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    Homebuilder sentiment drops to lowest point in a year, but falling rates spur some optimism

    Homebuilder sentiment is now at the lowest level since the end of last year.
    More builders reported cutting prices in November. The average cut was 6%.
    The report reflects sentiment before a recent decline in interest rates.

    High mortgage rates continue to weigh on the nation’s homebuilders, leading to an increase in price cuts to lure buyers. But builders are cautiously optimistic about recent signs that interest rates may move lower soon.
    Homebuilder sentiment fell six points to 34 in November on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Anything below 50 is considered negative. Analysts had expected the number to come in unchanged from October.

    “The rise in interest rates since the end of August has dampened builder views of market conditions, as a large number of prospective buyers were priced out of the market,” NAHB Chair Alicia Huey said in the release. “Moreover, higher short-term interest rates have increased the cost of financing for home builders and land developers, adding another headwind for housing supply in a market low on resale inventory.”
    This marks the fourth straight month of declines. Sentiment is down 22 points since July and is now at the lowest level since the end of last year. The builders did note that nearly all of the monthly data for November was collected before the monthly consumer price index, released earlier this week, showed inflation moderating.
    “While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months,” Robert Dietz, NAHB’s chief economist, said in the release.
    “In particular, the 10-year Treasury rate moved back to the 4.5% range for the first time since late September, which will help bring mortgage rates close to or below 7.5%,” he said. “Given the lack of existing home inventory, somewhat lower mortgage rates will price in housing demand and likely set the stage for improved builder views of market conditions in December.”
    Of the index’s three components, current sales conditions fell six points to 40, sales expectations in the next six months dropped five points to 39, and buyer traffic fell five points to 21.

    More builders reported cutting prices in November – 36%, up from 32% in the previous two months. That is the highest share in this cycle tying the previous high two years ago. The average price cut was 6%.
    NAHB forecasts a roughly 5% increase for single-family starts in 2024, “as financial conditions ease with improving inflation data in the months ahead,” according to the release. More

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    Amazon says its first Project Kuiper internet satellites were fully successful in testing

    Amazon announced its pair of prototype internet satellites were fully successfully in operations and testing.
    “Thirty days after launch, we’re streaming 4K videos, doing [video] calls, and shopping on Amazon.com,” Project Kuiper Vice President of Technology Rajeev Badyal told CNBC.
    Amazon plans to begin building the first production Kuiper satellites in December and launch the first satellites for its network in mid-2024.

    A Project Kuiper engineer conducts network testing as prototype satellites pass over McAllen, Texas.

    A little over a month after launch, Amazon on Thursday announced its pair of prototype internet satellites were fully successfully in operations and testing.
    “We were able to validate everything and get all the data that we need,” Project Kuiper Vice President of Technology Rajeev Badyal told CNBC. “All systems, all subsystems and all the use-cases that we designed the satellite for, work as designed.”

    “Thirty days after launch, we’re streaming 4K videos, doing [video] calls, and shopping on Amazon.com,” Badyal added.

    Sign up here to receive weekly editions of CNBC’s Investing in Space newsletter.

    Project Kuiper is Amazon’s plan to build a network of 3,236 satellites in low Earth orbit to provide high-speed internet access anywhere in the world. The company plans to invest upwards of $10 billion to build Kuiper and recently broke ground on a $120 million pre-launch processing facility in Florida.
    With the prototypes’ testing in space now complete, Badyal said Amazon plans to begin building the first production Kuiper satellites in December and launch the first satellites for its network in the “latter part of the first half” of 2024.
    Badyal emphasized that Amazon wasn’t sure what performance to expect from the prototype satellites, since “you don’t know how well it’s going to work in space.”
    “They’re working brilliantly,” Badyal said.
    Amazon declined to share specifics around the broadband speeds that the Kuiper tests demonstrated, with Badyal only saying that “the experience that you got was operating like cable or fiber.” More

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    Charlie Munger says there isn’t the slightest chance Buffett traded own account to enrich himself

    Berkshire Hathaway Vice Chairman Charlie Munger pushed back against a report that alleged his partner Warren Buffett at times traded stocks in his personal account before the conglomerate made moves in the same securities.
    Munger, 99, told CNBC’s Becky Quick in an interview that the idea that Buffett was front-running Berkshire’s own trades doesn’t make sense, pointing toward his charitable giving and the fact that most of his wealth is tied up in Berkshire stock.

    “I don’t think there’s the slightest chance that Warren Buffett is doing something that is deeply evil to make money for himself. He cares more about what happens to Berkshire than he cares what happens to his own money. He gave all his own money away. He doesn’t even have it anymore,” Munger said.
    In a Nov. 9 article, ProPublica reported that Buffett on at least three occasions made personal trades in a stock shortly before or in the same quarter that Berkshire did. ProPublica cited leaked IRS data as the source of the information. CNBC has not independently confirmed the timing of these trades.
    The ProPublica report said Buffett made at least $466 million in personal stock sales between 2000 and 2019. That would account for a very small percentage of Buffett’s overall net worth. A securities filing from August showed Buffett owns more than 200,000 Berkshire Hathaway A shares, a position worth more than $100 billion.
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    How an F1 spending cap made racing teams more investable

    The heads of Formula 1 credit a league-wide budget cap with making the team businesses more sustainable and boosting valuations.
    A more predictable balance sheet makes it easier to bring new sponsors on board.
    “When we got involved, literally, the bottom teams were being traded for zero. Today I don’t think you could buy a team for less than $750 million,” Liberty Media CEO Greg Maffei told CNBC.

    Singapore’s F1 Grand Prix in 2022. 2022.
    Bryn Lennon – Formula 1 | Formula 1 | Getty Images

    Take an elite field of world-class racing experts. Ask them to spend fewer dollars toward beating their bitter rivals. The result, it turns out, is a slate of newly investable assets.
    That’s how the heads of Formula 1 racing see it, crediting a league-wide budget cap with making the team businesses more sustainable and boosting valuations.

    “When we got involved, literally, the bottom teams were being traded for zero. Today I don’t think you could buy a team for less than $750 million, and the top teams are valued [around] $3 billion,” Liberty Media CEO Greg Maffei told CNBC’s Sara Eisen in the documentary “The Inside Track: The Business of Formula 1,” debuting Thursday at 8 p.m. ET.
    The budget cap — set at $135 million per team in 2023 — limits how much teams can spend on developing and building their race cars. Before it was introduced in 2021, the top teams in the league could spend multiples of that in a given year.
    It’s a model similar to U.S. sports leagues, several of which limit what teams can spend on player salaries (though F1 driver salaries are excluded) — and it’s the work of F1-owner Liberty Media, which bought the league in 2017.
    “We understood that some of the things that, for example the NFL, has done about creating more revenue parity, creating a cost cap, those allow for a way more competitive and more compelling sport,” Maffei said.

    F1’s 10 teams each get a share of league revenue, brought in through sponsorships and media deals. They also collect individual revenue through team-specific partnerships, hospitality and engineering efforts.

    Better performance on the track makes it easier to earn money, but it takes significant spending to get there.
    “Before, someone investing in a race team didn’t know if you would spend $200 million a year or half a billion a year. There was everything in between,” said Guenther Steiner, team principal at Haas F1 Team.
    Haas has seen a particularly aggressive revolving door of investors in recent years, plagued by poor performance on the grid and some poor luck: In March 2021, the team announced a title partnership with Russian fertilizer company Uralkali only to drop the investment a year later after Russia invaded Ukraine.
    Haas now counts MoneyGram and Chipotle among its sponsors. The budget cap, Steiner said, has made the team’s balance sheet more predictable and made it easier to bring new partners on board.

    “Because of the testing restrictions, it’s now difficult to take a driver out of America who maybe hasn’t been around these tracks,” McLaren’s CEO Zak Brown said.
    Dan Mullan | Getty Images Sport | Getty Images

    F1 teams expend huge amounts of capital throughout the race season to troubleshoot, repair and improve the cars. Major upgrades mid-season can be costly, but critical to a team’s success.
    “It’s an R&D game,” Zak Brown, CEO of McLaren Racing, told CNBC in June from the sidelines of the Canadian Grand Prix weekend in Montreal. “We’re in the prototype business. We have new stuff on our car this weekend, we’ll have new stuff on our car next weekend, and depending on what your challenges are with the car is where you’re choosing where to invest your money.”
    Before Brown took over the helm at McLaren in 2018, the team was losing money on an annual basis — as much as “nine figures,” he told CNBC.
    “Now we’re a profitable sports team,” he said. “A lot of that is performance-based, and a lot of credit to Liberty that when they came in they established a cost cap.”
    Tune in to CNBC at 8 p.m. ET Thursday for the premiere of “The Inside Track: The Business of Formula 1.”
    Disclosure: CNBC is a sponsor of McLaren Racing. More

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    Macy’s stock pops as inventory, margin improvement help profit beat estimates

    Macy’s reported third quarter earnings.
    Profit topped Wall Street estimates as inventory and margins improved.
    Macy’s CEO sounded an optimistic note about holiday shopping.

    Macy’s Herald Square store in New York is shown on Aug. 21, 2023.
    View Press | Corbis News | Getty Images

    Macy’s on Thursday topped Wall Street’s quarterly expectations, as inventory and margin improvement helped offset an 7% year-over-year decline in sales.
    The department store chain’s shares popped more than 7% in premarket trading.

    In an interview with CNBC, CEO Jeff Gennette said the company has seen steady business across key categories for the holiday season, especially beauty.
    He said Macy’s sees factors that could work in its favor during the holidays: Its inventory levels are roughly flat to a year ago, giving the company flexibility to buy more or less of merchandise depending on what shoppers want. Customers have an extra weekend to shop this year before Christmas. And after warmer weather in parts of the country, Macy’s has started to see shoppers respond to cooler temperatures by buying winter gear.
    Here’s what the retailer reported for the fiscal third quarter compared with what analysts expected, according to consensus estimates from LSEG, formerly known as Refinitiv:

    Earnings per share: 21 cents adjusted vs. 0 cents expected
    Revenue: $4.86 billion vs. $4.82 billion expected

    In the three month period that ended Oct. 28, Macy’s net income fell to $43 million, or 15 cents per share, from $108 million, or 39 cents per share a year earlier. Excluding certain items, per-share earnings were 21 cents.
    The company’s revenue fell from $5.23 billion in the year-ago period.

    Macy’s also adjusted its full-year guidance. It raised the low end of its expected sales range to $22.9 billion from $22.8 billion. For comparable, or same-store sales, the company said it expects a decline of up to 7%, an improvement from its previous estimate of a 7.5% decline at most.
    For full-year adjusted EPS, Macy’s now projects a tighter range of $2.88 to $3.13, versus an earlier estimate of $2.70 to $3.20.
    Macy’s has looked for new drivers of growth, as it tries to refresh its legacy brand. As sales as its namesake mall stores lag, the company announced in October that it would open up to 30 smaller stores in strip malls over the next two years. It has also refreshed some of its private brands and launched new ones, such as On 34th, a new women’s clothing brand.
    The company’s strongest sales have come from higher-end department store chain, Bloomingdale’s, and its beauty chain, Bluemercury.
    Overall, on an owned-plus-licensed basis, the company reported a same-store sales decline of 6.3%, better than the 7.75% decline expected by analysts.
    On an owned basis, Bluemercury posted comparable sales growth of 2.5%, while Bloomingdale’s reported a 3.2% decline. The namesake Macy’s chain saw comparable sales fall 7.6%.
    Lower permanent markdowns on merchandise helped boost the company’s gross margin to 40.3% from 38.7% a year earlier. Merchandise inventories fell 6%.
    Shares of Macy’s closed on Wednesday at $12.61, up 7.5%. The company’s stock has struggled this year, falling nearly 39% compared to the 17% gains of the S&P 500.
    The company is also in the middle of a leadership change. Gennette will retire in February and be succeeded by Tony Spring, the CEO of Bloomingdale’s. More

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    Xi says U.S. and China can only be adversaries or partners, with no middle ground

    Chinese President Xi Jinping told U.S. business executives Wednesday the two countries have to choose between being adversaries or partners.
    Xi was speaking at a dinner in San Francisco following his meeting with U.S. President Joe Biden a few hours earlier, on the sidelines of the Asia-Pacific Economic Cooperation conference.
    He also said China would send its giant pandas to the San Diego Zoo.

    U.S. President Joe Biden waves as he walks with Chinese President Xi Jinping at Filoli estate on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit, in Woodside, California, U.S., November 15, 2023. REUTERS/Kevin Lamarque
    Kevin Lamarque | Reuters

    BEIJING — The U.S. and China have to choose between being adversaries or partners, Chinese President Xi Jinping told American business executives late Wednesday in San Francisco.
    His remarks contrast with the Biden administration’s approach of pursuing strategic competition with Beijing — restricting exports of advanced U.S. tech to China, while looking for areas of cooperation.

    Xi was speaking at a dinner in San Francisco following his meeting with U.S. President Joe Biden a few hours earlier, on the sidelines of the Asia-Pacific Economic Cooperation conference.
    “I have always had one question on my mind: How to steer the giant ship of China-U.S. relations clear of hidden rocks and shoals, navigate it through storms and waves without getting disoriented, losing speed or even having a collision?” Xi said, according to an English-language readout of his Mandarin-language speech.

    China is ready to be a partner and friend of the United States.

    Xi Jinping
    President of China

    “In this respect, the number one question for us is: are we adversaries, or partners? This is the fundamental and overarching issue,” he said.
    “The logic is quite simple. If one sees the other side as a primary competitor, the most consequential geopolitical challenge and a pacing threat, it will only lead to misinformed policy making, misguided actions, and unwanted results,” Xi said.
    “China is ready to be a partner and friend of the United States,” he said. “The fundamental principles that we follow in handling China-U.S. relations are mutual respect, peaceful coexistence and win-win cooperation.”

    Nearly 400 business leaders — including Apple CEO Tim Cook and Qualcomm CEO Cristiano Amon — government officials, U.S. citizens and academics attended the dinner, hosted by the U.S.-China Business Council and the National Committee on U.S.-China Relations.
    U.S Secretary of Commerce Gina Raimondo delivered remarks ahead of Xi’s address.
    In a roughly 30-minute speech, Xi said China-led international initiatives such as the Belt and Road are open to U.S. participation, while Beijing is ready to join U.S.-proposed multilateral cooperation initiatives.
    “No matter how the global landscape evolves, the historical trend of peaceful coexistence between China and the United States will not change,” Xi said.

    Pandas returning to the U.S.

    Regarding earlier conversations with Biden, Xi said “we agreed to make the cooperation list longer and the pie of cooperation bigger.”
    Xi said China is ready to invite 50,000 young Americans to study in the Asian country over the next five years.
    He also said China would send its giant pandas to the San Diego Zoo. He did not specify a time.
    Last week, the remaining three pandas in the U.S. on loan from Beijing returned to China due to an expiring contract. China has lent pandas to countries around the world as a diplomatic tool.

    China never bets against the United States, and never interferes in its internal affairs.

    Xi Jinping
    President of China

    Xi’s speech was titled “Galvanizing Our Peoples into a Strong Force For the Cause of China-U.S. Friendship.”
    “It is wrong to view China, which is committed to peaceful development, as a threat and thus play a zero-sum game against it,” Xi said. “China never bets against the United States, and never interferes in its internal affairs.”
    “China has no intention to challenge the United States or to unseat it. Instead, we will be glad to see a confident, open, ever-growing and prosperous United States,” he said. “Likewise, the United States should not bet against China, or interfere in China’s internal affairs. It should instead welcome a peaceful, stable and prosperous China.”
    — CNBC’s Christina Wilkie and Eamon Javers contributed to this report.
    Correction: The summary and key points have been updated to accurately reflect that Xi’s dinner with U.S. business executives took place on Wednesday night in San Francisco. More

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    Walmart shares slide as retailer gives a cautious outlook about consumer spending

    Walmart shares dropped as the company offered a cautious outlook on consumer spending.
    The company beat fiscal third-quarter earnings and revenue estimates.
    Revenue rose again on the strength of Walmart’s grocery and e-commerce businesses.

    Atchison, Kansas. Walmart store logo with gardening products for sale. 
    Universal Images Group | Getty Images

    Walmart on Thursday topped Wall Street’s fiscal third-quarter earnings estimates as sales rose, but the big-box retailer struck a cautious tone with its outlook after it saw consumer spending weaken at the end of the period.
    The company’s shares slid in premarket trading Thursday after they touched an all-time high the previous day. Walmart gave a slightly lower-than-expected forecast for the year as it enters the critical holiday shopping season.

    The company anticipates adjusted earnings per share of $6.40 to $6.48 for the year, lower than the $6.48 analysts expect but higher than its previous range. Walmart expects consolidated net sales will rise 5% to 5.5%, also an increase from its prior range. 
    In an interview with CNBC, Chief Financial Officer John David Rainey said consumers are “leaning heavily” into major promotions as they watch their spending and search for deals. As customers hold out for lower prices, the company has seen a drop in purchases before and after a sales event.
    “Our events have been strong,” he said. We’ve been pleased with those. Halloween was good overall. But in the in the last couple of weeks of October, there were certainly some trends in the business that made us pause and kind of rethink the health of the consumer.”
    At the start of the holiday quarter, however, he said sales of items including clothing picked up as holiday promotions gained momentum.
    Here’s what Walmart reported for the three-month period ended Oct. 31 compared with what analysts were expecting, according to consensus estimates from LSEG, formerly known as Refinitiv:

    Earnings per share: $1.53 adjusted vs. $1.52 expected
    Revenue: $160.80 billion vs. $159.72 billion expected

    In the fiscal third quarter, Walmart’s net income rose to $453 million, or 17 cents per share, compared with a loss of $1.8 billion, or 66 cents per share, in the year ago period. Walmart posted a loss in that quarter due to a settlement after opioid-related legal charges. 
    Revenue rose from $152.81 billion in the year-ago period. It climbed on the strength of the retailer’s grocery business, which has thrived during a period of high inflation, and digital sales.
    In the U.S., shoppers both visited and spent more. Customer transactions rose 3.4% and average ticket grew 1.5%. E-commerce sales increased 24% in the U.S. and 15% across the globe year over year.
    As the holidays approach, investors have bet the big-box retailer has the ingredients to drive sales, even as shoppers are more discerning. It’s the nation’s largest grocer, which helps drum up steadier foot traffic.
    It’s also making money in newer ways, such as selling ads and annual memberships to Walmart+, its answer to Amazon Prime. 
    Revenue for its ad business, Walmart Connect, jumped 26% from the prior-year period. 
    Shares of the company touched an all-time high Wednesday dating to when Walmart debuted on the New York Stock Exchange in August 1972. The stock closed at nearly $170 on Wednesday, up about 19% for the year.
    Walmart has generally fared better than retail rivals during an inflationary period. 
    Target’s performance also lifted Walmart’s stock on Wednesday. Target’s sales declined year-over-year, but it topped Wall Street’s expectations for earnings and revenue.
    Walmart has outperformed Target over the past year, leaning on grocery sales and a reputation for low prices.
    This is breaking news. Please check back for updates.

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    Morgan Stanley CEO says his firm is ready for ‘Basel III endgame’ — the sweeping new global rules on banking

    U.S. regulators on Tuesday defended their plans for a sweeping set of proposed changes to banks’ capital requirements, speaking in front of the U.S. Senate Banking Committee.
    These proposed changes in the U.S. seek to incorporate parts of international banking regulations known as Basel III, which was agreed to after the 2008 crisis and has taken years to roll out.
    Regulators say the changes in the proposals are estimated to result in an aggregate 16% increase in common equity tier 1 capital requirements.

    James Gorman, chairman and chief executive of Morgan Stanley, speaks during the Global Financial Leader’s Investment Summit in Hong Kong, China, on Tuesday, Nov. 7, 2023. The de-facto central bank of the Chinese territory is this week holding its global finance summit for a second year in a row. Photographer: Lam Yik/Bloomberg via Getty Images
    Bloomberg | Bloomberg | Getty Images

    SINGAPORE — Morgan Stanley Chairman and CEO James Gorman said his firm will be able to cope with “any form” that new banking regulations end up taking, but added he expects some watering down before the final rules are confirmed.
    U.S. regulators on Tuesday defended their plans for a sweeping set of proposed changes to banks’ capital requirements, speaking in front of the U.S. Senate Banking Committee. They are aimed at tightening regulation of the industry after two of its biggest crises in recent memory — the 2008 financial crisis, and the March upheaval in regional lenders.

    These proposed changes in the U.S. seek to incorporate parts of international banking regulations known as Basel III, which was agreed to after the 2008 crisis and has taken years to roll out.
    Regulators say the changes in the proposals are estimated to result in an aggregate 16% increase in common equity tier 1 capital requirements — which is a measure of an institution’s presumed financial strength and is seen as a buffer against recessions or trading blowups.
    “I think it will come out differently from the way it’s been proposed,” Gorman told CNBC Thursday in an exclusive interview on the sidelines of Morgan Stanley’s annual Asia-Pacific conference in Singapore.
    “It’s important to point out it’s a proposal. It’s not a rule, and it’s not done.”
    “I think [the U.S. banking regulators] are listening,” Gorman added. “I’ve spent many years with the Federal Reserve. I was on the Fed board in New York for six years and I just think they are trying to find the right answer.”

    “I’m not sure the banks need more capital,” Morgan Stanley’s outgoing CEO said. “In fact, the Fed’s own stress test says they don’t. So there’s that … sort of purity of purpose and in pursuit of perfection that can be the enemy of good.”
    Whatever the outcome though, Gorman said his New York-based bank will be able to manage.
    “We have been conservative with our capital. We run a CET1 ratio, which is among the highest in the world, significantly in excess of our requirements, so we’re ready for any outcome. But I don’t think it will be as dire as most of the investment committee believes it will be,” Gorman said.
    The bank said in its latest earnings report that its standardized CET1 ratio was 15.5%, approximately 260 basis points above the requirement.

    Wealth management and inflation

    In late October, Morgan Stanley announced that Ted Pick will succeed James Gorman as chief executive at the start of 2024, though Gorman will stay as executive chairman for an undisclosed period.
    Led by Gorman since 2010, Morgan Stanley has managed to avoid the turbulence afflicting some of its competitors.
    While Goldman Sachs was forced to pivot after a foray into retail banking, the main question at Morgan Stanley is about an orderly CEO succession.
    There will likely be some continuity with the bank’s focus on building out its wealth management business in Asia.
    “We think there’s going to be tremendous growth,” Gorman said Thursday.
    “So we would like to do more. We have. If I was staying several years, we would very aggressively be pushing our wealth management in this region. And I’m sure my successor would do the same.”
    On the issue of inflation, Gorman said central bankers have brought surging inflation under control.
    “Give the central banks credit. They moved aggressively with rates,” Gorman said. “I think they were late —that’s my personal view — but it doesn’t matter. When they got there, they really got going. Took rates from zero to five and a half percent. The Fed did five, five and a half percent in almost record time, fastest rate increase in 40 years. And it’s had the impact.”
    U.S. Federal Reserve Chairperson Jerome Powell said last Thursday that he and his fellow policymakers are encouraged by the slowing pace of inflation, but more work could be ahead in the battle against high prices as the central bank seeks to bring inflation down closer to its stated 2% target.
    The U.S. consumer price index, which measures a broad basket of commonly used goods and services, increased 3.2% in October from a year ago despite being unchanged for the month, according to seasonally adjusted numbers from the Labor Department on Tuesday. 
    “Are we done? We’re not done,” Gorman said.
    “Is 2% absolutely necessary? My personal view is no, but directionally to be heading in that to around 2, 3% — I think is a very acceptable outcome given the cards that they were dealt with.”
    — CNBC’s Hugh Son and Jeff Cox contributed to this story. More