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  • 💳 Apple Gets Hit With $14B Tax Bill

💳 Apple Gets Hit With $14B Tax Bill

+ CPI: Inflation Cools, But Core's Still Hot

September 11, 2024

Good afternoon. Twenty-three years ago today, nearly 3,000 lives were lost in the 9/11 attacks on New York, Washington D.C., and Pennsylvania, a day that forever altered the world—and the financial markets weren’t immune to its impact. The attacks triggered one of the most significant stock market shutdowns in U.S. history, with trading halted for four days. When the markets reopened, the Dow plunged nearly 7%, marking the largest one-day point drop at the time. The financial world was rattled, but it also marked the beginning of a long recovery, much like the country itself.

As we reflect on that tragic day, we honor the memory of those who lost their lives and the bravery of the first responders who ran toward danger to save others. The spirit of resilience, unity, and service that followed 9/11 is a testament to the strength of the American people. On this day of remembrance, we pay our respects and commit to keeping the lessons of compassion, courage, and unity alive in everything we do.

MARKETS

  • Stocks bounced back Wednesday after a choppy session as investors mulled over the latest inflation report. The S&P 500 climbed 1.07% to finish at 5,554, while the Nasdaq Composite jumped 2.17%. Meanwhile, the Dow rose a more modest 0.31%, tacking on over 100 points.

  • August’s inflation data showed core prices edging up 0.3%, slightly above the expected 0.2%, though headline inflation eased to a three-year low. Despite the initial market jitters, tech stocks led the charge, turning early losses into strong gains by the closing bell.

STOCKS
Winners & Losers

What’s up 📈

  • First Solar ($FSLR) surged 15.19% as solar stocks gained following Vice President Kamala Harris's debate performance, boosting confidence in a potential Democratic victory in the upcoming U.S. presidential election.

  • AppLovin ($APP) climbed 13.15% after BofA analyst Omar Dessouky raised the firm’s price target to $120 from $100, maintaining a Buy rating on the shares.

  • Lucid Group ($LCID) rose 12.75% after the electric-vehicle maker hosted a technology day, with management dropping insights that helped boost investor sentiment.

  • Viking Therapeutics ($VKTX) advanced 11.31% after JPMorgan initiated coverage at an overweight rating.

  • Nvidia ($NVDA) jumped 8.25%, benefiting from several positive news items: a cooler-than-expected inflation report, a strong presentation at the Goldman Sachs conference, and potential export deals with Saudi Arabia.

  • Chip Stocks: These semiconductor stocks rose, correlating with Nvidia’s performance, which was boosted by favorable inflation data and potential new export opportunities. Broadcom ($AVGO) gained 6.79%. Taiwan Semiconductor Manufacturing ($TSM) climbed 4.80%. Arm Holdings ($ARM) increased 10.30%.

  • Affirm Holdings ($AFRM) rose 7.97% following its CEO’s presentation at the Goldman Sachs Communacopia Conference, discussing growth and expansion plans.

What’s down 📉

  • Rentokil Initial ($RTO) plunged 21.04% after the pest control company announced it expects second-half organic sales growth for North America to slow to around 1%.

  • GameStop ($GME) dropped 11.98% after reporting a steep decline in second-quarter sales compared to the same period last year. The company also announced an "at-the-market" stock offering of up to 20 million shares.

  • Trump Media ($DJT) fell 10.47% following the debate between majority shareholder Donald Trump and Democratic Vice President Kamala Harris. The stock hit its lowest intraday level since going public on Nasdaq.

  • Campbell Soup ($CPB) slipped 3.84% after announcing it plans to change its name to The Campbell's Company, marking a rebranding after more than 155 years.

  • Humana ($HUM) fell 5.26%.

    Polestar Automotive ($PSNY) dropped 5.06%.

TECH
Apple’s $14 Billion Bite: EU Wins Big

Apple’s Tax Drama Ends in Defeat

Apple just faced a crushing blow in its decade-long tax battle. The European Union’s top court upheld the tech giant’s €13 billion ($14.4 billion) tax bill in Ireland, a case that’s been brewing since 2016. At the heart of it, Apple was accused of getting sweetheart tax deals from Ireland—a violation of EU state-aid rules. The ruling is a major win for the EU, specifically for Margrethe Vestager, its outgoing antitrust chief, who’s spent her tenure targeting Big Tech with a vengeance.

While Apple isn’t thrilled—Tim Cook once called the whole thing “total political crap”—it’s now staring down a hefty $10 billion tax charge for its fiscal fourth quarter. Ireland, which denied giving any special treatment, must now figure out what to do with that massive windfall, currently chilling in an escrow account. With this decision, Apple’s hopes of escaping the EU’s tax net have officially fizzled.

This isn’t Apple’s first run-in with the EU. Vestager has long had the company in her crosshairs, accusing them of taking advantage of Europe’s low corporate tax rates while reaping billions in revenue. While Apple argues that it pays its fair share wherever it operates, the EU views this as a clear case of tax avoidance, and this victory sets a strong precedent. Moving forward, other Big Tech firms like Amazon may want to watch their backs as the EU sharpens its focus on leveling the tax playing field.

Who is Vestager?

Margrethe Vestager isn’t just any bureaucrat—she’s the EU’s competition czar and a thorn in the side of Silicon Valley giants. As the European Commission's executive vice president for competition since 2014, she’s made it her mission to hold tech behemoths accountable for their market dominance and questionable tax practices. Apple, Google, Amazon—you name it, she’s probably fined them. Vestager’s nickname “Tax Lady” (courtesy of Donald Trump) reflects her relentless pursuit of fairness, particularly when it comes to leveling the playing field for European companies against global titans. Her bold approach has made her a hero in some circles and a nightmare in others, but her departure from the Commission leaves a legacy of major wins against Big Tech.

Google’s Not Laughing Either

Not to be left out, Google also felt the sting of the EU’s iron fist. The court upheld a €2.4 billion ($2.6 billion) fine against the search giant for unfairly promoting its own shopping service in search results. The penalty, originally slapped on Google in 2017, marked the beginning of a series of fines that now total more than €8 billion ($8.5 billion). Despite changes Google made years ago to appease regulators, the court's ruling reinforces the EU’s determination to keep Big Tech in check.

While Google is "disappointed" with the decision, the EU is riding high on its tech crackdown, hoping that the Digital Markets Act (DMA) will be the final nail in the coffin for self-preferencing. The law, passed last year, seeks to curb the dominance of giants like Google and Apple. As Vestager put it, “No one is above the law”—and it seems she’s making good on that promise.

In short, Apple’s tax break? Gone. Google’s search dominance? Under fire. The EU isn’t backing down, and this week, the Silicon Valley giants were the latest to feel the heat.

NEWS
Market Movements

ECONOMY
Inflation Cools, But Core's Still Hot

The inflation train has finally hit a cooling station—kind of. The Consumer Price Index (CPI) showed that prices rose just 0.2% in August, bringing the year-over-year inflation rate down to 2.5%, the lowest since early 2021. Cue cautious optimism. But before you start popping the champagne, core inflation (which excludes those pesky volatile items like food and energy) came in a tad higher than expected, rising 0.3%. The housing market was the main culprit here, with shelter prices climbing their fastest all year.

This means the Fed has some tough choices to make. Wall Street was hoping for a bolder 50 basis point rate cut next week, but with core inflation still sticky, traders are now betting on a more modest 25 basis point reduction. Don’t expect the Fed to let up entirely on inflation just yet—they’ll likely be playing defense for a while longer.

What This Means for the Fed (and You)

Despite the mixed inflation signals, the market actually took the news in stride. Stocks wobbled at first but bounced back to end the day in the green, and Treasury yields remained near year-long lows. Traders are pricing in an 85% chance of a quarter-point rate cut when the Fed wraps up its meeting on September 18, with expectations for even more rate cuts through the end of the year.

But what’s the Fed’s game plan from here? Jerome Powell and company are still threading the needle between taming inflation and preventing a slowdown in the job market, which has already cooled significantly. With unemployment on the rise and wage growth slowing, the Fed has to balance its rate cuts carefully to avoid tipping the economy into a full-on recession. So, while inflation may be losing steam, the bigger question is: How low will rates go before the Fed hits pause?

Consumer Prices: A Mixed Bag

Not all prices are following inflation’s cooling trend. Housing costs, which make up a third of the CPI, were up 0.5%, accounting for a whopping 70% of the core inflation increase. On the flip side, energy prices fell by 0.8%, while used vehicle prices dipped 1%. Medical services were down 0.1%, but don’t get too comfortable—egg prices soared 4.8%, and airline fares jumped nearly 4%.

All of this points to a mixed picture for consumers, who are still feeling the squeeze in certain areas despite overall price moderation. Real earnings rose 0.2% in August, outpacing inflation for the month, but households are still dealing with much higher prices for goods and services than before the pandemic.

So, what's next? Keep your eyes peeled for more rate cuts by year-end as the Fed continues its balancing act between inflation and economic slowdown. Oh, and maybe rethink that fall getaway—airline prices aren’t getting any cheaper.

Calendar
On The Horizon

Tomorrow

After checking off the Consumer Price Index, it’s time to give some love to the Producer Price Index (PPI). While CPI tells us what you’re paying at the checkout line, PPI tracks what producers are getting for their goods—basically, retail vs. wholesale inflation.

PPI rose a modest 0.1% last month, falling short of the 0.2% economists expected. On an annual scale, it slid to 2.2%, down from June’s 2.7%. Meanwhile, core PPI (excluding those pesky food and energy costs) was flat, which forecasters hope will remain the case this month.

Also, keep an eye on the weekly initial jobless claims report. With the Fed zeroing in on the labor market, this data could be key to guessing whether we’re headed toward another interest rate hike.

Before Market Open:

  • Kroger ($KR) is still playing the waiting game on its $25 billion merger with Albertsons, leaving the stock in a bit of limbo. Shareholders are eager to see what the grocery dream team can achieve, but until then, Kroger’s standing strong on its own. With revenue and profits both on the rise, it’s still a grocery heavyweight. Wall Street expects $0.91 EPS and $34.07 billion in revenue.

After Market Close:

  • Adobe (ADBE) has been stuck in neutral this year, despite being the top dog in content creation software. You’d think the AI boom would be its golden ticket, but it’s also brought new competition and a few regulatory headaches. With a lofty valuation already, there’s not much room to maneuver. The consensus? $4.10 EPS and $4.85 billion in revenue.

NEWS
The Daily Rundown

RESOURCES
The Federal Reserve Resource

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