The Rundown - Super Micro Investigated by DOJ, Costco Posts Earnings Beat

Episode Date: September 27, 2024

Stock market update for September 27, 2024.

Public.com presents the rundown, your daily market update in five minutes. My name is Zadadmani, and today is Friday, September 27th. In today's episode, we tell you about the latest inflation and GDP data and why the vibes are great on Wall Street. We also tell you about Southwest Airlines plans to completely change their business and why Super Micro is being investigated by the DOJ. Then stick around to the end of the show for an update on the OpenAI saga, why Costco stock is down and why ETFs are taking over Wall Street.

All right, let's go. Stocks went back to making all-time highs yesterday. The S&P 500 was up 0.4% and the Dow was up 0.6%. Both those indices closed at record levels. The tech-heavy NASDAQ also had a solid day up 0.6%. The NASDAQ has been up for every single day this week and it's now less than 3% away from record highs. So it's been a pretty good week for stocks.

You know, I was curious how the markets were going to react this week now that we've had some time to digest the Fed rate cuts. Things seem to be going pretty great. And it's not just stocks. Bitcoin also had a great week. Bitcoin jumped past $65,000 for the first time since July. Bitcoin's all-time high is $73,000, which is set back in March. So just keep an eye out for Bitcoin because it's quietly creeping up to its all-time high levels.

So the Fed rate cuts from last week has the markets feeling good. But it's not just that. we also just got some positive economic data as well. Like according to the latest numbers, the U.S. GDP grew by 3% in the second quarter, according to the Bureau of Economic Analysis, which was better than expected. And it's better than what the average GDP growth has been over the last five years. And current estimates call for a 3% GDP growth in the third quarter. And to add to the good news, we just got the PCE inflation data this morning.

This is the Fed's preferred inflation gauge. And the August PCE came in at 2.2%, which was less than expected. Remember, the Fed's target is 2%, and it looks like we are nearly there. So it's been a great couple of weeks and a great way to close out the month of September, which did not start off so hot. And we got rate cuts now, we got strong economic data, stocks are making all-time highs. So vibes are good right now, and soft landing seems to be on track. Let's run through some headlines.

Southwest is making some major changes to their business. The old Southwest is going to be unrecognizable at this point. Gone are the days of no assigned seating and boarding the plane like a bus. Moving forward, Southwest plans to offer premium seating and give customers the option to pick their seat. On top of that, starting next year, Southwest plans to offer red-eye flights. I didn't know that they didn't have red-eye flights. On top of that, Southwest will start offering international vacation packages by partnering

with international airlines. So things are going to be different at Southwest. Now, Southwest has outlined this as a three-year grand plan to turn the company around. And maybe this will get Southwest to finally start growing again, because they have been struggling for the past few years. We've talked about this on previous episodes, but Southwest is under a lot of pressure from an activist investor, the hedge fund Elliott Management. Elliot Management has taken a 10% stake in the airline. Then they're ready to replace the entire Southwest executive team to get the changes they want done. But now with Southwest making all these changes, you know, maybe they'll ease

up a little bit. Now, I'm personally happy to see these changes happening at Southwest. I mean, the fact that we couldn't pick our seats just didn't make any sense to me. And Southwest has not really been a discount airline for a while now. I mean, their tickets are usually the most expensive that I see. was nice about Southwest, though, was the two free check bags. And as if right now, that's still not going away. But with all the pressure of Southwest to make money, don't be surprised if they at least take one of these free check bags away. Let's shift gears and talk about Supermicro. The super hot AI company just came under investigation by the DOJ. This is after short-seller Hindenberg research released a report calling out Super Micro for several suspicious activities, including

faulty accounting and some sketchy business relationships with Russia. Now, Supermicro has been punished in the past. The SEC fined them nearly $18 million in 2020 for accounting issues and the firm fired employees connected to its accounting problems. Well, the Super Micro Whistleblower claims that the firm rehired those employees who were let go. What are they doing? Super Micro has been getting a lot of attention these days for its server business during the AI boom. Stock went from being $40 back in 2022 to over $1,000 at one point this year. Now shares are down 60% in the past six months. Super Micro is in a very weird place right now. They They delayed their 2024 annual report filing to the SEC last month, and they said they're reviewing

their internal controls. That sounds like corporate language for looking into their accounting problems. It seems pretty sketchy, in my opinion. Super Micro has seen a tremendous growth in revenue and profit over the last year. It would be a shame if a lot of that was made up. Guess we'll see what the DOJ finds. And finally, a quick update from yesterday's show on the OpenAI saga. We said yesterday that there was rumors that Sam Albin was getting a 7% stake in OpenAI worth

close to $10 billion as part of the company's reclassification from a nonprofit company to a for-profit company. Well, that might not be the case. In an all-hands meeting at Open AI yesterday, Sam Altman said that he hasn't received any equity in the company. And on top of that, Open AI's chairman, Brent Taylor told CNBC the same thing. He said that Open AI's board is thinking about giving Sam Altman equity in the company, but there's been no decision made or how much he would get. So that's the latest in the Open AI saga, but probably just a matter of time until the next bombshell drops. week. Let's talk about some stocks making moves today. Shares of the pharma company Bristol-Myers Squibb

are up this morning after the FDA approved their schizophrenic drug, Cobbifee. I hope I'm saying that name right. Now, this is the first new type of treatment for schizophrenia in decades, and this drug was highly anticipated. And as a result, shares of Bristol-Myers Squibbid are up more than 4% in reaction to this approval. Now, on the flip side, shares of Costco are on the red this morning after the company reported earnings, and the numbers were kind of, you know, meh. Same store sales growth was up 5.4%, but estimates were calling for 5.7%. E-commerce sales were up 19%, but analysts were hoping to see a 20% increase. But profits continued to be pretty strong.

Profits were up 7% to $2.35 billion. So the numbers weren't bad, but just not extraordinary, you know? Costco has a high bar to me. Now, Costco has raised their membership fees recently, and the impact of that will be seen mostly on next earnings report. Shares of Costco are down about 1% in the pre-market in reaction to these earnings. Let's wrap the show with a fun fact. Assets held by ETFs in the U.S. just hit $10 trillion for the first time ever, according to Bloomberg.

In fact, 2024 has already seen close to $700 billion in inflows so far, and we still got one more quarter to go. ETFs have pretty much taken over Wall Street at this point. And what's insane is the growth that ETFs have seen over the last decade or so. ETFs first hit $1 trillion only 14 years ago back in 2010 and now have 10x since. Investors just love ETFs. I mean, I love ETFs. According to Bloomberg, there are over 3,800 ETFs. And with fees getting cheaper, they're a pretty attractive investment for investors. And you can find one for pretty much any strategy these days. There's passive ETFs that just

invest in an index like the S&P 500. You can also find ETFs for certain themes like real estate, commodities, crypto, weight loss drugs, and there are even actively managed. as ETFs that have complex strategies that pay yield based on call options. I mean, there's so much out there now, and I love them and investors seem to love them as well. So I got to do them that the money going into ETFs will only continue to increase over time. I don't think we're anywhere close to peak ETFs yet. Well, all right, guys, that's the rundown for today. That's the rundown for this week. Now, it was a relatively slow week compared to what we've had in the past, but hey, stock's making all the time highs. So hard to complain there. If you guys enjoy these

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And we'll see you guys back here on Monday. This is the rundown. Your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell, or hold that security. Run down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult, respected professionals. Learn more at public.com disclosures. In partnership with Zayidamani, brokerage services for U.S. listed,

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