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Business Insider
2 hours ago
- Business Insider
The big buydown bet
Good morning. If you bought the Great Value raw frozen shrimp at Walmart, throw it away. The FDA says a possible contamination from Cesium-137, a radioactive isotope, has been detected. Don't sell it, don't serve it, and definitely don't eat it — no matter how much BI's Katie Notopoulos may want to. In today's big story, homebuyers made a big bet on lower mortgage rates. They're paying a high price. What's on deck: Markets: Bank of America thinks these 10 cheap stocks are poised for big gains. Tech: This party is the surest sign yet that the tech dating scene is a mess. Business: In its latest hardcore turn, AT&T is hitting some managers with an ultimatum. But first, betting the house. If this was forwarded to you, sign up here. The big story The big buydown bet For homebuilders, it represented a silver bullet. For buyers, it can be a mousetrap. Rick Palacios Jr., the director of research at John Burns Research and Consulting, has been sounding the alarm since last summer about a dangerous gamble tempting Americans: " mortgage rate buydowns." They seemed to offer an elegant solution. With mortgage rates sky-high, your dream home might feel out of reach. That's not good for you, nor for the homebuilders stuck with inventory. But what if a homebuilder shaved a percentage point off your monthly payments, even just for the first couple of years? Surely, rates must drop soon. When the deal runs out, you could refinance. Easy. The cost to builders is the upfront cash to lower the rate via their in-house lenders. Matt Hutton, a millennial homebuyer, told BI his builder threw in $30,000 in incentives — including the buydown — to close the deal. You buy your house. They sell theirs. Crucially, the official listing price doesn't change, so home values remain inflated. That was the wager a few years ago. Today, rates are typically still above 6.5% — right where buyers had hoped not to end up. Their gamble has failed spectacularly, BI's James Rodriguez writes. Andre Rucker for BI There's an even more dire scenario, Palacios warns. What if you need to sell? Life happens — a new job, a marriage, a divorce — and you may have to move. But today's sellers face a weak market. In many parts of the US, more homes are sitting unsold than at any point since the pandemic. Buyers a few years ago may have accepted inflated prices in exchange for monthly savings — but they can't usually pass those savings along to the next buyer. To close a deal, they may have to take a loss. Just ask Hutton. After five years, he and his wife sold their first home for a $150,000 profit and upgraded to a bigger, brand-new home for nearly $800,000. A few months later, they wanted out. They ended up selling it for roughly what they paid for it, after dropping their asking price by $50,000. In addition, the buyer asked them to cover a $40,000 buydown to match the builder's ongoing incentives for nearby homes. They agreed. Today, Hutton and his wife are back in an apartment, waiting for another shot at the dream. 3 things in markets 1. Wage growth isn't keeping up with prices. However, some industries have enjoyed more growth than others. Business services and financial activities have less purchasing power than they did in 2021, while hospitality and healthcare workers have more. 2. Bank of America shares 10 ultra-cheap stocks primed to rebound. The bank thinks the days of large-cap stock dominance are numbered. If the US enters a recovery phase alongside rate cuts, beaten-down stocks could surge. 3. A short-seller explains why he thinks Palantir is overvalued. In a new note, Andrew Left's firm Citron Research used OpenAI's $500 billion valuation as a benchmark to measure the defense tech giant against. Even if Palantir fell to $40 a share, it'd still be expensive, the firm said. 3 things in tech 1. Inside San Francisco's "enforced ratio" party in a Tesla showroom. Fed up with male-dominated spaces in SF, two women who work in the tech industry threw a bash centered around "feminine energy." It offered a rare chance to dress up and a strictly enforced 50/50 gender ratio — which, of course, left hundreds of men on the waitlist. 2. Another W for Tim Cook. The Apple CEO notched a win in his fight with the UK government, which had ordered the company to make encrypted user data accessible to it. Apple enjoyed the backing of the US government, which said that the UK had agreed to drop the order. 3. Do you miss the old internet? There's an app for that. Perfectly Imperfect is a newsletter and social network that's designed to feel like the old version of the internet, reminiscent of Tumblr and MySpace. Its founder told BI it's betting on events and community-focused tools to grow. 3 things in business 1. AT&T tells some managers: Relocate or get laid off. The telecom company is consolidating 22 internal help-desk centers into six US locations. Affected managers get two weeks to decide whether to move or lose their jobs and get severance, BI's Tim Paradis and Dominick Reuter exclusively report. 2. Spike Lee's Colin Kaepernick doc is officially game over. The acclaimed director has no plans to shop around his scrapped ESPN docuseries about the retired football player to other platforms. "That thing fell apart a year ago," Lee said in an interview with BI's Jason Guerrasio. " I've moved on." 3. We still don't know if Trump is getting free ads from Paramount. Trump says Larry and David Ellison promised him millions in free ads, but Paramount CEO David Ellison doesn't want to comment on it. We shouldn't be left guessing about what's true, writes BI's Peter Kafka. In other news Meta CTO gives his short-term and long-term predictions for AI's impact on software engineering. Wall Street bosses want junior bankers to come clean about PE jobs. It won't be easy. A CPA couple who invest in real estate on the side share the investment mistake that cost them about six-figures worth of 401(k) money. What investors should be listening for in Jerome Powell's Jackson Hole speech. OpenAI chairman compares AI to the dot-com boom: There's lots of "snake oil" but some " real value being created." What the " hidden job market" really is and how to make it work for you. What's happening today Federal Open Market Committee meeting minutes published. Lowe's and Target report earnings. Made by Google event to launch latest devices, including Pixel smartphone. Hallam Bullock, senior editor, in London. Meghan Morris, bureau chief, in Singapore. Akin Oyedele, deputy editor, in New York. Amanda Yen, associate editor, in New York. Lisa Ryan, executive editor, in New York. Kiera Fields, editor, in London. Dan DeFrancesco, deputy editor and anchor, in New York (on parental leave).
Yahoo
a day ago
- Yahoo
The Magic Force Driving US Stocks to Records? Earnings Upgrades
(Bloomberg) -- No wonder the S&P 500 Index is marching from one record to the next: Analysts are ratcheting up earnings estimates for the current quarter at the swiftest pace in nearly four years. A Citigroup Inc. index that tracks the relative number of US earnings-per-share estimate upgrades versus downgrades is at its highest since December 2021. And the trend is just as strong among companies that recently issued their own outlooks. A gauge of forward guidance that compares corporate forecasts with the Wall Street consensus is hovering at its second-highest level in nearly four years, Bloomberg Intelligence data show. A Photographer's Pipe Dream: Capturing New York's Vast Water System Festivals and Parades Are Canceled Amid US Immigration Anxiety A London Apartment Tower With Echoes of Victorian Rail and Ancient Rome Princeton Plans New Budget Cuts as Pressure From Trump Builds The brighter outlook marks a dramatic turnaround from earlier in the year, when anxiety over President Donald Trump's trade policies reached a peak and sent that same gauge of corporate guidance to the lowest in a decade. There is one caveat to all the rosiness, however: It may take months before Corporate America begins to feel the full hit from Trump's trade wars on its supply chains and profit margins. 'The sheer number of 'what ifs' caused analysts to reduce earnings estimates months ago on tariff fears,' said Yung-Yu Ma, chief investment strategist at PNC Asset Management Group. 'Now there's more belief that this won't be a crushing blow to the economy as once feared. But the catch is everyone is waiting to see what happens with tariffs in the coming months.' That may help explain why the full-year outlook still hasn't completely recovered to what it was. Analysts' earnings estimates imply growth for all of 2025 will be 9.2%, down from nearly 13% at the start of the year. Wall Street sees companies in the S&P 500 earning around $269 per share in 2025 — below the $273 seen at the start of the year and a projection of $279 a year ago, according to data compiled by Bloomberg Intelligence. And there's no guarantee the upward momentum will continue. Sell-side analysts and companies could guide forecasts lower in coming months, according to Nick Giacoumakis, president of NEIRG Wealth Management. Such a scenario played out during Trump's first term: Though the US trade war with China heated up early in 2018, the hit to corporate profits only showed up about a year later. And Giacoumakis noted that the economy had the tailwind of big corporate tax cuts during that period. This time around, the latest sweeping tax-cut legislation championed by Trump is also alleviating worries about the effects of his trade policies on the economy. Yet the bill may only reduce the tax burden on S&P 500 companies by about half as much as the 2017 package, according to BI. In a note to clients on Friday, Goldman Sachs Group Inc.'s David Kostin said that he expects the strong recent trajectory of analyst earnings revisions to 'weaken going forward,' adding that 'the magnitude of margin expansion embedded in consensus estimates appears unrealistic.' Of course, analysts are hesitant to revise their outlooks for the second half of the year until more companies deliver profit guidance in the coming quarters, according to Wendy Soong, senior analyst at BI. Still, the trend from the current earnings season was unmistakably strong, though the data set is limited. Only 25% of S&P 500 companies provide quarterly guidance, a group typically dominated by technology and consumer-discretionary companies. Some 90 have reported third-quarter EPS outlooks so far and BI scores the momentum of their guidance as the strongest since the final three months of 2024. Of the 64 firms that have reported third-quarter revenue guidance, the momentum score is the highest since the second quarter of 2021. Traders will get a close look at how American consumers are faring in the early days of Trump's tariff regime when the biggest US retailers like Walmart Inc. and Target Corp. report earnings this week. Corporate results in recent years have shown resilience in the face of everything from soaring inflation to the highest interest rates in decades. And now, many investors are hoping Trump will either soften or remove tariffs before they pinch profits. Yet while US companies are displaying confidence in their ability to weather the trade storm, 'cost pressures could increase' in the second half of 2025, 'introducing downside risk to real revenue growth,' Goldman Sachs strategists led by Guillaume Jaisson wrote in a note to clients on Aug. 4. 'Most companies are still burning through pre-tariff inventories that had been set aside coming into this year before executives really knew what was going to happen with global trade,' NEIRG's Giacoumakis said. 'So it'll take multiple quarters before we have a better idea how all of this is affecting companies.' Foreigners Are Buying US Homes Again While Americans Get Sidelined What Declining Cardboard Box Sales Tell Us About the US Economy Americans Are Getting Priced Out of Homeownership at Record Rates Living With 12 Strangers to Ease a Housing Crunch Bessent on Tariffs, Deficits and Embracing Trump's Economic Plan ©2025 Bloomberg L.P. 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Business Insider
a day ago
- Business Insider
The US has lost 790,000 workers in the last three months. Here's why this could be a sleeper problem.
Good morning. At BI, we often share stories of people making big changes to chase their dreams. But sometimes, it can be a nightmare. One man moved his family to Hawaii for his wife's career. Six months after he joined them, she lost her job. Now, they're no longer together. In today's big story, an under-the-radar number reveals a huge red flag for America's job market. What's on deck: Markets: The hedge funder who sparked the Opendoor rally sees it surging 2,000% more by end of year. Tech: Anthropic is getting picky about how you can invest in it. Business: Zelenskyy wore an all-black suit to the White House. Stylists say it's crucial to dress up for high-stakes meetings. But first, where is everyone? If this was forwarded to you, sign up here. The big story The scariest job market number It's not a statistic that gets much attention. Not like CPI, core PCE, or PPI — all strutting into the spotlight every month, making headlines and market moves. Lurking under the hood of unemployment data, you'll find it. Look even closer, and you'll see a huge red flag. The official US labor force, which measures the number of working-age Americans actively working or looking for work, is shrinking at a rate usually seen during the throes of economic disaster. The consequences could be perilous, Callie Cox, the chief market strategist at Ritholtz Wealth Management, writes for BI. For years, the number of working-age Americans entering the workforce has outpaced those leaving, helping to fuel economic expansion. Things have changed. Over the last three consecutive months, the US has lost 790,000 workers. One factor is immigration. A 90% drop in border encounters over the past year has cut the influx of foreign-born workers — a group that historically has played a big role in supporting the US labor force, Callie highlights. At the same time, other challenges — such as return-to-office mandates and high childcare costs — have led to fewer women entering or staying in the workforce. Take the AI talent wars. With a tiny pool of elite engineers, tech giants like Meta have spent billions chasing a handful of workers — and competitors like Microsoft are trying to snatch them away. But not every company has pockets as deep as Meta and Microsoft. As labor shortages drag on, many businesses may start to reduce hiring, expansion, and investment. This sends ripples through consumer spending, which drives nearly 70% of the US economy. Fewer workers means less spending, which slows growth. Reversing the trend demands smarter policy and stronger economic momentum, Callie writes. But right now, neither seems in sight. 3 things in markets 1. Jackson Hole and other potential market movers. It's set to be another big week in markets. Here's everything we're watching this week, from Fed Chair Jerome Powell speaking at the central bank's Jackson Hole symposium to the release of new housing data and key retail earnings. 2. Opendoor's great expectations. Hedge fund founder Eric Jackson — aka the guy who sparked the stock's July rally — thinks it has a lot further to climb. Thanks to the CEO's recent exit, Jackson sees the stock surging 2,000% by the year's end. 3. All the smart tech inside JPMorgan's new HQ. From biometric scanners to circadian rhythm lighting and lattes on demand, the bank is leveraging tech to make return-to-office more comfortable for its employees. See the high-tech features going into its new Park Avenue space. 3 things in tech 1. Beggars can't be choosers, but Anthropic is no beggar. In its latest funding round, the AI startup is raising about $5 billion at a $170 billion valuation, and this time, it doesn't want investors using special purpose vehicles, or SPVs, to get in on the action. Anthropic has more leverage to dictate terms because demand is so hot, BI's Ben Bergman exclusively reports. 2. The iPhone manufacturer has a new golden child. Sales from the Cloud and Networking division at Foxconn, the company known for being Apple's factory floor, just surpassed its consumer electronics business. The pivotal moment marks the shift from mobile to AI, writes BI's Alistar Barr, as Foxconn, once the backbone of smartphones, is now building the infrastructure of the AI age. 3. See the pitch deck an AI scribing startup used to raise $243 million. Ambience Healthcare, which uses AI to automate the medical transcription process, counts A16z and Oak HC/FT among its investors. See the 15 slides it used to raise its Series C. 3 things in business 1. Broke: MSNBC. Bespoke: MS NOW. MSNBC is taking a new name, My Source News Opinion World, when it officially spins off from Comcast at the end of the year. Big names like Joe Scarborough and Rachel Maddow are supportive, but company insiders who spoke to BI struck a less effusive chord. 2. A hot new bombshell enters the streaming wars. The world's biggest comics platform, Webtoon, is getting into vertical video with the hopes of wooing Gen Z, BI's Lucia Moses exclusively reports. It's planning on using real actors, not AI. 3. Trump is gutting a policy that supercharged Rivian, Tesla, and Lucid. The EV carmakers make billions of dollars from selling regulatory credits to rivals. Now the Trump administration is repealing those EV regulations, and the carmakers are warning of big losses as a result. In other news Starbucks has a new plan for raises: a flat 2% pay hike for salaried staff. Tesla teases a new Model Y L variant is 'coming soon' in a video posted to Chinese social media. Morgan Stanley sees the AI productivity boom adding $16 trillion to the stock market's value. The AI startup Nominal wants to address the accountant shortage. Read the pitch deck that it used to raise $20 million. What tariffs? S&P 500 companies are wrapping up one of the strongest earnings seasons on record. Boat Trader and YachtWorld owner has a chokehold on the US marine vessel market, an antitrust lawsuit alleges. Ukraine's electronic warfare fight against Russian drones is so chaotic that its own are getting caught in the crossfire. Why yearslong bear market slumps may be a thing of the past. What's happening today Home Depot reports earnings. Hallam Bullock, senior editor, in London. Grace Lett, editor, in New York. Meghan Morris, bureau chief, in Singapore. Akin Oyedele, deputy editor, in New York. Amanda Yen, associate editor, in New York. Lisa Ryan, executive editor, in New York. Dan DeFrancesco, deputy editor and anchor, in New York (on parental leave). Kiera Fields, editor, in London.
