Axios Markets

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September 25, 2023

⚔️ It's Monday. Another battle between bulls and bears awaits. Once more unto the breach!

  • Today's newsletter is 799 words, 3 minutes.

1 big thing: Higher rates, lower stocks

Illustration of a stock trend line being pulled down by a heavy, metal percentage symbol

Illustration: Annelise Capossela/Axios

Investors are coming around to the idea that high-interest rates will stick around for longer than they previously thought — which helps explain the stock market's recent reversal, Matt writes.

Why it matters: As we've written about a ton over the past two years, rates play a huge but often unseen role in determining stock market prices.

  • Long story short, when rates rise, they pull down the value of stocks in lots of investor models.
  • High rates make risk-free assets like Treasuries look a lot more attractive, relative to stocks — and that lures money out of the stock market.

What they're saying: "US equities [are] unlikely to reach new highs" any time soon, wrote JPMorgan analysts in a note last week, summarizing the common views expressed at a recent investment conference. They cited the increasing investor interest in "cash and high-yielding, high-quality short duration fixed income."

  • And BofA Global analysts, noting the large flow of money into short-term, cash-like investments, described investors as "cautious" and willing to be "paid to wait" in cash until the market decides its next move.

State of play: The Federal Reserve last week threw cold water on investor hopes that it'll cut rates soon.

  • In response, 10-year Treasury note yields jumped to a new 16-year high of nearly 4.50%.
  • And as you might expect, the S&P suffered — see the chart below.
  • With one week left in September, the index is on track for its worst month.

Zoom out: This year's once robust rally — which lots of people were saying had all the earmarks of a new bull market — has really lost momentum.

💭 Matt's thought bubble: If stocks keep stalling (or falling), I'd expect investors to avail themselves of other attractive places to stash cash while they wait for a good reason to take stock market risk.

The bottom line: As markets adjust to high rates, no one seems very confident in where the stock market goes from here.

2. Bad week

Data: FactSet; Chart: Thomas Oide/Axios

Last week's nearly 3% slide in the S&P 500 was the second-worst weekly performance this year.

Flashback: Only the 4.6% tumble in early March, when the collapse of Silicon Valley Bank set off a mini financial panic, was worse.

3. Rally looks less bullish

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

This year's stock market rally — which some saw as the start of a new bull run— is really sputtering.

State of play: After being up nearly 20% for the year in early August, gains are now down to less than 13% for the S&P 500.

The bottom line: It could be worse, but it used to be better.

4. Catch up quick

🎬 Hollywood writers reach a tentative deal with studios. (Axios)

🤖 Amazon to invest up to $4 billion in Anthropic, a rival of ChatGPT developer OpenAI. (CNBC)

🚙 UAW strike scrambles political allegiances. (Axios)

💸 Small businesses fret over the looming government shutdown. (Axios)

5. The continuing allure of the 4-day workweek

Illustration: Maura Losch/Axios

Most of the demands that the striking autoworkers are making look pretty typical — like better pay and benefits. But one stands out: The union is asking for a four-day workweek.

Why it matters: The four-day workweek has gotten a lot of buzz over the past few years among the desk-jockey class, but the UAW's putting it on the map for hourly workers, too, Emily writes.

How it works: The idea is workers would put in a 32-hour week and get paid for 40 hours — plus anything clocked over the 32-hour limit would count as overtime.

  • A shorter workweek could help these workers transition from building gas-powered vehicles to electric, Sharon Block, a professor at Harvard Law School, told Marketplace.
  • It takes less time to assemble electric vehicles, she noted. So, workers who make the transition, under a four-day rubric, wouldn't necessarily see their pay take a hit.

Reality check: Most observers don't think this proposal has a shot. Other demands are a higher priority.

  • Plus: Hourly workers, outside the auto industry, are often fighting for more hours — since some employers seek to keep workers under certain thresholds for benefits.

Zoom out: Still, the fact that the ask is on the table is yet another indicator of how work culture has shifted radically in the U.S. over the past few years.

  • Quiet quitting, bare minimum Mondays, putting in 85% instead of 100% — they all point to a growing sense that the hustle culture isn't all it's cracked up to be and there's more to life than work.

The bottom line: Unions were instrumental in the push for other benefits once viewed as outrageous, like weekends off, overtime pay, and employer-provided health benefits. In fact, the reason we have a five-day workweek is because of the auto industry  Henry Ford started it.

  • At a time when the wind is at labor's back in the U.S., it makes sense that unions would try to move forward again.

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Today's Axios Markets was edited by Kate Marino and copy edited by Mickey Meece.