Finance

The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors wrote to the Fed “to convey profound concern” about the industry.
The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities.

New homes under construction in Miami, Florida, Sept. 22, 2023.
Joe Raedle | Getty Images

Top real estate and banking officials are calling on the Federal Reserve to stop raising interest rates as the industry suffers through surging housing costs and a “historic shortage” of available homes for sale.
In a letter Monday addressed to the Fed Board of Governors and Chair Jerome Powell, the officials voiced their worries about the direction of monetary policy and the impact it is having on the beleaguered real estate market.

The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors said they wrote the letter “to convey profound concern sharedamong our collective memberships that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.”
The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities at least until the housing market has stabilized.
“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the group said.
The letter comes as the Fed is weighing how it should proceed with monetary policy after raising its key borrowing rate 11 times since March 2022.

In recent days, several officials have noted that the central bank could be in a position to hold off on further increases as it assesses the impact the previous ones have had on various parts of the economy. However, there appears to be little appetite for easing, with the benchmark fed funds rate now pegged in a range between 5.25%-5.5%, its highest in some 22 years.

At the same time, the housing market is suffering through constrained inventory levels, prices that have jumped nearly 30% since the early days of the Covid pandemic and sales volumes that are off more than 15% from a year ago.
The letter notes that the rate hikes have “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume. These market challenges occur amidst a historic shortage of attainable housing.”
At recent meetings, Powell has acknowledged dislocations in the housing market. During his July news conference, the chair noted “this will take some time to work through. Hopefully, more supply comes on line.”
The average 30-year mortgage rate is now just shy of 8%, according to Bankrate, while the average home price has climbed to $407,100, with available inventory at the equivalent of 3.3 months. NAR officials estimate that inventory would need to double to bring down prices.
“The speed and magnitude of these rate increases, and resulting dislocation in our industry, is painful and unprecedented in the absence of larger economic turmoil,” the letter said.
The groups also point out that spreads between the 30-year mortgage rate and the 10-year Treasury yield are at historically high levels, while shelter costs are a principal driver for increases in the consumer price index inflation gauge.
As part of an effort to reduce its bond holdings, the Fed has reduced its mortgage holdings by nearly $230 billion since June 2022. However, it has done so through passively allowing maturing bonds to roll off its balance sheet, rather than reinvesting. There has been some concern that the Fed might get more aggressive and start actively selling its mortgage-backed securities holdings into the market, though no plans to do so have been announced. More

Paul Tudor Jones said it’s an extremely tough time to be an investor in risk assets amid escalating geopolitical tensions and the dire fiscal position in the U.S.
The founder and chief investment officer of Tudor Investment said the Israel-Hamas war brought on a challenging geopolitical environment, which would create a significant risk-off market environment.
Also, he said, a surge in interest rates has deteriorated the fiscal health of the U.S. as the country continues to take on more debt.

Paul Tudor Jones speaking at the World Economic Forum in Davos, Switzerland, January 21, 2020.
Adam Galica | CNBC

Billionaire hedge fund manager Paul Tudor Jones said Tuesday it’s an extremely tough time to be an investor in risk assets amid escalating geopolitical tensions and the dire fiscal position in the U.S.
“It’s a really challenging time to want to be an equity investor and in U.S. stocks right now,” Jones said on CNBC’s “Squawk Box.” “You’ve got the geopolitical uncertainty… the United States is probably in its weakest fiscal position since certainly World War II with debt-to-GDP at 122%.”

The high-profile investor said the Israel-Hamas war brought on the most threatening and challenging geopolitical environment, which would create a significant risk-off market environment. Meanwhile, a surge in interest rates has deteriorated the fiscal health of the U.S. as the country continues to take on more debt.
“As interest costs go up in the United States, you get in this vicious circle, where higher interest rates cause higher funding costs, cause higher debt issuance, which cause further bond liquidation, which cause higher rates, which put us in an untenable fiscal position,” Jones said.
Jones is founder and chief investment officer of Tudor Investment. He shot to fame after he predicted and profited from the 1987 stock market crash.
He said he would personally wait for a resolution and evaluate the potential impact of the Israel-Hamas conflict before he jumps into risk assets again. Jones said he hasn’t ruled out the possibility of a nuclear war.
“From a personal standpoint, would I be investing in risk assets now and stocks until I saw what the resolution was with Israel, Iran?” Jones said. “Israel is going to respond in some way, shape or form. The determination of whether Iran was actually responsible is enormous because again, it has the possibility to really escalate into something terrible.”
Jones is also the chairman of nonprofit Just Capital, which ranks public U.S. companies based on social and environmental metrics. More

Palantir headquarters in Palo Alto, California, May 10, 2023.
David Paul Morris | Bloomberg | Getty Images

Check out the companies making headlines in premarket trading.
Palantir Technologies — Shares of the data analytics company added 2.3% on news that the U.S. Army awarded the company a $250 million contract to test and develop artificial intelligence and machine learning.

Unity Software — The game engine stock surged nearly 6% after the company said CEO John Riccitiello would retire. Unity said James M. Whitehurst would assume the interim chief role.
Rivian Automotive — Shares of the electric truck company rose 3% in premarket trading after UBS upgraded Rivian to buy from neutral. The investment firm said Rivian’s fundamentals are improving and that the stock has upside after a recent $1.5 billion capital raise sparked a sell-off.
PepsiCo — Shares of the beverage giant added roughly 1% after a third-quarter earnings beat. The company reported an adjusted $2.25 per share on $23.45 billion in revenue, while analysts polled by LSEG forecast an adjusted $2.15 and $23.39 billion.
Ameris Bancorp — Shares rose about 1% after DA Davidson upgraded Ameris Bancorp to buy from neutral, saying the company is “uniquely insulated” from unrealized losses connected to higher interest rates.
Arm Holdings — The semiconductor stock climbed about 2% a day after several analysts initiated bullish coverage of the stock, including JPMorgan, Deutsche Bank and Goldman Sachs.

Akero Therapeutics — The biotech company’s shares plummeted more than 63% after it reported initial trial data related to a Phase 2B study of cirrhosis drug efruxifermin.
— CNBC’s Jesse Pound and Sarah Min contributed reporting. More

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The draw of bargains may be fading.
As three of the nation’s biggest retailers kick off a key sales week, former Walmart U.S. CEO Bill Simon warns consumers are starting to buckle for the first time in a decade.

He’s blaming a list of headwinds weighing on consumers including inflation, higher interest rates, federal budget wrangling, polarized politics and student loan repayments — and now new global tensions connected to violence in Israel.
“That sort of pileup wears on the consumer and makes them wary,” the former Walmart U.S. CEO told CNBC’s “Fast Money” on Monday. “For the first time in a long time, there’s a reason for the consumer to pause.”
The timing comes as Amazon begins its two-day Prime Big Deal Days sale on Tuesday. Walmart and Target are trying to compete with their own sales events to get an early jump on the holiday- shopping season.
Simon observes the retailers have a glaring thing in common: The bargains are not as deep.

‘You’re not real proud of your price point’

“They usually say 50-inch TV [is] $199 or something like that. And now, they say 50-inch TV [is] 40% off,” said Simon. “You use percentages when you’re not real proud of your price point. I think you’ve got inflation pushing the relative price points up.”

Shares of Amazon, Walmart and Target are under pressure over the past two months. Target is performing the worst of the three — off 19%.
Simon, who sits on the Darden Restaurants and HanesBrands boards, believes Walmart does have a big advantage over its competitors right now.
“It’s solely because of the food business,” Simon said. “They’re going to have both the eyeballs and the food traffic to probably have a better Christmas than maybe their competitors.”
Disclaimer More

On the morning of October 9th the National Bureau of Economic Research circulated a working paper to economists around the world entitled “Why Women Won”. In the paper, Claudia Goldin of Harvard University documents how women achieved equal rights in American workplaces and families. Rather fittingly, a few hours later, Ms Goldin was announced as the winner of this year’s economics Nobel prize for advancing “our understanding of women’s labour-market outcomes”.Having been the first woman to be granted tenure at Harvard’s economics department, Ms Goldin is now the third woman to have won the subject’s Nobel prize. Taken together, her research provides a comprehensive history of gender labour-market inequality over the past 200 years. In telling this history, she has overturned a number of assumptions about both historical gender relations and what is required to achieve greater equality in the present day.Before Ms Goldin’s work, economists had thought that economic growth led to a more level playing field. In fact, Ms Goldin has shown, the Industrial Revolution drove married women out of the labour force, as production moved from home to factory. In research published in 1990 she demonstrated that it was only in the 20th century, when service-sector jobs proliferated and high-school education developed, that the more familiar pattern emerged. The relationship between the size of Western economies and female-labour-force participation is U-shaped—a classic Goldin result.Ms Goldin’s research has busted other myths, too. By employing time-use surveys and industrial data she has painstakingly filled in gaps in the historical record about women’s wages and employment. Straightforward statistics, such as the female employment rate, were mismeasured because women who, say, worked on a family farm were simply recorded as “wife”. For example, Ms Goldin found that the employment rate for white married women was 12.5% in 1890, nearly five times greater than previously thought.Her calculations also showed that the gender wage gap narrowed in bursts. First, a drop from 1820 to 1850, then another from 1890 to 1930 and finally a collapse, from 40% in 1980 to 20% in 2005. What drove these bursts? The initial two came well before the equal-pay movement and were caused by changes in the labour market: first, during the Industrial Revolution; second, during a surge in white-collar employment for occupations like clerical work.For the third and most substantial drop, in the late 20th century, Ms Goldin emphasised the role of expectations. If a young woman has more control over when and whether she will have a child, and more certainty about what types of jobs will be available, she can make more informed choices about the future and change her behaviour accordingly, such as by staying in school for longer. In work published in 2002 Ms Goldin and Lawrence Katz, her colleague and husband, detailed the example of the contraceptive pill, which was approved in 1960, and allowed women to have greater say over when and whether to have children. Between 1967 and 1979 the share of 20- and 21-year-old women who expected to be employed at the age of 35 jumped from 35% to 80%.Expectations also matter for employers. Although the pay gap narrowed in the early 20th century, the portion of the gap that was driven by discrimination, rather than occupation, grew markedly. One important factor, according to Ms Goldin, was a change in how people were paid. Wages used to be based on contracts tied to tangible output—how many clothes were knitted, for instance. But after industrialisation, they were increasingly paid on a periodic basis, in part because measuring an individual’s output became trickier. As a result, other more ambiguous factors grew in importance, such as expectations of how long a worker would stay on the job. This penalised women, who were expected to quit when they had children.Since around 2005 the wage gap has hardly budged. Here Ms Goldin’s work questions popular narratives that continue to blame wage discrimination. Instead, in a book published in 2021, called “Career and Family: Women’s Century-Long Journey Toward Equity”, Ms Goldin blames “greedy” jobs, such as being a lawyer or consultant, which offer increasing returns to long (and uncertain) hours.She explains how such work interacts with the so-called parenthood penalty. Women spend more time raising children, which is why the gender pay gap tends to open up right after the first child arrives. The gap continues to widen even for women and men with the same education and in the same profession. Work by Ms Goldin in 2014 finds that the gender earnings gap within jobs has grown to be twice as important as the gap caused by men and women holding different jobs.Ms Goldin’s research holds lessons for economists and policymakers. For the former group, it shows the importance of history. Her first book was about urban slavery in America’s South during the mid-1800s. In other well-known work, with Mr Katz, she has shown how the relationship between tech and education can explain inequality across the 20th century. Before Ms Goldin, many academics considered questions about historical gender pay gaps unanswerable owing to a paucity of data. She has demonstrated—again and again—that digging through historical archives allows researchers to credibly answer big questions previously thought beyond their reach.For policymakers, her research shows that fixes for gender inequality vary depending on time and place. In early 20th-century America, firms barred married women from obtaining or retaining employment. A policy response came with the Civil Rights Act of 1964, which banned such behaviour. Today, wage gaps persist because of greedy jobs and parental norms, rather than because of employer discrimination. In the past, Ms Goldin has suggested more flexibility in the workplace could be a solution. Perhaps working out how to achieve that will be her next act. ■ More

The USS Truxtun (DDG-103) destroyer sits in dry dock at the General Dynamics Corp. NASSCO shipyard facility on the Elizabeth River in Norfolk, Virginia, on Jan. 9, 2018.
Luke Sharrett | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Spotify — Shares of the music streaming service company fell 2.5% after Redburn Atlantic downgraded the streaming giant to neutral from buy. The firm said Spotify’s new audiobook offer doesn’t fit into its original forecast for margin expansion, while simultaneously stoking competition from Amazon.

Zscaler — Shares of the cloud security company rallied 4.2% following an upgrade to an overweight rating from Barclays. As a catalyst, analyst Saket Kalia cited a new growth opportunity in the secure access service edge, or SASE, cybersecurity segment.
Mirati Therapeutics — Shares of the cancer drug company fell more than 5% after Bristol Myers Squibb announced a deal to acquire Mirati for $48 per share, plus a contingent value right worth up to $12 per share. Mirati’s stock closed at $60.20 per share Friday.
Tesla — The automaker’s stock fell 2.3% in Monday trading upon news that the company’s year-over-year sales declined 10.9% in China last month, according to data from the China Passenger Car Association.
On Holding — The sneaker maker rose more than 1% after Baird upgraded the stock to outperform from neutral. The firm said On’s recent investor day reinforced its confidence in the brand’s health and upcoming three-year pipeline of growth.
Motorola Solutions — Motorola added 3.3% after Bank of America initiated the stock at a buy rating. The bank cited solid pricing power, strong growth and a sustainable order pipeline.

Datadog — Datadog dropped 3.6% after Bank of America downgraded the cloud stock to neutral from buy, citing downside revenue risk from demand checks.
Oil stocks — Energy stocks soared following the escalation of the Israel-Hamas conflict over the weekend. Shares of Halliburton, CF Industries and Hess each respectively rose 6.5%, 5.5% and 5%.
Defense stocks — Similar to the energy sector, defense stocks also rallied on the back of rising conflict between Palestine and Israel. Northrop Grumman, L3Harris Technologies and General Dynamics respectively soared 10.8%, 9.1% and 8.4%.
Airline stocks — On a broader level, airline names were down after several major airlines suspended service to Israel following this weekend’s attacks. United Airlines slid 5.3%, while Delta Air Lines and American Airlines shed 4.5% and 5.3%, respectively.
— CNBC’s Yun Li, Tanaya Macheel, Sarah Min and Jesse Pound contributed reporting. More

An Exxon gas station sign in the Brooklyn borough of New York City, Oct. 6, 2023.
Michael M. Santiago | Getty Images

Check out the companies making headlines before the bell:
Walt Disney — Shares of the media giant rose more than 1% after The Wall Street Journal reported that activist investor Nelson Peltz’s Trian Fund Management has hiked its stake and could seek multiple board seats, including for himself. Trian’s stake is now worth north of $2.5 billion after it added more than 30 million shares from just 6.4 million at the end of June, the Journal reported. Trian declined to comment.

Arm Holdings — Shares of the chipmaker climbed nearly 3% after JPMorgan initiated coverage with an overweight rating and lauded the company’s potential expansion into autos.
Spotify Technology — The music streaming platform fell 2% after Redburn Atlantic downgraded shares to neutral from buy. The firm cited factors including gross margin dilution from the company’s recent decision to include audiobooks in its premium subscription package.
Zscaler — The stock edged higher after Barclays upgraded the cloud security company to overweight rating. Analyst Saket Kalia cited a new growth opportunity in an emerging segment as a reason for the upgrade.
Oracle — Shares added about 1% after Evercore ISI upgraded Oracle to outperform from in line. The Wall Street firm said the software stock is at an attractive entry point after its recent pullback.
Exxon Mobil, Chevron, Occidental Petroleum — Energy stocks popped as oil prices rallied following the Palestinian militant group Hamas’ attack on Israel over the weekend. Exxon and Chevron were up more than 2%, and Occidental gained more than 3%.

Blue Owl Capital — Shares of the investment company dropped 2.6% after Oppenheimer downgraded Blue Owl Capital to perform from outperform.
Mirati Therapeutics — Shares of the commercial stage oncology company slipped 4.7% after Bristol Myers Squibb announced Sunday that it will acquire Mirati for $58 per share in cash, for a total equity value of $4.8 billion. Mirati is known for its Krazati lung cancer medicine, which Bristol Myers Squibb will add to its commercial portfolio.
Tesla — Tesla shares fell more than 1% after data from the China Passenger Car Association showed the company saw a 10.9% year-over-year sales decline in China last month. Meanwhile, rival BYD’s sales grew more than 40%.
Lockheed Martin — The aerospace and defense company saw shares rise about 4.5% in premarket trading following the surprise attack on Israel by Hamas.
— CNBC’s Brian Evans, Lisa Kailai Han, Fred Imbert, Hakyung Kim, Yun Li, Tanaya Macheel and Pia Singh contributed reporting. More

The U.K.’s Metro Bank on late Sunday announced it had secured a £325 million ($395.6 million) capital raise and £600 million in debt refinancing, as Colombian businessman Jaime Gilinski Bacal becomes its majority shareholder.
Some bondholders will take a 40% haircut, as the bank restructures its debt, while also discussing the sale of up to £3 billion of residential mortgages.
Shares were up 26% Monday morning after volatile trade last week.

A close-up of a sign of Britain’s Metro Bank.
Matthew Horwood | Getty Images

LONDON — Shares of the U.K.’s Metro Bank were sharply higher Monday morning, after the lender on late Sunday announced it had secured a £325 million ($395.6 million) capital raise and £600 million in debt refinancing.
The capital raise includes £150 million of new equity and £175 million of “MREL” issuance, a form of bail-in debt. The bank said it will also undergo a debt restructuring that will extend the maturity of its borrowings. Holders of its £250 million of tier 2 bonds, due in June 2028, will take a 40% haircut.

Metro Bank shares were 25.5% higher at 10:28 a.m. London time.
The deal comes after investors were last week spooked by news that the bank was searching for a large financing package. Crunch talks took place over the weekend, with several large banks approached for potential offers, according to multiple reports.
The raise was led by Colombian banker and real estate developer Jaime Gilinski Bacal — an existing shareholder through Spaldy Investments Limited — which contributed £102 million to the initiative. Gilinski Bacal is now the bank’s controlling shareholder with a 53% stakehold.
“The opportunity to become the bank’s major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service,” he said in a statement.
“I believe that the package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years.”

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Metro Bank share price.

Metro Bank said the raise will provide the opportunity to shift towards specialist mortgages and commercial lending, as well as continuing growth in current accounts and raising deposits.
The bank further said it is in discussions over the sale of up to £3 billion of residential mortgages.
Regulators last month said they were unlikely to allow Metro Bank to use its own internal risk models for some mortgages — raising concerns for investors, as this would result in higher capital requirements.
Shares of the London-based bank were highly volatile and finished 22.5% lower last week, according to LSEG data.
The challenger bank launched in 2010 and has a market capitalization of less than £100 million. It faced a major blow in 2019 when a major accounting error resulted in the resignation of its founder and in fines for its former CEO and CFO.
A number of ratings agencies and investment banks downgraded the bank’s stock amid the turbulence last week, with investment bank Stifel saying it may have capital needs of up to a billion over the next two years.
“Not the best possible outcome for shareholders and bondholders by any stretch but it does secure [Metro Bank]’s longevity as an independent institution and no one loses everything,” John Cronin, head of financials research at Goodbody, said in a note Monday.
Cronin said that the capital package still requires support from these parties, with bondholders taking a “deep haircut” and shareholders suffering material dilution under the current deal terms. However, he said recent deposit outflows and the challenges of coming up with an alternative plan quickly may push the deal over the line, even if they “feel aggrieved at this outcome.” More