Finance

How quickly the mood turns. Barely a fortnight ago stockmarkets were on a seemingly unstoppable bull run, after months of hitting new all-time highs. Now they are in free fall. America’s Nasdaq 100 index, dominated by the tech giants that were at the heart of the boom, has fallen by more than 10% since a peak in mid-July. Japan’s benchmark Topix index has clocked losses well into the double digits, dropping by 6% on August 2nd alone—its worst day since 2016 and, following a 3% decline on August 1st, its worst two-day streak since 2011. Share prices elsewhere have not been bludgeoned quite so badly, but panic is sweeping through markets (see chart 1). Wall Street’s “fear gauge”, the VIX index, which measures expected volatility through the prices traders pay to protect themselves from it, has rocketed to its highest since America’s regional-banking crisis last year (see chart 2). More

Berkshire Hathaway’s cash hoard is likely to exceed its previous record of $189 billion when it reports second-quarter earnings Saturday morning.
Buffett has been offloading winning investments in Apple, Bank of America and BYD, making some believe the Oracle of Omaha has grown concerned that the bull market is overheated.
Buffett confessed at Berkshire’s annual meeting in May that he is open to putting more capital to work, but high prices give him pause.

Warren Buffett in Omaha, Nebraska, on May 3, 2024.
David A. Grogan

Berkshire Hathaway’s highly scrutinized cash pile could top $200 billion — more than the entire annual gross domestic product of Hungary — amid CEO Warren Buffett’s rare sale of some of his favorite stocks.
The Omaha-based conglomerate is likely to say its cash hoard topped the previous record of $189 billion, set in the first quarter, when it reports second-quarter earnings Saturday morning. Berkshire’s results come at a time when Buffett has been offloading winning investments in Apple, Bank of America and BYD, leading some to believe the Oracle of Omaha has grown concerned that the bull market is overheated.

“It does look like he wants to de-risk the portfolio a little bit,” Bill Stone, chief investment officer at Glenview Trust Company and a Berkshire shareholder, said early in the week. “He’s trimming two top holdings and you don’t get anything more economically sensitive than the banks. The market seems so sure right now of a soft landing, and maybe he’s taking more of a contrarian view.”

Arrows pointing outwards

Berkshire has been a net seller of stocks for six straight quarters. Notably, Buffett trimmed his massive Apple bet by 13% in the first quarter for tax reasons after reaping enormous gains. The selling could have resumed in the second quarter as shares of the iPhone maker jumped 23% during the period.
Meanwhile, in a surprising move, the conglomerate recently started dumping Bank of America shares, its second-biggest holding after Apple. Over the past 12 trading sessions, Berkshire has sold $3.8 billion of the Charlotte-based bank’s shares. The Bank of America sales began in July and will not be reflected in the second-quarter report.
Buffett’s gigantic war chest has been earning sizeable returns due to the jump in Treasury yields over the past two years, but with interest rates set to decline from multiyear highs, his mounting cash pile could once again draw questions. If invested in three-month Treasury bills at about 5%, $200 billion in cash would generate about $10 billion a year, or $2.5 billion a quarter, but those returns are set to decline once the Federal Reserve starts lowering interest rates.
“It’s just a question of how long they are going to sit on it,” Andrew Kligerman, TD Cowen’s Berkshire analyst, said in an interview, referring to Berkshire’s enormous cash pile.

‘Things aren’t attractive’
Buffett, who turns 94 at the end of the month, confessed at Berkshire’s annual meeting in May that he is open to putting more capital to work, but high prices give him pause.
“I think it’s a fair assumption that [cash holdings] will probably be about $200 billion at the end of this quarter,” the investment icon said at the time. “We’d love to spend it, but we won’t spend it unless we think [a business is] doing something that has very little risk and can make us a lot of money … it isn’t like I’ve got a hunger strike or something like that going on. It’s just that … things aren’t attractive.”

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Berkshire Hathaway

Weakness in noninsurance
Investors will also closely study the quarterly results for Berkshire’s BNSF Railway and Berkshire Hathaway Energy utility business, which recently showed signs of weakness. BNSF is grappling with wage increases and revenue declines, while BHE faces pressure from being held liable for damage caused by wildfires.
“The non-insurance side will weigh on the results, whether it’s the sluggish volumes in railroad coupled with higher labor costs, or utilities, which could put up a good quarter, but nobody’s going to be excited about that just given the liability exposure,” said TD Cowen’s Kligerman, who recently initiated research coverage of Berkshire with a hold rating.
Conversely, Berkshire’s insurance business has been a bright spot, with a 185% year-over-year increase in insurance underwriting earnings in the first quarter.
Shares of Berkshire have rallied more than 21% this year, outperforming the S&P 500’s 14% return, through Thursday. The conglomerate’s market capitalization has ballooned to $956 billion, close to joining the tiny number of U.S. stocks valued at $1 trillion or more.

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The information services sector was a notable weak spot for July, posting a job loss of 20,000.
Professional and business services and financial activities experienced payroll declines of 1,000 and 4,000, respectively.

People walk through a Manhattan mall on July 05, 2024 in New York City.
Spencer Platt | Getty Images News | Getty Images

Hiring in the U.S. slowed significantly last month, with information and financial sectors registering job losses.
The information services sector was a notable weak spot for July, posting a job loss of 20,000. Professional and business services and financial activities experienced payroll declines of 1,000 and 4,000, respectively.

“These sectors are known for creating higher-wage, higher-quality jobs,” said Julia Pollak, chief economist at ZipRecruiter. “The labor market is clearly no longer normalizing. Further deterioration could set off a negative cycle of job losses, consumer spending declines, business revenue declines and more job cuts.”

Nonfarm payrolls grew by just 114,000 for the month, well below the Dow Jones estimate for 185,000. The unemployment rate climbed to 4.3%, its highest since October 2021.
To be sure, there were some relative bright spots.
Health care again led in job creation, adding 55,000 to payrolls. Other notable gainers included construction (25,000), government (17,000), and transportation and warehousing (14,000). Leisure and hospitality, another leading gainer over the past few years, added 23,000.
“The latest snapshot of the labor market is consistent with a slowdown, not necessarily a recession. However, early warning signs suggest further weakness,” said Jeffrey Roach, chief economist at LPL Financial.

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Morgan Stanley on Friday told its army of financial advisors that it will soon allow them to offer bitcoin ETFs to some clients, a first among major Wall Street banks, CNBC has learned.
The firm’s 15,000 or so financial advisors can solicit eligible clients to purchase shares of two exchange-traded bitcoin funds starting Aug. 7, according to people with knowledge of the policy.
Those funds are BlackRock’s IShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund, the people said.

Getty Images

Morgan Stanley on Friday told its army of financial advisors that it will soon allow them to offer bitcoin ETFs to some clients, a first among major Wall Street banks, CNBC has learned.
The firm’s 15,000 or so financial advisors can solicit eligible clients to purchase shares of two exchange-traded bitcoin funds starting Wednesday, according to people with knowledge of the policy.

Those funds are BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund, the people said.
The move from Morgan Stanley, one of the world’s largest wealth management firms, is the latest sign of the adoption of bitcoin by mainstream finance. In January, the U.S. Securities and Exchange Commission approved applications for 11 spot bitcoin ETFs, heralding the arrival of an investment vehicle for bitcoin that is easier to access, cheaper to own and more readily traded.
Bitcoin has weathered market sell-offs, the spectacular collapse of crypto exchange FTX and criticism from the most established figures in finance including JPMorgan Chase CEO Jamie Dimon and Berkshire Hathaway CEO Warren Buffett.
So it’s not surprising that Wall Street’s major wealth management businesses didn’t immediately embrace the new ETFs, forbidding their financial advisors from pitching them and only allowing trades if clients actively sought out the product.
Goldman Sachs, JPMorgan, Bank of America and Wells Fargo still follow that policy, according to spokespeople at the four banks.

‘Aggressive’ tolerance

Morgan Stanley made the move in response to demand from clients and in an attempt to follow an evolving marketplace for digital assets, said the people, who declined to be identified speaking about the bank’s internal policies.
The bank is still striking a note of caution, however, in the rollout: Only clients with a net worth of at least $1.5 million, an aggressive risk tolerance and the desire to make speculative investments are suitable for bitcoin ETF solicitation, said the people. The investments are for taxable brokerage accounts, not retirement accounts, they added.
The bank will monitor clients’ crypto holdings to make sure they don’t end up with excessive exposure to the volatile asset class, according to the sources.
The only crypto investments approved for solicited purchase at Morgan Stanley are the pair of bitcoin ETFs from BlackRock and Fidelity; private funds from Galaxy and FS NYDIG that the bank made available starting in 2021 were phased out earlier this year.
Morgan Stanley is watching how the market for newly approved ether ETFs develops and hasn’t committed to whether it would provide access to those, the people said.

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Correction: Private funds from Galaxy and FS NYDIG that Morgan Stanley made available starting in 2021 were phased out earlier this year. An earlier version of this story included inaccurate information from Morgan Stanley sources about the company’s crypto investment offerings. More

Warren Buffett speaks during the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska, May 4, 2024.

Warren Buffett is not done selling Bank of America.
Berkshire Hathaway shed a total of 19.2 million BofA shares on Tuesday, Wednesday, and Thursday for almost $779 million at an average selling price of $40.52 per share, according to a new regulatory filing.

The conglomerate has now been offloading the bank stock for 12 consecutive days with total sales now exceeding $3.8 billion. Its remaining 942.4 million shares have a market value of $37.2 billion at Thursday’s close of $39.50.
As of Thursday’s close, Bank of America fell to the No.3 spot on Berkshire’s list of top holdings, trailing behind Apple and American Express, which is currently valued at $37.7 billion. Before the selling spree, BofA had long been Berkshire’s second biggest holding.
Berkshire remains the bank’s largest shareholder with a 12.1% stake.
The bank stock has dropped 5.2% so far this week, going as low as $38.98 in Thursday’s trading as recession fears plague the financial sector. Year to date, BofA is up more than 17%, outperforming the S&P 500.

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Bank of America

Buffett famously bought $5 billion worth of BofA’s preferred stock and warrants in 2011 in the aftermath of the financial crisis, shoring up confidence in the embattled lender struggling with losses tied to subprime mortgages. He converted those warrants in 2017, making Berkshire the largest shareholder in BofA, vowing that it would be a “long, long time” before he would sell.

The legendary investor said then that he liked the business, valuation and management of the Charlotte-based bank “very much.”
BofA, under the leadership of Brian Moynihan since 2010, recently reported blowout results for the second quarter that showed rising investment banking and asset management fees as well as a positive outlook on net interest income. More

The group will focus on addressing market challenges, fostering listings, and facilitating market revitalization, as well as enhancing regulations to facilitate market growth and foster investor confidence.
MAS said another key goal will be to identify methods for encouraging private sector participation, including from capital market intermediaries, investors and listed companies. 

Signage for the Monetary Authority of Singapore (MAS) is displayed outside the central bank’s headquarters in Singapore.
Sam Kang Li | Bloomberg | Getty Images

Singapore’s central bank established a task force to bolster the city-state’s stock market.
The Monetary Authority of Singapore announced that the review group will evaluate measures to “improve the vibrancy” of the Singapore equities market.

MAS said on Friday the panel will focus on addressing market challenges, fostering listings, and facilitating market revitalization, as well as enhancing regulations to facilitate market growth and foster investor confidence.
It said another key goal will be to identify methods for encouraging private sector participation, including from capital market intermediaries, investors and listed companies. 
The authority noted that a “dynamic equities market is an important part of the capital formation value chain,” and that a liquid market enables companies to not only access capital as they expand, but also “allows asset owners and the investing public to participate in the growth of quality companies.”
“Improving the attractiveness of Singapore’s equities market can therefore enhance Singapore’s standing as a vibrant enterprise and financial hub,” the MAS said, adding that this will also “[complement] Singapore’s innovation and start-up ecosystem, private markets, as well as asset and wealth management sectors.”

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Despite the Straits Times Index rising in three of the last four years including 2024, Singapore’s stock market has been long plagued by thin trading volumes and more delistings than listings. This has led observers to describe the exchange as “boring,” “unexciting” and even once in 2021, a “zombie” bourse.

Turnover velocity at the SGX, a measure of market liquidity, stood at 36% for the whole of 2023, compared to 57.35% at the Hong Kong Exchange in the same period, and 103.6% at the Japan Exchange.
Analysts who previously spoke to CNBC outlined ways to revive interest in the SGX, including taking lessons from “value up programs” in Japan and South Korea.
The review group announced Friday will be chaired by Chee Hong Tat, Singapore’s second minister of finance, and also include members like Koh Boon Hwee, the current chairman of the SGX.
The SGX said it welcomes the announcement and pledged to work closely with the review group.SGX RegCo, the regulatory arm of the exchange, will also aim to “increase accountability, transparency and market discipline.””Only a whole-of-ecosystem approach can lead to transformative actions that will give fresh impetus to improving liquidity and listings in Singapore’s equities market,” SGX said in a statement to CNBC. More

Customers are trying on and learning about Apple Vision Pro headsets at an Apple store in Shanghai, China, on July 22, 2024. 
Costfoto | Nurphoto | Getty Images

Check out the companies making headlines in extended trading:
Apple — Shares of the iPhone maker inched higher, as the company beat analysts’ estimates on the top and bottom lines. Apple reported fiscal third-quarter earnings of $1.40 per share while analysts polled by LSEG called for $1.35 per share. Revenue clocked in at $85.78 billion, also surpassing the Street’s estimates.

Intel — The chip stock sank 17%. Intel said it would suspend its dividend in the fiscal fourth quarter, and it announced plans to lay off 15% of its workforce. The news coincided with worse-than-expected quarterly results. Intel also shared disappointing guidance for the current quarter.
Amazon — Shares of the e-commerce giant dropped 5% in extended trading. The company reported weaker-than-expected revenue for the second quarter and issued a disappointing forecast for the third quarter. Revenue in its cloud division increased 19% in the second quarter, beating analysts’ estimates, however.
DoorDash — Shares surged nearly 14% after the online food ordering company reported a revenue beat in the second quarter. DoorDash posted $2.63 billion in revenue while analysts polled by LSEG had estimated $2.54 billion. Management also raised the marketplace gross order value forecast for the third quarter.
Coinbase — The crypto exchange operator saw its shares rise nearly 5% in extended trading. In the second quarter, revenue came in at $1.45 billion, slightly above estimates of $1.40 billion, according to LSEG.
Block — The fintech company rallied more than 7% on better-than-expected adjusted earnings in the second quarter. Block reported adjusted earnings of 93 cents per share, coming above consensus calls for 84 cents per share, according to analysts surveyed by LSEG. Meanwhile, revenue of $6.16 billion missed analysts’ estimates for $6.28 billion. 

Snap — The parent of the instant messaging app cratered 17%. Snap called for third-quarter adjusted earnings to range between $70 million and $100 million, falling short of the $110 million estimate from analysts polled by StreetAccount. Revenue for the latest quarter missed the Street’s forecasts.
Roku — Shares jumped more than 5% after Roku posted second-quarter results that exceeded expectations. The streaming device company posted a narrower-than-expected quarterly loss of 24 cents per share, better than the loss of 43 cents per share anticipated by analysts polled by LSEG. Revenue of $968 million topped the $938 million consensus estimate.
Clorox — The stock advanced 4%. Clorox issued fiscal full-year earnings guidance in a range between $6.55 and $6.80 per share, coming above analysts’ estimates of $6.45 in earnings per share, according to analysts polled by LSEG. Fiscal fourth-quarter adjusted earnings came in at $1.82 per share, while consensus estimates called for $1.56 per share.
Coterra Energy — Shares dipped 1.8% after Coterra Energy posted disappointing earnings results. Coterra reported adjusted second-quarter earnings of 37 cents per share, below the FactSet consensus estimate of 39 cents in earnings per share.   
GoDaddy — Shares jumped 6% after the web hosting company raised its revenue guidance for the full year. GoDaddy issued full-year revenue guidance between $4.525 billion and $4.565 billion, while analysts polled by FactSet had expected $4.53 billion. 
Atlassian — The software company sank more than 13% after the company’s forward outlook disappointed investors. Atlassian guided revenue in the current quarter between a range of $1.149 billion to $1.157 billion, while analysts surveyed by LSEG had expected $1.16 billion.
Booking Holdings – The online travel reservation company slumped 4%. Gross bookings for the second quarter came in at $41.4 billion, missing consensus estimates of $41.73 billion, per StreetAccount. The company beat on the top and bottom lines for the period.
— CNBC’s Sarah Min, Yun Li, Samantha Subin, Tanaya Macheel and Darla Mercado contributed reporting. More

The developing world has fallen back in love with economic planning. As protectionism sweeps the West, poor countries are no longer afraid of industrial policy—or bold ambition. India’s government declares that manufacturing will propel the country to high-income status by 2047. Indonesia wants to get there by 2050, with growth driven by green commodities. Vietnam is aiming for annual gdp growth of 7% until 2030. By the same time, South Africa wants to have more than doubled its income per person from 2021. Surely economies everywhere are about to accelerate. More