—— S&P 500 Could See 10% Pullback Before Election; Young Retail Traders Chase High-Risk Investments; Microsoft China Bans the Use of Android Phones; Broadcom Issues $50bn Bond to Repay Acquisition Loan; US Consumer Debt Rises Most in the Quarter; French Data4 to Issue $2bn Debt for Data Center Expansion
1. S&P 500 Could See 10% Pullback Before Election
Traders should prepare for a potential correction in the stock market as uncertainties loom around the US presidential campaign, corporate earnings, and Federal Reserve policy, according to Mike Wilson of Morgan Stanley.
“I think the chance of a 10% correction is highly likely sometime between now and the election,” Wilson said in an interview with Bloomberg Television on Monday. He predicted that the third quarter will be “choppy.” The S&P 500 Index began the week at all-time highs and could achieve its 35th record closing this year if it finishes Monday in positive territory.
Anticipations of two rate cuts by the Fed this year and excitement around artificial intelligence have driven the benchmark to a 17% gain this year, following a 24% surge in 2023. Even Wilson, who has been bearish in recent years, has moderated his tone.
Source: Bloomberg – Morgan Stanley’s Wilson Says a 10% Stock Market Correction Is ‘Highly Likely’
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2. Young Retail Traders Chase High-Risk Investments
In 2021, a surge of retail investors flocked to the stock market, driven by a desire to invest in volatile “meme stocks” with strong social media followings but weak financials. This enthusiasm for companies like GameStop Corp. and AMC Entertainment Holdings Inc. appeared to be a passing craze. Fueled by pandemic stimulus checks and pre-vaccine boredom, new traders had little else to do but invest their cash in stocks promoted by internet investing influencers like Keith Gill and Ryan Cohen.
Fast forward three years, and it’s clear: we are in a new era of finance. It’s easier than ever to invest—anytime, anywhere—and the meme-stock phenomenon is here to stay. Technological advancements and new apps and platforms have created a thriving ecosystem where anyone can trade stocks as easily as swiping on Tinder.
Young people can open trading accounts in minutes, and Generation Z begins investing at an average age of 19, according to a Charles Schwab Corp. survey released in June. This is significantly younger than previous generations, with Gen X starting at 32 and baby boomers at 35. Schwab also found that nearly 3 in 5 Americans are now investing in stocks, the highest proportion on record according to Federal Reserve data.
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3. Microsoft China Bans the Use of Android Phones
Microsoft Corp. informed its employees in China that starting in September, they will only be able to use iPhones for work, effectively excluding Android-powered devices from the workplace.
According to an internal memo reviewed by Bloomberg News, the US company will require its China-based employees to use Apple Inc. devices to verify their identities when logging in. This measure, part of a companywide initiative to strengthen the security of Microsoft products and services against hackers, will impact hundreds of workers across the Chinese mainland. The goal is to ensure that all staff use the Microsoft Authenticator password manager and Identity Pass app.
Microsoft decided to block Android devices from accessing its corporate resources because they cannot connect to Google’s mobile services in China. With Google Play unavailable in the country, Apple’s App Store remains the only platform where employees in China can download the required security apps.
The company has been enhancing security measures globally following repeated attacks by state-sponsored hackers. In January, a breach linked to Russia was disclosed, impacting dozens of US government agencies, including the State Department.
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4. Capri-Sun Plans to Sell Minority Shares
Capri-Sun, known for its juice drink pouches, is considering selling a minority stake, according to sources familiar with the situation.
The company, controlled by Swiss billionaire Hans-Peter Wild, is collaborating with advisers to attract potential investors, seeking to raise more than $500 million, the sources said, requesting anonymity due to the private nature of the information.
Capri-Sun plans to use the proceeds to repurchase the license for Capri-Sun North America and its associated operations, which are currently owned by Kraft Heinz Co., the sources added.
The Capri-Sun drink was created by Wild’s father in 1969. Based in Zug, Switzerland, the company reports $1.5 billion in annual sales and operates 24 production sites worldwide, according to its website.
Discussions are ongoing, and there’s no guarantee a deal will be reached. A representative for Capri-Sun declined to comment, while a spokesperson for Kraft Heinz stated the company doesn’t comment on market rumors and speculation.
Despite the broader industry’s trend towards calorie reduction, with companies like Coca-Cola Co. and PepsiCo Inc. leading the charge, Capri-Sun has only 40% of its portfolio containing reduced or no sugar, although it avoids artificial flavorings. An orange Capri-Sun pouch contains 16% of the UK’s recommended daily sugar intake for an adult.
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5. Broadcom Issues $50bn Bond to Repay Acquisition Loan
Broadcom Inc. is raising $5 billion in the US investment-grade bond market on Monday to refinance part of the loans it used for its $69 billion acquisition of VMware Inc.
The semiconductor and software developer is issuing debt in three parts, according to a source familiar with the matter. The longest tranche will yield 0.95 percentage points over Treasuries, down from an initial target of 1.25 percentage points above Treasuries, said the source, who requested anonymity.
This planned debt sale occurs more than seven months after Broadcom finalized its acquisition of VMware. It also follows nearly a year after the company secured up to $28.4 billion in new debt commitments to fund the purchase and replace a short-term loan taken while awaiting regulatory approvals.
The committed financing was divided into three parts: a $10.7 billion A-2 facility, a $10.7 billion A-3 facility, and a $7 billion A-5 facility, as stated in an August filing. Broadcom intends to use the proceeds from the bond sale to prepay part of the term A-2 loans under its term loan credit agreement and for general corporate purposes, leaving at least $23.4 billion of debt still requiring refinancing.
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6. US Consumer Debt Rises Most in the Quarter
US consumer borrowing increased in May by the most in three months, driven by a significant rise in credit-card balances.
Total credit outstanding rose by $11.4 billion after a revised gain of $6.5 billion in April, according to Federal Reserve data released on Monday. This figure surpassed the median forecast of an $8.9 billion increase for May in a Bloomberg survey of economists. The data are not adjusted for inflation.
Revolving credit, which includes credit cards, surged by $7 billion, the largest increase in three months. Non-revolving credit, such as loans for vehicle purchases and education, rose by $4.3 billion.
Many Americans, having depleted their pandemic-era savings, are increasingly relying on credit cards and other payment methods. Coupled with rising living costs, this trend is putting additional strain on household finances and signaling a potential slowdown in consumption.
This trend may explain the recent decline in consumer spending. Retail sales barely rose in May, and figures for previous months were revised downward, according to the latest data.
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7. French Data4 to Issue $2bn Debt for Data Center Expansion
Brookfield-backed French data center group Data4 is exploring a $2 billion debt deal, according to a person familiar with the matter.
The private equity firm is in discussions with about half a dozen banks regarding the financing, said the person, who requested anonymity due to not being authorized to speak publicly about the matter.
Data4’s efforts to raise funding come after Britain’s Vantage Data Centers completed Europe’s first-ever asset-backed securitization deal for data centers last month, raising £600 million ($769 million). Data center providers globally are investing billions to expand capacity as artificial intelligence drives demand for processing infrastructure.
Brookfield acquired Data4 from Axa Investment Managers in 2023, expanding its footprint to a current total of 135 data centers with approximately 850 megawatts of operational computing capacity.
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本文内容来自《Financial Times》、《Bloomberg》，以及《The Real Deal》等多家财经新闻媒体。