markets

9/10/24

GameStop is a T-Bill fund cosplaying as a retailer

GameStop is ostensibly in the business of selling video games and other collectibles. That business is not good!

The company’s second quarter results showed they lost $22 million dollars doing that for the three months ending August 3. Not stellar, but an improvement over the nearly $55 million in operating losses in the previous quarter.

But the business of having money and sitting on it is still good – as good as it’s been in decades, thanks to the high rate of return available on short-term, safe government debt. That’ll be the case until the Federal Reserve’s rate-cutting cycle is well underway.

GameStop made a lot from just that, thanks to its major cash infusions from a pair of share offerings during the second quarter as the return of Keith Gill reignited enthusiasm for the stock even as its core business and outlook remain lackluster. Net interest income was a cool $39.5 million, more than offsetting its operating losses.

This “is primarily attributable to interest income increasing as a result of higher returns on invested cash, cash equivalents, and marketable securities, as well as return on cash received from the issuance and sale of shares of our common stock from the ATM Offering,” said the company in its quarterly filing.

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Nia Warfield, Luke Kawa

US stocks dip as rate cut fails to ignite broad enthusiasm

The S&P 500 fell 0.1%, the Nasdaq 100 gave back 0.2%, and the Russell 2000 outperformed with a 0.2% advance, though it was up more than 2% at its highs of the day.

Brown bear (Ursus arctos) looks out of its den in the woods under a large rock in winter

markets

5h

Walmart hits all-time high following Bank of America boosting its price target

Walmart shares touched an intraday all-time record of $106.11 before settling lower for the close, missing its previous record closing price of $105.05 on February 13 of this year.

The rally came after Bank of America lifted its price target on Walmart to $125 from $120 and stuck with its “buy” rating. Analysts said Walmart is emerging as a leader in “agentic AI commerce,” pointing to its GenAI assistant, Sparky, which offers occasion-based recommendations and help shoppers plan, compare, and buy products.

Analysts also flagged Walmart’s sheer scale, backed by data from 180 million customers, and its fast-growing delivery business as major competitive advantages. Beyond AI, the fundamentals are catching eyes, too. Walmart’s food delivery arm is already profitable, reaching 95% of US households within three hours and a quarter of customers in under 30 minutes.

The note also highlighted Walmart’s cushion against tariffs, since two-thirds of its products are sourced domestically, and pointed to its new Synchrony Financial-backed credit card as another way to juice membership growth.

The stock is up over 16% year to date and has more than doubled since 2020.

markets

7h

Federal Reserve cuts rates by 0.25%, signals 50 basis points of additional easing by year-end

The Federal Reserve cut interest rates for the first time this year, lowering its policy rate to a range of 4.25% to 4.5%, as anticipated.

The “dot plot” from the Summary of Economic Projections shows the median Fed official thinks it will be appropriate for the policy rate to end this year at 3.625% (expected 3.875%) and 3.375% in 2026 (expected 3.375%) if the economy evolves in line with their expectations.

Stocks slid during Fed Chair Jay Powell’s press conference, where he described the reduction as a “risk-management cut,” didn’t rule out that the US economy might still warrant restrictive monetary policy, and signaled there was not wide support for a larger 50-basis point cut at this meeting.

The iShares Russell 2000 ETF, which was up nearly 2.5% at the highs, fell into negative territory before rebounding. The SPDR S&P 500 ETF traded down as much as 0.9% before paring those losses to end up right around where it was when the rate cut was announced.

The US central bank raised its forecast for how high core PCE inflation will be next year to 2.6% from 2.4% in June, which heavily implies that monetary policymakers are willing to look through the near-term inflationary impulse from tariffs and that softening job growth has assumed more prominence in their decision-making process.

There was only one dissent: newly added Fed Governor Stephen Miran, who favored a 50-basis point cut at this meeting and appears to be the outlier Fed official who thinks the policy rate should end the year at 2.875%.

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