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The revised hike is well below the 19% floated in the original plan. (0:15) Oracle rallies sharply after results. (3:00) DOJ argues at trial Google ‘crushed’ ad competition. (4:05)
This is an abridged transcript of the podcast.
Our top story so far. The largest U.S. banks, known as global systemically important banks (GSIBs), would encounter a 9% increase in capital requirements in a revised bank-capital overhaul unveiled by Federal Reserve Vice Chair for Supervision Michael Barr.
That’s well below the 19% capital hike regulators floated in the original plan.
The Fed’s regulatory head said that regulators will release revised, softened versions of the Basel III endgame rule and a separate capital rule for large, high-risk lenders. This marks a victory for Wall Street banks, which have pushed back against substantial increases in capital requirements.
“There are benefits and costs to increasing capital requirements. The changes we intend to make will bring these two important objectives into better balance, in light of the feedback we have received,” Barr said.
Still, the too-big-to-fail banks were trading mostly in the red. JPMorgan Chase (JPM), Citigroup (C), Goldman Sachs (GS), Bank of America (BAC), and Morgan Stanley (MS) are lower.
Looking to politics, Vice President Kamala Harris and former President Donald Trump face off in their first presidential debate in Philadelphia tonight.
When it comes to the economy and business, Trump has repeatedly pushed for lowering government spending, easing regulation of companies, cutting corporate taxes, and expanding trade tariffs.
Trump, who called climate change a “hoax,” plans to repeal the Inflation Reduction Act and eliminate a key EV tax credit. He has also called for boosting U.S. manufacturing and energy production.
Harris eyes raising taxes for the wealthy and big corporations, expanding the child tax credit, cracking down on price gouging, and expanding small business tax relief.
Harris had cast the tiebreaking vote to pass the massive Inflation Reduction Act in 2022, which aims to lower living costs, reduce medicine prices, and promote clean energy through incentives. As for trade, Harris is expected to largely follow Biden’s policies.
Goldman Sachs economists projected that Trump’s policies could slow down GDP growth in H2 2025 by up to 0.5 percentage point, while Harris’ plans would slightly boost GDP growth.
Danske Bank Research says: “With polls now showing an almost 50-50 split, investors have begun unwinding ‘Trump trades’ as the race tightens in favor of Harris. Market consensus views Trump’s policies as generally USD-positive.”
According to the Penn Wharton Budget Model at the University of Pennsylvania, Harris’ plans are estimated to increase U.S. primary deficits by $1.2 trillion over the next 10 years, while Trump’s plans will likely increase primary deficits by $5.8 trillion.
Oppenheimer recently published its election playbook featuring its best stock ideas for a federal government controlled by either party.
Goldman Sachs (GS), Amgen (AMGN), and Tesla (TSLA) were among the names benefiting from a Republican sweep. While the Democratic sweep would be a plus for stocks like Snap (SNAP), KKR (KKR) and Comcast (CMCSA).
Among active stocks, Oracle (ORCL) jumped following its latest results, which topped estimates.
JMP analyst Patrick Walravens boosted his rating on the stock to Market Perform from Underperform, noting that after 13 years of single-digit organic total revenue growth, Oracle is reaccelerating into the double digits with CEO Safra Catz commenting on the call that “we remain very confident and committed to full-year total revenue growth growing double digits.”
Taiwan Semiconductor (TSM) said August sales rose about 33% year over year.
J.P. Morgan analyst Gokul Hariharan, who has an Overweight rating on the stock, said the strength in sales suggests the global foundry could surpass its third-quarter guidance.
September revenues are likely to remain flattish or grow slightly month-over-month, helped by the ramp for iPhone processors and continued strength in N3/N5 demand, he said.
Data center operator Switch is reportedly looking at an initial public offering, which could value the company at about $40 billion, including debt. The talks of the potential IPO are at an early stage and no final decision has been made, but an IPO could cash in on the current AI demand frenzy.
In other news of note, the Department of Justice opened Google’s advertising antitrust trial saying the company sought to dominate all sides of online advertising by controlling competitors and customers.
According to Reuters, Julia Tarver Wood, an attorney with the Justice Department’s antitrust division, said in her opening statement that “Google used classic monopoly-building tactics of eliminating competitors through acquisitions, locking customers into using its products, and controlling how transactions occurred in the online ad market. Google is not here because they are big; they are here because they used that size to crush competition.”
Gannett ad executive Tim Wolfe testified, saying the company has used Google’s publisher ad server for around 13 years and that there are no other realistic options.
Google lead attorney Karen Dunn said the DOJ and a coalition of states based their case on “ancient history” from a time when Google was still working on making its tools able to connect to competitors
And in the Wall Street Research Corner, Citi Research strategist Scott Chronert says investors should continue to own the Magnificent 7, but for a broader technology setup suggests a barbell approach with midcap traditional and non-traditional tech exposure.
The weight of the Magnificent 7 stocks –- Amazon (AMZN), Alphabet (GOOG) (GOOGL), Apple (AAPL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA) –- in the S&P 500 (SP500) makes those stocks critical to the index’s performance. But their significant outperformance may be more measured going forward.
The “the setup is for solid Magnificent 7 growth in 2025 with a high-single digit rate for the other 493,” Chronert said.
For its barbell approach, he screened for buy-rated, midcap stocks with at least 15% expected total return and positive 2024 EPS estimates.
Among the names surfaced are DocuSign (DOCU), Zscaler (ZS), Pinterest (PINS), GlobalPayments (GPN), Take-Two (TWO), HubSpot (HUBS), Corning (GLW), Best Buy (BBY) and Digital Realty Trust (DLR).
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
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