Business

Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Tuesday’s key moments. The defensives are the only place to be Semis and U.S.-China tensions Quick mentions: META, STZ 1. The defensives are the only place to be Stocks edged down Tuesday, while bond yields rose on investor worries over inflation and its ripple effect on corporate earnings and the broader economy. The S & P 500 fell 0.13%, while the Nasdaq Composite lost 0.36% in midmorning trading, both down for the fifth straight session. The yield on the 10-year Treasury climbed to 3.9%. West Texas Intermediate — the U.S. oil benchmark that had climbed more than 10% last week — fell nearly 2%, to $89.2 a barrel. Amid this ongoing market volatility, we maintain our position that investors should hold defensive stocks in their portfolios to weather the economic slowdown and a potential recession looming on the horizon. Key defensive Club names include pharmaceuticals like Johnson & Johnson (JNJ), AbbVie (ABBV) and Eli Lilly (LLY), as well as Procter & Gamble (PG) and Constellation Brands (STZ). 2. Semis and U.S.-China tensions We’re paring our exposure to semiconductors because the personal computer market is collapsing, on top of new U.S. export restrictions on companies that sell their chips to China. We took off 150 shares of Qualcomm (QCOM) after Monday’s sell-off and would have trimmed our positions in Nvidia (NVDA) and Advanced Micro Devices (AMD), if we weren’t restricted from doing so at this point. We’re holding off on touching our position in Marvell Technology (MRVL) for now, since its business is more with enterprises than consumers. However, we’ve downgraded all of our semis to a 2 rating. We also want to note that we don’t expect escalating tensions between Washington and Beijing to impact other U.S. companies that have business in China, such as Starbucks (SBUX) and Apple (AAPL), since they have products that are both made and sold in China. 3. Quick mentions: META, STZ Atlantic Equities downgraded Meta Platforms (META) to neutral, citing concerns with the company’s growth outlook due to macroeconomic headwinds and rising competition for advertising dollars. We think cost reductions could partly offset the anticipated softer topline growth. But given high decremental margins and greater challenges reducing costs than anticipated, we see an ongoing downside risk to earnings. Wedbush initiated coverage on Constellation Brands (STZ) with an outperform rating and $275 price target. We added to our position on Monday , ramping up the defensiveness of our portfolio, and believe that STZ could be one of the few companies that beats this earnings season. (Jim Cramer’s Charitable Trust is long AMD, AAPL, META, MRVL, NVDA, SBUX, STZ, QCOM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. More

Europe’s busiest airport, London Heathrow, says “demand outlook remains uncertain.”.
Heathrow is not expecting to come into profit this financial year.
But a spokesperson described the balance sheet and liquidity to CNBC as “strong.”

The biggest airport in Europe by passenger numbers, London’s Heathrow, is not expecting to come into profit this financial year.
Anadolu Agency / Contributor / Getty Images

LONDON — Europe’s busiest airport, London Heathrow, gave a downbeat assessment of the industry on Tuesday, saying the “demand outlook remains uncertain” as economic turbulence, a new wave of Covid-19 and the escalating crisis in Ukraine could cause disruption to the barely-recovered aviation sector.
The sector experienced unprecedented chaos both during the height of the Covid-19 pandemic and in its aftermath.

“While we face many economic headwinds, as well as the legacy of Covid, our aim is to get back to full capacity and the world class service people should expect from the U.K.’s hub airport as soon as possible,” Heathrow CEO John Holland-Kay said in a statement.
Europe’s biggest airport by passenger numbers announced on July 12 that it would impose a cap of 100,000 daily departing passengers as the industry continued to face a host of challenges — the airport had sought to cut down queues, cancellations and baggage delays.
Heathrow said Tuesday that it would finally be lifting that daily passenger cap at the end of October. It also said it was not expecting to come into profit this financial year but a spokesperson described the balance sheet and liquidity to CNBC as “strong.”
Peak days in this year’s Christmas period are still expected to be busy, the statement Thursday said. Almost 5.8 million passengers traveled through the airport in September, which is 15% below 2019 levels.
Holland-Kaye said in a July press release that the aviation sector had been “deeply scarred” by Covid.

WATCH LIVEWATCH IN THE APP More

Honda Motor and LG Energy Solution on Tuesday said a new multibillion-dollar plant to produce batteries for electric vehicles will be located in Ohio.
The battery plant is expected to cost $3.5 billion, with overall investment by the unnamed joint venture eventually reaching $4.4 billion, the companies said.
Construction of the new facility is expected to begin in early 2023, followed by mass production of lithium-ion batteries by the end of 2025.

An employee inspects the door of a 2018 Honda Accord vehicle during production at the Honda of America Manufacturing Inc. Marysville Auto Plant in Marysville, Ohio, on Thursday, Dec. 21, 2017.
Ty Wright | Bloomberg | Getty Images

Honda Motor and LG Energy Solution on Tuesday said a new multibillion-dollar plant to produce batteries for electric vehicles will be located in Ohio.
Construction of the new facility – located about 40 miles southwest of Columbus – is expected to begin in early 2023, followed by mass production of lithium-ion batteries by the end of 2025.

The battery plant is expected to cost $3.5 billion, with overall investment by the unnamed joint venture eventually reaching $4.4 billion, the companies said.
Honda and LGES announced plans for the joint venture and battery plant last year, but had not revealed a location. The facility is expected to employ about 2,200 people, the companies said.
In addition to the new battery plant, Honda on Tuesday said it plans to invest $700 million to retool several of its existing auto and powertrain plants for production of EVs. The Japanese automaker expects to begin production and sales of EVs in North America in 2026.
The announcements are part of several recent multibillion-dollar investments in U.S. production of EVs and batteries amid tightening emissions regulations and legislation to encourage domestic manufacturing.
Automakers are facing stricter sourcing guidelines that are part of the United States-Mexico-Canada Agreement (formerly the North American Free Trade Agreement) and, more recently, the Inflation Reduction Act. Both policies increased requirements for domestically sourced vehicle parts and materials in order to avoid tariffs or qualify for financial incentives.

Honda has plans to phase out traditional internal combustion engines and exclusively offer battery-electric and fuel cell electric vehicles by 2040 in North America. It’s part of the company’s plans to achieve carbon neutrality by 2050.
LGES – a spinoff from LG Chem – has also announced joint ventures with General Motors, Hyundai Motor and Jeep maker Stellantis.

WATCH LIVEWATCH IN THE APP More

American Airlines said Tuesday that its third-quarter sales likely came in better than it previously expected.
The brighter forecast points to higher fares making up for a jump in expenses.
American is set to report quarterly results on Oct. 20.

American Airlines jet parked at LaGuardia International Airport in New York. 
Adam Jeffery | CNBC

American Airlines said Tuesday that its third-quarter sales likely came in better than it previously expected, sending the company’s shares higher on the sign that a strong summer helped the carrier cover a jump in costs.
American’s stock was up more than 3% in premarket trading.

The airline’s revenue for the three months ended Sept. 30 will be up 13% from the same period of 2019, when it brought in $11.91 billion, the carrier said. That guidance is an increase from its July forecast for a 10% to 12% increase. American forecast a pretax margin of 4.5%, above an earlier estimate of no more than 4%.
While revenue will likely be above 2019 levels, the carrier said it flew 9.6% less than three years ago, near the low end of its range — another demonstration of how passengers are paying more to fly.
American is set to report quarterly results before the market opens on Oct. 20. Rival Delta Air Lines kicks off the sector’s reporting early Thursday.

WATCH LIVEWATCH IN THE APP More

Delta will also have an exclusive five-year partnership with Joby operating electric vertical takeoff and landing aircraft, or eVTOLs, as part of the Delta network.
Delta CEO Ed Bastian envisions moving passengers to and from airports quicker and with less hassle.

A Joby Aviation Electric Vertical Take-Off and Landing (eVTOL) aircraft outside the New York Stock Exchange (NYSE) during the company’s initial public offering in New York, U.S., on Aug. 11, 2021.
Michael Nagle | Bloomberg | Getty Images

Delta Air Lines, which has watched competitors map future plans with electric vertical takeoff and landing aircraft startups, is joining the growing list of airlines looking to make short trips to and from airports faster and easier.  
The carrier is investing $60 million in startup Joby Aviation, which is planning to build and operate an electric vertical takeoff and landing aircraft, or eVTOL, effectively an air taxi.  

Delta will also have an exclusive five-year partnership with Joby operating eVTOLs as part of the Delta network.
Delta CEO Ed Bastian envisions moving passengers to and from airports quicker and with less hassle.
“We’ll flash them an opportunity to enhance that experience by taking a Joby vehicle from someplace close to their home or their business right into the airport experience and cut out 50%, if not more, of their travel time on the ground.”
Initially, Joby and Delta will target eVTOL service to and from airports in New York City and Los Angeles, though the companies envision the service growing to other airports around the country and eventually overseas.
“The airport routes are the cornerstone routes for any city building really valuable infrastructure that is close to the terminal and can save customers time is critical,” Joby founder and CEO JoeBen Bevirt told CNBC.

Delta’s deal with Joby means the three legacy airlines in the U.S. have all taken stakes with eVTOL startups.  
American Airlines has invested $25 million in Vertical Aerospace and ordered 50 aircraft from the U.K.-based company.
United Airlines has two eVTOL investments and aircraft orders. One for $15 million with Eve Air Mobility while ordering 200 aircraft. The other for $10 million with Archer Aviation and an order for 100 Archer eVTOLs.
In the last year, eVTOL stocks like Joby have struggled as investors moved away from pre-revenue companies.
When will that day come for Joby and other eVTOL companies? It depends on when their aircraft are certified and enter commercial service.  
Some are targeting 2024, but Joby CEO Bevirt won’t commit to a launch date. “There are pieces within our control and there are pieces that are not in our control, so I can’t give you a firm date,” he said.
Correction: This article has been updated to correct the spelling of Joby CEO JoeBen Bevirt’s name.

WATCH LIVEWATCH IN THE APP More

Lyft’s president, John Zimmer, previously said a majority of the company’s rides would be in self-driving vehicles by 2021.
Zimmer still believes his company can help bring about revolutionary change to transportation — just on a different timeline than he’d first envisioned.
Lyft this year started offering self-driving vehicles on its ride-hailing app from partners in Las Vegas, Miami and Austin, Texas.

Confetti falls as Lyft CEO Logan Green (C) and President John Zimmer (LEFT C) ring the Nasdaq opening bell celebrating the company’s initial public offering (IPO) on March 29, 2019 in Los Angeles, California. The ride hailing app company’s shares were initially priced at $72.
Mario Tama / Getty Images

DETROIT — In 2016, Lyft co-founder John Zimmer predicted most of the company’s rides would be self-driving within five years, a transformation that would largely eliminate the need for costly drivers.
Today, the ride-hailing company is still nowhere near that milestone, and Zimmer, Lyft’s president, isn’t saying when he thinks it might come to pass. But he still believes self-driving vehicles remain a critical part of Lyft’s future.

“I really think in the next two to three years that kind of actual no driver, driverless vehicle will be something you can order pretty easily on the Lyft platform,” he told CNBC last week in Detroit.
Zimmer, acknowledging that he already got it wrong once, declined to speculate on when a majority of Lyft rides would be offered without a driver.
Along with companies including Uber, Tesla and General Motors, Lyft has come to realize that taking the driver out of driving could take years, if not decades.
Since its initial public offering in March 2019, Lyft has sold its internal autonomous vehicle development to a subsidiary of Toyota Motor and has only recently started offering self-driving rides in three U.S. cities with autonomous vehicles made by its partners. And even those vehicles still include backup safety drivers.
Zimmer, 38, said autonomous vehicles, or AVs, will be used in tandem with traditional drivers for the foreseeable future, which is why he is convinced the company is well positioned to grow in both areas.

“I’m extremely confident that autonomous vehicles will roll out on existing ride-share or transportation networks,” he said. “I think we will be quite important to the AV transition.”

A “hybrid network” allows the company to better match supply with the peaks and valleys of demand throughout a day or week, according to Zimmer. He argues a fleet only filled with self-driving vehicles will almost always be either under-supplied or over-supplied, leading to high costs and low utilization.
That cautionary tone marks a shift from six years ago, when Zimmer sent waves across Wall Street and the automotive industry with his prediction that self-driving cars would soon dominate the industry. Some believed at the time the ride-hailing company and others like it — namely, Uber — could eventually eliminate the need for car ownership.
“Every year, more and more people are concluding that it is simpler and more affordable to live without a car,” Zimmer wrote in a Medium post in September 2016. “And when networked autonomous vehicles come onto the scene, below the cost of car ownership, most city-dwellers will stop using a personal car altogether.”
A transition is happening, but at a lot slower pace than many have predicted.
Companies such as GM majority-owned subsidiary Cruise and Alphabet’s Waymo have begun offering completely driverless rides in select cities. Other companies such as Amazon’s Zoox and Argo AI, which is backed by Ford Motor and Volkswagen, are making advancements in their research and testing fleets as well.
Lyft this year started offering self-driving vehicles on its ride-hailing app from partners Motional in Las Vegas, and Argo in Miami and Austin, Texas.
“Creating a car that sees better than humans and reacts better than humans is very difficult. And so it’s just taking more time, but I don’t have doubts that it will happen,” Zimmer said.

Partnerships are key to Lyft’s plans to deploy more self-driving vehicles, according to Zimmer. They can eliminate the need to own the pricey vehicles and potentially lower liability risks in the event of an accident.
On the Lyft side of the equation are nearly 20 million active users and billions of dollars invested in fleet management, pricing algorithms and other back-end services, Zimmer said.
In the second quarter, Lyft began generating revenues from licensing and data-access agreements, primarily with third-party autonomous vehicle companies.
Still, the hype on Wall Street has faded for ride-hailing companies. Lyft’s stock is down by more than 80% since its IPO in March 2019, including a roughly 70% decline year to date. Its largest rival, Uber, is down by about 33% this year and since it went public in May 2019.
Rumors circulated earlier this year that Lyft could become an acquisition target, but Zimmer said it is committed to being “an independent company and to execute and build an extremely large and impactful business.”
– CNBC’s Michael Bloom contributed to this report.

WATCH LIVEWATCH IN THE APP More

Retail sales rose in September, but this was due to higher prices, and sales volumes fell.
Consumers avoided expensive purchases like computers and furniture but bought warm clothes and energy-saving appliances such as air fryers.
Businesses face a catalogue of challenges, including retaining price-sensitive customers while their input costs rise, a weak pound and the number of available workers per job opening falling bellow 1.

Shoppers pass along the main high street in Whitstable, UK.
Bloomberg | Bloomberg | Getty Images

LONDON — U.K. retail sales rose in September, data published Tuesday showed — but the details highlighted the multitude of challenges facing the public heading into the winter months.
The headline 2% year-on-year increase was largely due to higher prices, with the volume of sales declining, according to trade association the British Retail Consortium.  

And consumers eschewed big purchases like computers, TVs and furniture, instead boosting sales of items like blankets, warm clothing and energy-efficient household appliances, such as air fryers.
“As consumer confidence continued to fall, people shopped cautiously,” said Helen Dickinson, chief executive of the BRC. “A difficult winter looms for both retailers and consumers.”

Energy crisis

With wholesale gas and electricity prices rocketing in Europe, the U.K. government in early September announced a cap on consumer energy bills and a £400 ($442) grant to each household over six months, with more for vulnerable groups.
However, the average household is still looking at a £2,500 annual bill for the next two years, up from £1,400 in October 2021.
Last week, Prime Minister Liz Truss said the U.K. would not run a public information campaign encouraging people to reduce energy use, as several other European countries have done.

It came as utility firm National Grid warned there could be planned three-hour power outages this winter if gas supplies do not meet demand, which it said was “unlikely.”

Dickinson said the retail sales data showed households were preparing themselves for the higher energy prices.
They also face broader price increases, with inflation at 9.9% and the most recent reading showing a significant rise in food prices. Rent and many mortgage payments, with the Bank of England hiking rates, are also on the up. Average pay adjusted for inflation is down 2.9% year on year, further squeezing consumer spending power.
A survey by consultancy GFK showed U.K. consumer confidence dropped to the lowest level since it began readings in 1974 for the fourth time in a row in September.
Paul Martin, U.K. head of retail at KPMG, said that heading into the holiday period, shoppers would be focused on getting value for money, likely switching to own-brand items and seeking out discounts; meaning retailers faced a “very fine line” in protecting their margins.

Economic turmoil

Dickinson also highlighted challenges for businesses, including cost increases throughout supply chains, the weak pound and a tight labor market driving up staff costs.
Figures also published Tuesday showed U.K. unemployment fell to 3.5% in the period from June to August, and the number of unemployed people per job vacancy was at a record low of 0.9.
The British Retail Consortium said the “relentless” tightness of the market was holding back businesses’ ability to service existing customers and grow.
Meanwhile, the pound has fallen dramatically against the U.S. dollar this year, increasing costs for importers.
A combination of relentless dollar strength due to global stock market volatility and weak U.K. economic forecasts have hit sterling, which has also declined against the euro.

Loading chart…

WATCH LIVEWATCH IN THE APP More

Peter Coker Sr. and James Patten, charged in an alleged scheme involving a small-town deli, are scheduled to appear in New Jersey federal court.
The deli’s parent company, Hometown International, attained a $100 million market valuation despite having only the deli to its name.
The men are accused of various federal crimes, including conspiracy, fraud and money laundering.
Patten told CNBC that had hired attorney Ira Sorkin, who had previously represented late Ponzi schemer Bernie Madoff.

Your Hometown Deli in Paulsboro, N.J.
Google Earth

CAMDEN, N.J. – Two men accused in an alleged stock-manipulation scheme involving a small-town New Jersey deli are set to appear Tuesday morning at a federal courthouse that’s about a 20-minute drive from the now-closed shop at the heart of the case.
Peter Coker Sr., 80, and James Patten, 63, who were arrested by federal authorities last month in North Carolina, are set to show at the U.S. District Court in Camden, New Jersey, just over the bridge from Philadelphia.

Patten told CNBC before the hearing Tuesday that he would be represented by attorney Ira Sorkin, who is known for representing the late Ponzi schemer Bernie Madoff.
Coker Sr. will be represented by Marc Agnifilo, who has previously defended fraudster and “pharma bro” Martin Shkreli, disgraced movie producer Harvey Weinstein, NXIVM cult leader Keith Raniere, and a Russian bank sanctioned over the invasion of Ukraine. Agnifilo did not immediately respond to CNBC’s request for comment before the hearing.
Patten and Coker are accused of several federal crimes, including fraud, for allegedly pumping up the value of a publicly traded company that achieved a market capitalization of more than $100 million last year despite having only Your Hometown Deli in Paulsboro, New Jersey, to its name. The deli made less than $40,000 in sales a year.
Federal prosecutors have described the case as a tale of international fraud and betrayal. Peter Coker Jr., 53, the son of Coker Sr., is based in Hong Kong and is considered at large. Federal authorities sought to jail Coker Sr. before agreeing to a conditional release. The Securities and Exchange Commission also sued the men in civil case over the alleged plot.
The men were charged for their involvement in Hometown International and a similar shell company called E-Waste. Prosecutors alleged that the men sought to enrich themselves by inflating the prices of Hometown International and E-Waste. At one point, their values on so-called over-the-counter markets had surged by 939% and 19,900%, respectively.

The men are charged with conspiracy to commit securities fraud, securities fraud and conspiracy to manipulate securities prices. The fraud and manipulation charges carry a maximum sentence of 20 years and a maximum fine of $5 million.
Patten is additionally charged with manipulation of securities, wire fraud and money laundering.
According to the indictment, the men duped the founders of Your Hometown Deli — Paul Morina, a former high school wrestling teammate of Patten’s, and Morina’s co-worker Christine Lindenmuth — telling them that the umbrella corporation could help with the restaurant’s expansion. Neither Morina, principal and wrestling coach at Paulsboro High School, nor Lindenmuth, a math teacher at the same school, were mentioned by name in court documents.
The men then coordinated to control and transfer Hometown International stock between themselves and their friends for the purpose of inflating the share price, prosecutors said.
Patten didn’t comment when asked Tuesday morning whether he had since spoken to Morina.

Peter Lee Coker mugshot from the Raleigh/Wake City-County Bureau of Identification (CCBI).
Source: Raleigh/Wake City-County Bureau of Identification

Prosecutors said Patten and the Cokers personally enriched themselves through consulting contracts that paid $15,000 a month to Coker Sr.’s company, North Carolina-based Tryon Capital, and $25,000 a month to Coker Jr.’s company, Macao-based VCH Limited. James Patten was a partner at Tryon Capital. 
The men had similar, albeit smaller, consulting contracts with E-Waste.
Ultimately, the men planned to use both Hometown International and E-Waste as vessels for reverse mergers, which would allow other companies to go public through the two vehicles, authorities said.
When Makamer Holdings, a bioplastics company, initiated a reverse merger with Hometown International, the deli was sold for $15,000. The deli is now permanently closed.
Coker Sr. and Patten have had brushes with regulators and the law before.
Coker Sr. was sued in 1992 for allegedly hiding money from creditors and alleged business-related fraud. He has denied wrongdoing in those cases, one of which was settled out of court in recent years in North Carolina. The same year, Coker Sr. was also accused of indecent exposure to minors.
In 2006, James Patten was barred from FINRA, the broker-dealer regulator, for not complying with an arbitration award of more than $753,000 for violating securities laws, unauthorized trading and churning a client’s account.
The peculiarities surrounding Your Hometown Deli first caught the eye of hedge-fund manager David Einhorn in 2021. 
“The pastrami must be amazing,” Einhorn quipped at the time. After the indictments last month, he tweeted: “I guess the pastrami wasn’t so great.”

WATCH LIVEWATCH IN THE APP More