Week in Review

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Week in Review

07/29/2023

For the week 7/24-7/28

[Posted 5:30 PM ET, Friday]

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Edition 1,267

Ukraine’s long-awaited counteroffensive is officially underway, not just probing actions but large armored brigades, the primary focus in the south as Ukraine attempts to cut off the land bridge between Russian-occupied Ukraine and the Crimean Peninsula.  The casualty rates on both sides are high, sickeningly so.

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The Dow Jones Industrial Average had a 13-session winning streak snapped on Thursday, the longest such streak since 1987.  [The rally then resumed today.]  On a wall in my office is a framed New York Post front page from Oct. 19, 1987…Black Monday…“Wall Street Bloodbath” taking up half the page as the Dow would fall 508 points, 22.6%, the largest one-day percentage drop in history.

I was working with Thomson McKinnon Securities then and had been assigned to a new region.  Black Monday was my first day in it and I had scheduled a dinner with all the branch managers in Nanuet, New York, for that evening.  So I get to the restaurant and the managers are kind of shell-shocked, and then one legendary figure, Jerry S., goes, “What the hell are we doing here?!  We should be in our branches calling our clients!”  It wasn’t the best way for me to make a good first impression.

By the way, there was a smaller headline on the front page that day (this being an evening edition).  “Take That!  U.S. blasts Iran oil rig.”

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The American electorate was reminded this week how crazy it is that we are staring at a presidential election between one octogenarian and a soon-to-be one next November, as Sen. Mitch McConnell, 81, froze up for over 20 seconds on Wednesday during a news conference, before being escorted to his office.  It was jarring, to say the least, and deeply disturbing.  McConnell returned after several minutes and was asked by reporters to address what had taken place.

“I’m fine,” he said simply.  An aide to the Senate minority leader said he felt “lightheaded.”

Since his return from a fall he took in March, where he suffered a concussion and a broken rib, taking six weeks to recover, McConnell has struggled at times in the Senate.  And then we learned he fell again at Reagan National Airport about a month ago.

What are we thinking, people.  In such tumultuous and dangerous times, the current occupant of the White House will be two weeks from his 82nd birthday next Election Day, with his own McConnell-esque episodes; his challenger, facing multiple indictments and threatening to run amok should he return to the Oval Office, will be 78.

Meanwhile, Joe Biden has to be rather concerned that his son Hunter’s legal issues were not put to bed as expected and are just beginning (see below), while Hunter’s business partner, Devon Archer, is slated to testify behind closed doors to the House Oversight Committee in order to clarify just what level of involvement Joey, aka ‘the big guy,’ had in the corrupt business dealings of his son. 

All the while, China, in particular, is licking its chops.  Lots of generals with all kinds of stars, bars, and stripes on their dress uniforms who’ve basically done nothing except lead drills, some of them no doubt chomping at the bit for real action.

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This Week in Ukraine….

--Russia attacked Ukraine with 17 cruise missiles and 2 ballistic missiles on Sunday.  Just nine of the cruise missiles were shot down before hitting their targets, according to Kyiv’s military.   In Odesa, one person was killed and 18 injured, including four children, the attack damaging residential buildings and the city’s largest Orthodox church, the Spaso-Preobrazhenskyi Cathedral consecrated in 1809, a place revered by the people.  [Though the Ukrainian Orthodox Church has been accused of links to Russia, which the church denies.]

Ukraine’s Air Force said that Russia launched high-precision Onyx missiles and sea-to-shore Kalibr cruise missiles on Odesa after midnight Sunday.

Moscow has described the persistent attacks on Odesa as revenge for a Ukrainian strike on the Kerch Bridge to Crimea.

--Ukrainian ground forces are advancing “gradually but confidently” around the destroyed city of Bakhmut, Deputy Defense Minister Hanna Maliar said Monday on Telegram.  “In one week, 4 sq. km of territory was liberated in the Bakhmut direction,” she said.  And “In total, during the offensive in this direction, the liberated area was 35 sq. km,” she added.

Ukraine has clawed back 192 square km (74 sq. miles) of occupied territory since June, Maliar said.  Secretary of State Antony Blinken said Sunday that Ukraine has “already taken about 50 percent of what was initially seized” by Russia’s invasion forces – though Blinken did not elaborate.  “Now they’re in a very hard fight to take back more,” he said.

“These are still relatively early days of the counteroffensive,” said Blinken.  “It is tough.  The Russians have put in place strong defenses…But it will not play out over the next week or two; we’re still looking, I think, at several months.”

Vladimir Putin told reporters on Sunday that Ukraine’s counteroffensive “has failed.”  Putin was standing beside Belarus’ Alexander Lukashenko, the two meeting in St. Petersburg.  “There is no counteroffensive,” Lukashenko dutifully said.  “It exists, but it has failed,” Putin replied.

Putin also said Moscow would use all means it has to react to any hostility towards Minsk, after Poland decided to move military units closer to its border with Belarus in response to the arrival of Russia’s Wagner Group.

Speaking of Wagner, Yevgeny Prigozhin was spotted this week, supposedly in Russia.

--Russia used Iranian-made drones to attack another Ukrainian port city, this time in Reni.  After the four-hour attack, which wounded at least seven people, “a grain hangar was destroyed, tanks for storing other types of cargo were damaged, and a fire broke out in one of the production premises,” Ukraine’s military said Monday.

This was a highly significant attack, as Reni is right beside Romania, on the Danube River, which is a potential future route for Ukrainian grain after Russia withdrew from the UN-brokered grain deal last week. 

This comes after a weeklong attack on Odesa’s grain facilities and port infrastructure.  Global wheat and corn futures rose sharply on concern that Russia’s attacks and more fighting could threaten grain exports and shipping.

“Food terrorism” is what Ukraine’s top diplomat, Foreign Minister Dmytro Kuleba, called it Monday.  “Russia hit another Ukrainian grain storage overnight.  It (Russia) tried to extract concessions by holding 400 million people hostage.  I urge all nations, particularly those in Africa and Asia who are most affected by rising food prices, to mount a united global response to food terrorism.”

The governor of the Odesa region, Oleh Kiper, told Ukrainian television, “Russia is trying to fully block the export of our grain and make the world starve.”

As a result of the attack on Reni, almost 30 ships dropped anchor near Ukraine’s crucial Izmail port terminal, although it was unclear exactly what had caused them to stop.  The waterway does lead to the terminal of Reni-Odesa.

Insurance industry sources told Reuters that war risk coverage for Ukraine’s ports that were part of the previous grain deal had been suspended.  Some providers were also reviewing whether to continue to provide cover for Danube ports.  The premiums are skyrocketing, as you can imagine.  One leading insurance broker said, “The difficulty here is that unlike a rateable commodity, insurance costs for Ukraine right now are unmodellable.”

--Ukraine launched its own drone attack on occupied Crimea early Monday, hitting an ammunition depot in the city of Dzhankoi, prompting an evacuation of anyone living within 3 miles of the site.

And another drone attack hit Moscow, including two buildings near Defense Ministry headquarters on Monday, which Russia called a “terrorist attack.”

--International Atomic Energy Agency Director General Rafael Grossi said Monday that Russian forces have laid landmines around the Zaporizhzhia Nuclear Power Plant. “Detonation of these mines should not affect the site’s nuclear safety and security systems,” Grossi said in a statement.  “But having such explosives on the site is inconsistent with the IAEA safety standards and nuclear security guidance and creates additional psychological pressure on plant staff,” he stressed.

--A Ukrainian lawmaker suspected of collaboration with Russia was arrested and placed in pre-trial detention, Ukraine’s prosecutor general’s office said on Tuesday.  The prosecutor’s office said in a statement that Oleksandr Ponomaryov, a lawmaker elected for a now-banned party accused of ties to Russia, was placed in detention without bail by a district court in Kyiv.

President Zelensky, in his nightly video, said some of the following: “Let me warn all members of parliament, officials and everyone working as a civil servant.  When you spend days on end looking for weapons for the country, when everyone’s attention is fixed on whether there is artillery, missiles and drones, you feel the moral strength our soldiers have given Ukraine.

“No one will forgive members of parliament, judges, military officials or any other officials for placing themselves in opposition to the state.”

Zelensky added he would no longer tolerate those who “because of some sort of personal gain” refuse to back legislation needed for Ukraine to begin its long campaign to secure EU membership.

--Russia’s lower house of parliament voted on Tuesday to raise the maximum age at which men can be conscripted to 30 years from 27, increasing the number of young men liable for a year of compulsory military service at any one time.  Last year, Russia announced a plan to boost its professional and conscripted combat personnel by more than 30% to 1.5 million.

The new legislation, which comes into effect on Jan. 1, means men will be required to carry out a year of military service, or equivalent training during higher education, between the ages of 18 and 30, rather than 18 and 27 as now.  The law also bans men from leaving Russia from the day they are summoned to a conscription office.

Conscripts cannot legally be deployed to fight outside Russia, however, Russia unilaterally claimed four Ukrainian regions as its own last September, in a move not recognized internationally, fueling fears that raw conscripts could now legally be sent into battle.

--Wednesday, two Pentagon officials said the main thrust of Ukraine’s nearly two-month-old counteroffensive is now underway in the country’s southeast, with thousands of reinforcements pouring into the grinding battle, many of them trained and equipped by the West and, until now, held in reserve.

The officials spoke on condition of anonymity to discuss details of the campaign, but their comments dovetailed with reports from the battlefield Wednesday, where artillery battles flared along the southern front line in the Zaporizhzhia region.

Igor Konashenkov, the Russian Defense Ministry’s chief spokesman, reported a “massive” assault and fierce battles south of Orikhiv, a town that Ukraine holds about 60 miles north of the Sea of Azov.  Vladimir Rogov, an official appointed by Moscow in southern Ukraine, said the assault involved Ukrainian troops who had been trained abroad and were equipped with about 100 armored vehicles, including German-made Leopards and American-made Bradley Fighting Vehicles.

Ukrainian troops along the southern front said in interviews on Wednesday that they were steadily pushing Russian troops back, but their progress had been incremental with no major breakthroughs.  They’ve been slowed by minefields, as well as withering Russian artillery and airstrikes.

Ukrainian officials have told U.S. officials they are targeting the city of Tokmak, and, if successful, then Melitopol, near the coast, as they seek to sever the above-noted land bridge.

The Pentagon said, “This is the big test.”

Vladimir Putin said on Wednesday that Ukraine had intensified its frontline attacks over the last few days, but he told Russian television that every attack had been beaten back, and that Moscow’s forces had inflicted significant losses on their opponents.

President Zelensky said in his Wednesday evening video message that Ukrainian officials were already planning “a list of de-occupation steps for Crimea.”

“We can quickly integrate Crimea into the state fabric” of Ukraine, Zelensky said.  “In fact, the occupiers should already consider that while the Crimean bridge is still somewhat operational, they should return home” to Russia.

“Russia will lose this war, and no missile will save it,” Zelensky said.  “Crimea, like the rest of Ukraine, will be free – free from all [Russian] evil, starting with Russian missiles and ending with every Russian occupier.”

In his Thursday night address, Zelensky showed a video of Ukrainian soldiers recapturing the southeastern village of Staromaiorske from Russian forces in Donetsk region.

Russian troops are heavily entrenched in the south where they have prepared a sprawling network of trenches, minefields, anti-tank ditches and lines of “dragon’s teeth” barricades. 

--Friday, Andriy Yermak, head of Zelensky’s office, accused Russia of threatening civilian vessels in the Black Sea, and urged the international community to condemn what he said were “the methods of terrorists.”

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--President Putin has been holding a summit in St. Petersburg with African leaders to try to inject new momentum into Russia’s ties with Africa, promising increased trade and investment there as part of a drive to counter what he portrays as a hegemonic U.S.-dominated world order.  On Thursday, he promised to deliver free Russian grain in the next several months to six of the countries in attendance.

But African leaders then pressed Putin on day two of the summit, Friday, to move ahead with their peace plan for Ukraine and to renew the grain deal that Moscow tore up.

This is so insane.  Putin blows up the food and the port infrastructure, food heading to Africa, in part, and then says, ‘Don’t worry…we’ll send you ours for free.’

Egyptian President Abdel Fattah al-Sisi, whose country is a key buyer of grain via the Black Sea route, told the summit it was “essential to reach agreement” on reviving the deal. Putin responded by arguing, as he has in the past, that rising world food prices were a consequence of Western policy mistakes that long predated the Ukraine war.  He says Russia quit the Black Sea agreement because it was not getting grain to the poorest countries and the West was not keeping its side of the bargain.

--Eve Sampson and Samuel Granados / Washington Post…on Ukraine being the most mined country.

“In a year and a half of conflict, land mines – along with unexploded bombs, artillery shells and other deadly byproducts of war – have contaminated a swath of Ukraine roughly the size of Florida or Uruguay.  It has become the world’s most mined country.

“The transformation of Ukraine’s heartland into patches of wasteland riddled with danger is a long-term calamity on a scale that ordnance experts say has rarely been seen, and that could take hundreds of years and billions of dollars to undo.

“Efforts to clear the hazards, known as unexploded ordnance, along with those to measure the full extent of the problem, can only proceed so far given that the conflict is still underway.  But data collected by Ukraine’s government and independent humanitarian mine clearance groups tell a stark story.

“ ‘The sheer quantity of ordnance in Ukraine is just unprecedented in the last 30 years.  There’s nothing like it,’ said Greg Crowther, the director of programs for the Mines Advisory Group, a British charity that works to clear mines and unexploded ordnance internationally.

“About 30 percent of Ukraine, more than 67,000 square miles, has been exposed to severe conflict and will require time-consuming, expensive and dangerous clearance operations, according to a recent report by GLOBSEC, a think tank based in Slovakia.”

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Wall Street and the Economy

The Federal Reserve’s monetary policy-setting committee raised its benchmark lending rate 25 basis points on Wednesday to a range of 5.25%-5.50%, the highest level in 22 years, resuming its tightening campaign following a pause last month and saying inflation remained “elevated.”

I wrote last week that in Chairman Jerome Powell’s press conference after, the chair would say ‘In September we are likely to go where the data takes us,’ and that’s exactly what he said, pointing to the slew of key data points between now and then…two CPI reports, two jobs reports, and two reports on the personal consumption expenditures index, Powell again noting that for the Fed, the core PCE is critical.

Powell also made it clear he doesn’t expect the Fed to lower interest rates this year.

“We’ll be comfortable cutting rates when we’re comfortable cutting rates, and that won’t be this year,” he said.  “My base case is we’ll be able to achieve inflation moving back down to our target without the kind of really significant downturn that results in high levels of job losses,” but that path is “a long way from assured.”

“The committee will continue to assess additional information and its implications for monetary policy,” the Federal Open Market Committee said in its statement after its two-day meeting.  “In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

The FOMC said recent indicators show economic activity has been expanding at a “moderate” rate, while job gains have been strong in recent months.  The committee reiterated that the U.S banking system is “sound and resilient.”

So, we’ll see how the data comes in.

Editorial / Wall Street Journal

“Wall Street and Washington are grousing, but Chairman Jay Powell and his Federal Reserve comrades deserve credit for staying their anti-inflation course on Wednesday. The hardest decision for central bankers is holding firm on policy as political turbulence builds….

“Mr. Powell said at his post-FOMC press conference that future rate increases are possible this year if the inflation data warrants….

“The Fed ‘can afford to be a little patient, as well as resolute,’ Mr. Powell said, though his overall message tilted toward resolute.  ‘We need to get this done,’ referring to the anti-inflation campaign, and ‘the record is clear that if we take too long, or if we don’t succeed, that the pain will only be greater.’

“He’s right.  There’s always a danger the Fed will go too far in raising rates, but that’s been an occupational hazard since the central bank let inflation run wild in 2021-2022.  The Fed’s monetary tightening, which began in March 2022, hasn’t come close to putting the economy in the tank so far….

“Consumer prices in June rose only 3% at an annual rate, down from 9.1% a year earlier. But core prices, sans energy and food, were up 4.8%, and the service price index is up 5.7% year-over-year.  That’s sticky enough to warrant more Fed vigilance, even if that statement earns us scowls on Wall Street.”

So first off, Thursday’s first look at second-quarter GDP from the Bureau of Economic Analysis was released and it came in better than expected, 2.4% vs. the consensus view of 1.5% from Econoday (my source for consensus economic readings, incidentally).  Interestingly, the Atlanta Fed’s GDPNow barometer’s last look at the second quarter was indeed exactly 2.4%.

And then today we had the PCE for June, 0.2%, 3.0% year-over-year, both in line with expectations, while the critical core PCE was 0.2%, and 4.1% Y/Y, a tick better than the consensus call of 4.2% and down from last month’s 4.6%.  This is good news.  The first of six key reports the Fed will be looking at prior to the Sept. 19-20 gathering.

But core is still above 4.0%.

Personal income for June was up 0.3%, consumption rose 0.5%.

In other economic news this week, the Case-Shiller National Home Price Index for May continued to show an improving housing market, with prices for the 20-city index up 1.0% month-over-month, and down 1.7% year-over-year, both better than expected.

June new home sales were disappointing; a 697,000 annualized pace.

June durable goods were much better than expected, up 4.7%, and 0.6% ex-transportation.

Freddie Mac’s 30-year fixed-rate mortgage came in at 6.81%.

Europe and Asia

We had flash PMIs from S&P Global for the month of July in the eurozone this week, with the composite index at 48.9, an 8-month low (50 the dividing line between growth and contraction).  Manufacturing was 42.9, services 51.1.

Germany: Mfg. 41.0 (38-mo. low); services 52.0
France: Mfg. 43.2; services 47.4

UK: Mfg. 46.5; services 51.5

Dr. Cyrus de la Rubia / Hamburg Commercial Bank:

“Manufacturing continues to be the Achilles heel of the eurozone.  Producers have cut their output again at an accelerated pace in July, while the services sector’s activity is still expanding, though at a much slower rate than earlier in the year.

“The eurozone economy will likely move further into contraction territory in the months ahead, as the services sector keeps losing steam.”

The European Central Bank then, as expected, raised its deposit rate to a historic high on Thursday and kept its options open on whether more increases will be needed to bring down inflation against a worsening economic backdrop.

Thursday’s hike, the ninth in a row, increases the rate that the ECB pays on banks’ deposits from 3.50% to 3.75%, its highest level since 2000.

But the ECB removed a clear hint at further hikes from the policy statement, meaning a fresh increase at the ECB’s next meeting in September should not be taken for granted.

Eurobond markets barely moved on the expected hike and tamer guidance.

Spain: The general election Sunday produced an unexpectedly tight result, the center-right People’s Party gaining the most seats in parliament.  Alberto Nunez Feijoo’s PP beat the ruling Socialists, led by Pedro Sanchez, the prime minister, who finished second.  But the PP, even with the support of the hard-right Vox, lacks a governing majority.

The PP picked up 136 seats (way up from the party’s 89 seats in the last national election) and with the far-right Vox party’s 33 (down from 52), they would still be seven short of an absolute majority of 176 in parliament.

Sanchez’s Socialists had 122 seats.  The far-left Sumar has 31 seats.

Both camps are claiming success, but Spain is left with an inconclusive result.  As the leader of the party that won the most votes, though, Feijoo will be invited by King Felipe VI to try to form a government, but if Feijoo declines on the grounds that he cannot muster enough support, the king may turn to Sanchez.  Whoever accepts the king’s invitation then has two months to secure a majority.

Negotiations by the two blocs to form governments will start after a new parliament convenes on Aug. 17.

Failing that, new elections must be held.

What sucks is that Spain currently holds the rotating presidency of the European Union Council.

Give Spaniards credit, as turnout was over 71% amidst an historic heatwave, so voters were showing up in bathing suits.

For now, the biggest takeaway is the far-right did not do nearly as well as some prognosticators were predicting.

Turning to Asia, nothing of significance on the data front from China this week.  PMIs are released over the weekend.  As I allude to below, the Chinese government did say it would support the floundering economy.

Japan’s flash manufacturing PMI for July came in at 48.4; services 53.9.

But then on Friday, the Bank of Japan loosened its yield curve control (YCC) policy, a pillar of the central bank’s efforts to limit borrowing costs and stimulate the economy.

Rumors of such a move had roiled markets Thursday and the yield on 10-year Japanese government bonds jumped to their highest level since 2014, finishing the week at 0.54%.

YCC was introduced in 2016, the BOJ seeking to keep short- to medium-term rates low while allowing long-term rates to go higher.  The goal was to encourage consumers to spend and head off the risk of deflation.

The target for the 10-year government bond yield was set at around zero percent, while short-term rates are set at -0.1%.  The BOJ then gradually raised the band on the 10-year, tweaking it to 0.5% last December.

So now, the BOJ said it will control 10-year yields “flexibly” and will allow them to rise above the 0.5% level.  Much more on this topic in the future as warranted.

Street Bytes

--Save for Thursday’s Bank of Japan-related hiccup, the market rally continued as more and more investors, and strategists, fall into the soft-landing camp and that’s where the evidence is these days.  Personally, watch oil, and thus gasoline prices, the latter up 15 cents on the week at the pump, nationally.  Nothing influences Americans’ spending habits more than this. 

On the week, the Dow rose 0.7% to 35459, the S&P 500 1.0%, and Nasdaq 2.0%.  Next week Apple and Amazon earnings, plus PMI/ISM data and the July jobs report.

--U.S. Treasury Yields

6-mo. 5.47%  2-yr. 4.88%  10-yr. 3.96%  30-yr. 4.01%

The 10-year briefly crossed 4.00%, a critical level for both equities and bonds, on the BOJ issue, so we’ll see what happens the next few weeks on this front.

--Oil hit $80 on Thursday, and closed the week at $80.45, a 3-month high (West Texas Intermediate), as the prospect of tighter global supply and a rebound in Chinese demand supported the market.  Chinese authorities pledged to step up policy support to shore up the economy, bolstering the outlook for the world’s top crude importer.  The flip side is the ongoing moves by central banks, such as our Fed and the ECB, to hike interest rates further, which could curb demand.

--Exxon Mobil Corp. on Friday reported a 56% slump in second-quarter profit, joining rivals hurt by a sharp drop in energy prices but delivering results in line with an earnings preview issued earlier this month.

Second-quarter results from oil majors have tumbled from huge profits booked a year ago after Russia’s invasion of Ukraine sent oil and gas prices soaring.

Net income was $7.88 billion, or $1.94 per share, vs. a record $17.85 billion a year earlier (and $4.14 per share).  The Street was at $2.02.  Yet excluding last year’s record Q2, Exxon posted its strongest result for the months of April to June in more than a decade, helped by cost cuts and the sale of less profitable assets.

Total revenue for the quarter was $82.91 billion, compared with $115.68bn a year earlier, and consensus of $90.32bn.

Exxon’s oil production stands at 3.7 million barrels of oil equivalent per day, in line with the company’s annual target.  Results were helped by better output in the Permian Bais, and in Guyana.

Capital and exploration spending in the first half of 2023 was $12.5 billion, in line with the company’s full-year guidance of $23 billion to $25 billion.

--Chevron announced it was waiving the company’s fixed retirement age for CEO Mike Wirth, allowing him to remain CEO for a longer period as it weighs its C-Suite strategy.  Some directors have said the company doesn’t have an internal candidate ready to succeed Wirth, who would reach the company’s fixed retirement age of 65 in late 2025, and that additional time would allow him to prepare a successor.

Chevron also said on Sunday it banked a $6 billion profit in the second quarter*, about 6% higher than analysts expected, but down from its quarterly record of $11.6 billion in the same period last year, when oil and natural-gas prices had spiked following Russia’s invasion of Ukraine.

Wirth, who will turn 63 later this year, is an engineer and Chevron employee for over 40 years.  He became chairman and CEO in 2018, when the company was reeling from years of cost overruns made more acute by an oil-market crash in 2015 and anemic energy prices.

*The formal earnings report was issued Friday and profit came in at $6.01 billion, on revenue of $48.90 billion compared with $68.76 billion a year earlier.  Adjusted earnings per share of $3.08 were shy of consensus of $3.12.

Worldwide net oil-equivalent production was up 2 percent from a year-ago quarter due to record Permian Basin production of 772,000 barrels of oil equivalent per day.

--Leaders of the largest U.S. chip makers told Biden officials this week that the administration should study the impact of restrictions on exports to China and pause before implementing new ones, according to the South China Morning Post.

During meetings in Washington on Monday, Intel’s Pat Gelsinger, Nvidia’s Jensen Huang and Qualcomm’s Cristiano Amon warned that export controls risk harming U.S. leadership of the industry.  Biden officials listened to the presentations but didn’t make any commitments, sources told SCMP.  The talks were private.

The chip industry is trying to navigate increasing tensions between China and the U.S.   Companies are being forced to curb shipments to their largest market by Washington, which has cited national security concerns about the Asian nation acquiring certain capabilities.

The Biden team has been exploring ways to further tighten existing curbs – for example, by targeting chips made by Nvidia specifically for the China market, according to people familiar with the matter.  In addition to the U.S. restrictions, U.S. chip makers such as Micron Technology have faced actions by Beijing that have hurt their ability to do business in the country.

--Alphabet’s second-quarter profit exceeded Wall Street expectations on Tuesday and the Google parent announced that its long-time CFO Ruth Porat would assume a new role, chief investment officer and president, while the company sought a new finance chief.

Alphabet’s results were helped by steady demand for its cloud services and a rebound in advertising. The shares jumped 6% as revenue at Google Cloud, which is among the biggest cloud service providers, rose 28% to $8.1 billion, besting expectations.  Ad sales for Google’s YouTube video service unit rose 4.4% to $7.67 billion.

Alphabet reported net profit of $1.44 per share for Q2, on revenue of $74.6 billion, compared with estimates of $1.34 and $72.82bn.

--Microsoft on Tuesday surpassed Wall Street estimates for fiscal fourth-quarter revenue and profit as its cloud business benefited from product upgrades featuring new artificial intelligence technology.

But costs rose sharply from the previous quarter as it built new data centers to support AI, and the shares fell about 5%.

The Steet is looking at how generative AI services may benefit Microsoft, which secured an early lead with investments in OpenAI, owners of the popular ChatGPT service.

Microsoft is weaving AI into its own products, such as the $30-a-month “Copilot” for its Microsoft 365 service that can summarize a day’s worth of emails into a quick update.  It is also aiming to sell cloud computing services that other firms will use to build AI services.

MSFT’s results show heavy spending on AI services ahead of commensurate revenue growth.  While its Azure sales growth rate was slightly higher than forecasts, Microsoft’s quarterly capital expenditures hit the highest single-quarter total since at least fiscal 2016.  Company executives said the spending reflects its demand expectations for AI services.

Revenue rose to $56.2 billion in Fiscal Q4 ending June 30, compared with expectations of $55.5 billion. Net income was $2.69 per share, above consensus of $2.55.

Microsoft’s Intelligent Cloud unit, which houses the Azure cloud computing platform, increased its revenue to $24 billion, Azure revenue rising 26%, but this pace continues to decelerate, while at the same time the company is still navigating a PC business slump, with sales of its Windows operating system falling to $13.9 billion.

Capital expenditures jumped to $10.7 billion from $7.8bn, after the company told investors spending would rise as it builds out data centers for AI work.

“We remain focused on leading the new AI platform shift,” CEO Satya Nadella said in a statement announcing the results.

--Shares in Meta Platforms soared 9% after the company forecast third-quarter revenue above market expectations on Wednesday, the suggestion being that it anticipated higher ad spending as a result of an improving macroeconomic environment.  Meta expects July-September revenue in the range of $32 billion to $34.5 billion, compared with analysts’ averages estimate of $31.30 billion.

“We continue to see strong engagement across our apps and we have the most exciting roadmap I’ve seen in a while with Llama 2, Threads, Reels, new AI products in the pipeline, and the launch of Quest 3 this fall,” said Mark Zuckerberg.

The revenue bump comes despite the company also forecasting that expenses would rise in both 2023 and 2024, citing costs including legal fees and increased spending on infrastructure considered key to the tech sector’s feverish AI race.

Meta also beat second-quarter revenue estimates, up 11% to $32 billion, vs. the Street’s forecasts for $31.12 billion.

Adjusted earnings per share came in at $3.23 vs. consensus of $2.87.

Usage metrics were strong.  Meta said “daily active people” were 3.07 billion, up 7% from a year ago – crossing the 3 billion level for the first time – while Facebook daily active users were 2.06bn, up 5%.  Facebook monthly actives were 3.03 billion, up 3%.

Ad impressions delivered across the company’ “family of apps” were up 34% from a year ago, Meta said, while the average price per ad was off 16%.

Head count was down 14% from a year ago, to 71,469 but headed lower – the company noted that about half of the employees affected by its recent layoff announcements were included in the June 30 total.

--China’s state-owned aerospace manufacturer aims to deliver between six to eight of its home-grown, narrow-body passengers jets by the end of the year, after commercial operation of the sole C919 started with a passenger seat occupancy rate of 82 percent since May.

The Commercial Aircraft Corporation of China (Comac) delivered the first C919 to China Eastern Airlines in December and it completed its maiden commercial flight in May between Shanghai and Beijing.

The aircraft, which can carry between 158 to 192 passengers and is designed to compete with Boeing’s 737 and Airbus’ A320, has since been operating between its base in Shanghai and Chengdu.

Comac said in January it had received orders for 1,200 C919’s, with annual production capacity expected to hit 150 in five years.

--Speaking of Boeing, it flipped to a $149 million loss in the second quarter, from income of $160 million a year earlier, despite higher revenue, as the plane maker struggled with higher costs in both its airline and defense business.

Boeing said it is beginning to increase production of its two most popular airline planes.  The company plans to raise production of the 737 MAX from 31 to 38 planes a month to take advantage of demand for newer, more fuel-efficient planes.  Boeing is also boosting output of the larger, two-aisle 787 Dreamliner from four to five per month by year end.

“We have more work ahead to improve performance, but our progress is clear and we’re confident in our path forward,” CEO David Calhoun said in a memo to employees.  He said the company was improving the stability of operations in its factories and among suppliers.

Boeing has been beset by supply-chain problems that continued during the second quarter, including a temporary delay in 737 deliveries because of fittings on the MAX and regulators’ questions about Dreamliner inspections.

Boeing said the commercial-planes division was weighed down by “abnormal costs,” which it did not detail.

The defense and space business also performed worse than analysts expected, with the company recording charges of $257 million related to a delay in launches of its Starliner reusable space vehicle, $189 million for higher-than-expected production costs for a military training jet, and $68 million for delays in a defense refueling drone.

Revenue rose 18% to $19.75 billion, beating consensus of $18.59bn.  Sales were boosted by an increase in delivery of commercial planes to airlines and lessors.

The shares rose 6% as the results beat forecasts, and investors are hoping Boeing can successfully boost production in the midst of a huge backlog.

--U.S. airline stocks struggled on Tuesday as investors were spooked by downbeat forecasts from Alaska Air Group and a warning on jet engines by aerospace giant RTX.

Investors have been on guard after inflation data in July showed a third consecutive monthly decline in fares, with prices dropping at their fastest pace since February 2021. Alaska said it expects total revenue in the third quarter to be flat to up 3%, compared with a 6.8% rise in the second.  Its revenue growth forecast for 2023 missed Wall Street estimates.  The shares plunged 9%, dragging United, American, Southwest and Delta down as well.

At the same time, RTX, formerly Raytheon, said a “significant portion” of its Pratt & Whitney GTF engines that power Airbus A320neo jets will need “accelerated removals and inspections.”  The problem will force an inspection of 1,200 out of more than 3,000 engines over the next nine to 12 months, RTX shares plummeting 10%.

“Pratt & Whitney has determined that a rare condition in powder metal used to manufacture certain engine parts will require accelerated fleet inspection,” RTX said on Tuesday.  This requires removing the engine and disassembling it, inspecting and potentially replacing the disk, and then reassembling the engine, Raytheon said.

An issue you could have is a large number of flight cancellations if airlines have to take their planes offline and have them retrofitted.

--Shares in Southwest Airlines then plunged 9% on Thursday after the company warned of higher labor costs for the year and signaled softer pricing for the current quarter, stoking worries that rising operational expenses could add to a potential hit to travel demand from strained household budgets.

The largest domestic U.S. airline expects revenue per available seat mile (RASM) to fall between 3% and 7% in the third quarter, while capacity is expected to be up about 12%.  However, Southwest expects the quarter to be profitable and operating revenue to hit a record.

Southwest, which is yet to strike a new deal with its pilots, said cost per available seat mile, excluding fuel, will fall 1% to 2% in 2023, smaller than the 2% to 4% drop it had expected earlier.  Fuel costs were also revised upwards.

Higher expenses also weighed on second-quarter profit, which fell to $683 million, or $1.08 per share, from $760 million, or $1.20 per share, a year earlier.  Total operating revenue grew 4.6% to $7.04 billion.

--TSA checkpoint numbers vs. 2019

7/27…99 percent of 2019 levels
7/26…93
7/25…96
7/24…102
7/23…103
7/22…105
7/21…102
7/20…101

--UPS reached a contract agreement with its 340,000-member union, averting a strike that had the potential to disrupt logistics nationwide for businesses and households alike.

The agreement was announced Tuesday, the first day that UPS and the Teamsters had returned to the table after negotiations broke down this month.  Negotiators had clashed over pay for part-time workers who make up more than half of the UPS employees represented by the union.

Under the tentative agreement (voting on the contract begins Aug. 3 and concludes Aug. 22), existing full- and part-time union workers will get $2.75 more per hour in 2023 and $7.50 more per hour over the length of the five-year contract.  The agreement also includes a provision to increase starting pay for part-time workers, which the union had called the most at risk in the company’s workforce of being exploited.  Starting pay for part-time workers will be $21 per hour, it said, up from $16.20 today.  The average pay for part-timers had been $20, according to the company.

Tenured drivers will get a bump too, up to an average top rate of $49 an hour from $42 today, or about 3.4% a year over five years.

UPS had also agreed to eliminate a lower-paid category of drivers who work shifts that include weekends, and convert them into regular full-time drivers.  The company will also create 7,500 full-time jobs and fill 22,500 open positions, which could allow more part-timers to transition to full-time work.

A walkout would have had far-reaching implications for the U.S. economy, with millions of Americans now accustomed to online shopping and speedy delivery.

The 24 million packages UPS ships on an average day amounts to about a quarter of all U.S. parcel volume, according to global shipping and logistics firm Pitney Bowes, and as UPS puts it, that’s the equivalent of about 6% of the nation’s gross domestic product.

--General Motors Co. reported adjusted profits of $1.91 per share for the second quarter, up from $1.14 a year earlier and ahead of consensus of $1.83, with net income of $2.54 billion, a 52% increase over a year ago.

Revenue for the quarter ending June 30 was $44.75 billion, up from $35.76 billion a year earlier, ahead of expectations of $42.36bn.  And GM raised guidance for full-year 2023 adjusted earnings to $7.15 to $8.15, versus a prior forecast of $6.35 to $7.35, or net income of between $9.3 billion and $10.7 billion, up from a previously predicted $8.4 billion to $9.9 billion.

Continued strong vehicle sales and pricing, as well as cost cuts, led to the better-than-expected quarter.  But the increased guidance all depends on negotiating union labor contracts without a strike.  Contracts between the Detroit Three automakers and GM, Stellantis and Ford workers  expire at 11:59 p.m. on Sept. 15.  United Auto Workers President Shawn Fain, who represents about 43,000 GM U.S. factory workers, has told members they are poised to make big gains in this year’s contract talks, but they have to be prepared to go on strike against the profitable auto companies.

GM said it met an internal target of producing 50,000 electric vehicles in North America during the first half of the year, and now expects to build about 100,000 EVs in the second half of the year, with increased battery cell production and vehicle assembly.

Separately, the company announced 5,000 workers taking early retirement buyouts, as part of its cost-cutting initiative.

But the shares fell in part on word of further cost cutting, amid plans to invest less in new products.  CEO Mary Barra said GM has reversed plans to kill its least expensive EV, the aging Chevrolet Bolt, at the end of this year, and now instead the company expects to introduce an updated Bolt, with a newer Ultium battery pack, but she did not disclose details about cost, timing or plant location.

--Ford Motor on Thursday raised its profit guidance, as improving supply chains helped the automaker produce more pickup trucks and crossover family-SUVs to meet sustained demand from consumers.  But Ford said it will take longer to accelerate EV production to an annualized rate of 600,000 vehicles annually.  Previously Ford had said it would hit that rate late this year.  Now the company is aiming to reach that pace in 2024.

Ford said it now expects its electric vehicle unit, Model e, to lose $4.5 billion this year, 50% higher than its previously forecast loss of $3 billion.  The company expects pre-tax profit for the year to come in between $11 billion and $12 billion, compared with its prior forecast of $9 billion to $11 billion.

For the second quarter, profit surged to $1.92 billion, 72 cents per share, while revenue rose to $45 billion, from the year-ago $40.2 billion, Ford beating the Street on both the top and bottom line.

But the shares continue to go nowhere because of the EV issues, and losses.

--Seven major automakers announced a plan on Wednesday to nearly double the number of fast chargers in the United States in an effort to address one of the main reasons that people hesitate to buy electric cars.

The carmakers – BMW, GM, Honda, Hyundai, Kia, Mercedes-Benz and Stellantis – will initially invest at least $1 billion in a joint venture that will build 30,000 charging ports on major highways and other locations in the U.S. and Canada.

Currently, the U.S. and Canada have about 36,000 fast chargers – those that can replenish a drained battery in 30 minutes or less.  But in some sparsely populated areas, such chargers can be hundreds of miles apart.

--One person died and several others were hurt when a fire broke out on a cargo ship carrying cars off the northern tip of Netherlands, forcing several members to jump overboard, the Dutch coastguard said on Wednesday.

The Panama-registered Fremantle Highway was transporting 2,857 cars from Germany to Egypt, 25 of them electric.*

An electric car was the suspected source of the blaze, a coastguard spokesperson said, adding that the ship was still burning.

*Well then Friday, the charter company “K” line said the car carrier is carrying nearly 500 electric vehicles…not exactly 25.  We’re now told there were 3,783 total vehicles on board, 498 battery EVs.

--Verizon Communications said it is too soon to gauge how much it might cost to address lead-sheathed cables in the oldest parts of its network, while at the same time it is focused on growing its wireless business.

“There are a number of unknowns in this area, including whether there is a health risk presented by undisturbed lead-sheathed cable,” finance chief Ton Skiadas told investors Tuesday.  “We do not believe there’s a meaningful way to estimate any potential cost to the company or that any such estimate would even be useful.”

Verizon has said lead-covered cables make up a small percentage of the less than 540,000 miles of cable in its copper network.

Stiff competition from wireless and cable rivals has overshadowed Verizon’s steady profits of late.  Its consumer division bled customers for most of the past year and a half, prompting the company to overhaul the way it markets wireless plans.

Total revenue fell 3.5% to $32.6 billion in the second quarter, the company blaming the slump on fewer smartphone upgrades, a trend that has persisted across the industry as users hold on to their devices for longer spans.  Its core wireless service revenue rose 3.8% to $19.1 billion, fueled by wireless home internet growth, price increases and the reclassification of some fee revenue.

Verizon’s overall profit fell to $4.65 billion from $5.2 billion a year earlier, $1.10 per share, adjusted, down from $1.24.

--AT&T reported adjusted earnings of $0.63 per share, better than consensus of $0.60. Revenue rose 0.9% to $29.92 billion, in line with expectations of $29.94 billion, with the company reporting quarterly net income of $4.44 billion. 

In the Mobility sector, the company reported a net gain of 6.2 million wireless subscribers.  At June 30, 2023, wireless subscribers totaled 229.0 million, compared to 203.4 million a year ago.  Revenues from this part of the business were $20.3 billion, up 2% from the second quarter of 2022.  Business wireline revenues came in at $5.3 billion, down 5.6% vs. the year-ago quarter.

The company said Wednesday it plans to expand cost cutting by more than $2 billion over the next three years.  AT&T addressed the lead-cable issue last week.

--Shares in General Electric rose sharply on the manufacturer’s improved forecasts for the year.  GE’s stock has steadily climbed as investors have focused on the company’s future as an aviation play, hitting its highest levels in five years.

The company cited rising demand for its jet engines and improved demand for its wind energy turbines.

GE said it is on track for $61 billion in revenue this year, compared with $113 billion in 2018, but this is after GE sold off units that made lightbulbs and locomotives, oil-and-gas operations and most of its legacy GE Capital unit, which once rivaled the biggest banks and tipped the company into a financial squeeze.

In 2024, the company will be even smaller as it prepares to split off its power and renewable-energy businesses as GE Vernova.  GE has reduced head count by 10% so far this year in preparation for the split.

--Chipmaker Intel saw its shares rise in the aftermarket Thursday after the company posted a surprise profit as a PC market slump started to ease, and it forecast third-quarter earnings above Wall Street expectations.

The market for personal computers has tumbled over the past year, with inventory piling up because consumers had already bought machines needed during the pandemic.  But the glut has started to ease, with PC shipments falling only 11.5% in the June quarter compared to a 30% slump in each of the previous two quarters, Canalys data showed.  Shipments rose 11.9% from the first quarter, signaling that vendors’ appetite for fresh stock will rebound in the second half of the year.

In the case of Intel, after over four consecutive quarters of deep declines across its biggest segment that includes personal computers, revenue dropped 12% to $6.8 billion, from $7.7 billion in the year-ago period.  Sales by Intel’s data center and AI segment fell 15% to $4 billion from $4.7bn in the year-ago quarter.

The company forecast adjusted current-quarter earnings per share of 20 cents, vs. expectations of 16 cents.  Intel forecast adjusted current-quarter revenue of about $12.9 billion to $13.9 billion, compared to estimates of $13.23 billion.  The company said it expects profit margins to improve in the second half.

--Industrial conglomerate 3M Co. on Tuesday raised its full-year forecast, benefiting from higher prices and cost-cutting measures including significant layoffs.  The company, which makes everything from power tools to medical products, has been raising prices to offset a hit from mounting commodity costs.  To counter the surge, 3M also reduced its total global workforce by 10% over two rounds of layoffs.

The maker of ‘Scotch’ tape and ‘Post-it’ notes said it now expects its full-year profit to be between $8.60 and $9.10 per share, up from its prior guidance of $8.50 to $9.00.

But the diversified manufacturer reported a quarterly loss compared to a one-year ago profit, as it took a hit from a $10.3 billion settlement related to water pollution claims tied to “forever chemicals.”  The reported loss was $12.35 per share, but adjusted for the loss, profit was $2.17 per share.  Revenue fell 4.3% to $8.3 billion.

--The Banc of California has agreed to buy PacWest Bancorp in an all-stock transaction, bringing an end to months of speculation about the fate of PacWest and whether it could survive on its own after the failures of three other regional banks this spring.

Two large private equity firms, Warburg Pincus and Centerbridge Partners, are investing $400 million to help shore up and restructure the balance sheet of the combined bank.  Centerbridge Partners has a long history as an investor in distressed companies.

The deal is generally good news for PacWest and its shareholders.  Based on Tuesday’s closing prices, PacWest shareholders will receive Banc of California shares valued at $9.60.  A year ago the shares of PacWest traded for around $27. 

The bank had a similar business model to First Republic Bank: serving rich customers and giving clients favorable loans in exchange for those deposits.  PacWest also had an investment banking division that served the tech community as well.

But like many other regional banks, PacWest had billions of dollars’ worth of unrealized losses in its bond portfolio and uninsured deposits that were at risk of being pulled at the first sign of trouble.

The fear was that the bank would be bought in a fire sale, shares essentially worthless.

The combined company will take the Banc of California name, although it is a much smaller institution than PacWest.

--Related to the above, when the regional banks ran into trouble this spring, customers ran for the exits because many of their deposits weren’t insured.  Banks then began to play with their deposit numbers to reduce the portion of their deposits that they said were uninsured.

On Monday, the FDIC sent a warning to the banks not to take liberties with their deposit numbers.  As in ‘cut the crap, boys.’

--Domino’s Pizza missed Wall Street estimates for second-quarter revenue on Monday, as elevated delivery fees and higher prices to boost margins hurt demand for its pizzas and chicken wings.  Shares of the world’s largest pizza chain initially fell on the news but recovered, even as Domino’s said it saw lower order volumes during the quarter.

Higher labor and raw material costs have forced restaurant chains, even the biggest names such as McDonald’s, to jack up menu prices and delivery fees, which hurt cost-conscious consumers whose budgets are already squeezed by sticky inflation.

Domino’s U.S. same-store sales rose 0.1% in Q2, a tick lower than estimates.  Earlier in the month, the pizza maker partnered with Uber, which will allow its customers to place offers on the ride-sharing company’s food delivery apps Uber Eats and Postmates, though it will take a while for this to roll out.

Domino’s total revenue fell 3.8% to $1.02 billion in the three months ended June 18, slightly below the Street’s forecasts.  Profit of $3.08 per share was above consensus of $3.05bn.

--Speaking of McDonald’s they reported solid results, with global same-store sales rising nearly 12% in the April-June period.  That handily beat the Street’s forecast of a 9.4% increase.

McDonald’s benefited from a marketing campaign featuring Grimace, their big purple mascot, with a limited-time purple milkshake, the campaign taking on a life of its own after fans posted videos of themselves drinking the milkshake and then ending up on the ground in a messy pool of purple, or whatever.  One TikTok video garnered 5 million ‘likes.’

Revenue rose 14% to $6.5 billion, beating expectations.  Same-store sales in the U.S. more than doubled, rising 10.3% in the quarter compared with a 3.7% rise a year earlier.

Price hikes on some items in the U.S. did not dent customer traffic, the company said.  Sales in the UK, Germany and China were also strong.

Net income nearly doubled to $2.3 billion for the quarter.  Adjusted earnings came in at $3.17 per share, beating analysts’ forecasts of $2.78.

--Chipotle Mexican Grill shares fell 8% after the company missed Wall Street estimates for quarterly sales on Wednesday, signaling softening demand for its rice bowls and burritos in the face of higher menu prices and waning household budgets.

Like other restaurants, Chipotle has also hiked menu prices to offset the impact of higher input costs of everything from beef to potatoes, deterring lower-income customers from ordering its pricier meals.

Comparable sales rose 7.4% in the second quarter, below expectations, and total revenue of $2.51 billion, up 13.6% for the three months ended June 30, also was shy of consensus.

--Coca-Cola Co. raised its annual revenue and profit forecasts on Wednesday, betting on higher pricing and resilient demand for its sodas, especially its namesake drink and Sprite.

When supply chain snags and the Russia-Ukraine conflict pushed prices of everything from commodities like sugar to transport higher, many consumer goods companies including Coca-Cola hiked prices of its products to offset the impact from these rising costs.  Still, consumers have been steadily spending on sodas and snacks even though rising interest rates and food prices hammer non-essential spending in a difficult economy.

Coca-Cola’s average selling prices rose 10% in the second quarter, while in North America volumes declined 1%, showing little impact to demand with overall unit case volumes remaining flat.  Rival PepsiCo also raised its annual revenue and profit forecasts for a second time this year after beating second-quarter results last week.

In Asia Pacific, China’s reopening from pandemic restrictions has led to an increase in consumer activity helping Coca-Cola post higher revenue in the region.

The company now expects organic revenue growth of 8% to 9% for the full year, compared with a prior forecast of an increase of 7% to 8%.  The company forecast full-year core earnings per share to rise between 5% and 6%.

--Hilton Worldwide Holdings beat Street estimates for second-quarter revenue on Wednesday, as record lodging prices and rebounding corporate and summer travel demand boosted results.  Hotel companies have seen demand plateau in the United States after benefiting in recent quarters from elevated domestic bookings as consumers used remote work as an excuse to travel.

But with international travel rising, Hilton is facing increased competition as it has a smaller footprint abroad compared with its competitors.

The company’s revenue per available room, or RevPAR, an important metric in the hospitality industry, rose 12% in the quarter from a year earlier.

Second-quarter revenue rose to $2.66 billion, exceeding consensus of $2.57 billion.  Average daily hotel rates were up about 18% in Q2 from the same period in 2019, pre-pandemic.  U.S. hotel demand has been below pre-pandemic levels for four consecutive months, falling 2% in June year-over-year.

Hilton boosted full-year adjusted profit between $5.93 and $6.06 per share, compared with its prior forecast of $5.68 to $5.88.

--In a radical rebranding, Twitter owner Elon Musk announced over the weekend he was replacing Twitter’s iconic bird logo with X.

“Interim X logo goes live later today,” he wrote early Sunday.

Musk then explained Monday his decision to strip Twitter of its famous blue-bird logo as a move to remake the business into a broad platform for communications and financial transactions, a target he’s described as the everything app.

“This is not simply a company renaming itself, but doing the same thing,” Musk said about the apparently spontaneous move over the weekend to crowdsource a logo from fans and adopt it as Twitter’s new insignia.  “The Twitter name made sense when it was just 140 character messages going back and forth – like birds tweeting.”

The X.com web domain now redirects users to Twitter.com, Musk said.

But think about all the small businesses, non-profits, and government agencies that have relied on Twitter for years to push their message and reach people, and they have the Twitter icon on everything from their web site to their business cards.

Changing all this has costs.

But Musk has always had a fascination with the letter X.  He renamed Twitter’s corporate name to X Corp. after he bought it in October.  There is SpaceX.  He started an artificial intelligence company this month called XAI to compete with ChatGPT.  And he calls one of his sons “X.”  The child’s actual name is a collection of letters and symbols.

--Conservative news channel Newsmax saw its prime-time viewership more than double in the second quarter, as it held on to a good chunk of the gains it made following the departure of Tucker Carlson from Fox News.

Newsmax drew 247,000 prime-time viewers in the period, through June 25, compared with 111,000 in the first quarter.

Carlson’s last show on Fox News was April 21, and Newsmax’s viewership quickly surged, averaging 334,000 during the last week of April.  Ratings have declined from those peaks, but the average remains substantially above first-quarter levels.

Fox News’ prime-time ratings declined 22% in the second quarter after Carlson’s departure, to about 1.7 million prime-time viewers, though it remains the most-watched cable news network.

Jesse Watters made his debut on July 17, filling Carlson’s former 8 p.m. slot, and he drew 2.3 million, lower than Carlson’s ratings but higher than the 1.6 million viewers that the time slot drew a week earlier.

Second-place MSNBC saw a slight uptick in the second quarter, through June 25, to 1.2 million.

CNN’s average prime-time viewership increased slightly to 548,000.

--Finally, you all saw the booming success of “Barbenheimer” last weekend.  “Barbie” hauled in $155 million in the U.S. and Canada, while “Oppenheimer” collected $80.5 million.

“Oppenheimer” took in $174 million globally, while “Barbie” collected $337 million worldwide.

The domestic ticket sales of $300 million for the industry overall last weekend was just the fourth time in history that level had been achieved.

That’s big because pre-“Barbenheimer,” the domestic box office was lagging 16.1% and 6.6% behind the year-to-date earnings of 2019 and 2022, respectively, according to Comscore.

Foreign Affairs

China: Qin Gang, who hadn’t been seen in public since June, was removed as the country’s foreign minister on Tuesday, state broadcaster CCTV reported.

The abrupt announcement of Qin’s removal came after weeks of speculation about his fate.

CCTV’s short statement said Wang Yi, who outranks Qin and serves as President Xi’s top foreign policy aide, is the new foreign minister.

Wang, the director of the Office of the Central Foreign Affairs Commission, has been standing in as foreign minister the past few weeks.  He was foreign minister in Xi’s first and second term before Qin was promoted in December.

The decision to remove Qin was made at a special session of the National People’s Congress Standing Committee, which usually holds a session once every two months.

North Korea: The North fired two ballistic missiles into the sea off its east coast late on Monday, South Korea’s military said, hours after a U.S. nuclear-powered submarine arrived in a naval base in the South.  Japan’s defense ministry also reported the launch of what it said could have been multiple missiles.

Tensions continue to ratchet up on the Korean peninsula as South Korea and the U.S. take steps to increase their military readiness against the North’s weapons program with the deployment of U.S. strategic military assets.  And you’ve seen how Pyongyang has responded.  Over the weekend, the North fired a barrage of cruise missiles into the sea off its west coast.  Last week, they conducted ballistic missile tests, that time after a nuclear-armed U.S. submarine arrived at a South Korean port for the first time since the 1980s.

Kim Jong-un met Russian Defense Minister Sergei Shoigu in Pyongyang to discuss military issues and the regional security environment, state media reported.

Kim and Shoigu held talks Wednesday and reached a consensus on unspecified “matters of mutual concern in the field of national defense and security and on the regional and international security environment.”

Video showed the two inspecting North Korea’s latest weaponry, Kim beaming with delight.

At the same time a Chinese military delegation was also there, and they all were treated to a lavish military parade, it being the 70th anniversary of the end of the Korean War, celebrated in North Korea as “Victory Day.”

Shoigu’s visit was the first by a Russian defense minister to North Korea since the 1991 break-up of the Soviet Union, which is rather startling.  It also marks Pyongyang’s first major opening-up to the world since the pandemic.

Meanwhile, still no word from North Korea on the American soldier, Travis King, who was detained by the orcs after he crossed the border.

Israel: The Israeli Parliament passed a law on Monday that limits the Supreme Court’s ability to overturn decisions made by government ministers, completing the first stage of a wider and deeply contentious effort to curb the influence of the judiciary.

The decision capped one of the most turbulent moments in Israel’s history, tens of thousands blocking roads outside Parliament on Monday, attempting to disrupt a measure they called an affront to democracy, as mediators raced in vain to secure a last-minute compromise.

Prime Minister Benjamin Netanyahu’s broader judicial overhaul has become a symbol for deeper rifts in Israel between his far-right religiously conservative government and those who want a more secular and pluralist state.

Opposition leaders immediately said they would ask the Supreme Court to rule on the legality of the new law.

Israel’s largest labor union is considering calling a national strike, while more than 10,000 military reservists (critical to Israel’s defense) are threatening to resign from duty and hundreds of thousands of protesters are poised to spring into action.

Netanyahu’s governing coalition holds a slim majority in the 120-member Knesset, with lawmakers passing the measure 64-0 when opposition members walked out of the chamber, boycotting a vote they had no chance of winning.

The new law limits the Israeli Supreme Court’s use of the legal concept of “reasonableness” to countermand decisions by ministers.

But the immediate impact is there will probably be little change, though the law opens the door to corruption because it makes it easier for government as a whole or individual ministers to hire and fire officials for potentially wrong reasons.

Critics fear it will compromise gate keepers who help keep government in check.  Civil servants like the attorney-general or ministry legal advisers could more easily be replaced with “yes-men.”

There is more to come on the legislation, however, and Netanyahu has set November as a target date to agree to judicial changes with the opposition parties, though there is no guarantee that will happen.

The Judicial Selection Committee is the most contentious issue of judicial reform.  Critics of the current system believe that the panel for appointing judges is not accountable enough to voters.

And Netanyahu is still in the midst of his long-running corruption trial. Critics fear that he will try to use judicial changes to void his case or influence its outcome.

Netanyahu was in the chamber as the vote took place, a day after he was rushed to the hospital for an emergency procedure to implant a pacemaker. 

The Knesset will be on an extended recess and we will see what happens in November.

Wednesday, Israel’s Supreme Court said it would hear petitions by the opposition in September to strike down the first part of the plan to weaken the judiciary.

So Israel’s top court will now consider a law aimed at limiting its own authority.

The court did not immediately issue an injunction barring the change from coming into effect until the justices reached a decision on the petitions, as some opponents had hoped.

Meanwhile, Netanyahu has taken a hit in opinion polls. Surveys by two main Israeli news broadcasters showed that if an election was held now, the number of seats held by Netanyahu’s governing coalition in the 120-seat Knesset parliament would fall from 64 to 52 or 53.

Seats held by the 73-year-old premier’s Likud party would fall from 32 to 28, according to N12 News, and to as low as 25, according to Reshet 13 in the polls published late Tuesday.

Editorial / Washington Post

“The passage of the legislation on Monday abolishes the court’s ability to nullify actions it deems ‘unreasonable.’  But that is only the first step for this coalition, which also would like to gain control of the committee that selects judges and, with the judicial system no longer a counterweight to the executive, open the way to even more far-reaching goals such as annexation of the West Bank, which Palestinians envision as a future state.

“This presages a grim future. Mr. Netanyahu, having brought Israel to this point, should immediately seek to open negotiations with the opposition on some compromise over the just-passed legislation, which won’t become law until signed by the president.  Mr. Netanyahu could use the upcoming Knesset recess for talks. He should signal that he and his coalition will not attempt to unilaterally ram through the rest of the judicial reform package.

“If he proceeds without compromise the risks are great.  He endangers Israel’s security, further splinters an already badly divided body politic and strains Israel’s relationship with the United States, which has repeatedly called on him to compromise.  Much damage has already been done.  Mr. Netanyahu should not throw more fuel on this dumpster fire but start to find a way out of the crisis.”

Niger: Soldiers in this West African country announced a coup on national TV Wednesday. They said they had dissolved the constitution, suspended all institutions and closed the nation’s borders.

Ousted Niger President Mohamed Bazoum, a staunch ally of the United States and the West and a key in the fight against Islamist militancy in West Africa, vowed he would survive and preserve the democracy, while Secretary of State Antony Blinken and UN Secretary General Antonio Guterres (who spoke to Bazoum) said he had their “unwavering support.” 

The U.S. maintains more than 1,000 troops in Niger for a regional counterterrorism mission.  NBC News just reported on the special operations outpost in Niger this week before coup leaders detained the president.  A coup now throws all that U.S. support “into the air,” according to terrorism scholar Charles Lister from the Middle East Institute.

“Our partnership depends on the continuation of democratic governance,” Sec. Blinken said in a statement.

Two neighboring countries, Mali and Burkina Faso, have experienced coups triggered by jihadist uprising in recent years, both of whom then drew closer to Russia, the new military leaders having  fallen out with France, the former colonial power, which also formerly ruled Niger.

Niger also borders Algeria, Libya, Chad and Nigeria.

There have been seven coups in West and Central Africa since 2020.

Somalia: A suicide bomber killed at least 30 soldiers and wounded scores more inside a military academy in the capital Mogadishu on Monday, an attack claimed by al Shabaab, the al-Qaeda-linked group.  A military campaign launched by government forces had forced the militant group to abandon large swathes of territory in southern Somalia, but the group has continued to stage deadly attacks.  In late May, they killed at least 54 Ugandan peacekeepers at a base south of Mogadishu.  And they’ve staged a number of raids in the capital this month.

A captain at the base said, “The soldiers were being counted in the queue when the suicide bomber blew himself up.”

Pure evil.

Random Musings

--Presidential approval ratings….

Gallup: 43% approve of President Biden’s job performance, 54% disapprove; 41% of independents approve (June 1-22).  Awaiting an update.

Rasmussen:  46% approve, 53% disapprove (July 28).

--In Fox Business News polls of likely Republican primary voters in two key early states, Donald Trump has whopping leads in both.

Iowa: Trump 46%, DeSantis 16%, Scott 11%.

South Carolina: Trump 48%, Haley 14%, DeSantis 13% and Scott 10%.

--Special counsel Jack Smith leveled new charges against Donald Trump on Thursday – including an allegation that he sought to delete surveillance video – and indicted a second Trump aide for obstruction of justice in the hoarding of classified information.

Carlos De Oliveira, an employee at Mar-a-Lago, is accused of lying about helping indicted aide Walt Nauta hide subpoenaed boxes of classified information around Trump’s home, according to a superseding indictment filed in the Florida-based case.

The revised indictment said Trump and others sought to erase security video of rooms in which boxes were kept.  It said they tried to get another unnamed person to “delete security camera footage at the Mar-a-Lago Club to prevent the footage from being provided to a federal grand jury.”

“De Oliveira told Trump Employee 4 that ‘the boss’ wanted the server deleted,” the indictment said.

The new charges include attempts to “alter, destroy, mutilate or conceal evidence,” and inducing others to do so.

The grand jury also added a charge of willfully retaining secret national defense information and showing it to other people.

The Trump campaign attacked the superseding indictment in a statement calling the new charges against the former president’s employees “a continued desperate and flailing attempt” by the Biden administration to “harass President Trump and those around him.”

In an interview with Fox News Digital, Trump said of the superseding indictment: “They’re harassing my company, they’re harassing my family and by far, least importantly of all, they’re harassing me.”

Florida-based U.S. District Judge Aileen Cannon has scheduled a trial on the documents case for May 20, 2024.

The revised indictment came on the same day that Jack Smith’s office met with Trump attorneys about another case, the investigation into attempts to overturn the 2020 presidential election.  Trump has received a target letter and could be charged any day now.

Trump and his attorneys will try to delay all of the trials until after the election.

--Former vice president Mike Pence on Donald Trump’s reported plan to expand presidential power if he’s returned to the White House.

“I don’t want to consolidate power in Washington, D.C., I want to devolve power out of Washington, D.C.,” Pence said.

That’s the answer every Republican presidential candidate not named Trump should be giving.

--The Justice Department has agreed to allow Delaware U.S. Attorney David Weiss – who oversaw the criminal investigation into Hunter Biden – to testify before Congress about an alleged coverup in the case.

The DOJ “believes it is strongly in the public interest for the American people and for Congress to hear directly from U.S. Attorney Weiss on these assertions and questions about his authority at a public hearing,” a letter to House Judiciary Committee Chairman Jim Jordan said.

--Speaking of which, a deal for Hunter to plead guilty to a pair of misdemeanor tax charges while avoiding prosecution on a gun charge hit a last-minute snag, with the judge in the case unexpectedly putting off her decision.

The federal judge overseeing the case, Maryellen Noreika, deferred her decision on approving the deal between Biden and federal prosecutors on Wednesday afternoon – the latest twist in a politically charged case that seemed to have been sewn up just hours earlier.

But during a three-hour hearing in Federal District Court in Wilmington, Del., Judge Noreika asked the two sides to make changes to the deal that would clarify her role and insert language that limits the scope of immunity from prosecution it would grant to Mr. Biden for past business dealings that came under scrutiny by investigators.

During the proceedings, prosecutors confirmed that the investigation into Biden was ongoing.

As Biden’s lawyer asked for a recess to try to hash out a compromise to salvage the deal, the parties began negotiating but after a brief halt to the proceedings, Judge Noreika said she would delay her ruling.  Biden’s lawyers estimated it would take about two weeks to hammer out the changes she requested.

“I cannot accept the plea agreement today,” Judge Noreika said.

So we’ll see where this goes now.  Under the terms of the proposed agreement, Hunter Biden was going to escape jail time.

Hanging over the plea hearing are recent claims from two IRS whistleblowers who helped lead the investigation that the Justice Department gave preferential treatment to Hunter Biden beginning when Trump was president in 2020.

Their claims dovetail with the GOP-fueled narrative that Hunter got a “sweetheart deal.”

The career IRS agents told Congress that DOJ officials undercut their attempts to further scrutinize Biden family members, slow-walked requests for subpoenas and search warrants and blocked David Weiss from filing the felony tax evasion charges that they had recommended.

Editorial / Wall Street Journal

“The June 20 plea never made sense except as a way to disguise and bury the political embarrassment of Hunter’s business shenanigans.  The two misdemeanor tax charges and the deferred felony gun count could have been brought in the first few months of the investigation.  Judge Noreika zeroed in on the diversion agreement on the gun count, which spared Mr. Biden jail time and would mean he would not be charged if he met certain conditions.

“The critical point came when the judge asked if the deal meant Hunter could still be prosecuted on other charges, such as violations of the Foreign Agents Registration Act. Prosecutor Leo Wise said he could.  Defense attorney Chris Clark said that wasn’t his understanding.  If the plea didn’t give his client such immunity, then there’s no deal, said Mr. Clark.

“The hearing featured multiple recesses in which the prosecution and defense tried to clarify the terms of a revised deal.  Judge Noreika said she felt that ‘you are telling me to rubber stamp the agreement.’  In the end Hunter pleaded not guilty to the tax charges, and the judge gave the lawyers 30 days to provide further briefings before she reaches a decision.

“Courtroom drama aside, the big issue isn’t whether any plea deal is too tough or lenient.  The question hovering over the plea is whether Joe Biden was also in on his son’s sleazy influence-peddling. Is the President the ‘big guy’ famously mentioned in an email to Hunter from one of his business partners?....

“Americans may learn even more next week, when (Hunter’s) former business associate, Devon Archer, is scheduled to testify behind closed doors to the House Oversight Committee about then-Vice President Biden’s attendance at dinners and talks on speakerphone with Hunter’s foreign business associates.

“Voters may not care much about the shady dealings of a dissolute son. But they will care if President Biden is shown to have lied about his knowledge of his son’s multi-million-dollar payments to Biden family members – and if Mr. Biden’s Justice Department blocked IRS and FBI investigators from learning the truth.”

--Rudy Giuliani conceded that while acting as a lawyer for former President Trump, he made false statements by asserting that two Georgia election workers had mishandled ballots while counting votes in Atlanta during the 2020 election.

The concession by Giuliani came in court papers filed on Tuesday night as part of a defamation lawsuit that the two workers, Ruby Freeman and Shaye Moss, had brought against him in Federal District Court in Washington in December 2021.

The suit accused Giuliani and others of promoting a video that purported to show Ms. Freeman and Ms. Moss – who are mother and daughter – of manipulating ballots while working at the State Farm Arena for the Fulton County Board of Elections.

In a two-page declaration, Giuliani acknowledged that he had in fact made the statements about Freeman and Moss that led to the filing of the suit and that the remarks “carry meaning that is defamatory per se.”  He also admitted that his statements were “actionable” and “false” and that he no longer disputed the “factual elements of liability” the election workers had raised in their suit.

--The Senate on Thursday gave overwhelming approval to the annual defense policy bill, sidestepping a contentious debate over abortion access for service members and quashing efforts to limit aid for Ukraine in a show of bipartisanship that set up a clash with the House.

The vote was 86 to 11, the bill authorizing $886 billion for national defense over the next year.  It includes a 5.2 percent pay raise for troops and civilian employees, investments in hypersonic missile and drone technology, and measures to improve competition with China.

But the legislation that passed the Republican-led House has a raft of conservative social policy mandates.  I don’t know how compromise is reached between the two versions.

--The Supreme Court on Thursday cleared the way for construction of the controversial Mountain Valley Pipeline to proceed, granting an emergency request from backers of the project that has the support of Congress and the Biden administration.

The justices agreed to lift lower court orders that froze construction of the project while legal challenges play out.

This is a big victory for West Virginia Democratic Sen. Joe Manchin, who has championed the project and pushed for it during debt ceiling negotiations in June.

The 300-mile-long pipeline would transport gas from West Virginia’s Marcellus and Utica shale areas to Virginia.

--Former military and intelligence officials testified to a congressional panel Wednesday that they have seen UFOs and said they could pose risks to national security.

The former officials called for the U.S. government to share what it knows about the phenomena.

Two of the witnesses, former U.S. Navy fighter pilots, said they have seen “unidentified anomalous phenomena,” or UAP, a phrase the federal government uses to refer to what are commonly known as UFOs.

One of the pilots testified that encounters with UAP are common among military aircrews and commercial pilots.

“These sightings are not rare or isolated,” said former Navy fighter pilot Ryan Graves, who served in the Navy for over a decade. “Military aircrews and commercial pilots, trained observers whose lives depend on accurate information, are frequently witnessing these phenomena.”

Truthfully, I don’t know where I come down on this topic.  Arizona Dem. Sen. Mark Kelly, former astronaut, said on a Sunday news show recently that he is not a believer.  However, in the next breath he talked about the universe, writ large, and how there is bound to be someplace with intelligent life form, which is the real answer.  And it could be far more intelligent than we are, which is also the scary thing about the looming evolution of AI.

--The dreadful weather…

The European Union’s climate monitor said on Thursday that July was on track to be the Earth’s warmest month on record, after experiencing its hottest June since records began in 1850.  And the odds are rising that 2023 will end up displacing 2016 as the hottest year. At the moment, the eight warmest years on the books are the past eight.

Here I wrote about Greece tourism Friday and then the fires on the island of Rhodes exploded Saturday, with a chaotic evacuation for some 20,000 tourists and residents, many claiming their tour operators had no contingency plans, leaving them on their own.  Miraculously, no one has died.  After a blaze in the seaside town of Mati, east of Athens, in 2018 killed 104 people, Greece has taken a more proactive approach towards evacuations.  But critics say it has not improved its ability to put out fires that are common in summer, though more intense in this year’s heatwave, which is going to be the worst on record before it ends.  Temps hit 111F this week in some parts of the country.

Rhodes attracts 1.5 million foreign tourists in the summer months.  It’s critical they quickly rebuild…and rebuild confidence.

Overall, tourism accounts for 18% of Greece’s economic output and one in five jobs.  On Rhodes and many other Greek islands, reliance on tourism is even greater.

By Wednesday, while scores of new fires were erupting across Greece, the fires had largely died down on Rhodes.

Wildfires swept across regions of Algeria, killing at least 34 people including 10 soldiers on Monday, the interior ministry said.

Nova Scotia received three months’ worth of rain in just 24 hours, 10 inches, killing four people (as best as I can ascertain after two bodies were discovered in recent days).  It was the Atlantic Canadian province’s worst flooding in over 50 years, scores of roads washed out, bridges destroyed, and this after the historic wildfires swept through the province.  I’ve always wanted to go to Halifax for a 3-day trip because it’s a short flight from here and there’s a lot to do and was preparing to make plans when the fires hit, and now this, so maybe next year.  [Halifax’s infrastructure was hit hard.]

The surface ocean temperatures in and around the Florida Keys soared to typical hot tub levels this week, amid recent warnings from global weather monitors about the dangerous impact of warming waters on ecosystems and extreme weather events.

A water temperature buoy located inside Everglades National Park in the waters of Manatee Bay hit a high of 101.1F on Monday afternoon, which would be an all-time world record water temp, if judged official, the previous record being 99.7F in Kuwait.

Normal water temperatures for this area should be between 73 and 87 degrees, according to the National Oceanic and Atmospheric Administration, which published the findings from the National Buoy Center.

Phoenix saw its run of air temps of 110 hit 29 straight days on Friday, the previous record having been 18.  It’s been so hot for so long, even owls are making evening visits to swimming pools to stay hydrated. Officials have been urging residents to put out clean, shallow bowls of water to help birds find sustenance.

El Paso has had 43 consecutive days of 100 air temps, including today.

Miami had a run of 46 straight days with a heat index of 100 or more, which I believe ended yesterday, the old record being 32.

And we have this scary thought…though it might not come to fruition while most of us are still alive.

The Gulf Stream system could collapse as soon as 2025, a new study out of Denmark, published Tuesday in the journal Nature Communications, suggests.  The shutting down of the vital ocean currents, called the Atlantic Meridional Overturning Circulation (AMOC…pronounced “EY-mock”) by scientists, would bring catastrophic climate impacts.

AMOC was already known to be at its weakest in 1,600 years owing to global heating and researchers spotted warning signs of a tipping point in 2021.

The new analysis estimates a timescale for the collapse of between 2025 and 2095, with a central estimate of 2050, if global carbon emissions are not reduced.  Evidence from past collapses indicate changes of temperature of 10 degrees in a few decades, although these occurred during ice ages.

Other scientists said the assumptions about how a tipping point would play out and uncertainties in the underlying data are too large for a reliable estimate of the timing of the tipping point.  But all said the prospect of an AMOC collapse was extremely concerning and should spur rapid cuts in carbon emissions.

AMOC carries warm ocean water northwards towards the pole where it cools and sinks, driving the Atlantic’s currents.  But an influx of fresh water from the accelerating melting of Greenland’s ice cap and other sources is increasingly smothering the currents.

A collapse of AMOC would have disastrous consequences around the world, severely disrupting the rains that billions of people depend on for food in India, South America and West Africa.  It would increase storms and drop temperatures in Europe, and lead to a rising sea level on the eastern coast of North America.  It would also further endanger the Amazon rainforest and Antarctic ice sheets.

--Lastly, did you see the video of the pod of pilot whales huddled together for nearly a full day in the shallow waters off a remote beach in Western Australia?  At times they made the shape of a circle, or spread into a line, and briefly formed a loose heart shape.

Some residents were thrilled by the unusual sight.  But authorities and researchers, baffled by the behavior, feared that a mass beaching was imminent.

“Healthy pilot whales don’t generally behave like this, and when you see it, you think there’s something odd going on,” Kate Sprogis, a marine mammal ecologist at the University of Western Australia told the BBC.

And, as feared, the next day, the pod of almost 100 long-finned whales rushed to the shore, and despite the efforts of rescuers, last I saw at least 52 died. 

So sad.

Well, on that note, who wants a beer?

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Pray for the men and women of our armed forces…and all the fallen.

Pray for Ukraine.

God bless America.

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Gold $1958
Oil $80.45…fifth straight up week

Regular Gas: $3.73; Diesel: $3.97 [$4.27 / $5.34 yr. ago]

Returns for the week 7/24-7/28

Dow Jones  +0.7%  [35459]
S&P 500  +1.0%  [4582]
S&P MidCap  +0.4%
Russell 2000  +1.1%
Nasdaq  +2.0%  [14316]

Returns for the period 1/1/23-7/28/23

Dow Jones  +7.0%
S&P 500  +19.3%
S&P MidCap  +11.8%
Russell 2000  +12.5%
Nasdaq  +36.8%

Bulls 55.6
Bears 19.4

Hang in there.

Brian Trumbore

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