CONSUMER WATCH
From The Transcript:
“…we’re not seeing any deterioration. It’s continued strength. It may not be at the highest level that it’s been over the last 12 months, but we do see continued strength.” – Bank of America Co-President Jim DeMare
“The consumer is surprising us. She’s resisting gas prices. She’s resisting worries about tariffs, and she’s spending.” – The PNC Financial Services Group President Mark Wiedman
“Our members continue to show resilience in their spending, and they show a willingness to spend in discretionary areas where they’re seeing exciting new items at great value. Net sales for the fourth quarter were $93.87 billion, an increase of 11.2% from $84.43 billion in Q4 2025. Comparable sales were up 9.4% and 6.7% adjusted for gas price inflation and FX. Excluding gas sales entirely and adjusting for the impact of foreign exchange, comparable sales were also up 6.7%.” – Costco Wholesale CFO Gary Millerchip
“So I would simply say the consumer remains resilient. I never thought I would use that word as often as I’ve used that word. They’re definitely choiceful.” – Macy’s CEO Tony Spring
“The last thing I’ll mention is, and I’m sure you’ve asked this question, is the consumer is very resilient though, still through all this. And the biggest reason why, and it’s no surprise, is she is gainfully employed still.” – Dollar General CEO Todd Vasos
There is a lot of capital investment going on. There is a need for a lot of electricians and a lot of construction work going on in some of this AI boom…So we have not seen anything in the macro environment, still not seeing any signs of a recession.” – Paychex CEO John Gibson
“I’ll say externally, you can see consumer sentiment being down, but consumers are still spending. They’re still resilient. They’re spending in Casual Dining.” – Darden Restaurants CEO Rick Cardenas
“…as we look into the fourth quarter, bookings are tremendously strong…the consumer has disposable income and wants to spend on experiences. And so the industry, to maintain profitability, has had to push through some price to offset rising fuel prices. And I wouldn’t say, to our surprise, it was our expectation, but it’s proven out that demand is incredibly resilient.” – United Airlines CFO Mike Leskinen
“…you see consumer sentiment down, but behavior hasn’t really changed. And that’s been true across the board. We’ve still seen a lot of success in our full-size trucks and SUVs . And no sign of that abating.” – General Motors CFO Paul Jacobson
GLP-1 effects
“August was also slightly negative. We expect September will be positive. But I think because of that slower start to the beginning of the quarter, I think we expect the U.S. business will be slightly negative for Q3. In the U.S., approximately 10% of adults use GLP-1s. And of those households with GLP-1 users, guess how many visit McDonald’s? 84%. Let me say that again. 84% of households with GLP-1 users visit McDonald’s. This is an opportunity.” – McDonald’s President Skye Anderson
All I can see is that the plus-size business is very soft and that most other areas of apparel are healthy. And I think you’re seeing people as they go through a period of time on GLP-1s, losing enough weight, what happens? People want to get a new wardrobe. And you don’t get a new wardrobe just for the summer. Then you need a new wardrobe for the fall, then you need a new wardrobe for the winter, then you need a new coat, then you need a new swimsuit. So we see this as a — we’re on the early cycle of GLP-1s” – Macy’s CEO Tony Spring
Lindt to Cut Prices as Chocolate Demand Wanes in Key Markets
The Swiss company is cutting prices for its Christmas offerings and plans to lower them across the board starting from January, Chief Executive Officer Adalbert Lechner said Tuesday on a media call. Lindt earlier revised its full-year 2026 outlook for organic sales growth to a range of 0%–2%, down from 4–6% previously, having already trimmed it in March. (…) “Pricing power, long Lindt’s trump card, is now being tested.”
Resiliency’s bad breadth:
The median and average stock in the S&P 500 are down more than -10% from the 52-week highs. Only about a quarter of stocks are above their 50-day averages, and new lows have been outpacing new highs consistently. This is the breadth divergence I illustrated yesterday: the index is near highs, driven by about 20 mega-cap names that make up half its weight, while most stocks are in their own corrections.
The ratio of the equal-weighted S&P 500 to the S&P 500 index is down to 1.11, its third-lowest level since April 2003 — having declined now for five weeks in a row. (…)
As per Peter Schiff, “The S&P 500 is 0.7% below a record high, yet 430 of those stocks are 21.7% below their highs. That means on average 86% of the stocks are in a bear market. (David Rosenberg)
Anthropic’s IPO prospectus shows sweeping AI vision, surging costs
(…) Anthropic reported a net loss of $42 billion in 2025, and plans to spend $518 billion on cloud, computing and infrastructure obligations in coming years, according to the prospectus. (…)
Revenue grew 12-fold in 2025 to nearly $4.6 billion, even as the company lost more than $8 billion on an operating basis, excluding writedowns of various liabilities mostly tied to previous fundraising, according to the documents, reported here for the first time. (…)
The AI lab spent $7.33 billion on compute and infrastructure last year, a threefold surge from 2024, accounting for more than half of its $12.65 billion in total operating expenses. (…)
Anthropic said nearly a quarter of its revenue came from two customers last year, and as part of its risk factors, warned that many of its largest clients were not locked into long-term contracts and could cut or stop spending.
Anthropic had cash, cash equivalents and short-term investments totaling $20.28 billion as of December 31, the prospectus shows.
BTW:
Chinese AI is leading in performance per compute
“Chinese AI models are generally outstanding, actually. I mean, you can see on the intelligence rankings, especially given the limited amount of compute that the Chinese AI companies have, the performance is excellent. Probably China is doing by far the best in terms of performance per unit of compute. And as I’ve said publicly, I think China’s going to address the compute limitation faster than most people expect. My rough guess would be that China addresses the compute constraints with lithography and chipmaking in about two or three years.” – Tesla CEO Elon MuskChina has a huge edge in electricity production
“It was just a statement of fact that China, I think, earlier this year passed the electricity output of the United States, Europe and India combined, and is continuing to increase significantly. So if China reaches the same GDP-to-electricity output as the US, which I think is likely, then China would go from where it is now, roughly three times the US electricity production, to probably four times, which would be proportionate to the population difference.” – Tesla CEO Elon Musk“One, they just have a lot more energy than we do, and they plan to build a lot more than we did. I think we just have to acknowledge that we got ourselves really gummed up in climate change and sustainable energy, and as a result, we just didn’t plan enough energy production.” – Nvidia CEO Jensen Huang
China Signals Economic Stimulus to Counter Worsening Slowdown
(…) Having spent months insisting the focus was on fully implementing existing measures, China’s cabinet — the State Council — now says it will “put in place a package of practical and effective additional policies” to safeguard this year’s economic goals. The “emerging issues” in the economy require the government to “step up counter-cyclical adjustments,” it said in a statement Monday.
The abrupt shift in language indicates an imminent new round of stimulus as Beijing becomes increasingly concerned over the cooling momentum in the world’s second-largest economy. Growth has likely weakened further below the bottom end of the government’s annual target in the third quarter after reaching 4.3% in the previous three months, with consumption flatlining and investment falling into a deeper slump. (…)
While China’s leadership appears ready to tailor policies in any way necessary to meet this year’s growth target, the government has so far hinted at several measures that suggest it’s not contemplating a stimulus package on the same scale as two years ago, when it moved aggressively to turn around market sentiment.
Local authorities will be allowed to tap unused bond quota left from previous years, with the central bank’s relending allowance increased to encourage loans to sectors including technology, agriculture and small businesses, according to the statement issued after a Monday meeting of the State Council chaired by Premier Li Qiang. Policymakers will also study fresh measures to stabilize the property market, promote employment and boost household income, it said. (…)
In the statement on Monday, officials also reiterated a call for faster implementation of existing policies. (…)
Toyota and Lexus brand sales cratered 23% in the world’s biggest auto market in August on weak demand for gasoline and hybrid vehicles, the Japanese manufacturer said Tuesday. That dragged down its global group deliveries, which declined 7.5% from a year earlier. (…)
Honda Motor Co.’s global sales fell 9.2% in August, dragged down by a 50% slump in China. Nissan Motor Co.’s deliveries in the country plummeted 52%, resulting in a global sales decline of 17.5%.
Toyota and Lexus did better elsewhere, with sales rising 2.6% in Europe and 9.1% in Japan thanks to robust demand for new models, especially hybrids. They declined 4.4% in the US and fell by more than a third in the Middle East.
Earlier this year, Toyota said hybrid sales are on track to exceed 5 million units for the first time in 2026. Alternative powertrains have provided the Japanese carmaker with a strong arsenal in the US, where steep tariffs have all but blocked BYD Co. and other Chinese brands from entering the market.
The FT has more:
Toyota has been the most resilient of all legacy automakers in China after cut-throat competition led many rivals to retreat from the market or rethink their strategy. (…)
Toyota is pivoting its local strategy to a “China-for-China” model that uses more Chinese parts and technology suppliers and empowers domestic engineers to compete better against local EV rivals led by BYD.
As well as trying to catch up on technology and development speed, Toyota is laying the groundwork to embark on its biggest factory overhaul investment programme in decades to modernise its production facilities through robots to fight back against Chinese rivals.
US forces exit Iraq after two decades, leaving opening for Iran
US forces are set to pull out from their last bases in Iraq by Wednesday, a departure celebrated as a victory by Iran and its allies who now have deep influence in the country where 4,500 Americans died during more than two decades of war.
Iraqi security experts say the withdrawal — agreed in 2024 under President Joe Biden and carried out by Donald Trump’s administration even as it wages war against Iran — could give Tehran and its powerful allies free rein, while also allowing other US enemies to stage a comeback, including Islamic State.
“Iran stands to benefit strategically from the coalition’s departure because it removes a military presence that for years acted as a counterweight to Tehran’s influence in Iraq,” said Jasim al-Bahadli, an Iraqi security analyst specialising in studying armed Shi’ite groups aligned with Iran. (…)
“We believe Iraq is still not fully ready to take over the security file at this time,” Abdulrahman al-Zobaie, a Sunni tribal leader in Fallujah, once a bastion of anti-American resistance, told Reuters.
“All Iraqis aspire to full sovereignty, and no Iraqi would dispute that. But I believe that the (US-led coalition) leaving in this way and creating a vacuum is what all Iraqis fear.” (…)
In recent years, Iraq has been the only country to maintain close political and military alliances with both the United States and Iran, which sometimes used Iraqi territory as a proxy battlefield. (…)
In this year’s war against Iran, 7 of the 18 US service members listed as killed were in Iraq, the last an army sergeant who died during the controlled detonation of a drone at a base near Erbil in July.
Iran, which says its ultimate aim is to force American forces to leave the entire Middle East, casts the US withdrawal from Iraq as a victory for its “axis of resistance” of allied armed groups across the region. (…)
Washington has accused Iran-backed militia groups in Iraq of playing a role in the wider Middle East conflict by launching attacks on neighbouring countries at the direction of Tehran, most recently hitting a major Saudi oil pipeline this month. The Baghdad government says it is trying to curb their influence. (…)
Iraqi security forces said a suspected Islamic State cell was preparing suicide attacks to coincide with the pullout. The plot highlighted concerns that the militant group remains capable of exploiting security gaps despite years of military setbacks, said four Iraqi security and army officials.
Islamic State “is seeking to send a message that the group is still powerful and capable of launching bloody attacks,” said Colonel Khalid al-Bayati, a senior security official in the strategic oil town of Kirkuk.
“Super Intelligence” hallucinations:
Trump, speaking to reporters at the White House on Monday, said he’s betting the Canadians will agree to what he called “a fair deal” in three to four weeks. “They’re going to come in, and they’re going to say, ‘Sir, we are sorry.’”