What’s News in Markets: Southwest Soars, AI Divergence, Costco’s Markdown
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Hey, listeners. It's Saturday, September 28th. I'm Francesca Fontana for The Wall Street Journal, and this is What's News in Markets, our look at the biggest stock moves of the week and the news that drove them. Let's get to it. Last week's rate cut was a big breath of fresh air for markets. And the rally kept on going this week, thanks in part to more economic good news. We got strong readings from jobless claims and other data. Plus, on Friday, we got the latest from the Fed's favorite inflation gauge. the Personal Consumption Expenditures Price Index, or PCE. And that came in lower than expected. Plus, this week, China's central bank unveiled a bunch of stimulus measures, including a rate cut of its own.
As a result, Chinese stocks had a total banner week, and we saw the ripple effects across global markets. European companies that make luxury goods, which have been suffering from weaker Chinese sales, their shares got a boost, commodity prices got a lift, and so did U.S. listed shares of Chinese companies. All in all, all three indexes ended higher on a weekly basis. The Dow Jones Industrial Average and the S&P 500 each added about 0.6%, and the tech-heavy Nasdaq rose about 1%. Looking at specific stocks, let's start with Southwest, where a new vision is taking flight, you might say. Southwest, a pioneer in budget air travel, is known for its open seating policy. It's one of the things that makes Southwest Southwest.
Not anymore. The company said that next year it's going to start selling assigned seats, and it's also adding rows of premium seating with extra legroom. You know, the ones that you can pay extra for. Southwest also unveiled a $2.5 billion share buyback program, cost-cutting plans, and a new board member. All of this is an effort to fend off activist investor Elliott Investment Management and convince shareholders that it can turn itself around. So far, it looks like Elliott, which owns about 10 percent of Southwest shares, is unimpressed. And the activists said it would continue to press for new leadership. But investors, they were getting on board. And Southwest shares took off Thursday, gaining roughly 5 percent and giving back some of those gains the next day.
Next up, let's talk about the tale of two AI stocks we saw play out this week. First, we had Micron Technology, the memory chip maker that posted earnings late Wednesday. The company reported better than expected results thanks to robust artificial intelligence demand, and it expects the momentum to continue in the current quarter. And that sunny outlook gave the stock a big boost. Micron shares jumped 15% Thursday, gaining 18% for the week. Then there was Supermicrocomputer. It's a server maker whose specialized servers use the chips that NVIDIA designs for generative AI. So it's definitely been another beneficiary of the AI boom.
How did recent economic data and central-bank moves lift markets this week?
Now, Supermicro's latest news was not so sunny. The Wall Street Journal reported Thursday that the company is facing a federal probe following a critical report by an activist short-selling firm, Hindenburg Research. So back in August, Hindenburg disclosed a short position in the stock, and its report focused on a former Supermicro employee's allegations of accounting violations. as well as transactions between Supermicro and companies run by its chief executive's family members. I'll note here that a Supermicro spokesman declined to comment, as did a spokesman for the U.S. Attorney's Office. So how'd the stock do? Well, Supermicro lost 12% Thursday, clawing back some ground on Friday.
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