Who do you believe? The American consumer or the bond market?
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Talk about whiplash. Stocks ended in positive territory on Thursday — but for investors, it’s clearly getting harder to separate the signal from the noise.
On one hand, there have been consistent signs that the US economy remains strong despite growing weakness abroad. US retail sales for July beat estimates. And Walmart, seen as a bellwether of consumer spending, raised its guidance for the rest of the year.
On the other hand, investors continue to pile into government bonds, sending yields lower and lower. The yield on US 30-year debt recently fell below 2% for the first time ever. It’s still close to that level.
Such opposing forces could lead to a lot more trading sessions like this:
The data doesn’t entirely favor the bulls — just look at US manufacturing. Industrial production fell 0.2% in July while manufacturing output shrank 0.4%. That’s worse than analysts had expected.
RSM’s chief economist Joe Brusuelas says industrial production served as a wakeup call “just as one got that warm fuzzy feeling from retail sales.”
He predicts the US manufacturing sector is either entering a recession — or it’s already in one.
Watch this space: Whichever indicators you favor, it’s clear the Fed will have a difficult decision when it meets in September. Deutsche Bank’s takeaway is that recent data could make it harder for the Fed to surprise investors with a more aggressive cut.
Investor insight: The University of Michigan reading on consumer sentiment hits at 10 a.m. ET. That could strengthen the case for those who point to retail sales and Walmart earnings as proof there’s little to fear.
GE gets crushed by whistleblower report
General Electric is fighting to change the narrative after it was accused of massive fraud in a whistleblower report.
The claims: Harry Markopolos, who’s famous for blowing the whistle on Bernie Madoff’s Ponzi scheme in 2008, said in a report released Thursday that GE had hid nearly $40 billion of losses in its insurance business. He called the alleged fraud “more serious” than Enron.
That sparked panic among investors, who do not like the words “Madoff” or “Enron,” and certainly don’t like it when they’re used together. Shares fell more than 11%, their worst one-day drop in 11 years.
GE’s take: GE strongly denies the allegations. Leslie Seidman, a GE board member and chair of its audit committee, called them “baseless” and “inflammatory.” She said in an interview on CNBC’s Closing Bell that the claims do not “reflect the GE I know.”
Next move: Shares are more than 2% in premarket trading after CEO Larry Culp bought almost $2 million in GE shares on Thursday, according to an SEC filing. He now owns more than 1% of outstanding shares, a sign of his confidence in the business.
Inside WeWork, one couple wields control
In the early days of WeWork, the two people most associated with the company were co-founders Adam Neumann and Miguel McKelvey.
But when WeWork filed paperwork this week to go public, McKelvey was mentioned only six times. Neumann’s wife, Rebekah, was mentioned 20 times, according to a new story from CNN Business’ Sara Ashley O’Brien in New York.
Why you should care: “In addition to being a cash-burning enterprise facing a host of question marks around its business, The We Company is uniquely set up to be controlled by the Neumanns — a move that’s raising some eyebrows among governance experts.”
One example: The We Company has chosen to create multiple classes of stock, giving Adam Neumann voting control over the company’s decisions. But in the event Adam Neumann is “permanently disabled or deceased” in the 10 years following the IPO, Rebekah will form a committee with one or two board members to fill the role.
