Finance

Register now for full access to the Delivering Alpha Investor Summit livestream

With the S&P 500 on pace for its worst monthly performance since December of last year, investors are increasingly turning to alternative assets outside of equities and bonds to generate returns.
One of those strategies is private credit. Despite the changing macro backdrop, the industry has posted annual gains for the last 13 years and is expected to continue drawing strong interest from institutional investors. According to a new report by Pitchbook, investors are likely to put more than $200 billion in commitments into private credit this year, for the fourth year in a row.

As the strategy gains steam, some are concerned that higher-for-longer interest rates could put more stress on the balance sheets of borrowers. Though, Michael Arougheti, who helms one of the largest private credit firms in the world, said he’s not too concerned about a major default cycle.
“I would expect default rates to tick up but not to dangerously high levels,” Arougheti said in an interview with CNBC’s Leslie Picker. “The irony of this moment in time, which is unlike many cycles we’ve seen before, the stresses are being created by liquidity and high rates not deteriorating cash flow.”
However, as servicing the debt becomes more expensive, that could force more negotiations between private credit managers and their borrowers.
“If rates stay high for long…through the end of 2024, that debt service will force companies back to the table,” Arougheti added.
Arougheti said the firm has been benefitting from rising rates, boosting their relative return. He noted that in pulling data points from the 3,000 portfolio companies Ares lends to and invests in, he’s seen “fundamental strength despite the rise in rates.” More

According to t. s. Eliot, April is the cruellest month. Shareholders would disagree. For them, it is September. The rest of the year stocks tend to rise more often than not. Since 1928, the ratio of monthly gains to losses in America’s s&p 500 index, excluding September, has been about 60/40. But the autumn chill seems to do something to the market’s psyche. In September the index has fallen 55% of the time. True to form, after a jittery August it has spent recent weeks falling.Such a calendar effect flies in the face of the idea that financial markets are efficient. After all, asset prices ought only to move in response to new information (future cash flows, for instance). Other fluctuations, especially predictable ones, should be identified, exploited and arbitraged away by traders. Yet this September there is no mystery about what is going on: investors have learned, or rather accepted, something new. High interest rates—most importantly in America but also elsewhere—are here for the long haul.The downturn was prompted by a marathon session of monetary-policy announcements, which began with America’s Federal Reserve on September 20th and concluded two days and 11 central banks later. Except for the Bank of Japan, which kept its short-term interest rate negative, all the big hitters repeated the “higher for longer” message. Beforehand Huw Pill of the Bank of England likened rates to Table Mountain, the flat-topped peak overlooking Cape Town, as opposed to the Matterhorn, which has a triangular summit. Christine Lagarde, president of the European Central Bank, raised rates and spoke of the “long race that we are in”. The Fed’s governors, on average, guessed that their benchmark rate (currently 5.25-5.50%) would still be above 5% by the end of 2024.image: The EconomistFor the bond market, this merely confirmed expectations that had been building all summer. The yield on two-year Treasuries, especially sensitive to near-term expectations of monetary policy, has steadily risen from 3.8% in early May to 5.1% today. Longer-term rates have been climbing as well, and not just in America, where the ten-year Treasury yield has hit a 16-year high of 4.5%. Ten-year German bunds now yield 2.8%, more than at any point since 2011. British gilt yields are within striking distance of the level they hit last autumn, which were then only reached amid fire sales and a market meltdown.At the same time, fuelled by America’s robust economy and the expectation that its rates will reach a higher plateau than those of other countries, the dollar has strengthened. The dxy, a measure of its value compared to six other major currencies, has risen by 7% since a trough in July.By comparison with the bond and foreign-exchange markets, the market for shares has been slow to absorb the prospect of sustained high interest rates. True, borrowing costs are not its only driver. Investors have been seized by euphoria over the profit-making potential of artificial intelligence (ai) and a seemingly inexhaustible American economy. The prospect of rapidly growing earnings, in other words, might justify a buoyant stockmarket even in the face of tight monetary policy.Yet it appears investors had also taken a pollyanna-ish view of interest rates, and not just because the most recent fall in prices was triggered by pronouncements from central bankers. Since shares are riskier than bonds, they must offer a higher expected return by way of compensation. Measuring this extra expected return is difficult, but a proxy is given by comparing the stockmarket’s earnings yield (expected earnings per share, divided by share price) with the yield on safer government bonds.Do this with the s&p 500 index and ten-year Treasuries, and you find that the “yield gap” between the two has fallen to just a single percentage point, its lowest since the dotcom bubble. One possibility is that investors are so confident in their shares’ underlying earnings that they barely demand any additional return to account for the risk that these earnings disappoint. But this would be an odd conclusion to draw from economic growth that, while robust, has presumably not escaped the business cycle entirely, as recent disappointing consumer confidence and housing data show. It would be an even odder conclusion to draw in relation to the potential profits from ai, a still-developing technology whose effect on firms’ bottom lines remains mostly untested.The alternative is that, until now, investors have simply not believed that interest rates will stay high for as long as the bond market expects—and central bankers insist—they will. If that is the case, and they are now starting to waver, the next few months could be crueller still. ■ More

Banks are facing mounting uncertainty as the commercial real estate (CRE) sector continues to struggle. But, tailwinds in our financial names should help safeguard their bottom lines. Club names Wells Fargo (WFC) and Morgan Stanley (MS) have bright spots in their operations that can offset potential weakness from CRE exposure. We’re optimistic about green shoots in Morgan Stanley’s dealmaking and the continued maturing of its wealth management business , along with progress in Wells Fargo’s multiyear recovery plans to expand its balance sheet and put past misdeeds behind it . Commercial real estate landscape Higher interest rates, tightening credit conditions and elevated office vacancies are weighing down the estimated $21 trillion commercial real estate sector . Many banks have exposure to CRE through loans. Fluctuations in property values and market conditions can impact their loan portfolios and asset quality. Economic downturns can lead to higher default rates and loan losses, affecting a bank’s profitability and overall financial health as well. Banks provide financing to investors and developers in the sector, making them vulnerable to weaker market cycles too. A lagging commercial real estate market can strain a bank’s capital reserves while a stronger market can boost incomes from lending and fees. Tomasz Piskorski, a property market expert and professor at Columbia Business School, said the key overhang on the banking sector is the central bank’s monetary tightening, and trouble in CRE is the “icing on the cake.” The Federal Reserve has hiked borrowing costs 11 times since March 2022 — from near-zero on the fed funds overnight bank lending rate to the target range of 5.25% to 5.5% — all in a bid to combat sticky inflation. The midpoint of the current range is the highest level in more than 22 years. “U.S. banks are now in a very difficult position and the main factor driving this difficult position is high interest rates,” Piskorski told CNBC in an interview. “This is one of the main problems affecting commercial real estate because a lot of these buildings were written at a lower rate and now they have to refinance to higher rates.” While there’s reason for concern in the broader commercial real estate market, we see the most pronounced challenges unfolding in offices. Work-from-home trends and tech layoffs have led to increased vacancies, decreased demand, and drastic reductions in property values. Office vacancy rates reached 18.6% in the first quarter of 2023. That’s 5.5% higher than when the Covid pandemic began to hit the U.S. during the first quarter of 2020. Back in July, Jim Cramer said the doom and gloom around CRE is a real threat but exaggerated, describing it at the time as a “well-overdone crisis” Morgan Stanley’s exposure MS YTD mountain Morgan Stanley (MS) year-to-date performance In reporting its second-quarter financial results, Morgan Stanley said that “increases in provisions for credit losses were primarily driven by credit deteriorations in the commercial real estate sector as well as modest growth across the portfolio.” The bank’s provision for credit losses rose to $161 million in Q2 from $101 million in the second quarter of 2022. Tailwinds spurred by a resurgence in Morgan Stanley’s investment banking (IB) services, however, could offset CRE market weakness going forward. There have been signals of more mergers and acquisitions (M & A) and initial public offerings (IPOs), which could boost this dormant, and crucial, part of the bank’s business. Semiconductor designer Arm Holdings (ARM) had a blockbuster listing earlier this month, the largest IPO since electric vehicle maker Rivian Automotive (RIVN) in 2021. Grocery delivery service Instacart (CART) and marketing automation Klaviyo (KVYO) made Klaviyo mad their debuts shortly after Arm. IB has lagged in recent quarters amid macro uncertainty and recession concerns. The global M & A value declined by 44% in the first five months of 2023, per data analytics firm GlobalData , with firms pulling back on dealmaking in order to preserve capital in the face of an economic downturn. During the Barclays conference earlier this month, management at Morgan Stanley said that capital markets are set to improve next year. This could boost IB broadly because companies will feel less conservative about how they allocate funds. “I would say we are more confident now than any time this year about an improved outlook for 2024,” the team said. “I think it’s clear to us now that the first half of the second quarter was probably the low point in sentiment around capital markets and M & A.” Still, there’s a lot of uncertainty around the U.S. economy as it’s unclear when the Fed will stop hiking interest rates. Academics like Piskorski, however, contend that pressure on traditional investment banking will likely continue. “We’re in a very different environment than two years ago. I would expect much fewer IPOs,” he said. “Cost of capital is much higher. Investor appetite to invest in companies, especially companies that are not profitable, is very different.” Wells Fargo’s exposure WFC YTD mountain Wells Fargo (WFC) year-to-date performance Offices represent around 22% of Wells Fargo’s outstanding commercial property loans and 3% of its entire loan book. It has one of the largest portfolios when it comes to CRE in the country, with more than $154 billion in loans outstanding and $33 billion of that consists of office loans. According to its latest quarterly earnings release, Wells Fargo boosted allowances for losses connected to its commercial property loans, driven mostly by the firm’s exposure to offices, flagging a $949 million increase in their credit loss allowance. However, management said that significant losses have not been observed so far. For context, banks typically boost reserves for credit losses as a preventative measure to curb losses from borrowers who could default on their loans. This, in theory, gives Wells Fargo the extra capital to absorb credit losses during a market downturn or periods of extreme volatility. For context, JPMorgan Chase (JPM) also bulked up its reserves in anticipation of rising office property loan losses. Wells Fargo stands to benefit from its multiyear recovery plan once U.S. regulators decide to lift its asset cap, which would increase its balance sheets, along with its valuation that’s providing a cushion to any downward earnings estimates. Still, it remains unclear when regulators may lift these rules. “The losses are still quite small,” Chief Financial Officer Michael Santomassimo said in July. “We do expect that there will be more weakness in the market, and it’s going to take a while to play out.” CEO Charlie Scharf said the bank sustained “higher losses in commercial real estate, primarily in the office portfolio.” He added, “While we haven’t seen significant losses in our office portfolio-to-date, we are reserving for the weakness that we expect to play out in that market over time.” Still, revenue from Wells Fargo’s commercial real estate business rose to $1.33 billion in the second quarter, up 26% from 2022 and 2% higher from the last quarter. The banking giant attributed the gains to “higher interest rates and higher loan balances.” Wells Fargo may not stand to gain as much as Morgan Stanley from an uptick in investment banking, but the comments made by management during the Barclays conference indicate ongoing signs of recovery for the bank. “A lack of bad news turned out to be good news,” Jeff Marks, CNBC Investing Club’s Director of Portfolio Analysis, said during a Morning Meeting earlier this month. Wells Fargo execs emphasized the bank’s solid forward guidance while signaling an improved efficiency ratio as the Wall Street giant continues to cut costs via various restructuring plans like layoffs. Santomassimo said the macro picture is “much better than people would have expected at this point” as well. (Jim Cramer’s Charitable Trust is long WFC, MS. 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.

Collin Madden, founding partner of GEM Real Estate Partners, walks through empty office space in a building they own that is up for sale in the South Lake Union neighborhood in Seattle, Washington, May 14, 2021.
Karen Ducey | Reuters

Banks are facing mounting uncertainty as the commercial real estate (CRE) sector continues to struggle. But, tailwinds in our financial names should help safeguard their bottom lines. More

Register now for full access to the Delivering Alpha Investor Summit livestream

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, September 26, 2023.
Brendan McDermid | Reuters

A majority of Wall Street investors haven’t taken solace in stocks’ 2023 gains, thinking the market could retreat further as risk of a recession creeps up, according to the new CNBC Delivering Alpha investor survey. 
We polled about 300 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money about where they stood on the markets for the rest of 2023 and beyond. The survey was conducted this week.

Arrows pointing outwards

More than 60% of respondents believe the stock market’s gain this year has just been a bear market bounce, seeing more trouble ahead. A total of 39% of investors believe we are already in a new bull market.
The S&P 500 has fallen more than 5% this month alone, cutting its 2023 gains to 11%. Stocks struggled as the Federal Reserve signaled higher interest rates for longer, sending bond yields higher. The market also contended with a rally in crude oil as well as a 10-week winning streak for the dollar. 

Arrows pointing outwards

Asked about the probability of a recession, 41% of survey respondents said they expect one in the middle of 2024, and 23% said a downturn will arrive later than 12 months from now. Only 14% said they don’t expect a recession.
“I think the market is telling us we should expect another hike or two, and the consensus is building higher for longer,” Ares Management CEO Michael Arougheti said in an interview with CNBC’s Leslie Picker.
The Fed kept interest rates unchanged this month but forecast it will hike one more time this year. DoubleLine Capital CEO Jeffrey Gundlach said odds for more rate hikes are higher now in light of the recent jump in oil prices, which could put upward pressure on inflation. JPMorgan Chase CEO Jamie Dimon also warned that interest rates could go up quite a bit further. More

Minneapolis Fed President Neel Kashkari told CNBC on Wednesday that he’s unsure whether the central bank has raised interest rates enough to tame inflation.
He cited various concerns suggesting that “we might not be as restrictive as we otherwise would think.”

Minneapolis Federal Reserve President Neel Kashkari said Wednesday he’s unsure whether the central bank has raised interest rates enough to tame inflation.
Speaking one day after he penned an essay suggesting that rates may have to go “meaningfully higher” from here in order to bring down prices, Kashkari told CNBC that the neutral rate of interest, or one that is neither holding back the economy nor stimulating it, may have moved higher.

“I don’t know,” he said on “Squawk Box” when asked whether the current target range for the federal funds rate of 5.25%-5.5% is “sufficiently restrictive” to bring inflation back to the Fed’s 2% goal. “It’s possible given the dynamics of the reopening of the economy, that the neutral rate may have moved up.”
Some of his concerns stem from the fact that sectors of the economy that normally are affected by rate hikes seem to be ignoring them.
“So one thing that makes me cautious that we might not be as restrictive as we think, is that consumer spending has remained robust, GDP growth continues to outperform,” Kashkari said. “The two sectors of the economy that are traditionally most sensitive to interest rate hikes, autos and housing, have both added some signs of bottoming and in some cases are starting to show some recovery that makes me cautious that we might not be as restrictive as we otherwise would think.”
Those comments come one week after the rate-setting Federal Open Market Committee, of which Kashkari is a voting member this year, opted not to raise interest rates but still signaled another quarter-point hike before the end of the year while cutting its outlook to two reductions next year, half the last projection in June.
Wall Street has been fearful that the continuing tightening of monetary policy could send the economy into recession.

But Kashkari insisted that is not the Fed’s goal.
“If we have to keep rates higher for longer, it’s because the economic fundamentals are even stronger than I appreciate and the [economic] flywheel is spinning,” he said. “It isn’t obvious to me that that means that a recession is more likely, it just might mean that we need a higher rate path to get inflation back down to 2%.”
However, he said “we just don’t know right now” whether the Fed has done enough, adding that “we all want to avoid a hard landing” for the economy. More

SEC Chair Gary Gensler participates in a meeting of the Financial Stability Oversight Council at the U.S. Treasury in Washington, D.C., July 28, 2023.
Kevin Dietsch | etty Images

Securities and Exchange Commission Chair Gary Gensler is testifying before the House Financial Services Committee today. It will be very much like his testimony two weeks ago to the Senate Banking Committee: a forum for Republicans to attack Gensler for being overzealous and overreaching in his rulemaking proposals. 
Republicans are increasingly apoplectic about the more than 40 rules Gensler has been proposing, especially now that he has begun adopting them. 

That’s not new. Republicans have been critical of Gensler from the get-go. 
What’s different, nearly three years into the Biden administration, is that the financial services industry (hedge funds, mutual funds, market makers, trading firms, exchanges) are increasingly abandoning attempts to negotiate with Gensler and adopting a more confrontational stance. 
Some are suing him. 
“The industry (brokers and exchanges alike) are left with the only remaining tool at their disposal – a tool of last resort — litigation against the Commission,” Kirsten Wegner, CEO of the Modern Markets Initiative, wrote in a recent editorial in Trader’s Magazine. 
The complaints from the industry have been mounting for over a year: too many rules. No time for industry input. No roundtable discussions. No sharing of data used to make the policy decisions. 

The tone of the industry commentary toward Gensler has become increasingly hostile and bitter: “”Comment letters’ are a facade because it is all but impossible for the market to digest, process and respond to thousands of pages of draft regulation in only a few months’ time, and regardless, their points are often dismissed without meaningful study or explanation,” Wegner wrote.
Litigation starts 
Last month, Grayscale Bitcoin Trust, which is seeking to convert to a bitcoin ETF, successfully sued the SEC on the grounds that it had already approved a “similar” product in bitcoin futures and its actions were arbitrary and capricious. The SEC is weighing an appeal. 
Now that Gensler has adopted several of the rules that had been in the proposal stage, the industry has begun to take a more litigious stance. 
For example, six financial trade associations this month sued the SEC over its new Private Funds Adviser Rule, which requires registered private fund advisers to undergo an annual financial statement audit. The trade associations claim the SEC exceeded its statutory authority and acted arbitrarily and capriciously.
Gensler also appears to be in open warfare with Virtu Financial, one of the world’s largest market makers.  The SEC recently sued Virtu, claiming it failed to provide measures to protect sensitive customer data, and for making materially false and misleading statements regarding information barriers to prevent the misuse of that information. 
These types of cases would normally result in a quiet settlement, but that doesn’t appear likely. 
Virtu claims that this suit was an “escalation” of a years-long investigation because Virtu CEO Doug Cifu has been openly critical of the SEC’s market structure rule proposals, which have yet to be adopted. 
“Unfortunately, the SEC’s position appears to be driven by politics and headlines rather than the facts and the law,” Cifu said in a recent statement. “Therefore, under these circumstances, we look forward to vigorously defending ourselves in court against these meritless allegations while maintaining our focus on serving clients and markets globally and creating long-term value for our shareholders.” 
Gensler grilled for proposed and adopted rules 
Republicans will be particularly keen to talk about some of the bigger issues Gensler has been tackling. 
Take Climate-Related Disclosures, which were proposed in March 2022 but have not been adopted yet. They would require publicly-traded companies to disclose detailed emissions data and climate risk management strategies, including direct and indirect greenhouse gas emissions from their supply chains.  Republicans have claimed this is beyond the SEC’s mandate. Gensler, in his prepared testimony, says the SEC “has no role as to climate risk itself. We, however, do have an important role in helping to ensure that public companies make full, fair, and truthful disclosure about the material risks they face.” 
Other rules that have been adopted (like cybersecurity, which mandates disclosure of a cybersecurity incident within four business days after a company determines the incident is material) will again be attacked for overreaching. 
Then there’s crypto. Gensler has brought numerous enforcement actions against crypto intermediaries on the grounds that the tokens they offer are securities. Republicans will again attack him for over-reaching. 
And what about that bitcoin ETF lawsuit? Gensler made it clear he “will not be able to comment on any active, ongoing litigation.” Translation: don’t ask about the bitcoin ETF lawsuit. 
What’s next? 
By now, it’s clear Gensler is not backing down and will continue passing new rules because he has a 3-2 majority at the commission. 
Gensler will repeat that he is being reasonable and listening to industry complaints. On the climate change proposal, for example, Gensler noted that the SEC has received more than 15,000 comments and that it “will consider adjustments to the proposed rule that the staff, and ultimately the Commission, think are appropriate in light of those comments.” 
Given what has happened already, that will not mollify the critics. 
Some are hoping that a few Democrats will join the Republicans and ask Gensler to slow down. Last year, a dozen Senate Democrats did just that, sending a letter to Gensler urging him to extend the deadlines for proposed rules and to provide a sufficient period for notice and comment.  
But given the head of steam Gensler has worked up, that too is unlikely to sway him much. 
Now that he has begun adopting many of these rules, the financial services industry seems to be saying, “See you in court.” More

The world’s largest economy is once again facing the prospect of a government shutdown unless lawmakers in Washington can pass a spending bill before an Oct. 1 deadline.
S&P downgraded the long-term credit rating from AAA representing a “risk free” rating to AA+ as early as 2011, citing political polarization after a debt ceiling squabble in Washington.

Washington, D.C. – March 17, 2023: President Joe Biden and House Speaker Kevin McCarthy speak outside the Annual Friends of Ireland Luncheon at the U.S. Capitol.
Drew Angerer | Getty Images News | Getty Images

The U.S. is in a weaker position now than when S&P downgraded its sovereign credit rating in 2011, according to the former chairman of the agency’s sovereign rating committee.
The world’s largest economy is once again facing the prospect of a government shutdown unless lawmakers in Washington can pass a spending bill before an Oct. 1 deadline.

House Speaker Kevin McCarthy cannot afford to lose more than four votes among fellow Republicans in the House of Representatives, but faces resistance from hard-right members within his caucus, who are demanding deeper domestic spending cuts.
Moody’s earlier this week warned that a government shutdown would harm the country’s credit, after Fitch downgraded the long-term U.S. sovereign credit rating by one notch in August on the back of the latest political standoff over raising the debt ceiling.
S&P controversially downgraded the long-term credit rating from AAA representing a “risk free” rating to AA+ as early as 2011, citing political polarization after another debt ceiling squabble in Washington.
John Chambers, former chairman of the Sovereign Rating Committee at S&P Global Ratings at the time of that 2011 downgrade, told CNBC’s “Capital Connection” on Tuesday that a government shutdown is likely and that the whole episode was a “sign of weak governance.”
This was a factor that led to S&P’s downgrade of 2011, and Chambers said the U.S. fiscal position is now even weaker than it was back then.

“Right now the deficit of the general government — which is the federal and the local governments combined — is over 7% of GDP and the government debt is 120% of GDP. At the time, we forecasted that it might get to 100% of GDP, and the government ridiculed us for being too scaremongering,” he said.

“The external position is about the same, but I think the governance has weakened and the fractiousness of the political settings is much worse, and that has led to government shutdowns, it’s led to fears that the government might default on its debt because of the debt ceiling, and it’s led to a failed coup d’état on the 6th [of] January, 2021.”
House Speaker McCarthy needs almost all of his Republican colleagues on the side, but the Freedom Caucus, which had 49 members in January, has stalled budget negotiations by demanding harsher domestic spending cuts.
McCarthy may seek help from Democrats to shore up the necessary votes to avoid a shutdown, but hard-line Republicans have discussed ousting him as speaker if such a compromise is agreed.
In May of this year, another standoff between the White House and opposition Republicans over raising the U.S. debt limit once again pushed the world’s largest economy to the brink of defaulting on its bills, before President Joe Biden and McCarthy struck a last-minute deal.
In its August downgrade, Fitch cited “expected fiscal deterioration over the next three years” and an erosion of governance in light of “repeated debt-limit political standoffs and last-minute resolutions.”
However, the downgrade was dismissed by many big-name bank bosses and economists as largely immaterial. More

The Levi Strauss & Co. label is seen on jeans in a store at the Woodbury Common Premium Outlets in Central Valley, New York, U.S., February 15, 2022. 
Andrew Kelly | Reuters

Check out the companies making headlines in premarket trading.
Sirius XM — Shares of the media company fell roughly 2% in premarket trading. A day earlier, Liberty Media proposed combining the Sirius XM tracking stock with the radio company. A special committee composed of board members of Sirius XM is currently considering the proposal.

Levi Strauss — The apparel maker advanced 1.3% in premarket trading after TD Cowen initiated coverage of the stock at an outperform rating. TD Cowen said Levi’s is in the “early innings of a favorable denim cycle.”
Costco — Shares of the club retailer fell more than 1% even though Costco’s fiscal fourth-quarter response came in better than expected. The company generated $4.86 in earnings per share on $78.9 billion of revenue. Analysts surveyed by LSEG were looking for $4.79 per share on $77.9 billion of revenue. Comparable sales were up just 0.2% in the U.S., however.
ChargePoint – The electric vehicle charging stock popped more than 4% after UBS initiated coverage of ChargePoint with a buy rating, saying that the recent stock performance creates an attractive risk-reward.
XPO — The trucking company climbed about 2% following an upgrade to outperform from Evercore ISI. Analyst Jonathan Chappell forecast greater margin expansion and pricing power from the company.
Lucid, Rivian —- Shares of the electric vehicle makers ticked up 2.1% and 2%, respectively. Both stocks rose a day earlier as the United Auto Workers strike deepened and garnered support from President Joe Biden, who joined a picket line in Michigan.

Mattel — Shares of the toymaker gained 2.4% in premarket trading Wednesday after Morgan Stanley initiated Mattel with an overweight rating, calling it a top pick. The firm said Mattel offers some of the best risk-adjusted returns despite a tough macroeconomic environment.
— CNBC’s Alex Harring, Jesse Pound, Samantha Subin and Pia Singh contributed reporting More