 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Wednesday's Headlines 1. Markets Rally on Tech Gains 2. Producer Prices Rise in the U.S. 3. China Exempts Key Products From Tariff List 4. The Gig Economy Suffers a Legal Setback 5. R.I.P. T. Boone Pickens Markets Closed
 Markets Today
U.S. markets rallied across the board today as technology stocks led the way, driven by Apple, which struck the right chords yesterday in its reveal of the new iPhones and a very competitive subscription price for its streaming service and Apple Arcade. Shares of AAPL climbed 3% today on top of Tuesday's 1% rise. Semiconductor stocks, which are closely tied to smartphone shipments, also traded higher today, with shares of Micron (MU) leading the gains.
The DJIA rallied 0.85% or 227 points to close above 27,000 for the first time since early August.
Producer Price Increase The U.S. Producer Price Index, which measures the average change over time in the selling prices received by domestic producers for their output, climbed 0.1% in August. While that's not a big gain, it does show that companies have pricing power, and were able to increase their prices even in the midst of the trade war with China.
The PPI chart from the U.S. Dept. of Labor shows that producer prices (the blue line, which leaves out food, energy, and trade services) has rebounded off of its July lows, and remains generally positive. It's a sign that there is enough demand for companies to increase prices commensurate with demand and inflation. That's healthy.  That's a good thing, because consumers may be starting to waver in their confidence. As you know, consumer spending, which accounts for about 70% of U.S. GDP, has been the stalwart of the economy for the past two years. As business confidence has faded given a global economic slowdown and the trade war, consumers have kept right on spending as they feel more secure about their jobs and wage growth.
But, a new survey from Bank of America indicates that their confidence may be starting to wane. According to the Bank, the consumer appears to be rattled by the latest escalation in the U.S. China trade war as the recent declines coincide with the announcement and subsequent implementation of the latest round of tariffs on the next tranche of Chinese imports.  Why it Matters While Bank of America's consumer confidence indicator is not the same as The Conference Board's Consumer Confidence Survey, we pay attention to Bank of America because it is the biggest retail bank in the U.S. It is a big issuer of debit and credit cards, and has its finger on the pulse of consumer spending and sentiment in this country. Incidentally, The Conference Board's survey of consumers also showed a decline of 0.7% in August.
Trade War Latest While consumers cited the trade war as the culprit for their decline in confidence, there are continuing signs that things are improving. We know that trade representatives from the two countries are meeting next month, and that China agreed yesterday to step up purchases of agricultural products. This morning, China's Ministry of Finance released a list of 16 U.S. imports that it will exempt from additional tariffs.
Those include food for livestock, cancer drugs, and non-petroleum lubricants. The exemption, which is scheduled to go into effect on Sept. 17, will be valid for a year through to Sept. 16, 2020.
It's a peculiar list of products to exempt, to be sure, but between yesterday's announcement of more agricultural buying of U.S. goods and today's list of exemptions, the trade winds are blowing in a positive direction. U.S. Companies Cut Back on China Investments While the latest news from the trade front has been positive, a new report from the American Chamber of Commerce in Shanghai shows that U.S. businesses have already cut back on their investment plans in China. The Chamber, which represents U.S. businesses in China, reports that U.S. companies cut back their investments in 2018 by 12%, and are on track to cut an additional 14% in 2019. The top reason cited for decreasing investment was uncertainty about U.S. China trade policy and commercial relations, followed by expectations of lower growth in China and the destabilizing impact of tariffs.
source: https://www.amcham-shanghai.org  The Gig is Up
Just like that, the business models underpinning new economy companies like Uber, Lyft, Doordash, Fiverr, Paws, and other gig economy upstarts that rely on armies of independent contractors, are under threat. The California State Senate voted overwhelmingly in favor of Assembly 5, a bill that would classify independent contractors like Uber and Lyft drivers as employees. If the bill becomes a law, it would require those companies to offer benefits, pay insurance, offer sick leave, guarantee a minimum wage, as well as a host of other benefits.
Uber warned, prior to today's decision, that if Assembly 5 becomes law, it would hire less drivers as a result. And today, in a conference call with reporters, Tony West, Uber's chief legal officer, made the case that Uber drivers' work is, "outside of its normal course of business..." While that seems completely absurd, Uber is very careful to classify itself as a "technology platform," and not a ride-sharing company.
Whatever...
The bill still needs to pass the California Senate to become a law in that state, and there were signs that California Governor Gavin Newsom will water it down if it gets that far. He's not about to stick a finger in the eyes of Uber and Lyft, which both bring a lot of tax revenue into the state.
Still, for Uber and Lyft, fundamental changes to their businesses—especially ones that require them to pay more to "employees"—could cripple them. Stay tuned.  R.I.P. T. Boone Pickens Legendary oilman turned wind farmer, T. Boone Pickens, died today at the age of 91. Pickens was a pioneer in the energy industry, a career-long champion for shareholder rights, a groundbreaking health and fitness advocate, and a generous philanthropist whose charitable donations exceeded $1 billion. In July 2008, he launched a self-funded, $100 million, grass-roots campaign aimed at reducing this country's crippling dependence on OPEC oil.
I had the pleasure of interviewing Boone several times in my career, and he was a generous, straight-shooting, and highly intelligent person. He made his mark, not just in the oil patch, but across the landscape of global business. He will be missed.
chart courtesy www.koyfin.com  Shares of CenturyLink rose by almost 6% following the company's acquisition of Steamroot Inc., a Paris-based startup that provides video delivery solutions across multiple platforms. Illumina's stock price increased by nearly 5% today, after the company announced its plan to expand its Cambridge-based EMEA headquarters.  Shares of Baker Hughes plummeted by more than 7% today amid its owner, GE, announcing its intention to sell enough of the company's stock to lose majority control. DaVita Healthcare Partners' stock price decreased by just over 3% after California's state legislature advanced a bill that caps payments to dialysis providers with business ties to charitable organizations that subsidize patients premiums.  Word of the Day: In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees. A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career.  Today in History Sept. 11, 2001: We will never forget.
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Wednesday, September 11, 2019
Trade Winds
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