Raphael Stevens

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    China optimism is surging. Why some investors are cautious

    China’s latest policy signals have a bigger impact on sentiment than resolving deeper issues such as real estate, analysts said.
    “The ‘shock and awe’ strategy could be meant to jumpstart the markets and boost confidence,” said Ting Lu, chief China economist at Nomura, but eventually it is still necessary to introduce well thought out policies to address many of the “deep-rooted problems.”
    “China’s policy moves to lower interest rates have not helped improve confidence among consumers who are fearful of borrowing in the first place,” Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, said in an email.

    A shareholder at a securities hall in Hangzhou, the capital of Zhejiang province in east China, on Sept. 24, 2024.
    Cfoto | Future Publishing | Getty Images

    BEIJING — China’s latest policy signals have a bigger impact on sentiment than resolving deeper issues such as real estate, analysts said.
    The Shanghai Composite rallied Thursday to close at a three-month high after state media reported Chinese President Xi Jinping led a Politburo meeting on the economy that morning.

    The unexpected high-level gathering called for halting the property market decline, and strengthening fiscal and monetary policy. It provided few specifics, while affirming central bank rate cuts announced earlier in the week.
    Markets should value how Beijing is recognizing the severity of the economic situation, and how its piecemeal approach so far hasn’t worked, Ting Lu, chief China economist at Nomura, said in a report Friday.
    “The ‘shock and awe’ strategy could be meant to jumpstart the markets and boost confidence,” Lu said, but eventually it is still necessary to introduce well thought out policies to address many of the “deep-rooted problems.”

    Growth in the world’s second-largest economy has slowed, dragged down by the real estate slump. Retail sales have risen by barely more than 2% in recent months, and industrial profits have barely grown for the first eight months of the year. Exports are one of the few bright spots.
    Nomura’s Lu said policymakers in particular need to stabilize property since it is in its fourth year of contraction. He estimated the impact of additional stimulus wouldn’t exceed 3% of China’s annual GDP.

    “Markets should place more emphasis on the specifics of the stimulus,” Lu said. “If not designed well, a stimulus program in a haste, even if seemingly large, could have a slow and limited impact on growth.”
    The People’s Bank of China this week cut major interest rates, and announced plans to lower rates for existing mortgage holders. The Ministry of Finance has yet to release major policies, despite reports of such plans.

    Questions about scale

    For some investment institutions, that’s still not enough to move the needle on their China outlook.
    “China’s policy moves to lower interest rates have not helped improve confidence among consumers who are fearful of borrowing in the first place,” Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, said in an email.
    “We would be selling emerging market equities at this point,” he said, “as we have little confidence in Beijing’s willingness to extend the large stimulus that is needed.”
    Christopher added that Thursday’s “announcement of coming fiscal stimulus is welcome, but it remains to be seen if China’s government is willing to take the steps necessary to reverse the psychological damage to household and private business sentiment.”
    The Chinese government has cracked down on real estate developers, after-school tutoring businesses and the gaming industry in recent years. Policymakers have since eased their stance, but business and consumer confidence has yet to recover.
    China’s latest interest rate cuts follow the U.S. Federal Reserve’s shift last week to easier monetary policy. U.S rate cuts theoretically give China’s central bank more room to reduce already-low domestic rates.
    A survey in September of more than 1,200 companies in China by the U.S.-based China Beige Book found that corporate borrowing declined, despite historic lows in the costs to do so.
    “One can certainly hope for a wealth effect from stocks and property, but stocks will be temporary and the wealth decline from property is overwhelming compared to any relief,” Shehzad Qazi, chief operating officer at the China Beige Book, a U.S.-based research firm, said in a note Thursday.
    He expects retail sales could pick up slightly in the next four to six months.
    Qazi also expects the latest rally in Chinese stocks to continue into the last three months of the year. But cautioned that policies announced this week for driving more capital into the stock market “are not yet operational, and some may never be.”

    Sentiment change

    Those caveats haven’t discouraged investors from piling into beaten-down Chinese stocks. The CSI 300 stock index climbed Friday, on pace for its best week since 2008. It could rise another 10% in the near term, Laura Wang, chief China equity strategist at Morgan Stanley, told CNBC’s “Street Signs Asia.”
    The sentiment shift has spread globally.
    “I thought that what the Fed did last week would lead to China easing, and I didn’t know that they were going to bring out the big guns like they did,” U.S. billionaire hedge fund founder David Tepper told CNBC’s “Squawk Box” on Thursday. “And I think there’s a whole shift.”
    Tepper said he bought more Chinese stocks this week.
    An important takeaway from Thursday’s high-level government meeting was the support for capital markets, in contrast to a more negative perception in China on the financial industry in recent years, said Bruce Liu, CEO of Esoterica Capital, an asset manager.
    “Hopefully this meeting is going to correct this misperception,” he said. “For China to keep growing in a healthy way, [they] really need a well-functioning capital market.”
    “I don’t think they sent any different messages,” Liu said. “It’s just [that] they emphasize it with detailed action plans. That made a difference.” More

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    FDA approves Bristol Myers Squibb’s schizophrenia drug, the first new type of treatment in decades

    The Food and Drug Administration approved Bristol Myers Squibb’s highly anticipated schizophrenia drug, the first novel type of treatment for the debilitating, chronic mental disorder in more than seven decades. 
    The company expects the twice-daily pill, which will be sold under the brand name Cobenfy, to be available in late October.
    Cobenfy will cost $1,850 for a month’s supply or $22,500 annually before insurance and other rebates, according to Bristol Myers Squibb executives.

    Bristol Myers Squibb’s Cobenfy drug
    Courtesy: Bristol Myers Squibb

    The Food and Drug Administration on Thursday approved Bristol Myers Squibb’s highly anticipated schizophrenia drug Cobenfy, the first novel type of treatment for the debilitating, chronic mental disorder in more than seven decades. 
    Schizophrenia affects how a person thinks, feels and behaves, and can cause paranoia, delusions, hallucinations, and changes in emotions, movements and behavior. Those symptoms can disrupt a patient’s everyday life, making it difficult to go to school or work, socialize and complete other daily activities. Most people are diagnosed in their late teens to early 30s.

    Bristol Myers Squibb expects the twice-daily pill, which will be sold under the brand name Cobenfy, to be available in late October, executives told CNBC. The drug is a badly needed new option for the nearly 3 million adults in the U.S. living with schizophrenia, some medical experts say.
    Only 1.6 million of those patients are treated for the condition, and 75% of them stop taking existing medications in the first 18 months because they struggle to find treatments that are effective or easy for them to tolerate, according to the drugmaker. 
    Cobenfy could also be a huge long-term sales opportunity for Bristol Myers Squibb, which faces pressure to offset the potential loss of revenue from top-selling treatments that will see their patents expire. The drug comes from the company’s whopping $14 billion acquisition of biotech company Karuna Therapeutics at the end of last year. 
    In a July research note, Guggenheim analysts said they view Cobenfy as a “longer-term multi-billion dollar opportunity” for the company. But they said the drug will likely have a slow launch, so it may not meaningfully contribute to Bristol Myers Squibb’s top line in 2024 and 2025. 
    “I think there’s potentially a really transformational moment in how we treat and talk about schizophrenia. And what you have is, unfortunately, an often disadvantaged population that doesn’t get the attention they deserve from a research and health-care perspective,” Andrew Miller, founder and former president of research and development of Karuna Therapeutics and now an advisor to Bristol Myers Squibb, told CNBC.

    “I think the most important moment is going to be five or 10 years from now, when we look back and say we’ve actually made a difference,” he continued. “We’ve helped people, we’ve improved outcomes, we’ve provided caregivers and physicians with another tool that they can use.”

    Dado Ruvic | Reuters

    Cobenfy will cost $1,850 for a month’s supply or $22,500 annually before insurance and other rebates, Bristol Myers Squibb executives said.
    They said that pricing is in line with existing branded oral schizophrenia treatments and that they expect most patients, particularly those enrolled in Medicare and Medicaid plans, to have minimal out-of-pocket costs for the drug. Around 80% of patients living with the condition are covered by government insurance, according to Bristol Myers Squibb.
    The company intends to launch a program aimed at helping patients afford Cobenfy, executives added. 
    It’s still unclear how much that program will increase access for people without insurance.
    Cobenfy will have to compete with some existing schizophrenia drugs – called antipsychotic treatments – with lower list prices, particularly generic copycats of branded treatments. For example, patients without insurance can get the generic version of an antipsychotic treatment called Abilify for as little as $16 for 30 once-daily tablets with free coupons from GoodRx.
    Existing schizophrenia drugs work by directly blocking the dopamine receptors in the brain to generally improve symptoms in patients. 
    But they come with a long list of serious potential side effects that can cause patients to stop treatment, including weight gain, excessive fatigue and involuntary, uncontrollable movements. Roughly a third of people with schizophrenia are also resistant to conventional antipsychotic treatments, according to WebMD.
    Cobenfy is the first treatment approved from a new class of drugs that do not directly block dopamine to improve symptoms of schizophrenia, Dr. Samit Hirawat, Bristol Myers Squibb’s chief medical officer, told CNBC. 
    He said one part of Cobenfy is a drug called xanomeline, which activates certain so-called muscarinic receptors in the brain to decrease dopamine activity without causing the side effects associated with antipsychotics. The second part of Cobenfy is called trospium, which reduces the gastrointestinal side effects linked to xanomeline, such as nausea, vomiting, diarrhea and constipation. 
    “The majority of these patients have already cycled through one or two of these products,” Adam Lenkowsky, Bristol Myers Squibb’s chief commercialization officer, told CNBC. “So the enthusiasm that we’re hearing from physicians is the opportunity to have a patient go onto treatment without seeing the side effects but also getting unprecedented like efficacy.” 

    More CNBC health coverage

    Lenkowsky said the company expects Cobenfy to eventually become the standard treatment for schizophrenia as physicians learn more about the drug and get more comfortable with prescribing it to patients. 
    But the price could limit use of the drug to patients who have already tried and failed with other existing treatments, said Nina Vadiei, clinical associate professor of pharmacotherapy and translational sciences at the University of Texas at Austin College of Pharmacy.
    “If it were up to me, I wouldn’t necessarily say we have to try X number of antipsychotics first. But I know from experience in a hospital setting that that is probably what’s going to have to happen because of cost, mainly,” said Vadiei, a clinical psychiatric pharmacist who sees patients with schizophrenia at San Antonio State Hospital.”

    Trial results and upcoming research

    The approval was based on data from three clinical trials comparing Cobenfy to a placebo, as well as two longer-term studies that examined how safe and tolerable the drug is for up to one year. Cobenfy met the main goal of the three trials, significantly decreasing symptoms of schizophrenia compared with a placebo, according to Bristol Myers Squibb. 
    In the studies, Cobenfy mostly led to mild to moderate side effects, which were mainly gastrointestinal and dissipated over time, Miller said.
    Bristol Myers Squibb said Thursday’s approval for schizophrenia may only be the beginning for Cobenfy.
    For example, the company has ongoing late-stage clinical trials examining Cobenfy’s potential in treating Alzheimer’s disease patients with psychosis. Bristol Myers Squibb said it expects to release data from those studies in 2026. 
    The company also plans to study Cobenfy’s potential to treat bipolar mania and irritability associated with autism. 
    “When we think about Cobenfy, we think about it as multiple indications packed in one product … because we are really developing the drug not only for schizophrenia but six other indications,” Hirawat said, referring to other potential uses for the drug. 
    — CNBC’s Angelica Peebles contributed to this report.

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    Trademark dispute emerges over Tiger Woods’ new logo

    Tigeraire, a company that makes cooling products for athletes, said Sun Day Red and Tiger Woods have “unlawfully hijacked” Tigeraire’s design into their own branding.
    The dispute will bring the trademark application that Woods filed for his new logo to a halt.
    Sun Day Red pays homage to the fact that Woods always wears red on Sundays and the logo is a tribute to the 15 majors he’s won over the course of his career.

    Tiger Woods speaks during the launch of Tiger Woods and TaylorMade Golf’s new apparel and footwear brand “Sun Day Red” at Palisades Village on February 12, 2024 in Pacific Palisades, California.
    Kevork Djansezian | Getty Images Sport | Getty Images

    Tiger Woods’ new logo for his Sun Day Red golf apparel line is facing a trademark dispute.
    Tigeraire, a company that makes cooling products for athletes, has filed a notice of opposition with the U.S. Patent and Trademark Office, alleging that Sun Day Red and Tiger Woods have “unlawfully hijacked” Tigeraire’s design into their own branding.

    Arrows pointing outwards

    Applicant’s Marks and the Registered Mark.
    U.S. Patent and Trademark Office

    “The actions of SDR, TaylorMade and Tiger Woods blatantly ignore Tigeraire’s long-standing protected mark, brand and identity, violate federal and state intellectual property law, and disregard the consumer confusion their actions create. SDR’s application should be denied,” the court filing said.
    TaylorMade Golf, the company behind Sun Day Red, told CNBC, “We have full confidence in the securitization of our trademarks.”
    Sun Day Red was launched in May, following Woods’ 27-year partnership with Nike.
    The brand pays homage to the fact that Woods always wears red on Sundays and the logo is a tribute to the 15 majors he’s won over the course of his career, Woods said previously.

    A detail of hats and a club cover during the launch of Tiger Woods and TaylorMade Golf’s new apparel and footwear brand “Sun Day Red” at Palisades Village on February 12, 2024 in Pacific Palisades, California. 
    Kevork Djansezian | Getty Images Sport | Getty Images

    “Sun Day Red continues to penetrate the North American marketplace,” TaylorMade CEO David Abeles said. “Our products have been extremely well received.”

    A spokesman for Woods declined to comment on the matter.
    Woods and the Sun Day Red team will have 40 days to file an answer on the notice.
    The opposition proceeding will bring the trademark application that Woods filed for his new logo to a halt, Josh Gerben, a trademark attorney, told CNBC. It is unlikely to affect future production of the line, though, he said.
    “They now likely give themselves an opportunity to negotiate with Tiger and TaylorMade to see if there’s a resolution that might be had,” Gerben said.
    He expects the case to settle before it gets close to a trial.
    “By filing this opposition, the portable fan company really basically gets them a seat at the table to negotiate,” he said. “Because in order for Tiger and TaylorMade to get this trademark registered there, you’re gonna have to win this case.” More

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    Wealthy investors support Harris over Trump, new survey says

    The majority of investors with at least $1 million of investible assets plan to vote for Vice President Kamala Harris, according to a UBS survey.
    However, the millionaire investors gave former President Donald Trump a better grade on the economy.

    Vice President and Democratic presidential candidate Kamala Harris speaks at the Philip Chosky Theatre during a campaign event in Pittsburgh, Pennsylvania, on September 25, 2024. 
    Jim Watson | AFP | Getty Images

    A majority of millionaire investors said they plan to vote for Vice President Kamala Harris in November, even though they give former President Donald Trump a better grade on the economy, according to new survey.
    According to a UBS survey of investors with at least $1 million of investible assets, 57% plan to vote for Harris and 43% plan to vote for Trump.

    Harris wins 91% of Democratic millionaires surveyed, 12% of Republicans and 60% of independents. Trump wins 88% of Republican millionaires, 9% of Democrats and 40% of independents.
    Like many voters, millionaire investors rated the economy as their No. 1 issue. Fully 84% said the economy is the top issue in the election, followed by Social Security (71%), then taxes (69%) and immigration.

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    While they support Harris more broadly, the investors who were surveyed give Trump slightly higher marks on the economy and taxes. When asked “who is better equipped to address the economy,” 51% said Trump and 49% said Harris. Trump also edged out Harris on taxes, at 52% to 48%.
    Trump has proposed extending the 2017 tax cuts entirely, while Harris wants them to apply only to those making less than $400,000. She has also proposed higher taxes on the wealthy and corporations.
    Millionaire investors give Harris better grades on Social Security and health care.

    Whoever wins, however, millionaire investors are bullish on the economy and markets. A majority (55%) said they are highly confident about the economy, up from 43% during the same period in the 2020 election cycle (which was during the Covid-19 pandemic). Three-quarters of investors are also “highly optimistic” about their portfolio returns in the next six months.
    More than three-quarters of wealthy investors are also planning to make changes to their portfolios based on the election results. If Trump wins, they said defense and energy stocks look attractive, but if Harris wins, they said health-care, sustainable investing and tech names look best, according to the survey.
    The survey polled 971 investors with at least $1 million in investible assets between Aug. 13 and Aug. 19.

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    Nuggets, Avalanche launch streaming service, with some games aired on local broadcast stations

    Local fans of the NBA’s Denver Nuggets and the NHL’s Colorado Avalanche will have a couple more ways to watch their teams’ games this season.
    Twenty of each team’s games will be aired via local broadcast stations owned by Tegna.
    All of the teams’ games that are not exclusive to a national network will be available on a new streaming service, Altitude+, for $19.95 a month.

    Nikola Jokic, #15 of the Denver Nuggets, shoots the ball against Bones Hyland, #5, and Norman Powell, #24, of the Los Angeles Clippers during the second half of a preseason game at Crypto.com Arena in Los Angeles on October 19, 2023.
    Kevork Djansezian | Getty Images

    Local fans of the NBA’s Denver Nuggets and the NHL’s Colorado Avalanche will have some new ways to watch their teams’ games this season.
    Kroenke Sports & Entertainment — Stan Kroenke’s company that owns several professional sports franchises including Denver’s NBA and NHL teams along with their regional sports network, Altitude — is partnering with broadcast station owner Tegna to offer a chunk of Avalanche and Nuggets games this season. It’s also launching a direct-to-consumer streaming service.

    The local broadcast partnership and new streaming service is part of a growing trend, especially among NBA and NHL teams, which are searching for more ways to offer games to fans who have turned away from the traditional pay TV bundle.
    Beginning this season, there will be 20 Nuggets and 20 Avalanche games on Tegna’s free local over-the-air broadcasts, 9NEWS and My20.
    Kroenke Sports & Entertainment is also launching the direct-to-consumer streaming service, Altitude+, in October. The platform will give fans in the Denver media market access to all Avalanche and Nuggets games for $19.95 a month.
    The NHL season begins on Oct. 4 when the New Jersey Devils and Buffalo Sabres play in Prague. The season in North America begins on Oct. 8. The NBA season begins on Oct. 22.
    While both teams’ local games are aired on Altitude Sports, the regional sports network is only available to fans in Denver on DirecTV and Fubo TV. It’s also available on Charter Communications’ Spectrum in some parts of its nine-state territory.

    However, Altitude hasn’t been available to Comcast and Dish pay TV customers since 2019, leaving a big hole in the Denver market. The availability on Tegna’s broadcast stations and the introduction of the streaming service may solve problems for fans in the market.
    “It certainly played a role. But what we’re really focused on is trying to get maximum exposure for our two great teams,” Steve Smith, president of Kroenke Sports & Entertainment’s KSE Media Ventures, said in an interview with CNBC. “And we think this deal really gives people the opportunity to do it however they want.”
    Altitude Sports sued Comcast in 2019 after the two sides could not reach a distribution agreement, leading to a so-called blackout for Comcast’s customers. The two sides settled in March 2023, but notably the settlement did not include a restoration of Altitude Sports on Comcast.
    The Bally Sports regional sports networks owned by Diamond Sports, which is under bankruptcy protection, went dark for Comcast customers earlier this year. However, the two sides reached an agreement in July.
    In the wake of Diamond Sports’ bankruptcy, numerous teams have parted ways with their regional sports networks, opting for deals with broadcasters and launching streaming services.
    Most recently, the NHL’s Dallas Stars and Anaheim Ducks exited Bally Sports. Stars games will be available on streaming service Victory+ this season, and the local Ducks games will be available via Victory+ and a local over-the-air broadcast. The streaming option for both is free.
    Meanwhile, the NBA’s Dallas Mavericks and New Orleans Pelicans have both turned to local over-the-air broadcasters instead of Bally Sports for all their games this season. This followed both teams reaching agreements similar to the Nuggets and Avalanche’s deal with Tegna. Before offering all games through broadcasters, the Pelicans had aired 10 of their matchups on Gray’s stations, while the Mavericks offered 13 games in the latter part of last season on Tegna’s stations.
    Regional sports networks are also increasingly offering streaming options.
    The YES Network, which airs MLB’s New York Yankees, and MSG Networks, which offers the NBA’s New York Knicks and NHL’s New York Rangers, among others, are also debuting a streaming option through a joint venture this fall.
    The pricing of regional sports networks’ streaming options reflects that they must be careful not to further disrupt the pay TV model and breach contracts with distributors. These pay TV contracts help support the billions of dollars in fees that the networks pay professional sports leagues to air their games.
    Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

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    U.S. new vehicle sales expected to have struggled during third quarter

    Sales are expected to fall roughly 2% during the third quarter compared with the same time in 2023 to about 3.9 million vehicles sold, according to Cox Automotive and Edmunds.com.
    Analysts note that the Federal Reserve’s recent decision to cut rates was positive, but it does not necessarily guarantee a major uptick in sales through the rest of the year.
    Sales of EVs are expected to increase about 8% during the third quarter compared with the same period a year earlier, according to Cox.

    New Jeep vehicles sit on a Dodge Chrysler-Jeep Ram dealership’s lot on October 03, 2023 in Miami, Florida.
    Joe Raedle | Getty Images News | Getty Images

    DETROIT — U.S. sales of new vehicles are expected to have struggled during the third quarter amid economic and political uncertainties, as well as elevated interest rates and prices, according to industry forecasters.
    Sales are projected to fall roughly 2% during the third quarter compared with the same time in 2023, to about 3.9 million vehicles sold, according to Cox Automotive and Edmunds.com. That would be a roughly 5% decrease compared with the second quarter of this year.

    Analysts note that the Federal Reserve’s decision last week to cut rates was a step in the right direction, but it does not necessarily guarantee a major uptick in auto sales through the rest of the year.
    “2024 has been a volatile year for the new vehicle market, and more of the same is expected in Q4,” said Charlie Chesbrough, Cox Automotive senior economist. “Affordability remains the main obstacle to a stronger market, but it is improving, so we remain optimistic on the outlook for industry sales.”
    Both Cox and Edmunds expect light-duty U.S. vehicle sales to total about 15.7 million vehicles in 2024. Edmunds has maintained its guidance since the beginning of the year, while Cox lowered it from an initial forecast of 16 million.
    Jessica Caldwell, Edmunds’ head of insights, said the current market is just too expensive for many consumers, limiting the number of Americans who can purchase a new vehicle.
    “Who can afford new cars seems to be the big issue. People, on average, are having to finance $40,000 for a new car,” she told CNBC. “The new market is quite limiting for a lot of buyers.”

    The average transaction price for a new vehicle is down from a year ago but remains elevated compared with historical levels at $47,870, according to Cox.
    Honda Motor and Ford Motor are expected to be among the only major automakers to experience growth during the third quarter compared with a year earlier, according to forecasts. Those with the biggest losses are expected to include Stellantis, Toyota Motor and BMW.
    Stellantis’ sales, which Cox forecasts to be off as much as 21% in the third quarter from a year earlier, have been in a freefall for more than a year. CEO Carlos Tavares has prioritized pricing and profits over market share, especially with the automaker’s crucial Jeep and Ram brands.
    Regarding electric vehicles, sales are growing but are still slower than many had previously anticipated. Sales of EVs are expected to increase about 8% during the third quarter compared with a year earlier, according to Cox.
    The projected rise in EV sales comes despite a forecast decrease in sales of 2.4% during the quarter for U.S. EV leader Tesla, Cox reports. Tesla, which has dominated EV market share for years, is expected to have its share drop below 50% for the second consecutive quarter, according to Cox.
    EV sales are being heavily assisted by incentives. While average transaction prices for new EVs is anticipated to be flat year over year, incentives for the vehicles are expected to have increased, to represent 13.3% of the average transaction price of the vehicles. That’s the highest rate so far this year and more than 80% higher than incentives for traditional vehicles with internal combustion engines.
    The EV incentives include an up to $7,500 federal credit from the U.S. government for consumers to purchase or lease an electric vehicle. Not all new EVs qualify for the incentive, unless they’re leased.

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    David Tepper says the Fed has to cut rates at least two or three more times to keep credibility

    David Tepper, founder and president of Appaloosa Management.
    David Orrell | CNBC

    Appaloosa Management’s David Tepper said investors should believe the Federal Reserve when it says it will lower interest rates because the central bank has now to keep credibility.
    “You just read what these guys are saying,” Tepper said Thursday on CNBC’s “Squawk Box.” “Powell told you something. … He told you some kind of recalibration. He has to follow through somewhat. I’m not that smart. I just read what they say and do they have conviction. They usually do what they say, especially when they have this level of conviction.”

    The Fed last week sliced half a percentage point off benchmark rates, starting its first easing campaign in four years with an aggressive move despite a pretty stable economy. In addition to this reduction, the central bank indicated through its “dot plot” the equivalent of 50 more basis points of cuts by the end of the year.
    Fed Chairman Jerome Powell said the cut was a “recalibration” for the central bank and did not commit to similar moves at each upcoming meeting.
    “Probably two or three interest rates, 25 basis point cuts, they have to do, or they lose credibility,” Tepper said. “They’re going to do something besides the 50. You know, another 25, 25, 25 seems like it’s going to have to be done.” (One basis point equals 0.01%.)
    ‘I don’t love the U.S. markets’
    Still, Tepper said the macro setup for U.S. stocks makes him nervous as the Fed eases monetary policy in a relatively solid economy like it did in the 1990s. The supersized rate cut last week came despite most economic indicators looking fairly solid.
    “It was around the ’90s in that market where the Fed cut rates into Y2K in a good economy,” he said. That turned into “bubble mania in ’99, early 2000 so I don’t love this. I’m a value guy.”

    Gross domestic product has been rising steadily, and the Atlanta Fed is tracking 3% growth in the third quarter based on the resilience in consumer spending. Meanwhile, most gauges showed inflation is still well ahead of the Fed’s 2% target. However, there has been a slowdown in the labor market, which partly prompted the oversized rate reduction.
    ‘Sure as heck won’t be short’
    The widely followed hedge fund manager said while the central bank’s move gave him hesitation, he certainly is not betting against U.S. equities because of the immediate benefits of easy policy.
    “I don’t love the U.S. markets on a value standpoint, but I sure as heck won’t be short, because I would be nervous as heck about the setup with easy money everywhere, a relatively good economy,” Tepper said. “It would make me nervous, not to be somewhat long the U.S.”
    Tepper, who is also the owner of National Football League’s Carolina Panthers franchise, revealed that he’s going all in on China on the back of a rate cut and a flood of support measures the government recently announced to shore up a flailing economy.
    He added that he prefers Asian and European equities to U.S. stocks.

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    Southwest Airlines raises summer revenue forecast, authorizes $2.5 billion in share buyback

    Southwest Airlines raised its third-quarter revenue forecast on Thursday and detailed a host of changes to its business model.
    The carrier also said it would add Bob Fornaro, who previously led Spirit Airlines, to its board of directors.

    DALLAS — Southwest Airlines raised its third-quarter revenue forecast on Thursday, announced its board authorized $2.5 billion in share buybacks and detailed a host of changes to its business model as it seeks to fend off activist Elliott Investment Management.
    The airline said it expects unit revenue to rise as much as 3% in the third quarter over the same period last year, up from a previous forecast of a decline of as much as 2%, helped in part by rebooking passengers who were originally flying on airlines affected by July’s CrowdStrike outage.

    The carrier also said it would add Bob Fornaro, a well-respected industry veteran who previously led Spirit Airlines, to its board of directors. Southwest and Fornaro go back more than a decade. He had served as CEO of AirTran, the airline Southwest combined with in 2011, and was a consultant to Southwest after the merger.
    Southwest executives are presenting their vision for the company’s future at the airline’s Dallas headquarters on Thursday in an investor day presentation. CEO Bob Jordan and Southwest’s other senior leaders are under increasing pressure from Elliott, which has called for a leadership change at the carrier.
    Southwest executives will try to convince investors that it is on the right track to boost profits and increase revenue. Over the summer, it unveiled dramatic changes to its more than half-century-old business model, including assigned and extra-legroom seats, which could generate more revenue for the carrier.
    Like with many changes in the airline industry, they won’t happen overnight. Seats with extra legroom won’t debut until 2026, as the carrier requires Federal Aviation Administration approval and time to retrofit aircraft, according to a slide from Thursday investor’s presentation. It estimated that the new cabins, in which about a third of the seats will have additional legroom, will generate $1.7 billion in earnings before interest and taxes in 2027.
    The new seats will have at least 34 inches of legroom, compared with a standard pitch of 31 inches, the airline said.

    Southwest on Thursday also said it is firm on its long-standing policy of allowing customers to check two pieces of luggage for free, saying it “generates market share gains in excess of potential lost revenue from bag fees.”
    The airline is facing a shortfall of new aircraft because of delays from Boeing, including a not-yet-certified 737 Max 7, the smallest plane in the family. Without a smaller aircraft, Southwest has cut unprofitable routes that might have been better served by airplanes with fewer seats to meet demand.
    On Wednesday, Southwest told staff it will slash its service in Atlanta next year and could cut more than 300 flight attendants and pilots from the city in an effort to reduce costs.
    Earlier this month, Southwest’s executive chairman and former CEO Gary Kelly said he would step down by the end of next year. Elliott later told Southwest mechanics’ union that it still wanted a leadership change at the top of the carrier. The firm didn’t immediately comment on Southwest’s strategy presentation it released Thursday.
    — CNBC’s Rohan Goswami contributed to this report.

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