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- 📈 Intel Faces China Showdown
📈 Intel Faces China Showdown
Morgan Stanley's big bet on wealth, Meta re-structure leads to layoffs, Raytheon settles charges, China pumping real estate, Intel security probe
Evelio Silvera
October 17, 2024
Good morning.
⚡ The Fast Five → Morgan Stanley's big bet on wealth, Meta re-structure leads to layoffs, Raytheon settles charges, China pumping real estate, Intel security probe
And now…
⏱️ Your 5-minute briefing for Thursday, October 17, 2024:
MARKET BRIEF
Before the Open
As of market close 10/16/2024.
Pre-Market
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Fear & Greed
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Trends
Dow ends at another record high as Wall Street buoyed by banks, small-caps
Futures rise as chip stocks rally after TSMC results; economic data in focus
Cheaper energy products depress US import prices in September
WHAT WE’RE WATCHING
Events
Today: Census Bureau - Core Retail Sales (Auto), 8:30AM
Why You Should Care: It's the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
Today: Dept. of Labor - Unemployment Claims, 8:30AM
Why You Should Care: Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country's monetary policy.
Earnings Reports
Today: Netflix, Morgan Stanley, Blackstone, Truist
Tomorrow: America Express, Proctor & Gamble, Fifth Third Bancorp, Ally Financial, Regions Financial
MARKET BRIEF
Leading News
Morgan Stanley’s Big Bet: A Shift Towards Wealth Management
Why it matters: Morgan Stanley's Q3 earnings reveal a strategic pivot towards wealth management, signaling where the real money is heading in volatile markets.
The big picture: Morgan Stanley ($MS) just posted third-quarter earnings that came in below expectations, but the real story isn’t about missing analyst targets. It’s about a clear shift in strategy. While its investment banking arm struggled amid sluggish dealmaking, the bank is betting big on wealth management, now a core pillar of its future growth.
CEO James Gorman has been gradually steering the ship toward more stable revenue streams, and with wealth management accounting for 45% of total revenue, that bet is paying off. The move provides a cushion against the boom-bust cycle of trading and investment banking—critical during times of economic uncertainty.
Key numbers:
$13.27 billion in revenue (down 2% year-over-year) as deal flow dries up
Wealth management revenue hit $6.4 billion, up 5% year-over-year
Assets under management (AUM) rose to $1.42 trillion, despite market volatility
Go deeper:
Dealmaking drought: The slowdown in M&A and IPOs has hurt banks across the board, but Morgan Stanley’s diversification shields it from the full impact.
Wealth management’s strength: As more individuals seek financial advice amid uncertainty, the firm’s shift to managing money for the rich proves a stable and scalable growth driver.
Tech plays a role: Morgan Stanley is leaning into digital platforms to boost efficiency, a trend that could scale further with the rise of AI and robo-advisors.
What they’re saying: "By focusing on wealth management, Morgan Stanley is building a business that can generate revenue across economic cycles," Gorman noted.
The bottom line: Morgan Stanley is playing the long game. For investors, this shift offers a more predictable revenue stream. As markets become more volatile, look for stable sectors like wealth management to hold steady, especially for long-term investors seeking safe harbor amid the storm.
Intel Faces High-Stakes Security Probe in China
Why it matters: Intel’s (INTC) growing challenges in China could impact its global supply chain and profit margins, raising key concerns for investors.
The big picture: Intel has been navigating tricky waters in China, where a major trade group just called for a security probe into the company. As China tightens control over its tech sector, U.S. companies are increasingly caught in the crossfire of escalating trade tensions.
This isn’t just about Intel—it’s a broader signal of shifting global power dynamics in the semiconductor industry. China’s push for self-reliance in chipmaking could hurt U.S. tech giants that rely on Chinese production and sales. But Intel’s recent resurgence in AI chips and partnerships could offset these headwinds if it plays its cards right.
Key takeaways:
Security probe threat: China's trade body has called for an investigation into Intel’s data security practices, reflecting growing mistrust.
China’s strategy: Beijing aims to reduce dependence on U.S. chipmakers like Intel by boosting local chip production, which could threaten future revenues.
Global ripple effects: Any restrictions on Intel could send shockwaves through the tech supply chain, especially for companies reliant on AI hardware.
Go deeper: If China clamps down, investors should watch for AI chip demand growth elsewhere, particularly in the U.S. and Europe, where Intel is positioning itself as a major player. Look for signs of diversification in Intel's production and partnerships to mitigate risk.
What they’re saying: “Intel remains committed to our customers in China while ensuring we meet U.S. export regulations,” a company spokesperson said.
The bottom line: While China’s probe could hit short-term earnings, Intel’s AI push and expansion outside China make this a bullish opportunity for long-term investors. Keep an eye on how it navigates this geopolitical storm.
Headlines
Biden cancels additional $4.5 billion in student debt (link)
China pumps half a trillion dollars into beleaguered property sector (link)
McKinsey Cuts 500 Jobs (link)
RTX subsidiary Raytheon to pay more than $950 million to settle bribery charges (link)
Meta lays off employees across multiple teams (link)
US subscriptions easier to cancel (link)
TSMC CEO says AI is not in a bubble and its growth is for real (link)
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Headlines
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On the Socials
*Hat-tip to HighYieldHarry