Biotech Stocks Continue Downward Spiral, Plus Ralph Lauren Departs Ralph Lauren

by 3 years ago

morning-brew

“When they start designing things I can’t understand, I’ll quit.” Ralph Lauren. Apparently, Ralph Lauren the company is now designing things that Ralph Lauren the person doesn’t understand, and now Ralph Lauren is Ralph Lauren’s CEO no longer.

MARKET SNAPSHOT 

Mixed Messages Across Markets

  • Yesterday’s markets were all over the place: the Dow and S&P finished higher along with oil, but the Nasdaq wasn’t as lucky. Fingers were pointed in numerous directions, from commodities and energy markets making a recovery to biotech stocks continuing their downward spiral as investors brace for major changes in the volatile industry. Want more on the ongoing biotech implosion? Check out yesterday’s Brew.
  • In an unexpected move, India decided to cut interest rates by 0.5 percent, its biggest cut since the global recession. The move caused Indian stocks to rise and strengthened the rupee against the dollar. As a large importer, India has benefited greatly from weakened commodities prices this year, but it’s also lowered the country’s inflation rate, precipitating the rate cut.
  • Speaking of the dollar, the greenback dipped on the aforementioned wild market fluctuations. With all this volatility, chances of the Federal Reserve increasing interest rates this year likely took another small hit.
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U.S. MACRO 

Economic Data on the Rise

Yesterday’s economic data was mostly positive, yet there remain concerns for future economic output. Let’s take a look:

  • September consumer confidence hit its highest level since January, handily beating expectations in the process. However, expectations for the future fell, indicating that Americans anticipate slower economic growth.
  • Meanwhile, U.S. home prices continued to rise. The National Home Price Index rose 4.7 percent annually in July, a higher pace than in the previous month. To put it simply, if you’re in the market for a new house, now is not a great time to be buying.
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CORPORATE PRIMER

Rough Road Ahead

The auto industry has had a scandalous few weeks: Volkswagen and Fiat Chrysler have both found themselves in hot water—and it’s only getting hotter. Volkswagen, which recently admitted to cheating its fuel emissions software in nearly 11 million vehicles, announced yesterday that it plans to repair the rigged software in its cars, a move that could cost the company upwards of $6.5 billion. Similarly, on Tuesday, Fiat Chrysler was accused of underreporting safety issues in its vehicles. Less than two months ago, Chrysler was charged $105 million by the NHTSA for mishandling recalls, and could now face millions more in fines. The moral? Trying to trick federal regulators will ultimately come back to haunt you.

Ralph Lauren Dismounts High Horse

After 48 years as CEO of Ralph Lauren, Mr. Ralph Lauren himself has decided to step down from the position. The 75-year-old completely redefined global luxury clothing design, but business is still business: a stronger dollar and intense competition has eroded the company’s market value by nearly $5 billion over the past year, and the company and Mr. Lauren decided it was time for a new corporate direction. Stefan Larson, the former president of Gap’s Old Navy division, will take charge of the company as Ralph Lauren’s successor.

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TODAY IN TECH

Mobile Singularity

Integrating software and hardware is the name of the game for Apple and the iPhone—and Google is continuing to follow suit with yesterday’s announcement of two new Nexus smartphones. Unlike Apple’s iOS, Android is deployed on other companies’ phones (think Samsung). While this makes Android the world’s most popular mobile OS, it also limits features that depend on blending hardware and software together, such as payment systems and health trackers. By focusing on its own hardware with the Nexus line, Google hopes to be able to drive innovation without fear of hardware incompatibilities.

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OTHER STORIES

  • Chesapeake cuts 15 percent of its workforce
  • Why Snapchat’s profile GIF is its most important asset
  • Musk: fully autonomous Tesla cars in three years
  • Walmart and Whole Foods targeted for food waste
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ECONOMIC CALENDAR

  • Monday: Personal Income and Spending
  • Tuesday: Consumer Confidence, Home Price Index
  • Wednesday: Private Payrolls
  • Thursday: ISM Manufacturing Index, Weekly Jobless Claims, September Auto Sales, Micron earnings
  • Friday: August Jobs Report

ICON FOR SALE

New York City’s Plaza Hotel has been an icon since before Eloise skipped down its halls. Over the last three decades, it has had a series of impressive owners, including Conrad Hilton, Donald Trump, Saudi Prince Al-Waleed and currently, Subrata Roy. Who’s next?

  • Subrata Roy of the Sahara Group in India bought a majority stake of the Plaza in 2012 for $575 million. But last year, India said “not so fast” to the tune of $6 billion in unpaid debt, and he’s been in jail ever since, with bail set at $1.6 billion.
  • So how does this affect the Plaza? The Indian government is close to selling off the hotel to the highest bidder, while Roy scrambles to find a buyer of his own liking from behind bars.
  • So who wants to buy a hotel? In a word: everyone. With interest rates still super-low, 2015 is projected to break 2007’s hotel sale record of $47 billion. But as long as Subrata Roy is doing time in a renovated prison guesthouse, it looks like the fate of the Plaza Hotel is in the Indian government’s hands.

INTERVIEW QUESTION OF THE DAY

A lift is on the ground floor. There are four people in the lift, including you. When the lift reaches the first floor, one person gets out and three people get in. The lift goes up to the second floor, and two people get out while six people get in. It then goes up to the next floor, where no one gets out but 12 people get in. Halfway up to the next floor the lift cable snaps, and the lift crashes to the floor. Everyone dies in the lift. How did you survive? (Answer)

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BUSINESS TERM OF THE DAY

Capitalized Cost — An expense that is added to the cost basis of a fixed asset on a company’s balance sheet. Capitalized costs are incurred when building or financing fixed assets. Capitalized costs are not expensed in the period they were incurred, but recognized over a period of time via depreciation or amortization.

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FOOD FOR THOUGHT

40: the percentage of Americans in a recent Gallup poll that claimed they had a fair amount of trust in the U.S. media, down from 55 percent last year. We only hope the Brew isn’t to blame.

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