Morning Brew: Pandora Shares Skyrocket And Apple Is Going To Launch A Car (Yes, A CAR) In 2019

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“We don’t put people at the head of our country whose faith might interfere with them carrying out the duties of the constitution.” Presidential candidate Ben Carson, bluntly defending his opinion that he would not support a Muslim president. He did back away slightly from the controversial stance, stating that he would support a Muslim who puts the U.S. over their faith, while also insinuating he didn’t think that was a likely scenario

MARKET SNAPSHOT 

The Tweet That Started It All

  • All three major U.S. indices finished in the green on Monday, but it was the benchmark U.S. 10-year yield that drew attention: it jumped up seven basis points, after dropping severely the past few days in response to the Federal Reserve’s decision not to raise interest rates last week.
  • The big loser yesterday: the biotech sector, which plummeted yesterday. The plunge not-so-coincidentally started right around the time that presidential candidate Hillary Clinton tweeted about “price gouging” in the pharmaceutical industry.
  • The other big loser: Volkswagen. Shares of the German carmaker fell 20 percent after the company admitted over the weekend that it cheated on emissions tests for its diesel-powered vehicles. As you might have guessed, that’s a big no-no, and it could result in penalties of up to $18 billion. No wonder investors were displeased.
  • Oil rallied 4 percent yesterday over speculation that U.S. oil drilling will decline (but we’ve heard that before). And as oil goes, so does gasoline prices, which also rose. It’s as simple as supply and demand.
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U.S. MACRO 

The Future of Housing

It’s been smooth sailing in the housing market recently, but not yesterday. Existing home sales declined 4.8 percent in August—a decent bit larger than predicted. The existing home market is the largest part of the housing market, which doesn’t exactly bode well. But it’s not all bad: with the employment picture strengthening, more people have the financial means to buy houses, leading to a shortage of supply and an increase in housing prices. Tack on the fact that the disappointing August data was preceded by a historically strong July, and most economists are fairly certain that this is just a small blip on the U.S. housing radar.

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CORPORATE PRIMER

Macy’s Hires A City’s Worth

The department store industry hires thousands of workers as the holidays approach. The number of these temporary jobs is a good metric to indicate shopping season expectations—especially since 20 percent of the industry’s sales come post-Thanksgiving. This year, Macy’s plans to hire a whopping 85,000 seasonal workers. For a sense of scale, that’s greater than the population of Gary, Indiana.

Pandora Shares Halted

Spotify’s less-loved older sibling, Pandora, has struggled to get users to listen to its music. But it sure has investors listening after the U.S. Copyright Office issued an opinion that could lead to Pandora paying significantly less in royalty fees. Shares surged 15 percent on strong volume, resulting in trading being halted twice during the session due to the volatility.

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TODAY IN TECH

Apple Double News Blast

Even by Apple standards, yesterday was quite a busy day:

  • Think that just because you have an iPhone you’re immune to malware-infected apps? Think again—Apple has pulled dozens of iOS apps from its App Store due to a rare malware outbreak that primarily aims to steal passwords. The apps are mostly Chinese and aimed at Chinese customers, so you should be in the clear—unless you own any Chinese social media apps, that is.
  • Apple is getting mighty serious about electric cars. The Wall Street Journal is reporting that Apple’s internal goal is to ship an electric car by…(drumroll) 2019. Furthermore, Apple’s internal car development team is about to get a major boost, tripling its team size to 1,800.
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OTHER STORIES

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ECONOMIC CALENDAR

  • Monday: Existing Home Sales
  • Tuesday: AutoZone/Carnival/General Mills Earnings
  • Wednesday: Manufacturing Index
  • Thursday: Durable Goods, New Home Sales, Weekly Jobless Claims, Janet Yellen Speech, Nike/Bed Bath Earnings
  • Friday: Consumer Confidence, 2Q GDP Revision #3

ODDS YOU DON’T BUY A HOUSE

That’s the bet landlord giants Starwood Waypoint Residential Trust and Colony American are hoping to win, as they agreed to merge on Monday. The success of this merger hinges on the assumption that rents will rise in the long term. Let’s take a closer look:

  • Both companies took advantage of the collapse of the U.S. housing market by buying up your neighbors’ foreclosures in bulk back in 2007, totaling nearly $8 billion.
  • The scale of this deal, at over 30,000 homes, should solidify the long-term durability of the single-family rental industry, especially since both companies have significant assets in the South and the West, where less and less people are buying homes.
  • This merger will allow for serious cost synergies of up to $50 million. The takeaway? Landlords will get richer and tenants’ pockets tighter as rents creep higher.

INTERVIEW QUESTION OF THE DAY

You have two hourglasses. The first one measures exactly seven minutes; the other measures exactly 11 minutes. Using just these two hourglasses and nothing else, how would you accurately measure 15 minutes? (Answer)

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BUSINESS TERM OF THE DAY

Convertible Preferred Stock — A preferred equity security that may be exchanged for common stock at specified prices or rates.

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FOOD FOR THOUGHT

0 percent: Wisconsin governor Scott Walker’s chances at winning the presidential bid, after the once-promising candidate suspended his campaign yesterday. Unfortunately, Walker was a victim of the Brew jinx: in yesterday’s Food for Thought, we noted how Walker had fallen to a 0 percent approval rating in a recent CNN poll.

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