Wall Street Breakfast Podcast: Alarm Bells On Wall Street

Macro Risk Advisors warns the S&P 500 could see an 8-10% correction triggered by imminent Fed rate hikes. Current market setup resembles 2018, with risk of a second leg down in December if multiple hikes materialize. Verizon and T-Mobile just hit mute on a costly legal fight over advertising. Costco is raising prices and limiting purchases on a member favorite, oil.

Macro Risk Advisors LLC is saying potential Federal Reserve rate hikes starting this week could trigger an 8% to 10% correction in the S&P 500. Dean Curnutt, chief executive officer and founder of Macro Risk Advisors said, “We expect an 8-10% pullback in S&P with a potential second leg in December,” in a Monday note to clients, according to Bloomberg. Curnutt added, rate hikes will “compress margins in companies that cannot pass costs through” and deliver a volatility shock to a market that is not positioned for it. The S&P 500 has fallen nearly 1% so far in September, historically its weakest month, amid concerns over elevated energy costs and recent inflation data that pushed the 10-year U.S. Treasury yield to its highest level in nearly two decades. Traders are now almost fully pricing in a quarter-point rate hike by Fed Chairman Kevin Warsh on Wednesday, up from about 60% odds a week ago. Curnutt said, a rate hike on Wednesday is likely to lead to more pain. Curnutt said the current setup resembles 2018, when the S&P 500 peaked in September before plunging 10% over October and November. That year, Curnutt warned, “The Santa Claus rally did not come,” and the market took another leg lower in December, eventually falling nearly 20% from its peak. Given that history, “a defensive posture is the correct approach,” he said. Similar to 2018, he expects the market to take another leg lower in December as multiple Fed hikes hit “into a K-shaped, low-churn economy.” The S&P 500 is heavily concentrated in mega-cap technology and AI-related stocks, with Nvidia, Apple, Microsoft, Amazon, Alphabet, Broadcom, Meta Platforms, and Tesla among its largest constituents. NVDA has fallen over 4% so far in September, AMZN is down 2.4%, AVGO is down 6.9%, and TSLA has dipped 2.4%. AAPL is up 5%, while GOOG has gained 3% in the month so far.

Verizon Wireless and T-Mobile US have agreed to end their legal battle. The two companies have been in litigation over advertising campaigns that each company said misled consumers about the savings available when switching wireless providers. They filed an agreement Friday in Manhattan federal court seeking dismissal of Verizon’s lawsuit and T-Mobile’s countersuit, bringing the dispute to a close after months of litigation. Discussions between the carriers had also explored ways to handle similar advertising disputes in the future.

Costco Wholesale has sharply raised the price of its Kirkland Signature full-synthetic motor oil and introduced purchase limits. The 10-quart package, which contains two 5-quart bottles, now sells for about $57.99, almost double the prior range of $30 to $35. Members are generally limited to two packages per week, with some local listings indicating a limit of one purchase at a time. Costco has also reportedly imposed limits on Mobil 1 full-synthetic six-quart packs, which sell for around $44. The move is unusual for the retailer since bulk availability is in its DNA. Repercussions from rising crude oil prices and broader lubricant shortages associate...