Prediction Markets Tell a Different Story From the Polls

HERE’S WHAT’S HAPPENING

Boeing looks to raise billions in stock sale. The embattled plane maker said in a regulatory filing that it may issue up to $25 billion in new shares and debt over the next three years; it may sell about $10 billion worth of stock, according to The Wall Street Journal. The news comes as Julie Su, the acting labor secretary, flew to Seattle to encourage a deal to end a strike at the company’s two main factories.

Elliott Investment Management formally pushes to remove most of Southwest’s board. The activist hedge fund made its first demand for a special meeting of the airline’s shareholders, at which it hopes to install its eight candidates for the company’s board. Southwest pushed back, saying that it had sought to reach a settlement.

Tesla’s robot reveal faces new scrutiny. At the car maker’s robotaxi event last week, Elon Musk showed off automatons that he said pointed toward the future of robotics — but news reports found that some of the machines’ actions were controlled remotely by humans. That raises further questions about how advanced Tesla’s autonomous technology is, and how quickly it can fulfill Musk’s promises.

A bull market rumbles on

Wall Street’s strong earnings season continued this morning with Goldman Sachs and Bank of America reporting better-than-expected profits, helped by a surge in trading and investment banking revenue. That bodes well for the wider markets, with the S&P 500 hitting a new milestone: a bull market that’s just entered a third year.

Heading into a busy stretch of corporate results, investors are reaping impressive returns as the U.S. economy grows at a faster clip than its peers. C.E.O.s are signaling optimism that the economy won’t fall into a recession, a sign that the bull market still has further to run.

For political watchers, this is usually a big deal. A stock rally this big has historically been good news for the incumbent party in an election year — or at least gives it some bragging rights. But many voters aren’t feeling especially euphoric about the economy because they’re worried about the cost of living.

DealBook has drilled into the rally’s numbers:

The S&P 500 has racked up 46 record highs this year. One company that’s been flying is Nvidia, the dominant A.I. chipmaker that closed in record territory on Monday. It’s now valued at more than $3.4 trillion.
The performance has far outpaced Wall Street forecasts.

Goldman Sachs was the latest firm to raise its year-end target for the S&P 500, to 6,000, from 5,600. That would imply a gain of about 2.4 percent this year.

What could happen from here? Since 1950, bull markets have run on average for 61 months, Adam Turnquist, the chief technical strategist for LPL Financial, wrote in a research note on Friday. The shortest one — from March 2020 to January 2022 — lasted just 21 months, however, doused by investor jitters over inflation.

There are a few wild cards to watch. Oil prices dropped this morning on reports that Israel won’t attack Iran’s oil or nuclear infrastructure. Volatile fuel prices will be closely watched by households and the Fed as it determines how far to cut interest rates.

On Monday, Christopher Waller, a more hawkish Fed governor, said he supported a go-slow approach to lowering borrowing costs.

Big Tech goes nuclear

Investors are pouring billions into all things artificial intelligence, including how to power it. That’s prompting a Big Tech-fueled nuclear energy revival in the United States, with Google the latest to back a start-up building new reactors.

The search giant agreed to a first-of-a-kind energy deal. Google signed an agreement with Kairos Power to create small, modular reactors, or S.M.R.s, that are meant to generate 500 megawatts of nuclear energy by 2030.

“The end goal here is 24/7, carbon-free energy,” Michael Terrell, senior director for energy and climate at Google, told The Wall Street Journal.

Nuclear energy is having a moment thanks to A.I. Last month, Microsoft partnered with Constellation Energy to restart the reactor at Three Mile Island, and Amazon bought a nuclear-powered data center this year. A growing list of tech moguls, including Bill Gates, Jeff Bezos and Sam Altman, are also betting big on nuclear.

A.I.’s huge energy needs are set to grow. A single search query for a chatbot such as OpenAI’s ChatGPT requires 10 times as much energy as a typical Google search, according to the International Energy Agency. The I.E.A. predicts that electricity consumption by A.I., cryptocurrency and data centers could double by 2026.

Tech companies will need new energy sources to meet their climate goals. A.I. is mostly powered by fossil fuels, which threatens to upend Big Tech’s net-zero ambitions. Advances in nuclear reactor design, especially in the build-out of potentially cheaper and smaller facilities, could help. That’s where S.M.R.s, which have been pioneered for military use, come in.

“S.M.R.s are much easier to build as they can be prefabricated at a factory and shipped already fueled on the back of a truck to the location where they will be installed,” Richard Windsor, an analyst at Altiplano Open Research, wrote in a note this morning.

Investors are taking note: The S&P utilities sector is up roughly 25 percent this year.

The Chinese converge on a Paris car show

Two things stand out at this year’s Paris Motor Show: There are hardly any new internal combustion engine cars on display despite slowing demand for electric vehicles, and Chinese companies like BYD and Xpeng Motors have a major presence, Vivienne Walt writes for DealBook.

A cordial atmosphere on the floor belies the tensions behind the scenes at the first major industry showcase since the European Union voted to impose higher tariffs on Chinese-made E.V.s to help local players.

The Biden administration has targeted Chinese car makers with tariffs, too, and Donald Trump has suggested he would ban Chinese self-driving cars if re-elected. Both say they’re protecting American jobs and thwarting a national security threat.

Europe’s auto sector is playing catch-up in the electrification race. “It will probably take something like one decade to be able to catch up,” Matthieu Hubert, the general secretary of Automotive Cells Company, a European E.V. battery producer, told DealBook. Chinese battery manufacturers have a huge head start, and control much of the global supply chain.

BYD is not slowing down its global push even as scrutiny rises. China’s top E.V. maker introduced its Sealion 7 model at the show on Monday, and is seen as the biggest threat to European rivals. The company sponsored the European soccer championships this summer, and it plans to open its 300th European dealership this month, a BYD spokesman told DealBook.

Its manufacturing foothold in the E.U. is key to its strategy of circumventing tariffs, which could run up to 45 percent in the market. The company’s factory in Hungary, its first European site, is expected to begin rolling out vehicles at the end of next year.

Europe is divided over the trade war. The German automakers Volkswagen and Mercedes-Benz are heavily invested in China and have argued against tariffs. But their sales are slumping in the country as local rivals ramp up their offerings.

Even former China hawks have changed their tune, perhaps fearing retaliation from Beijing. “Without the good cooperation with the Chinese, I think it will be more difficult to ramp up electrification in Europe, because they have in their hands materials, chemistry, gigafactory battery capacity,” Luca de Meo, the C.E.O. of Renault Group, told Bloomberg at the show.

That’s a U-turn in tone from earlier this year, when he pushed unsuccessfully for an Airbus-inspired European alliance to jointly produce E.V. batteries to better compete against China.

THE SPEED READ

Deals

TPG and Blackstone are said to be teaming up to bid for Bausch + Lomb in an auction that could value the eyecare company at more than $13 billion. (FT)
Barclays will replace Goldman Sachs as the issuer of General Motors credit cards. (WSJ)

Elections, politics and policy

The Biden administration is said to be weighing new restrictions on A.I. chip exports, including capping sales by Nvidia and others to certain countries. (Bloomberg)

“‘Shark Tank’: Mark Cuban goes after the S.E.C.’s Gensler” (Politico)

Best of the rest

Attention shoppers: The last full-size Kmart in the continental United States is set to close. (NYT)
“Lilly Ledbetter, Whose Fight for Equal Pay Changed U.S. Law, Dies at 86” (NYT)

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