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    Regional banks face another hit as regulators force them to raise debt levels

    U.S. regulators on Tuesday unveiled plans to force regional banks to issue debt and bolster their so-called living wills, steps meant to protect the public in the event of more failures.
    All American banks with at least $100 billion in assets would be subject to the new requirements, which resemble rules that apply to the world’s biggest banks.
    Impacted lenders will have to maintain long-term debt levels equal to 3.5% of average total assets or 6% of risk-weighted assets, whichever is higher, according to a fact sheet released Tuesday.

    Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corp. (FDIC), speaks during an Urban Institute panel discussion in Washington, D.C., on Friday, June 3, 2022.
    Ting Shen | Bloomberg | Getty Images

    U.S. regulators on Tuesday unveiled plans to force regional banks to issue debt and bolster their so-called living wills, steps meant to protect the public in the event of more failures.
    American banks with at least $100 billion in assets would be subject to the new requirements, which makes them hold a layer of long-term debt to absorb losses in the event of a government seizure, according to a joint notice from the Treasury Department, Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corp.

    The steps are part of regulators’ response to the regional banking crisis that flared up in March, ultimately claiming three institutions and damaging the earnings power of many others. In July, the agencies released the first salvo of expected changes, a sweeping set of proposals meant to heighten capital requirements and standardize risk models for the industry.
    In their latest proposal, impacted lenders will have to maintain long-term debt levels equal to 3.5% of average total assets or 6% of risk-weighted assets, whichever is higher, according to a fact sheet released Tuesday by the FDIC. Banks will be discouraged from holding the debt of other lenders to reduce contagion risk, the regulator said.

    Higher funding costs

    The requirements will create “moderately higher funding costs” for regional banks, the agencies acknowledged. That could add to the industry’s earnings pressure after all three major ratings agencies have downgraded the credit ratings of some lenders this year.
    Still, the industry will have three years to conform to the new rule once enacted, and many banks already hold acceptable forms of debt, according to the regulators. They estimated that regional banks already have roughly 75% of the debt they will ultimately need to hold.
    The KBW Regional Banking Index, which has suffered deep losses this year, rose less than 1%.

    Indeed, industry observers had expected these latest changes: FDIC Chairman Martin Gruenberg telegraphed his intentions earlier this month in a speech at the Brookings Institution.

    Medium is the new big

    Broadly, the proposal takes measures that apply to the biggest institutions — known in the industry as global systemically important banks, or GSIBs — down to the level of banks with at least $100 billion in assets. The moves were widely expected after the sudden collapse of Silicon Valley Bank in March jolted customers, regulators and executives, alerting them to emerging risks in the banking system.
    That includes steps to raise levels of long-term debt held by banks, removing a loophole that allowed midsized banks to avoid the recognition of declines in bond holdings, and forcing banks to come up with more robust living wills, or resolution plans that would take effect in the event of a failure, Gruenberg said this month.
    Regulators would also look at updating their own guidance on monitoring risks including high levels of uninsured deposits, as well as changes to deposit insurance pricing to discourage risky behavior, Gruenberg said in the Aug. 14 speech. The three banks seized by authorities this year all had relatively large amounts of uninsured deposits, which were a key factor in their failures.

    What’s next for regionals?

    Analysts have focused on the debt requirements because that is the most impactful change for bank shareholders. The point of raising debt levels is so that if regulators need to seize a midsized bank, there is a layer of capital ready to absorb losses before uninsured depositors are threatened, according to Gruenberg.
    The move will force some lenders to either issue more corporate bonds or replace existing funding sources with more expensive forms of long-term debt, Morgan Stanley analysts led by Manan Gosalia wrote in a research note Monday.
    That will further squeeze margins for midsized banks, which are already under pressure because of rising funding costs. The group could see an annual hit to earnings of as much as 3.5%, according to Gosalia.
    There are five banks in particular that may need to raise a total of roughly $12 billion in fresh debt, according to the analysts: Regions, M&T Bank, Citizens Financial, Northern Trust and Fifth Third Bancorp. The banks didn’t immediately respond to requests for comment.

    Bank groups complain

    Having long-term debt on hand should calm depositors during times of distress and reduces costs to the FDIC’s own Deposit Insurance Fund, Gruenberg said this month. It also improves the chances that a weekend auction of a bank could be done without using extraordinary powers reserved for systemic risks, and gives regulators more options in that scenario, like replacing ownership or breaking up banks to sell them in pieces, he said.
    “While many regional banks have some outstanding long-term debt, the new proposal will likely require issuance of new debt,” Gruenberg said. “Since this debt is long-term, it will not be a source of liquidity pressure when problems become apparent. Unlike uninsured depositors, investors in this debt know that they will not be able to run when problems arise.”
    Investors in long-term bank debt will have “greater incentive” to monitor risk at lenders, and the publicly traded instruments will “serve as a signal” of the market’s view of risk in these banks, he said.
    Regulators are accepting comments on these proposals through the end of November. Trade groups raised howls of protest when regulators released part of their plans in July.

    Correction: FDIC Chairman Martin Gruenberg gave a speech in August at the Brookings Institution. An earlier version misstated the month. More

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    High bond yields imperil America’s financial stability

    Interrogating a fairy tale is not usually the best use of an investor’s time. But there may be an exception. The internal logic of “Goldilocks and the Three Bears”, and the idea of whether the economy can be “just right” for financial markets, merits some inspection.Earlier this year, the prospect of a seemingly inevitable American recession—the result of rising interest rates—peppered conversations across the financial world. Now, with inflation falling rapidly, economic growth looking strong and the Federal Reserve at least slowing the pace of interest-rate rises, talk is of a “Goldilocks” situation: an economy that is neither too hot (with surging inflation) nor too cold (with unpleasantly high unemployment). As the picture has grown brighter, yields on American government bonds have ticked ever higher. The yield on ten-year Treasuries is now 4.2%, up from 3.8% at the beginning of the year. Real yields, adjusted for inflation expectations, are at their highest since 2009.They are unlikely to return to earth any time soon. On top of buoyant growth figures—one closely followed estimate suggests that the American economy may be growing at nearly 6%—underlying supply and demand also point upwards. The government will run a budget deficit of around 6% of gdp this year, a figure that is expected to grow over the coming years. Meanwhile, the Fed has allowed around $765bn of Treasuries on its balance-sheet to mature without replacement since last summer.Such good economic news has less rosy implications for the financial outlook than might be expected. Indeed, various markets are already being squeezed by rising yields in a manner that threatens financial stability. Sky-high bond yields mean considerable financial distress is baked in, even if it is not yet visible. And the threat is growing with every strong piece of economic data. Take commercial property. American office-vacancy rates reached 16.4% in the middle of the year, according to Colliers, an estate agency, above the previous record set after the global financial crisis of 2007-09. The combination of entrenched work-from-home habits and rising interest rates has been brutal for owners of commercial property. Capital Economics, a research firm, expects another 15% decline in prices by the end of 2024, and for the west coast to be hit particularly hard.The situation faced by commercial-property owners may deteriorate even if the economy further improves. One or two extra percentage points of growth will bring back few tenants. But the resulting increase in interest rates will put pressure on businesses unable to refinance the debt they accumulated at low rates in the covid-19 pandemic. Newmark, a property-services firm, identifies a maturity wall of $626bn in troubled commercial-property debt (where the senior debt of the borrower is worth 80% or more of the value of the property) that will come due between 2023 and 2025. Without a let-up in the bond market, plenty of companies will smash into the wall.Problems in commercial property could spread. Many American lenders have extended credit to the industry. In early August Moody’s downgraded ten small and mid-sized institutions and placed several larger ones on watch for downgrades. Banks with under $10bn in assets have exposure to commercial real estate worth 279% of their equity cushions, the rating agency noted, compared with 51% for those with over $250bn.The problems that felled Silicon Valley Bank, First Republic Bank and Signature Bank in March and April have not gone away, either. Deposits across the industry have barely recovered since their tumble in the spring, up by 0.02% a week on average over the past four months, compared with 0.13% average weekly growth over the past four decades. The allure of the bond market, where high yields offer an alternative to low-interest bank accounts, means the pressure is hardly letting up.For less leveraged firms, workers and stock investors, the economic porridge seems to be at just the right temperature. Even in the residential property market, which provided the spark for the global financial crisis, owners have largely shrugged off the Fed’s rapid interest-rate increases. But the parts of the American market most vulnerable to rising refinancing costs are faced with an unappetisingly cold bowl of porridge. A Goldilocks outcome for some is a bearish nightmare for others. If Treasury yields stay high, it could become increasingly hard to keep the two realities separate. ■ More

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    Eminem tells GOP presidential hopeful Vivek Ramaswamy to stop rapping his music

    Eminem has demanded GOP presidential hopeful Vivek Ramaswamy stop using his music on the campaign trail.
    Ramaswamy rapped Eminem’s hit 2002 song “Lose Yourself” at a campaign stop during the Iowa State Fair earlier this month.
    There’s a long history of artists telling presidential candidates to stop using their music on the campaign trail.

    Inductee Eminem performs on stage during the 37th Annual Rock & Roll Hall of Fame Induction Ceremony at Microsoft Theater in Los Angeles, Nov. 5, 2022.
    Jeff Kravitz | Filmmagic, Inc | Getty Images

    Rapper Eminem has demanded Vivek Ramaswamy stop using his music on the campaign trail — and the Republican presidential candidate looks ready to let the issue go.
    In a cease-and-desist order sent to Ramaswamy’s lawyer on Aug. 23, music publisher BMI said Eminem took issue with the use of his music during Ramaswamy’s campaign events. It came more than a week after Ramaswamy, a tech entrepreneur and political newcomer, delivered an impromptu performance of Eminem’s hit 2002 song “Lose Yourself” at a campaign stop during the Iowa State Fair.

    “BMI has received a communication from Marshall B. Mathers, III, professionally known as Eminem, objecting to the Vivek Ramaswamy campaign’s use of Eminem’s musical compositions,” the publisher wrote in letter obtained by NBC News and first reported by the Daily Mail.
    “BMI will consider any performance of the Eminem Works by the Vivek 2024 campaign from this date forward to be a material breach of the Agreement for which BMI reserves all rights and remedies with respect thereto,” the letter said.
    In response, the Ramaswamy campaign signaled the GOP hopeful will not perform the song again.
    “Vivek just got on the stage and cut loose. To the American people’s chagrin, we will have to leave the rapping to the real slim shady,” a spokesperson for the Ramaswamy campaign told NBC News.
    Many politicians have been sent similar cease-and-desist orders in past election cycles over their campaign song choices. Former president and 2024 Republican front-runner Donald Trump has received dozens of orders from popular artists including the Rolling Stones, Queen, Adele and Pharrell Williams. More

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    Biden administration unveils first 10 drugs subject to Medicare price negotiations

    The Biden administration unveiled the first 10 prescription drugs that will be subject to price negotiations between manufacturers and Medicare.
    The announcement kicks off a controversial process under the Inflation Reduction Act that aims to make costly medications more affordable for older Americans. 
    The list includes Bristol-Myers Squibb’s blood thinner Eliquis, Johnson & Johnson’s own blood thinner, Novo Nordisk insulin products and Merck’s diabetes drug Januvia.

    A pharmacist holds a bottle of the drug Eliquis, made by Pfizer Pharmaceuticals, at a pharmacy in Provo, Utah, January 9, 2020.
    George Frey | Reuters

    The Biden administration on Tuesday unveiled the first 10 prescription drugs that will be subject to price negotiations between manufacturers and Medicare, kicking off a controversial process that aims to make costly medications more affordable for older Americans. 
    President Joe Biden’s Inflation Reduction Act, which passed in a party-line vote last year, gave Medicare the power to directly hash out drug prices with manufacturers for the first time in the federal program’s nearly 60-year history. The agreed-upon prices for the first round of drugs are scheduled to go into effect in 2026. 

    Here are the 10 drugs subject to the initial talks this year: 

    Eliquis, made by Bristol-Myers Squibb, is used to prevent blood clotting to reduce the risk of stroke.
    Jardiance, made by Boehringer Ingelheim, is used to lower blood sugar for people with type 2 diabetes. 
    Xarelto, made by Johnson & Johnson, is used to prevent blood clotting to reduce the risk of stroke.
    Januvia, made by Merck, is used to lower blood sugar for people with type 2 diabetes.
    Farxiga, made by AstraZeneca, is used to treat type 2 diabetes.
    Entresto, made by Novartis, is used to treat certain types of heart failure.
    Enbrel, made by Amgen, is used to treat rheumatoid arthritis. 
    Imbruvica, made by AbbVie, is used to treat different types of blood cancers. 
    Stelara, made by Janssen, is used to treat Crohn’s disease.
    Fiasp and NovoLog, insulins made by Novo Nordisk.

    The Medicare negotiations are the centerpiece of the Biden administration’s efforts to rein in the rising cost of medications in the U.S. Some Democrats in Congress and consumer advocates have long pushed for the change, as many seniors around the country struggle to afford care.
    But the pharmaceutical industry views the process as a threat to its revenue growth, profits and drug innovation. Drugmakers like Merck and Johnson & Johnson and their supporters aim to derail the negotiations, filing at least eight lawsuits in recent months seeking to declare the policy unconstitutional.
    The drugs listed Tuesday are among the top 50 with the highest spending for Medicare Part D, which covers prescription medications that seniors fill at retail pharmacies.
    The 10 medicines accounted for $50.5 billion, or about 20%, of total Part D prescription drug costs from June 1, 2022, to May 31, 2023, according to the Centers for Medicare and Medicaid Services, or CMS. 

    The drugs have been on the market for at least seven years without generic competitors, or 11 years in the case of biological products such as vaccines. 
    In 2022 alone, 9 million seniors spent $3.4 billion out of pocket on the 10 drugs, a senior Biden administration official told reporters Tuesday during a call.
    Medicare covers roughly 66 million people in the U.S., and 50.5 million patients are currently enrolled in Part D plans, according to health policy research organization KFF.

    What happens next

    Drugmakers have to sign agreements to join the negotiations by Oct. 1. CMS will then make an initial price offer to manufacturers in February 2024, and those companies have a month to accept or make a counteroffer. 
    The negotiations will end in August 2024, with agreed-upon prices published on Sept. 1, 2024. The reduced prices won’t go into effect until January 2026. 
    If a drugmaker declines to negotiate, it must either pay an excise tax of up to 95% of its medication’s U.S. sales or pull all of its products from the Medicare and Medicaid markets. 
    The pharmaceutical industry contends that the penalty can be as high as 1,900% of a drug’s daily revenues. 
    After the initial round of talks, CMS can negotiate prices for another 15 drugs for 2027 and an additional 15 in 2028. The number rises to 20 negotiated medications a year starting in 2029 and beyond.
    “I think it’s incredibly important to keep in mind that the negotiation process is cumulative,” said Leigh Purvis, a prescription drug policy principal with AARP Public Policy Institute. “We could have as many as 60 drugs negotiated by 2029.”
    CMS will only select Medicare Part D drugs for the medicines covered by the first two years of negotiations. It will add more specialized drugs covered by Medicare Part B, which are typically administered by doctors, in 2028. 
    The drug price talks are expected to save Medicare an estimated $98.5 billion over a decade, according to the Congressional Budget Office. They’re also estimated to reduce the federal deficit by $237 billion over 10 years. 
    The negotiations are also expected to save money for people enrolled in Medicare, who take an average of four to five prescription drugs a month and increasingly face out-of-pocket costs that many struggle to afford. 
    Nearly 10% of Medicare enrollees ages 65 and older, and 20% of those under 65, report challenges in affording drugs, a senior administration official said Tuesday.

    Drugmakers’ legal challenges

    Merck, Johnson & Johnson, Bristol-Myers Squibb and Astellas Pharma are among the companies suing to halt the negotiation process. The industry’s biggest lobbying group, PhRMA, and the U.S. Chamber of Commerce have filed their own lawsuits. 
    The suits make similar and overlapping claims that Medicare negotiations are unconstitutional. 
    The companies argue that the talks would force drugmakers to sell their medicines at huge discounts, below market rates. They assert this violates the Fifth Amendment, which requires the government to pay reasonable compensation for private property taken for public use. 
    The suits also argue that the process violates drugmakers’ free speech rights under the First Amendment, essentially forcing companies to agree that Medicare is negotiating a fair price.
    They also contend that the talks violate the Eighth Amendment by levying an excessive fine if drugmakers refuse to engage in the process.
    The suits are scattered in federal courts around the U.S. Legal experts say the pharmaceutical industry hopes to obtain conflicting rulings from federal appellate courts, which could fast-track the issue to the Supreme Court. 
    Some drugmakers have confirmed their intention to bring their legal battle to the nation’s highest court. 
    “As we look forward, we’re going to take this to the fullest, which means we’ll take it through District Court and, if need be, into Circuit Court and ultimately to the Supreme Court,” Merck CEO Robert Davis said during an earnings call earlier this month. “So, really that’s the strategy.”
    Meanwhile, the Biden administration has vowed to fight the legal challenges.
    Biden and his top health officials have embraced the lawsuits as evidence that they’re making progress in the fight to cut drug prices.
    “Big Pharma doesn’t want this to happen, so they’re suing us to block us from negotiating lower prices so they can pad their profits,” the president said in a speech at the White House last month. “But we’re going to see this through. We’re going to keep standing up to Big Pharma.”

    How much Medicare spends on the drugs

    Medicare Part D spent the most among those drugs on Eliquis at $16.5 billion, according to a CMS fact sheet. 
    The plan also spent roughly $7 billion on Jardiance, $6 billion on Xarelto, $4 billion on Januvia and $3.2 billion on Farxiga. Spending for Entresto, Enbrel, Imbruvica, Stelara and the two insulins came in at more than $2.5 billion each. 
    In 2022, more than 3.5 million enrollees used Eliquis and paid $441 out of pocket on average for the blood thinner.
    Roughly 1.3 million enrollees used Jardiance last year, paying $290 out of pocket on average. About 1.3 million beneficiaries also used Xarelto and paid $451 out-of-pocket on average. 
    Far fewer enrollees used Imbruvica and Stelara last year, at 22,000 and 20,000, respectively. But enrollees paid the most out of pocket for those drugs: $5,247 for Imbruvica and $2,058 for Stelara on average. 
    Meanwhile, 763,000 enrollees used Novo Nordisk’s two insulin products last year and paid $121 out of pocket on average. 
    A handful of drugs on the list came as a surprise, including Farxiga and Stelara. Wall Street analysts and health policy researchers had been expecting other names, such as Eli Lilly’s diabetes drug Trulicity or Xtandi, a rheumatoid arthritis medication from Astellas Pharma. 
    A senior administration official said the list likely diverged from predictions due to changes in Medicare Part D spending. 
    “Data may now have fallen lower on the list because utilization may have dropped off in the last year or other drugs may have become more common,” the official said during the call. More

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    Best Buy scales back sales outlook as results top expectations

    Best Buy’s quarterly results topped Wall Street’s expectations.
    The retailer lowered the top end of its sales outlook for the year, however.
    CEO Corie Barry said Best Buy still anticipates this year will be “the low point in tech demand.”

    A shopper pushes a cart with a TV in front of a Best Buy store in Chicago, Illinois, November 25, 2022.
    Jim Vondruska | Reuters

    Best Buy on Tuesday surpassed Wall Street’s quarterly sales expectations, but tempered its outlook for the rest of the year as it feels the lull of post-pandemic spending on kitchen appliances, computer monitors and other electronics.
    CEO Corie Barry said the company still anticipates this year will be “the low point in tech demand,” before sales bounce back.

    “Next year the consumer electronics industry should see stabilization and possibly growth driven by the natural upgrade and replacement cycles and the normalization of tech innovation,” she said in a news release.
    Here’s how the company did for the fiscal second quarter that ended July 29, compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

    Earnings per share: $1.22 adjusted vs. $1.06 expected
    Revenue: $9.58 billion vs. $9.52 billion expected

    Shares of the company rose more than 2% Tuesday.
    Best Buy is seeing a reversion to pre-pandemic sales levels, as consumers return to more typical spending patterns and feel pressure on their budgets because of inflation. Similar to Home Depot and Lowe’s, Best Buy had outsized gains during Covid, fueled by big purchases that people don’t frequently repeat.
    Over the past year, the consumer electronics retailer has felt the sting of inflation and consumers’ shift back to spending on experiences. It is lapping a year-ago period when it paused share buybacks and cut jobs at stores across the country after slashing its forecast. (The company resumed buybacks late last year.)

    In the most recent three-month period, Best Buy’s net income fell to $274 million, or $1.25 per share, from $306 million, or $1.35 per share, a year earlier.
    Net sales in the quarter dropped from $10.33 billion in the year-ago period.
    Comparable sales, a key metric that includes sales online and at stores open at least 14 months, decreased 6.2% compared with the year ago period as customers bought fewer appliances, home theaters and mobile phones. Gaming systems, on the other hand, were sales drivers in the quarter, the company said.
    Online sales in the U.S. tumbled 7.1% year over year, but continued to drive a sizable part of the company’s business. E-commerce accounted for nearly a third of the retailer’s total revenue in the U.S., roughly in line with the year-ago proportion.
    The retailer narrowed its full-year outlook. It said it now expects revenue to range from $43.8 billion to $44.5 billion. It had previously anticipated between $43.8 billion to $45.2 billion. For comparable sales, it expects a decline of 4.5% to 6% instead of its prior guidance of between 3% to 6%.
    It slightly raised its profit expectations, however. It said it expects adjusted earnings per share of $6 to $6.40 instead of prior guidance of $5.70 to $6.50.
    On the investor call, Chief Financial Officer Matt Bilunas said sales trends are improving, and the company feels optimistic that may continue in the back half of the year. He said back-to-school has been “slightly better than we expected.” And in the second quarter, he said, the volume of laptops and TVs that the company sold was flat instead of declining.
    Best Buy has looked to new categories, such as health care, and launched a paid subscription program, My Best Buy, to keep driving growth. Those drove a slightly better gross profit rate for its U.S. business in the quarter, as it benefitted from those higher-margin businesses.
    On a call with investors, Barry said the company is seeing positive traction since relaunching My Best Buy as a three-tier program in late June, including year-over-year growth of paid memberships. The lowest tier of the program is free, but the top tier costs $179.99 per month.
    The retailer has reevaluated its store footprint as online sales drive higher costs. On a call with investors, Barry said the company is on track with its brick-and-mortar plans for the fiscal year. The company plans to close 20 to 30 stores, remodel eight stores to turn them into more experiential shops and expand outlet stores from 19 to about 25.
    As it gears up for the holidays, Barry said Best Buy expects that shoppers will return to “pre-pandemic behavior,” such as “looking for great deals and convenience and traffic will be weighted toward promotional events.”
    Shares of Best Buy closed on Monday at $74.07, bringing the company’s market value to $16.16 billion. So far this year, the company’s stock is down nearly 8%. That contrasts with the S&P 500’s approximately 15% gains during the same period. More

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    Nio reports wider second-quarter loss amid China slowdown and product line revamp

    Nio lost $835 million in the second quarter, more than twice its year-ago loss.
    Deliveries were down in the period as it transitioned to new models amid China’s economic slowdown.
    But deliveries rebounded in July as new and revamped models began shipping.

    Nio’s ET5 stands on display at the Central China International Auto Show on May 25, 2023, in Wuhan, China.
    Getty Images | Getty Images News | Getty Images

    Chinese electric vehicle maker Nio lost $835.1 million in the second quarter, more than twice its year-ago loss as deliveries of its upscale EVs slipped amid a transition to an updated vehicle platform and a broader economic slowdown in China.
    Here are the key numbers from Nio’s second-quarter earnings report, compared with Wall Street estimates as reported by Refinitiv.

    Revenue: 8.77 billion yuan ($1.21 billion), vs. 9.25 billion yuan expected.
    Adjusted loss per share: 3.28 yuan (45 cents), vs. 2.45 yuan expected.

    The company’s shares were down more than 6% in premarket trading following the news.
    Nio’s adjusted figures exclude share-based compensation expenses. On a GAAP basis, the company reported a net loss of $835.1 million, or 51 cents per share.
    In Chinese yuan, the company reported a net loss of 6.06 billion, or 3.70 yuan per share. A year ago, Nio reported a net loss of 2.76 billion yuan, or 1.68 yuan per share, on revenue of 10.29 billion yuan.
    Nio’s gross margin on vehicles for the second quarter was 6.2% in the second quarter, down from 16.7% a year ago but up from 5.1% in the first quarter of 2023.
    Nio launched a revamped version of its mainstay ES6 crossover on its new “NT2.0” platform in May, and a station wagon version of its ET5 sedan in June. The refreshed lineup is already driving better results, with 20,462 vehicles delivered in July alone.

    The company delivered just 23,520 vehicles in the second quarter as it sold down the last of its outgoing models with substantial discounts.
    CEO William Bin Li said in a statement that the July result was enough to put Nio at the top of China’s sales charts for EVs priced above 300,000 yuan (about $41,000) for the month.
    “We expect a solid growth in vehicle deliveries in the second half of 2023,” he said.
    Nio also boosted its balance sheet in July, closing a $738.5 million equity investment from a fund controlled by the government of Abu Dhabi on July 12. The company had $4.3 billion in cash and equivalents on hand as of the end of June.
    Nio now expects to deliver between 55,000 and 57,000 vehicles in the third quarter, up significantly from the 31,607 EVs it delivered in the third quarter of 2022. It expects its revenue for the period to fall between $2.61 billion and $2.69 billion, up from $1.83 billion in the year-ago period. More

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    GM, Google exploring ways to use AI across automaker’s business

    General Motors is working with Google to explore opportunities to implement AI technologies across the automaker’s business, the companies announced Tuesday.
    The broad partnership around generative, or conversational, AI between the Detroit automaker and Google Cloud unit expands upon previous work between the two companies on GM’s OnStar Interactive Virtual Assistant.
    Similar to other industries, the potential applications of AI, including the well known ChatGPT, have emerged as a growing discussion in the automotive industry.

    The GM logo is seen on the facade of the General Motors headquarters in Detroit, Michigan, March 16, 2021.
    Rebecca Cook | Reuters

    DETROIT – General Motors is working with Google to explore opportunities to implement AI technologies across the automaker’s business, the companies announced Tuesday.
    The broad partnership around generative, or conversational, AI between the Detroit automaker and Google Cloud unit expands upon previous work between the two companies on GM’s OnStar Interactive Virtual Assistant (IVA) that launched in 2022.

    The IVA system is powered by “intent-recognition algorithms” that use Google Cloud’s conversational AI technologies, providing OnStar users with responses to common inquiries, as well as routing and navigation assistance, GM said Tuesday.
    Similar to other industries, the potential applications of artificial intelligence, including the well-known ChatGPT, have emerged as a growing discussion in the automotive industry. Some use cases could include vehicle validation, software and in-car assistance such as the OnStar service.
    “Generative AI has the potential to revolutionize the buying, ownership, and interaction experience inside the vehicle and beyond, enabling more opportunities to deliver new features and services,” said Mike Abbott, a former Apple executive and GM’s executive vice president of software and services, in a statement.
    GM previously said it was exploring uses for ChatGPT as part of its broader collaboration with Microsoft.
    Mercedes-Benz earlier this year also announced a partnership to test in-car ChatGPT artificial intelligence in more than 900,000 vehicles in the U.S. The German luxury automaker said the emerging technology will be used for audio requests through its Hey Mercedes voice assistant, which is expected to greatly expand the system’s capabilities. More

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    Stocks making the biggest moves premarket: Oracle, AT&T, Best Buy and more

    Safra Catz, CEO of Oracle Corporation, rings the opening bell at the New York Stock Exchange (NYSE) in New York City, U.S., July 12, 2023. 
    Brendan Mcdermid | Reuters

    Check out the companies making headlines before the bell.
    Oracle — The software giant rose 2.7% after UBS upgraded Oracle to a buy from neutral, saying that shares could rally another 20% due to artificial intelligence-related tailwinds.

    AT&T, Verizon — AT&T and Verizon rose about 1.6% each after Citi upgraded the telecommunication companies to buy, citing a stabilizing competitive wireless environment. The firm also said that their current valuations may be over discounting remediation costs related to lead-covered cables.
    Best Buy — Best Buy rose about 1.3% after topping Wall Street’s fiscal second-quarter expectations on the top and bottom lines. The retailer reported adjusted earnings of $1.22 a share, ahead of the $1.06 expected by analysts polled by Refinitiv. Revenues came in at $9.58 billion, versus the $9.52 billion anticipated. Best Buy also trimmed its full-year revenue outlook.
    Big Lots — Shares of the home discount retailer surged 14% after posting a smaller-than-expected loss. Big Lots reported a loss of $3.24 per share, versus the $4.11-loss per expected by analysts polled by FactSet. Revenue came in at $1.14 billion, ahead of the $1.10 billion anticipated.
    PDD Holdings — U.S.-listed shares of the Chinese e-commerce company popped nearly 14% after PDD reported second-quarter earnings that surpasses Wall Street’s expectations. PDD also said it saw a “positive shift in consumer sentiment” during the second quarter.
    3M – Shares of the industrial products maker were higher by less than 1% in early morning trading after the company agreed to pay more than $6 billion to settle lawsuits by current and former U.S. military service members over defective combat earplugs.

    Heico — The engine and aircraft part manufacturer lost more than 5% even after topping fiscal third-quarter revenue expectations. Heico reported revenue of $723 million for the previous quarter, ahead of the $702 million expected by analysts polled by Refinitiv. Heico did report a decline in operating margins to 20.7% from 22.6% a year ago.
    Nio — Nio’s stock lost more than 6% before the bell after the Chinese electric vehicle company reported a wider-than-expected loss quarterly loss. Deliveries also declined from the year-ago period.
    J.M. Smucker — Shares of the snack food company rose more than 2% after J.M. Smucker’s fiscal first-quarter earnings topped expectations. The company reported $2.21 in adjusted earnings per share, while analysts were looking for $2.02 per share, according to FactSet’s StreetAccount. J.M. Smucker’s revenue of $1.81 billion did come in under estimates of $1.84 billion, but the company raised its earnings guidance.
    BYD — The Chinese automaker’s U.S.-traded shares rose more than 2% Tuesday premarket, a day after it announced a 204.68% jump in net profit for the first half of 2023.
    Toyota Motor — U.S.-listed shares of Toyota Motor lost about 1% after the automaker halted production at its assembly plants in Japan due to a system malfunction.
    — CNBC’s Hakyung Kim, Tanaya Macheel and Jesse Pound contributed reporting More