For Markets, a New Month Brings New Problems. Why That Includes the Fed.

There’s more bad news. Since 1928, the S&P hasn’t typically bounced back much in November following a drop of 2% or more in October. It tends to average a gain of just 0.1%. So it’s hard to count on seasonality to give shares a boost this month.

Wednesday is policy decision day for The Federal Reserve, which at least appears to have completed the most aggressive campaign of interest-rate increases in a generation. But Chairman Jerome Powell still has a lot to worry about, and it’s hard to rule out another one or two quarter-point rate hikes in the coming months.

Economic data Tuesday showed wage growth is indeed cooling, but not as quickly as the Fed would like. The United Auto Workers managed to win a 25% hourly pay raise from
General Motors.
That’s great for employees, who haven’t had much of a raise in years, but Powell may wonder if it sets a dangerous precedent for other workers who are still feeling the pinch of two years of high inflation.

Beyond this month, though, seasonality may help. December holds out the promise of a Santa rally, and institutional investors will often position big bets in January. But for now, brace for a cold November.

—Brian Swint

*** Join MarketWatch real-estate reporter Aarthi Swaminathan and John Burns, CEO of John Burns Research and Consulting, today at noon when they discuss what’s driving demand in the housing market, and what are home builders planning for the months ahead, as rates climb to 8%? Sign up here.

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AMD Issues Weak Guidance for Gaming and Other Chips

Advanced Micro Devices
gave a disappointing revenue forecast for the December quarter as demand for gaming machine chips slows and sales of chips for industrial, automotive, and networking systems also weaken. AMD is the second-largest maker of chips for gaming machines, and supplies
Sony
and
Microsoft
consoles.

• The chip maker reported third-quarter adjusted earnings of 70 cents a share, which beat expectations, as did revenue of $5.8 billion. But fourth-quarter revenue is expected to be $6.1 billion, plus or minus $300 million. Analysts expected fourth-quarter revenue of $6.4 billion.

• Revenue in the chip maker’s data-center unit was flat from a year earlierin the September quarter, while revenue in its client PC business was up 42%. AMD’s gaming business declined by 8% in the same period.

• AMD said its data center business was experiencing significant growth on the strength of its chip-supporting enterprise and AI customers. The MI300 accelerator chip is set to debut, and the total market for such chips could top $150 billion by 2027, AMD has said.

• CFO Jean Hu said in a news release that gaming-segment sales and deteriorating demand in its embedded segment that includes the chips for industrial, automotive, and networking systems would be a drag on revenue in the current quarter.

What’s Next: Chip makers including AMD,
Nvidia,
and
Intel
face stricter rules on the export of chips to China, which is the largest market for chips, after Washington has raised national security protections as a reason to restrict shipments.

—Tae Kim and Liz Moyer

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JetBlue’s Deal for Spirit Arrives in Court on Antitrust Claims

The Justice Department’s challenge to
JetBlue Airways
’ $3.8 billion acquisition of
Spirit Airlines
began in Boston federal court on Tuesday. The government says JetBlue wants to eliminate competition and raise ticket prices, while JetBlue’s lawyers say the merger would help JetBlue better compete with larger rivals.

• JetBlue told Barron’s that combining with Spirit is the best chance to disrupt the industry by increasing competition and creating a national low-fare challenger to
  American Airlines,

  Delta Air Lines,

  Southwest Airlines,
  and
  United Airlines.

• JetBlue shares fell to a 12-year low after the carrier posted a wider-than-expected quarterly loss of 39 cents a share and lower-than-expected revenue of $2.35 billion. CFO Ursula Hurley said the magnitude of delaysrelated to air-traffic control and weather has been “staggering.”

• For the full year, JetBlue now sees a net loss of 45 cents to 65 cents a share—greater than the loss of 25 cents expected. JetBlue’s previous outlook was for a per-share profit of 5 cents to 40 cents, which was cut from an earlier range.

• JetBlue noted an acceleration in corporate travel bookings since Labor Day, but said problems with engines from Pratt & Whitney—an issue other airlines have also cited—will continue to hurt growth and first-quarter capacity in 2024.

What’s Next: The government’s antitrust trial is expected to last 20 days, and a decision is unlikely for another few months. If the merger is blocked on antitrust grounds, JetBlue has to pay Spirit and its shareholders $470 million as a breakup fee.

—Callum Keown and Janet H. Cho

***

WeWork Plans to File for Bankruptcy Soon, Says Report

WeWork may file for bankruptcy next week just months after the New York-based company raised “substantial doubt” over its ability to stay in business. The short-term office-rental company is looking to file a chapter 11 petition in New Jersey, The Wall Street Journal reported, citing unnamed sources.

• The company, once valued at $47 billion after a funding round in 2019, had cited losses, its projected cash needs, increased member churn, and liquidity levels as issues when it posted second-quarter results back in August.

• WeWork last month failed to make interest payments owed to its bondholders, which triggered a 30-day grace period to settle the shortfall before it is considered a default, the Journal reported, adding WeWork had said Tuesday it negotiated a seven-day extension.

• WeWork told Barron’s it did not comment on “speculation.” It pointed The Journal to a recent securities filing that said a “forbearance agreement” provided time to enhance its capital structure.

What’s Next: The company had said its ability to continue as a going concern depended on the success of a turnaround plan that included cutting rent and tenancy costs and boosting new sales. A bankruptcy filing could give WeWork some breathing space to deliver on that turnaround.

—Rupert Steiner

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White House Moves Its ‘Junk Fee’ Fight to IRA Rollovers

The Biden administration has proposed a rule to protect retirement savers from conflicts of interest during account rollovers. The White House highlighted so-called “junk fees” in retirement planning that chip away at account balances, leading to lifetime savings that are up to 20% lower than they could have been.

• Millions of Americans roll over their accumulated retirement savings every year, and many get advice on how to do it. Retirement savers last year moved $779 billion into individual retirement accounts from 401(k)-type plans, up from $404 billion in 2013, according to Cerulli Associates.

• Right now, advisors to those who are rolling their savings into an IRA aren’t considered fiduciaries who must put clients’ interests ahead of their own. That means they could steer clients into investments that earn them commissions and aren’t necessarily the best product for them.

• The Labor Department has tried to strengthen investor protections for more than a decade, including expanding who is considered an investment advice fiduciary. A Trump-era federal court killed a previous effort that would have saved investors $17 billion a year.

• The Insured Retirement Institute, a trade organization that represents life insurers, asset managers, and broker-dealers, said the rule would increase retirement insecurity and cost millions of lower- and middle-income workers and retirement savers access to financial advice.

What’s Next: The proposal covers not just rollovers from 401(k) plans, but indexed annuities and commodities such as gold, which aren’t regulated by the Securities and Exchange Commission, and recommendations to companies on what to offer in a 401(k) plan. Public comments will open for 60 days.

—Janet H. Cho and Elizabeth O’Brien

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Real Estate Stocks Fall After Ruling Against Realtor Groups

Zillow Group
and other real estate stocks dropped after a Missouri jury found the National Association of Realtors and other large residential brokerages colluded to keep home sales commissions artificially high and awarded $1.785 billion in damages. “This matter is not close to being final,” NAR said.

• The lawsuit filed against the Realtors association, Keller Williams, and Berkshire Hathaway’s HomeServices of America did not name the real estate companies, but Zillow shares fell 7%,
  Redfin
  dropped 5.7%, and
  Compass
  brokerage lost 6.2%. Zillow reports earnings today.

• Brokerages
  Re/Max
  and Anywhere Real Estate settled with plaintiffs earlier this year and agreed to pay nearly $140 million combined. Analysts say the case and others like it could change the way brokers are paid, reduce commissions, and slash agent head count.

• Home prices tracked by the national S&P CoreLogic Case-Shiller Home Price Index gained a seasonally-adjusted 0.9% in August, about 2.6% higher than 2022. An index tracking prices in 20 large U.S. metropolitan areas rose a seasonally adjusted 1% in August, up 2.2% from last year.

• The average 30-year fixed mortgage rate, which surpassed 7% in August, has continued to climb. Last week’s average rate on a 30-year fixed-rate mortgage was 7.79%, according to Freddie Mac, the highest in more than two decades.

What’s Next: NAR and HomeServices each said they plan to appeal the verdict. Keller Williams said it would consider all options, including appeal. The plaintiffs asked the judge to order changes to decades-old rules that helped lock in commission rates, but appeals could delay changes for years.

—Janet H. Cho and Shaina Mishkin

***

Dear Quentin,

My mother is in her late 80s and owns her home outright. Let’s call my half-brother “Matt.” Matt has been designated my mother’s power of attorney. My mother has told me that in her will, everything will be split 50/50 between Matt and me.

Her house is the only valuable asset. She is considering adding both me and my half-brother to the deed of her house. I’ve asked to see her will several times to verify her claim, and she has denied me every time, reiterating that everything is split 50/50.

Matt has always been hostile toward me, and I do not trust him to cooperate or be fair. He has a history of doing this with other family property. I have cut Matt out of my life. I expect Matt to cheat me out of my share of the estate or delay probate to prevent me getting anything.

My mother has always favored Matt because he gave her grandchildren, and I did not. There is a second half-brother, Liam, who my mother claims to have cut out of her will because she says he “has plenty of money,” but I cannot confirm this.

Liam and my mother no longer have a relationship because of this. My mom and Matt live in the same state, and Liam and I live out of state to my mother. What can I do to ensure that I have a “good” outcome, and don’t get cheated out of my share of the estate by Matt or my mother?

—My Mother’s Son

Read the Moneyist’s response here.

—Quentin Fottrell

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner