This is a comparison of Wednesday’s Federal Open Market Committee statement with the one issued after the Fed’s previous policymaking meeting that concluded May 1.
Text removed from the prior statement is in red with a horizontal line through the middle.
Text appearing for the first time in the June statement is in red and underlined.
Black text appears in both statements.
Arrows pointing outwards More
Sony Pictures has acquired Alamo Drafthouse, the seventh-largest movie theater chain in North America.
This is the first time in more than 75 years that a major Hollywood studio will own a movie theater chain.
The company’s 35 cinemas will continue to be operated by Alamo Drafthouse and its headquarters will remain in Austin, Texas.
Interior of an Alamo Drafthouse Cinema theater.
Alamo Drafthouse
For the first time in more than 75 years, a major Hollywood studio will own a movie theater chain.
Sony Pictures has acquired Alamo Drafthouse, the seventh-largest movie theater chain in North America, the company announced Wednesday. The cinema company was purchased from owners Altamont Capital Partners, Fortress Investment Group and founder Tim League.
Between 1948 and 2020, film distributors were prohibited from owning an exhibition company under what was known as the Paramount Consent Decrees. While studios were permitted to own individual theater locations — Disney owns the El Capitan Theatre and Netflix owns The Egyptian Theatre and New York’s Paris Theater, for example — the U.S. Department of Justice disallowed ownership of a chain of cinemas.
The decrees were abolished in 2020. Now, some four years later, Sony is the first to invest in a theatrical company.
Alamo Drafthouse CEO Michael Kustermann will remain at the helm of the dine-in movie theater chain and will report to Ravi Ahuja, president and CEO of the newly formed Sony Pictures Experiences division.
The company’s 35 cinemas will continue to be operated by Alamo Drafthouse and its headquarters will remain in Austin, Texas.
“We look forward to building upon the innovations that have made Alamo Drafthouse successful and will, of course, continue to welcome content from all studios and distributors,” Ahuja said in a statement.
The acquisition comes after Alamo Drafthouse filed for Chapter 11 bankruptcy protection in 2021 due to Covid-19 pandemic disruptions. It was rescued by a private equity firm. However, just last week, five North Texas locations closed after a franchisee filed for bankruptcy.
“We are excited to make history with Sony Pictures Entertainment and have found the right home and partner for Alamo Drafthouse Cinema,” said Kustermann. “We were created by film lovers for film lovers. We know how important this is to Sony, and it serves as further evidence of their commitment to the theatrical experience. Together we will continue to innovate and bring exciting new opportunities for our teammates and moviegoers alike.”
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The Federal Reserve on Wednesday kept its key interest rate unchanged and signaled that just one cut is expected before the end of the year.
The Federal Open Market Committee also indicated that it believes the long-run interest rate is higher than previously indicated.
“In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective,” policymakers wrote in a statement.
The Federal Reserve on Wednesday kept its key interest rate unchanged and signaled that just one cut is expected before the end of the year.
With markets hoping for a more accommodative central bank, Federal Open Market Committee policymakers following their two-day meeting took two rate reductions off the table from the three indicated in March. The committee also signaled that it believes the long-run interest rate is higher than previously indicated.
New forecasts released after this week’s two-day meeting indicated slight optimism that inflation remains on track to head back to the Fed’s 2% goal, allowing for some policy loosening later this year.
“Inflation has eased over the past year but remains elevated,” the post-meeting statement said, echoing language from the last statement. In the only substantive change, the new statement followed with, “In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective.”
The previous language said there had been “a lack of further progress” on inflation.
Traders seemed encouraged by these comments, with the S&P 500 jumping to a record Wednesday after the statement was issued.
Aggressive cutting seen for 2025
For the period through 2025, the committee now sees five total cuts equaling 1.25 percentage points, down from six in March. If the projections hold, it would leave the federal funds rate benchmark at 4.1% by the end of next year.
Another significant development occurred with the projection for the long-run rate of interest, essentially a level that neither boosts nor restricts growth. That moved up to 2.8% from 2.6%, a nod that the higher-for-longer narrative is gaining traction among Fed officials.
In a further indication of a hawkish bent from central bankers, the dot plot showed four officials in favor of no cuts this year, up from two previously.
Return to 2% target
Elsewhere in the FOMC’s Summary of Economic Projections, participants raised their 2024 outlook on inflation to 2.6%, or 2.8% when excluding food and energy. Both inflation projections were 0.2 percentage point higher than in March.
The Fed’s preferred inflation gauge is the Commerce Department’s personal consumption expenditures price index, which showed respective readings of 2.7% and 2.8% for April. The Fed focuses more on core inflation as a better long-term indicator. The SEP indicates inflation returning to the 2% target, but not until 2026.
The decision and informal forecasts from the 19 meeting participants come during a volatile year for markets and investors’ hopes that the Fed would start easing after it raised benchmark rates to their highest level in some 23 years.
The federal funds rate, which sets overnight borrowing costs for banks but feeds into many consumer debt products, is targeted in a range between 5.25%-5.50%, the result of 11 rate increases between March 2022 and July 2023.
Earlier in the day, as Fed officials were preparing their economic and rate outlooks, the Bureau of Labor Statistics released the consumer price index for May. The report showed that inflation was flat on the month while the annual rate edged lower from the rate in April to 3.3%.
During a press conference, Powell said that report was better than almost anyone had expected, and was factored into the FOMC’s decision.
“We see today’s report as progress and as, you know, building confidence,” Powell said. “But we don’t see ourselves as having the confidence that would warrant beginning to loosen policy at this time.”
Inflation remains well above the Fed’s 2% target, while also being considerably below the peak of just over 9% seen nearly two years ago. Core readings excluding food and energy prices were at 0.2% from the prior month and 3.4% from the year-ago period.
In the first quarter of 2024, economic data softened from where it had been for most of the previous year, with GDP rising at just a 1.3% annualized pace. April and May have been a mixed bag for data, but the Atlanta Fed is tracking GDP growth at 3.1%, a solid pace especially in light of persistent recession worries that have dogged the economy for the past two years.
Inflation data, though, has been equally resilient and has posed problems for central bankers.
The year began with markets expecting a vigorous pace of rate cuts, only to be thwarted by sticky inflation and statements from Fed officials that they are unconvinced that inflation is heading back convincingly to target.
“This is a nothing-burger Fed meeting. They know conditions are improving, but don’t need to rush with rate cuts,” said David Russell, global head of market strategy at TradeStation. “The strong economy is letting Jerome Powell wring inflation out of the system without hurting jobs. Goldilocks is emerging but policymakers don’t want to jinx it.”
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Federal Reserve Bank Chair Jerome Powell announces that interest rates will remain unchanged during a news conference at the bank’s William McChesney Martin building on May 01, 2024 in Washington, DC.
Chip Somodevilla | Getty Images
The Federal Reserve on Wednesday projected only one rate cut for the remainder of 2024, down from its March forecast that called for three reductions.
The central bank’s “terminal rate” for 2024, or the rate at which its benchmark fed funds rate will peak, went up to 5.1%, equivalent to a target range of 5%-5.25%. That means that the Fed is only forecasting one quarter-point rate cut from the current target range of 5.25% to 5.5%.
The so-called “dot plot,” which indicates how 19 FOMC members, both voters and nonvoters, showed four officials in favor of no cuts this year, while seven members projected one reduction. The remaining eight officials forecast two rate cuts for 2024.
Here are the Fed’s latest targets:
Arrows pointing outwards
Back in March, the Fed projected three rate cuts this year with the fed funds rate hitting 4.6%. After a cool inflation report Wednesday but before the Fed’s new forecast release, traders were pricing in two cuts this year.
For 2025, the central bank anticipated four rate cuts in total or a full percentage point reduction in the benchmark fed funds rate. More
EV maker Fisker issued voluntary recalls for its Ocean SUV due to software-related issues.
The company plans to fix these software issues through an over-the-air update process.
The recall was announced amid three open NHTSA investigations into Fisker.
The Fisker Ocean electric sports utility vehicle (SUV) during AutoMobility LA ahead of the Los Angeles Auto Show in Los Angeles, California, U.S., on Wednesday, Nov. 17, 2021.
Kyle Grillot | Bloomberg | Getty Images
Electric vehicle startup Fisker announced on Wednesday that it is recalling thousands of Ocean SUVs in North America and Europe due to issues with vehicle software and will roll out an over-the-air software update.
The company recalled 11,201 Oceans across the U.S., Canada, and Europe due to safety issues. The affected vehicles potentially had issues with the Motor Control Unit and Vehicle Control Unit software, which could make the vehicle lose motor power, the company said in a press release.
Fisker also recalled 6,864 Oceans in the U.S. and 281 in Canada for compliance reasons. The company said the vehicles do not currently comply with federal vehicle safety standards related to gauges and telltale icons in the cluster display.
Fisker said that vehicles updated to OS 2.1 are not impacted by the recall. Fisker anticipates completing the software update process by June 30, 2024.
The recalls come after months of setbacks for Fisker. Reuters reported in February that the company may not be able to continue as a going concern due to high interest rates causing a slowdown in demand.
Fisker’s struggles continued into March as talks for a potential deal with an unnamed large automaker collapsed, and the New York Stock Exchange announced plans to delist the startup’s shares due to “abnormally low” price levels.
In April, Reuters reported that the U.S. auto safety regulator opened an investigation into the 2023 Ocean due to complaints over the vehicles’ doors failing to open. This marked the National Highway Traffic Safety Administration’s third probe into Fisker — additional investigations are open due to issues with the 2023 Ocean’s brakes and unintended vehicle movement.
Fisker delivered 4,929 Oceans in 2023, the company said in February when announcing its full-year financial results, the most recent report available. The company said it expected to deliver between 20,000 and 22,000 vehicles in 2024.
The company said it informed its dealers of the recalls on May 30 and will notify owners by June 30.
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Southwest Airlines CEO Bob Jordan said the company is ready to adapt to changing customer trends like premium seating as demand shifts.
Jordan’s comments came days after hedge fund Elliott Management disclosed a nearly $2 billion stake in Southwest and said it wants to replace the carrier’s CEO and chairman.
Southwest said in April that it was weighing changes to its longtime business model while rivals capitalize on travelers willing to pay more to fly.
A Southwest commercial airliner takes off from Las Vegas on Feb. 8, 2024.
Mike Blake | Reuters
Southwest Airlines CEO Bob Jordan said the company is ready to adapt to changing customer trends like premium seating as pressure from an activist investor mounts.
“We will adapt as our customers’ needs adapt,” Jordan said at an industry event hosted by Politico on Wednesday.
Jordan’s comments came two days after hedge fund Elliott Management disclosed a $1.9 billion stake in Southwest and said the carrier needs a new CEO and new chairman.
In April, Jordan told investors that the airline is considering major changes to its product, potentially ditching its system of unassigned seating that has made the Dallas-based carrier a standout among airlines, and even reevaluating its single class of service.
Jordan reiterated those considerations Wednesday, saying that the airline, which started flying in 1971 and now carries more passengers in the United States than any other, is in its “third generation.” He said the airline’s leaders are open to big shifts to increase revenue, while rivals like Delta and United capitalize on customers willing to pay up for a seat with more space or other perks.
Elliott didn’t immediately respond to a request for comment about Jordan’s remarks on Wednesday.
Southwest on Monday said in response to the activist campaign that its board backed the company’s leaders and the airline’s strategy, while it will also “look forward to further conversations with Elliott.”
Southwest has struggled with weaker margins than some of its competitors as it faces increased airline capacity in the U.S., shifting post-pandemic travel patterns and a spiraling problem that is out of its control: delays of new planes from Boeing, its sole aircraft provider, as that company grapples with several manufacturing and safety crises. The airline expects to receive just 20 Max jets from Boeing this year, down from an earlier forecast for close to 80 new planes.
Southwest had also taken months to find its footing after a year-end holiday meltdown in 2022 cost it more than $1 billion. The company later acknowledged its technology couldn’t handle the hundreds of flight and crew changes triggered by a winter storm, prompting it to quickly upgrade its system.
Meanwhile, Jordan said Southwest has continued to work toward improving the customer experience. It’s upgraded its inflight Wi-Fi and added power outlets on its fleet of Boeing 737s in recent years.
“I think customer preference is going beyond that,” Jordan said Wednesday. The carrier has spent months surveying customers to figure out what changes are needed, he added.
“It’s been several years since we last studied this in-depth, and customer preferences and expectations change over time,” an airline spokeswoman told CNBC. “We are also studying the operational and financial benefits of any potential change.”
— CNBC’s Rohan Goswami contributed to this article.
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Meme stock champion Roaring Kitty, whose real name is Keith Gill, held onto his positions of 5 million GameStop common shares and 120,000 call options.
If his position is in the money, many suspect that Gill won’t have the capital to exercise the options and E-Trade may have to intervene.
Gill could start selling his calls early to turn a quick profit and avoid the drama in a week and a half, but many argue that it’s not a good look for the champion of the stock.
Keith Gill, a Reddit user credited with inspiring GameStop’s rally, during a YouTube livestream arranged on a laptop at the New York Stock Exchange on June 7, 2024.
Michael Nagle | Bloomberg | Getty Images
As Roaring Kitty continues to watch his favorite GameStop shares swing wildly, he might be contemplating what to do with his massive options position that is approaching expiration.
The meme stock champion, whose real name is Keith Gill, has so far held onto his positions of 5 million GameStop common shares and 120,000 call options, according to a screenshot he shared Monday evening. The mammoth options position — involving 12 million underlying GameStop shares — could be a nightmare for Gill to offload or exercise even if the calls end up profitable or “in the money.”
His call options against GameStop have a strike price of $20 and an expiration date of June 21. Shares of the video game company have gained about 8% so far this week to around $30 a share. If the stock trades above $20 that Friday, which makes his call position in the money, Gill could exercise the options at $20 apiece, allowing him to purchase an additional 12 million shares at the discounted price. However, many think it’s unlikely he has enough capital to pull off such a move.
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For Gill to exercise the calls, he would need to have $240 million to take custody of the stock (12 million shares bought at $20 apiece). His last screenshot showed he has $29.4 million in cash in his E-Trade account, though he could deposit more money from other undisclosed accounts.
During Friday’s livestream, Roaring Kitty told some 600,000 viewers that he doesn’t have any institutional backers, but he didn’t entirely rule out the possibility of having more cash elsewhere.
E-Trade dilemma
Let’s say he doesn’t have the $240 million to exercise the calls. As June 21 looms, his broker E-Trade may have to intervene by liquidating his options before expiration.
“If they remain in the money and he doesn’t close them, the brokerage may be forced to take action on his behalf,” said CC Lagator, co-founder of brokerage Options AI.
The Morgan Stanley-owned E-Trade declined to comment.
E-Trade’s client agreement for self-directed accounts stated that the brokerage may decline, cancel or reverse a client’s orders or instructions at its discretion and without notice.
If Gill doesn’t give an instruction prior to expiration, the broker could sell the contracts that his cash balance doesn’t support, or submit a “do not exercise” (DNE) order for the same amount.
“The DNE option would be extremely costly as it marks them at zero. I’d imagine they would be in contact in the days ahead to make sure he has a plan. They can’t wait until the last hour,” Lagator said.
E-Trade has been debating whether to ban Gill from the trading platform over concerns regarding potential market manipulation, The Wall Street Journal reported last week.
Selling early?
Theoretically, Gill could start selling his calls early to turn a quick profit and avoid the drama in a week and a half, but many argue that it’s not a good look.
“He definitely has the public perception that’s perhaps to some degree stopping him from selling because then he would definitely be marked as a manipulator, kind of like a modern-day pump-and-dump scheme,” said Tony Zhang, chief strategist at OptionsPlay.
Meanwhile, market participants would easily catch wind of his sale given the sheer size of his position, said traders. His active selling could also put downward pressure on the stock and it could inspire his legion of retail traders to follow suit.
The Securities and Exchange Commission has been monitoring GameStop’s options trading activity, while Gill is under the scrutiny of the Massachusetts securities division.
Rolling the options
Gill also has the costly option to roll those calls to a further expiration date to buy some time, which means exiting the current position and immediately entering a similar position. He could opt for that up until 4 p.m. ET on June 21.
“It’s not something you just want to sit there doing on your laptop in the last hour. It’s too big. Again, if he’s in contact with them, it would be in his best interest to be working with their risk teams and trading desks, if rolling is his plan,” Lagator said.
If Gill holds the calls to expiration date with the stock falling below $20, this position would expire worthless. It cost him more than $60 million to acquire the position.
‘Options 101’
Still, if Gill somehow comes up with enough money to exercise all of his calls, it would leave him a total of 17 million shares and he would become the fourth-biggest shareholder in GameStop, behind Vanguard, BlackRock and Ryan Cohen’s RC Ventures, according to FactSet.
Alternatively, he could sell his other 5 million shares of GameStop to help fund the transaction to exercise the calls, but still, the stock would have to trade above $48 for him to secure enough money, nowhere near where it is now.
On Tuesday, Gill made light of his dilemma, posting on X a meme of a banana reading “Options Basics 101.”
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Stellantis CEO Carlos Tavares and other executives are expected to address Chinese competition, capital discipline, forthcoming products, software initiatives, and potentially, further cost reductions
The parent of brands like Ram and Jeep has set ambitious financial targets for 2030.
Stellantis has aggressively cut operations under Tavares, with some executives describing the measures as difficult or grueling.
Stellantis CEO Carlos Tavares holds a news conference after meeting with unions, in Turin, Italy, March 31, 2022.
Massimo Pinca | Reuters
DETROIT – Since spearheading a merger to create Stellantis in 2021, CEO Carlos Tavares has been on a cost-cutting mission. That’s beginning to pay dividends for the company and investors.
How the trans-Atlantic automaker expects to keep that momentum amid uncertainty surrounding all-electric vehicles and increasing competition from Chinese automakers is expected to be in focus this week as Tavares leads the automaker’s investor day Thursday.
Tavares and other executive are expected to address Chinese competition, capital discipline, forthcoming products, software initiatives, and potentially, further cost reductions as the company aims to achieve ambitious financial targets by 2030.
When Tavares’ PSA Groupe merged with Fiat Chrysler in January 2021, the freshly combined company set out to reduce spending by 5 billion euros, or about $5.4 billion, annually. It’s a target the company says it will achieve in 2024, a year ahead of schedule.
More recently, Tavares has said the parent of brands like Ram and Jeep needs to remove 40% of its costs to be able to profitably produce and sell EVs to mass-market consumers, citing the need for affordable models despite higher costs to manufacture the vehicles.
“We are not in the race to transition to EVs, but in a race to cut cost on EVs,” Tavares said in late May during a Bernstein investor conference.
The cuts are part of Stellantis’ strategic plan to increase profits and double revenue to 300 billion euros by 2030. The plan also includes targets such as achieving adjusted operating profit of more than 12% and industrial free cash flow of more than 20 billion euros.
The cost-saving measures have included reshaping the company’s supply chain and operations as well as headcount reductions.
Several Stellantis executives described the cuts to CNBC as difficult but effective. Others, who spoke on the condition of anonymity due to potential repercussions, described them as grueling to the point of excessiveness.
Since the merger was agreed to in December 2019, Stellantis has reduced headcount by 15.5%, or roughly 47,500 employees, through 2023, according to public filings. Additional job cuts this year involving thousands of plant workers the U.S. and Italy have drawn the ire of unions in both countries.
Meanwhile the associated billions in operational savings have helped to increase the automaker’s adjusted operating income by 31% from 2021 through last year. Its adjusted profit margin is also up, rising 0.4 percentage point during that time frame to 12.8%.
Stellantis Chief Technology Officer Ned Curic said the company is operating far more efficiently than before, including “proper system engineering” to ensure it’s optimizing design and function for its new vehicles.
Curic, who joined the company from Amazon in 2021, said headcount reductions, including laying off about 400 U.S. engineers in March, come after the company completed many of its systems for the next decade.
“We’ve been cutting headcounts, but we really don’t need that many,” he said during an interview last month, adding the company still employs 50,000 or so engineers. “To engineer the systems for our 10-year road map, it’s already done.”
Tavares, when asked last month whether additional cuts would be needed in the U.S., said “we’ll see.” He said officials “still have work to do” when it comes to getting EVs to be as profitable as traditional internal combustion engine, or ICE, vehicles.
“There is no silver bullet here. You need to throw 40% of additional cost because the middle class in the U.S. as much as the middle class of Europe, they need to buy EVs at the price of ICEs,” he said during a media roundtable in May. “This is no surprise. You can check my comments for the last five years. I’ve been running the same stuff for five years.”
Wall Street expectations
Future cost-saving efforts could be part of the company’s Thursday capital markets day.
Executives on Thursday will outline developments across Stellantis’ regions and businesses, including its capital and operational disciplines, according to Stellantis CFO Natalie Knight.
“We want to help you better understand how we see the industry evolving, how we’re leveraging standout technology, our leading operational discipline, and other competitive advantages that distinguish ourselves further,” she told investors in April. “And how we’re building a powerful and productive capital discipline that help us maintain and maximize sustainable returns.”
Stellantis declined to disclose any specifics ahead of the event, which is taking place at its North American headquarters in Auburn Hills, Michigan.
Carlos Tavares, CEO of Stellantis, poses during a presentation at the New York International Auto Show in Manhattan, New York, on April 5, 2023.
David Dee Delgado | Reuters
Wall Street will be looking for executives to address the company’s growing U.S. vehicle inventory levels, upcoming product launches and plans for China.
At the start of May, Cox Automotive reported days’ supply of vehicles at Stellantis’ Jeep and Ram brands were more than twice the industry average of 76 days.
Meanwhile the threat of cheaper, Chinese-made EVs looms in the background.
Tavares has called Chinese automakers his “No. 1 competitor” and said the company is taking an “asset-light” strategy. That includes plans to quickly grow vehicle exports from the country through a Stellantis-controlled joint venture with China’s Leapmotor.
“The share price reaction to the [capital markets day] will likely be driven by how these short-term concerns are addressed. We don’t expect any new financial targets to be announced,” UBS analyst Patrick Hummel wrote in a Thursday investor note.
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Stellantis, GM and Ford shares
Hummel and other analysts have noted a divergence in Stellantis’ stock performance compared with that of General Motors and Ford Motor.
Stellantis’ U.S.-traded shares are down more than 6% this year and off roughly 30% from an all-time high of more than $29.50 per share in March. GM shares in contrast are up more than 30% this year, and Ford shares are essentially flat.
RBC Capital Markets analyst Tom Narayan notes Stellantis, which has a roughly $68 billion market cap, should return 7.7 billion euros to shareholders in 2024 — 4.7 billion euros in dividends and 3 billion euros in buybacks.
Redburn Atlantis analyst Adrian Yanoshik last week in a note said largely muted expectations raise the potential for Stellantis to outperform expectations.
— CNBC’s Michael Bloom contributed to this report. More
