briefing October 31, 2024

October 31, 2024

Posted By: Harold King in Daily Briefing,

Top Story

Manufacturing Job Openings Fall

The number of job openings in U.S. manufacturing declined from August to September, in line with all nonfarm job openings, according to new data from the U.S. Bureau of Labor Statistics. What’s going on: Manufacturing job openings were 481,000 last month, down from 491,000 in August. Total openings were at 7.44 million, down from a downwardly revised 7.86 million in August and below market expectations of 7.99 million.

Job openings in nondurable goods manufacturing declined to 155,000 from 170,000.
Open positions in durable goods manufacturing, however, increased slightly in the same time period, to 327,000 from 321,000.
Manufacturing hiring was up in September, to 356,000 from August’s 306,000. Hiring increased across industries, too, coming in at approximately 5.56 million, up from 5.44 million the month prior.
The number of layoffs and discharges rose in durable goods manufacturing in September but changed little in the overall economy.
Quits in manufacturing, on the other hand, edged down, to 203,000 in September from 208,000 in August.

Read More at Wells Fargo

U.S. GDP Growth Slowed Slightly to 2.8% in Third Quarter

The U.S. economy continued its recent streak of strong growth in the third quarter, as consumers picked up their spending, and exports and government spending rose. Gross domestic product rose at a 2.8% annual rate in the third quarter, adjusted for seasonality and inflation, the Commerce Department said Wednesday. GDP is a broad measure of goods and services produced across the economy. The report continues a roughly two-year streak of steady growth in the U.S. economy. Still, the quarter was lower than the 3.1% growth rate that economists surveyed by The Wall Street Journal had expected. It also marked a slight pullback from a 3% rate in the second quarter.

Consumer spending rose at a 3.7% pace in the third quarter, accelerating from 2.8% in the second quarter. Shoppers spent strongly on goods like vehicles and prescription drugs.
Strong exports and government spending on defense were also tailwinds for growth.
Nonresidential fixed investment—which reflects business spending on software, research and development, equipment and structures—rose at a 3.3% rate, slowing slightly from the second quarter as spending on structures fell.
Final sales to private domestic purchasers, a measure of consumer and business spending that gauges underlying demand in the economy, rose to a 3.2% annual pace in the third quarter from 2.7% in the second, the Commerce Department said.
The housing market remained weak in the third quarter, a sign that still-high borrowing costs are weighing on the sector. Residential investment declined at a 5.1% rate, falling for the second quarter in a row.

Read More at The WSJ

Mortgage Rates Rise For Fourth Time in Five Weeks, Keeping Demand Down

Mortgage rates climbed for the fourth time in five weeks to reach their highest levels since July. The Mortgage Brokers Association reported that the 30-year, fixed-rate mortgage increased to 6.73% for the week ending Oct. 25. Since hitting a recent low in September, mortgage rates have increased by nearly 0.6 percentage points. The rise in borrowing costs comes as Treasury yields hit their highest levels since July, with the 10-year Treasury note pushing above 4.2% in recent days. The 10-year Treasury is one of the major factors that influence mortgage rates.

The recent spike in borrowing costs is creating a reversal in recent home loan trends; refinancing activity is declining after surging in the summer. Refinancing fell by 6% when compared with the prior week’s totals, though it is still far higher than a year ago when mortgage rates were even higher.

Read More at Investopedia

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Policy and Politics

Pentagon Unveils New Plan To Energize America’s Defense Sector

The Pentagon published a second and more detailed plan to invigorate the American defense industry this year, including the weapons it sees as most crucial to deter China. The implementation plan, released Tuesday, builds on a strategy published this January, which described how the U.S. defense sector has withered and how the Pentagon wants to revitalize it. “The contraction of the traditional DIB [defense-industrial base] … was a generation-long process and it will require another generation to modernize the DIB,” the strategy reads.

As it stands, the plan lists six priority areas, from deterring a conflict with China to firming up fragile supply chains. That first goal — the top one listed in the plan — will rely on America’s ability to build more submarines and munitions, two areas the Pentagon has struggled to expand in recent years. Both of these priorities have the longest time frame listed in the document, requiring more than five years to accomplish those goals, the plan estimates.

Read more at Defense News

Disaster Aid Bill Seen More Likely Than Omnibus Spending Package Post-Election

With all eyes on next week’s elections, appropriations battles are simmering on the back burner for Congress. But lawmakers won’t have long to make some tough decisions when they return starting on Nov. 12 for the lame-duck session. The priorities are twofold: first, passing an emergency relief package after two major hurricanes battered the Southeast, compounding pent-up demands for disaster aid going back to last year. Second, congressional leaders need to figure out what to do about funding the government beyond the stopgap law’s Dec. 20 deadline.

The current betting is that there simply won’t be enough time in the five weeks of session remaining to strike the deals needed to put together thousands of pages of text fleshing out a dozen full-year fiscal 2025 spending bills. Top Democrats and appropriators on both sides of the Capitol will push that option, but without GOP leadership buy-in, it’s very unlikely. That means another continuing resolution, or CR, possibly extending current funding levels for another three months into March, is emerging as a leading scenario, according to sources familiar with the process. Speaker Mike Johnson has long favored a March CR, and GOP leaders have already been sounding out committee leaders on what “extenders” should be included in a three-month stopgap bill.

Read More at Roll Call

FTC ‘Bags’ Preliminary Injunction in Challenge to "Affordable Luxury" Handbag Merger

The Federal Trade Commission (FTC) prevailed in the first round of its much-criticized challenge to Tapestry Inc.'s acquisition of Capri Holdings Limited. Tapestry owns the Coach brand, and Capri owns the Michael Kors and Kate Spade brands. Judge Jennifer Rochon of the U.S. District Court for the Southern District of New York on Oct. 24, 2024, granted the FTC's motion to preliminarily enjoin the transaction.

The court's ruling in favor of the FTC appears on its face to be a straightforward application of standard antitrust principles to each contested element of the case – but was also overwhelmingly favorable to the FTC, including on the important question of whether the FTC provided the existence of a market for "affordable luxury" handbags. Judge Rochon stressed that her finding of fact and conclusions or law were "merely preliminary" and subject to revisiting by the FTC in its in-house adjudicatory process, which is scheduled to begin on Dec. 9, 2024. What remains to be seen if the merging parties elect to continue the litigation is whether Judge Rochon's adoption of all of the FTC's arguments and rejection of all of the merging parties' defenses reflect the strength of the FTC's case or, instead, are just a decision by Judge Rochon to draw all inferences in favor of the FTC in reaching her "merely preliminary" rulings.

Read more at Holland & Knight

Health and Wellness

GLP-1s Like Ozempic Are Among The Most Important Drug Breakthroughs Ever

In the history of medicine, a few drugs tower above all others. Humira for rheumatoid arthritis; Prozac for depression; statins to prevent heart disease and strokes. All have helped patients far beyond doctors’ initial expectations and continue to benefit millions of people every day. A new class of drugs is set to join their ranks and has the potential to eclipse them all—GLP-1 receptor agonists.

These drugs mimic the action of a naturally occurring hormone, glucagon-like peptide (GLP-1), and for decades have been used to treat diabetes. More recently they have become a wildly popular way for people to lose weight. But in March semaglutide (a GLP-1 receptor agonist sold as Ozempic for diabetes and Wegovy for weight-loss) was approved in America for cardiovascular disease in overweight people. In April tirzepatide (sold as Mounjaro and Zepbound) showed positive results in late-stage trials for sleep apnoea, a breathing disorder. In other trials it seems to reduce chronic kidney disease. This is just the start. GLP-1 agonists are also being tested for everything from liver disease to substance-use disorders and addiction.

Read more at The Economist

Election 2024

Industry News

VW’s Profit Plunge Sets Stage for Skirmish Over Plant Closings

Volkswagen said significant cost cuts are urgently needed as it reported a steep decline in third-quarter earnings on Wednesday and faced employee representatives angry at the possibility of the automaker's first plant closures in Germany. The company reported net profit of 1.58 billion euros ($1.7 billion) for the July-September period, a 64% decline from the 4.35 billion euros it earned a year earlier. Revenue was only marginally lower, slipping 0.5% to 78.49 billion euros. The results were partly the result of “the high intensity of competition” in China, VW said, where domestic brands such as BYD, NIO and Xiaomi Auto are storming the market with a range of new electric cars. VW said vehicle deliveries in China had fallen by 10pc in the first nine months of 2024 to 2.1m cars.

The latest results “demonstrate the urgent need for action in a volatile environment characterized by intense competition,” chief financial officer Arno Antlitz said. “This is why we are facing important and painful decisions that we need to make together and to bear together. We've not forgotten how to build great cars, but the costs — specifically in our German operations and factories — are far from being competitive,” Antlitz said. “This is why things cannot continue as they are now.”

Read more at Yahoo Finance

Chinese EV Maker BYD's Net Profit Up 11.5%, Revenue Beats Tesla For First Time

Chinese electric vehicle maker posted an 11.5% rise in third-quarter net profit on Wednesday as it maintained strong sales momentum helped by government trade-in incentives. Net profit rose to 11.6 billion yuan ($1.63 billion) in the July-September quarter, the company said in a stock exchange filing. For the first nine months, net profit was up 18.1% to 25.2 billion yuan. With third-quarter revenue up 24% on year to 201.1 billion yuan ($28.24 billion), BYD's quarterly revenue for the first time outpaced Tesla, whose revenue for the July-September quarter reached $25.2 billion. Tesla still beat BYD in terms of EV sales globally during July to September.

The local champion and its peers such as Tesla have enjoyed a tailwind from expanded old-for-new stimulus measures favouring greener cars. Last month, China's car sales snapped a five-month decline on the subsidy boost, industry data showed. As of late October, 1.57 million applicants had registered to take advantage of a national subsidy of up to more than $2,800 apiece for trading-in older cars for greener vehicles, official data showed. Local governments in China have also been handing out up to 20,000 yuan as additional subsidies to EV buyers in schemes to expire at year end.

Read more at Reuters

Caterpillar Misses Estimates on Weakening Construction

Caterpillar Inc. posted a third-quarter profit that missed analysts’ expectations as the machinery producer grappled with weakening demand in construction around the world. The US maker of iconic yellow industrial machines reported adjusted per-share earnings of $5.17 on Wednesday, missing the $5.34 average estimate of analysts polled by Bloomberg. Caterpillar is viewed as a bellwether for the economy, with its heavy equipment deployed at construction sites, mining operations and energy projects across the globe.

Sales of construction equipment, Caterpillar’s biggest business segment, dropped 9% from the same period a year ago on lower sales volumes of machines to customers and lower prices, the company said. North America along with the Europe, Africa and Middle East region were especially weak, with each geographical segment seeing revenue decline about 11% and 15%, respectively. Sales in the segment to the Asia-Pacific region dropped 12%. The company reported that mining equipment revenue fell about 10%, also mainly due to lower sales volumes. Energy and transportation was a bright spot, with the segment seeing a 5% boost in sales.

Read more at Yahoo Finance

AMD Delivers Mixed Q3 Results, Light Guidance

Advanced Micro Devices (AMD) late Tuesday matched Wall Street's earnings target for the third quarter on better-than-expected sales. But the chip giant's revenue guidance for the current period was a bit light. AMD stock fell in extended trading. The company earned an adjusted 92 cents a share on sales of $6.82 billion in the September-ended quarter. Analysts polled by FactSet had expected AMD earnings of 92 cents a share on sales of $6.71 billion. On a year-over-year basis, AMD earnings rose 31% while sales increased 18%.

For the current quarter, AMD predicted sales of $7.5 billion, up 22% year over year. However, that forecast is a tad below Wall Street's estimate of $7.55 billion in Q4 sales. "We delivered strong third-quarter financial results with record revenue led by higher sales of Epyc and Instinct data center products and robust demand for our Ryzen PC processors," Chief Executive Lisa Su said in a news release. She added, "Looking forward, we see significant growth opportunities across our data center, client and embedded businesses driven by the insatiable demand for more compute."

Read more at Investor’s Business Daily

Microsoft Beats On Q1 Top And Bottom Lines On Cloud Strength

Microsoft (MSFT) reported its fiscal first quarter earnings Wednesday beating on the top and bottom lines on the strength of its cloud business. Microsoft is one of the biggest beneficiaries of the AI boom, thanks to the billions it has invested in its cloud infrastructure and ChatGPT-developer OpenAI. But it's also facing headwinds including increasing competition from the likes of Amazon, Google parent Alphabet, and Salesforce, which have developed or are developing their own OpenAI rivals.

For the quarter, Microsoft is saw earnings per share (EPS) of $3.30 on revenue of $65.6 billion. Analysts were expecting EPS of $3.10 and revenue of $64.5 billion, based on analyst consensus estimates compiled by Bloomberg. The company reported EPS of $2.99 on revenue of $56.5 billion during the same quarter last year. Microsoft's commercial cloud revenue, which includes cloud services sales, came in at $38.9 billion versus expectations of $38.1 billion. Microsoft, along with its manufacturing partners, is also pushing a new class of personal computers known as Copilot+ PCs. Copilot+ PCs, or laptops with the power to perform on-device AI processes, are the PC industry’s attempt to capitalize on the AI hype story.

Read more at Yahoo Finance

Boeing And Striking Workers Restart Talks A Week After Union Voted To Reject Contract Offer

Boeing resumed negotiations with representatives of its striking factory workers in the Pacific Northwest on Tuesday, less than a week after the unionized machinists voted to reject a negotiated contract offer and extend a strike—which is in its seventh week and has severely hampered the manufacturing of key Boeing aircraft. In an update on social media, the International Association of Machinists and Aerospace Workers (IAM) union said it had a “productive face-to-face meeting with the company” to address “key bargaining issues.”

The union said its “negotiating committee will continue to engage with the company to secure the best possible outcome for our members.” Boeing also confirmed to Bloomberg and Reuters that it had met with union leaders on Tuesday. The timeline for the completion of negotiations is unclear, as both sides hope to end a stalemate that has severely hampered the production of key Boeing airplanes. Boeing raised $21.1 billion from a stock offering on Monday to avoid a credit rating downgrade. The plane maker reported a $6.1 billion loss in its third-quarter earnings amid a series of safety-related issues and the strike.

Read more at Forbes

Investors Impatient As Ford Struggles To Boost Efficiency

Ford Motor stock has tumbled about 8% so far this week after the company faltered on CEO Jim Farley's mission to improve efficiency in its traditional gasoline-engine operations, whose profits the company needs to fund its expensive electric vehicle plans. Quality and warranty problems, supplier issues and waste in the automaker's 121-year legacy business have obscured its progress, Farley told analysts during a call to discuss quarterly earnings Monday. The automaker said annual results would be in the lowest range of its previous outlook.

“The biggest opportunity for the company clearly is cost and warranty," Farley said on the call. “I'm proud of the progress but we're not satisfied at all,” he later added. Some on Wall Street are concerned about Ford's ability to root out these perennial issues, which Farley has highlighted for years. T

Read more at Reuters

Lockheed Draws $1.2-Billion Helicopter Order

Lockheed Martin’s Sikorsky Aircraft unit has been assigned nearly $1.24 billion by the U.S. Dept. of Defense’s Foreign Military Sales arm to produce an unspecified number of UH-60M helicopters for defense forces in Australia, Brazil, Greece, Sweden, and Thailand. The award is a modification of an existing contract and anticipates funding for two years of manufacturing and supply, through December 31, 2027, with work to be performed by Sikorsky operations in Stratford, Conn.

The Black Hawk (UH-60M) aircraft are four-blade, twin-engine helicopters in service with the U.S. Army since 1979. The current versions of the multi-mission helicopters (combat, assault, utility) offer increased payloads and range, advanced digital avionics, active vibration control, improved producibility, enhanced handling qualities and situational awareness, and improved survivability, according to Lockheed.

Read more at American Machinist

Pentagon’s Commercial Satellite Internet Services Program Soars To $13 Billion

The military’s Proliferated Low Earth Orbit (PLEO) Satellite-Based Services program, launched just last year with a $900 million ceiling, has been expanded to $13 billion by the Defense Information Systems Agency (DISA) and the Space Systems Command, a spokesperson confirmed. The dramatic jump in funding underscores how vital high-speed satellite internet has become for military operations, as all branches clamor for the capabilities provided by services like SpaceX’s Starlink. The PLEO contract also is being expanded in anticipation of Amazon’s Project Kuiper entering the LEO internet market in the coming years.

The PLEO program is an Indefinite Delivery Indefinite Quantity (IDIQ) contract managed by DISA and the Space Systems Command’s Commercial Satellite Communications Office. The program so far selected 20 vendors to compete for specific task orders over a five-year base period with an option for an additional five years. Before this increase, the PLEO contract had already spent about $660 million of its original $900 million ceiling. Most of the orders have been for Starshield, the militarized version of the Starlink service.

Read more at Space News

Happy Halloween - Boeing’s Chaos And Other Haunting Manufacturing Safety Stories From 2024

In the 2005 horror film “The Land of the Dead,” one of filmmaker George A. Romero’s characters, Kaufman, played by the late Dennis Hopper, says, “Zombies, man. They creep me out.” For manufacturing, those “zombies” come in the form of safety violations, which can eat at a company’s budget through hefty citations and mandated production pauses, not to mention the risk to workers if they aren’t properly trained and protected.

In food manufacturing, Schoep’s Ice Cream was cited by the Labor Department in January for an ammonia outbreak at a Wisconsin plant, exposing workers to the nitrogen fertilizer’s gases due to a lack of sufficient process safety management procedures. And of course, there’s Boeing, which has faced immense scrutiny since a door plug blew out in mid-air on a Jan. 5 Alaska Airlines flight. The incident magnified the aircraft maker’s ongoing safety and quality issues, and has cost the beleaguered company billions of dollars. These are just some of the terrors the manufacturing industry has seen over the past 10 months. Take a look at these other scary stories, if you dare.

Read more at Manufacturing Dive

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