Weekly Research Briefing: The Road Converges

With another solid performance in the third quarter, the U.S. has grown 2.7% over the past year. It is outrunning every other major developed economy, not to mention its own historical growth rate.

More impressive than the rate of growth is its quality. This growth didn’t come solely from using up finite supplies of labor and other resources, which could fuel inflation. Instead, it came from making people and businesses more productive...

Most leaders from around the world would trade their economies for the U.S.’s in a heartbeat. Through the second quarter, the U.S. grew 3%; none of the world’s next six largest advanced economies grew more than 1%. Even China is struggling.

Sometimes strong growth is a prelude to a recession because it comes from straining the economy’s capacity, generating inflation and forcing the Federal Reserve to raise rates.

Yet inflation has fallen in the past year, to 2.7% in the third quarter, using the Fed’s preferred underlying measure. That’s still above the Fed’s 2% target, but the progress was sufficient for the Fed to cut rates in September and pencil in more cuts—all without growth flagging.

“That’s pretty impressive. That’s a bit of a Goldilocks outcome,” Robin Vince, chief executive of BNY, said in a recent interview. “A year, two years ago, very few commentators actually thought that was going to be possible.”

@RyanDetrick: Here's how stocks have done after the past 24 elections. What really stands out is how well stocks have done after the 10 most recent elections. Higher a year later 9 times and up 15.2% on avg (median of 17.2%).

@carlquintanilla: DEUTSCHE: “.. Earnings beats running well above average. 78% of S&P 500 companies have beat on earnings, by an aggregate 7.1%, well above the historical average of 4.9%.”

@TheTranscript_: $AMZN CEO: "We've seen significant re-acceleration of AWS growth for the last four quarters..."

@TheTranscript_: $MSFT CFO: "Microsoft Cloud revenue was $38.9B and grew 22% roughly in line with expectations.

Nvidia will replace Intel in the Dow Jones Industrial Average next week, a swap that reflects their reversal of fortunes within the tech industry. Sherwin-Williams will replace Dow Inc. as well.

S&P Dow Jones Indices, which manages the 30-stock benchmark, said the changes were made to ensure a more representative exposure to the semiconductors industry and the materials sector. They are effective prior to the open of trading on Nov. 8...

Unlike the S&P 500 and the Nasdaq Composite, the blue-chip index is weighted by share price, not by market capitalization. It is calculated by adding the prices of the 30 stocks and dividing by a factor that accounts for changes such as stock splits and index entrants. That means that companies with a higher share price have a greater effect on index moves, regardless of their total market value.

With a share price of $23.20, Intel was by far the least influential stock in the benchmark, while Dow Inc. was No. 28. At $135.40, Nvidia would rank 22nd—it executed a 10-for-1 stock split in June that analysts said made its inclusion in the Dow more likely. Sherwin-Williams closed Friday at $357.97, which would give it the sixth-highest share price in the index.

The Dow has lagged behind the S&P 500 and Nasdaq in recent years because it is less oriented toward technology stocks. It is up 12% this year, while the other indexes have climbed more than 20%. The Dow’s last shake-up came in February, when online retail powerhouse Amazon.com replaced Walgreens Boots Alliance.

Nasdaq Private Market LLC is publicly launching a proprietary pricing product for private companies, joining an increasingly competitive space for data on potential IPO candidates.

For the past month, privately-held NPM has been showing off a product called Tape D to its own investors – Wall Street’s biggest banks. Now, the firm is unveiling its offering more broadly with a public launch on Thursday.

With companies like SpaceX and Stripe able to achieve eye-popping valuations without selling a single share in the public markets, providers like NPM and its rivals are competing to establish their products as the go-to reference.

“It’s already a $3.5 trillion asset class. There’s already more capital raised each year in the Reg D than in the public markets,” NPM Chief Executive Officer Tom Callahan said, referencing the US Securities and Exchange Commission’s regulation that allows private companies to sell shares without registering. Tape D is meant to empower investors and “decrease the information asymmetry” that persists in the private market, Callahan said in an interview...

Since NPM’s inception in 2013, the firm has executed more than $55 billion in transactions, Callahan said. Hence the opportunity for Tape D. “What do the capital markets look like a decade from now? We’re going to have far fewer public companies and we’re going to have more unicorns,” he said.

@dailychartbook: Private equity firms "have struck almost $85 billion in deals this year involving listed US targets... That’s up by roughly half on the same point in 2023 and the second-highest year-to-date tally since 2010."

AIR TRANSPORT SERVICES GROUP, INC. is a leading provider of air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. The company is the largest provider of passenger charter service to the United States Department of Defense and other governmental agencies. Besides the Department of Defense, major customers of the company include Amazon.com, DHL and United Parcel Service. The company also offers a wide range of air-transportation-related services to its customers including aircraft maintenance and modification, ground handling and crew training.

Siemens is acquiring Altair Engineering in an equity deal that values the software and technology company at about $10.6 billion.

The German industrial giant said Altair shareholders will receive $113 per share in cash, representing a 19% premium to the closing price of Altair’s common stock on Oct. 21, the last trading day prior to media reports about a potential deal. The price represents a 13% premium to Altair’s unaffected all-time high closing price, Siemens said Wednesday...

The acquisition would help Siemens add growth of about 8% to its digital business revenue, or 600 million euros ($649.2 million) when compared to the EUR7.3 billion reported in fiscal 2023.

LITTLETON, Colorado, Oct 31 (Reuters) - Wind farms have generated a record share of U.S. electricity production so far in 2024, and are the second largest source of clean power behind nuclear plants in the U.S. generation system...

In terms of wind power's share of the power generated in each state, Iowa has the largest wind share of nearly 60%. South Dakota (55%), Kansas (46%), Oklahoma (42%) and New Mexico (38%) round out the top five. Texas generates 22% of its state power from wind. At the system level, the Southwest Power Pool - which covers 14 states stretching from Oklahoma to North Dakota - generates around 37% of its power from wind farms. The Electric Reliability Council of Texas (ERCOT) system has the next largest wind share of 24%, followed by the Midcontinent Independent System Operator (MISO) system, with 14%.

Iceland’s economy is outperforming most European peers after the nationwide introduction of a shorter working week with no loss in pay, according to research released Friday.

Between 2020 and 2022, 51% of workers in the country had accepted the offer of shorter working hours, including a four-day week, two think tanks found, saying the figure is likely to be even higher today.

Last year, Iceland logged faster economic growth than most European countries and its unemployment rate is one of the lowest in Europe, noted the Autonomy Institute in the United Kingdom and Iceland’s Association for Sustainability and Democracy (Alda).

“This study shows a real success story: shorter working hours have become widespread in Iceland… and the economy is strong across a number of indicators,” Gudmundur D. Haraldsson, a researcher at Alda, said in a statement.