The Dollar Is Crushing Rival Currencies. Here’s Where Things Are Headed.

It also poses problems for countries around the world, whose currencies are plummeting to fresh multi-decade lows by the day. The British pound slid to new 37-year lows below $1.11 Friday and the euro dropped below $0.98 for the first time since 2002. The Indian rupee even hit a record low against the dollar.

Japan, at least, decided that enough was enough Thursday as it intervened to buy yen for the first time since 1998. That was after the currency slipped to fresh 24-year lows against the dollar as the countries’ polar opposite monetary policy paths were reinforced.

Japan’s unilateral action is unlikely to reverse those trends but it may still be symbolically significant. Equally as important may be the U.S. response. There was no strong rebuke, far from it. “We understand Japan’s actions,” a Treasury spokesperson said.

The dollar’s strength is unlikely to subside anytime soon, at least as long as the Fed is hiking further and faster than everyone else. Coordinated intervention among countries may end up being the course of action–as it was in 1985 with the Plaza Accord and again in 2000.

That’s some way off at the moment. But the U.S. reaction to Japan’s plight may be the first step toward it.

—Callum Keown

*** Join William Burckart, CEO of The Investment Integration Project, today at noon for a discussion with Penta senior writer Abby Schultz about private market approaches for investing in renewable energy. Sign up here.

***

Boeing’s $200M SEC Settlement Another Step for 737 MAX

Boeing

took another step to put the 737 MAX crash tragedies in Indonesia and Ethiopia behind it, reaching a $200 million settlement with the Securities and Exchange Commission over allegedly misleading statements by the company and then-CEO Dennis Muilenburg.

• The MAX was grounded worldwide between March 2019 and November 2020 following the two deadly crashes within five months of each other. Boeing said it didn’t admit or deny the SEC’s’ findings, which concern company statements in late 2018 and early 2019.

• “We will never forget those lost on Lion Air Flight 610 and Ethiopian Airlines Flight 302,” Boeing told Barron’s in an emailed statement. “And we have made broad and deep changes across our company in response to those accidents.” Muilenburg will pay $1 million in the matter.

• The agency looked into Boeing’s communications with investors about the crashes and its response. The SEC said Thursday Boeing and Muilenburg “misled investors by providing assurances about the safety of the 737 MAX, despite knowing about serious safety concerns.”

• Boeing paid $2.5 billion to settle a criminal inquiry by the Justice Department.The money was mostly set aside for airline customers and families of the crash victims.

What’s Next: Boeing’s stock fell 3% in after-hours trading after the announcement. It is down 70% since early March 2019, but investors will likely be happy there is one less thing to track regarding the MAX. Boeing has a backlog of almost 4,200 orders for MAX planes.

—Liz Moyer and Al Root

***

Costco

Beats Expectations But Margins Contracting

Costco Wholesale
’s
fiscal fourth quarter earnings report beat analysts’ expectations, but gross margins of 10.1% fell from last year and CFO Richard Galanti said the warehouse club continued to see pressure from higher prices for wages, commodities, and transportation costs. Shares slid 2.6% after-hours.

• While other retailers have been hurt by inflation and are rushing to offload inventory,

  
  
  Costco
  ,
  with a relatively affluent customer base, reported resilience in nonfood categories.

  
  
  Costco
  ’s
  foot traffic has exceeded prepandemic levels in 31 of 36 weeks this year, according to Placer.ai data.

• 
  
  Costco
  
  stock has climbed more than 205% in the past five years, almost four times the S&P 500. Comparable sales are up double digits, store traffic and transaction amounts are increasing, and “membership trends have never been stronger,” Baird analyst Peter Benedict noted earlier this month.

• 
  
  Kohl’s
  
  activist shareholder Ancora Holdings called for the ouster of Chairman Peter Boneparth and CEO Michelle Gass in a letter to the board citing Kohl’s “abysmal performance” and single-digit sales declines. Shares fell 3.5% Thursday.

• Kohl’s said it “unanimously supports Michelle Gass and her leadership team.” A spokesperson said Kohl’s is “committed to maximizing value and acting in the interests of all our shareholders by staying focused on running the business,” and that the board and management are navigating the retail environment.

What’s Next:

Target

is offering holiday discounts starting Oct. 6, extending its price matching guarantees, and plans to hire 100,000 seasonal workers, about the same as last year.

—Janet H. Cho and Teresa Rivas

***

FedEx

Shares Slip Even as Official Earnings Don’t Disappoint Again

FedEx shares pointed lower early Friday after the company published its official quarterly earnings following a pre-release, which had sent the stock falling more than 20%, its worst day since 1978.

• The numbers were in line with what the company announced last week—earnings of $3.44 a share from $23.2 billion in sales in the quarter ending in August. Wall Street had been looking for $5.10 in per-share earnings from $23.5 billion in sales.

• Shares rose more than 1% when the release came during trading hours on Thursday. They slipped back again in Friday’s premarket, falling 2%.

• The stock has still dropped 40% this year, about twice as much as the S&P 500 index. The relief on Thursday was that the report wasn’t even worse than what was flagged earlier.

What’s Next: Investors will now be looking at how fast FedEx can cut costs to preserve profit margins. FedEx says it will generate as much as $2.7 billion of cost savings in the fiscal year 2023. It also said it would raise shipping rates by 6.9% starting Jan. 2.

—Al Root and Brian Swint

***

Luxury Home Sales Falter Amid Higher Rates, More Listings

The formerly hot luxury housing market is stumbling because of inflation, recession anxieties, and rising mortgage rates. Sales of luxury homes, defined as those in the top 5% of value, fell 28.1% for the three months ending in August, the biggest drop since at least 2012, according to

Redfin
.

• The inventory of available luxury homes is up 39.2% from the record low 121,000 homes earlier this year, Redfin said. Nationwide, new listings of luxury homes rose 1.2% during the three months ending in August from last year, while new listings of nonluxury homes fell 5.9%.

• The volume of high-end home sales plunged nearly 64% in Oakland, Calif.; declined by more than 55% in both San Jose and San Diego; and fell 44.3% in Los Angeles. Home sales in Miami decreased 55.5%, while New York home sales fell 11.8%, per Redfin.

• Average mortgage rates on a fixed 30-year loan rose to 6.29% on Thursday, according to Freddie Mac, the highest since October 2008. At that rate, the monthly payment on a $400,000 home would be about $600 higher than the last week in 2021, and $260 higher than in early August.

• Home builder

  
  
  Lennar
  
  said the seven housing markets where buyers have pulled back the most are: Boise, Idaho; Philadelphia; Pensacola, Fla.; Austin; Reno, Nev.; Minnesota; and Utah. Prospective buyers there need more convincing that “now is the time to buy,” co-CEO Richard Beckwitt said.

What’s Next: The growing popularity of remote work means people don’t have to move to pricey cities like San Francisco for their jobs. “Now you can take that job basically anywhere in the country,” Redfin Chief Economist Daryl Fairweather told The Wall Street Journal.

—Janet H. Cho

***

U.S. Latinos as a Group Rank Fifth in World GDP

The total economic output of the U.S. Latino population, if it was broken out as a separate country, would be the fifth largest in the world, according to a Latino Donor Collaborative report published with

Wells Fargo
.

• The gross domestic product of U.S. Latinos was $2.8 trillion in 2020, larger than that of the United Kingdom, India, France, and Italy, the report said. The GDP of U.S. Latinos grew at the third fastest pace among the 10 largest economies, behind only China and India.

• With more than 62.6 million people, U.S. Latinos represent a personal consumption market of $1.84 trillion in 2020, which is larger than the entire economies of Canada or South Korea, the study said.

• Latinos, a group that skews younger than other racial and ethnic groups, have added workers to the U.S. labor force at a rate nearly 15 times greater than their non-Latino peers, driven by personal income gains, educational attainment, and strong labor-force participation, the LDC said.

• “Our country’s biggest growth opportunity lies in our U.S. Latino cohort,” said Sol Trujillo, a co-founder and board chairman of the Latino Donor Collaborative, a nonpartisan nonprofit that aims to change perceptions about Latinos with economic research and data.

What’s Next: Latino economic growth hot spots might seem to be in unexpected places, the report said. Latinos drive economic growth in California, Arizona, and Texas, but their biggest impact in the years ahead will be in places such as Idaho, North Dakota, Ohio, and Tennessee.

—Janet H. Cho

***

Do you remember this week’s news? Take our quiz below about this week’s news. Tell us how you did in an email to [email protected].

1.

Hertz Global

plans to expand its electric vehicle offerings by buying 175,000 luxury and compact vehicles and midsize SUVs from which of the following companies:

a.

General Motors


b.

Ford Motor


c.

Tesla


d.

Stellantis

2. Chamath Palihapitiya, the so-called “SPAC King,” will wind down two special-purpose acquisition companies and return more than $1.6 billion in cash to shareholders after failing to find companies to acquire. Which of the following has he taken public:

a.

Virgin Galactic


b.

Opendoor Technologies


c.

Clover Health


d. All of the above

3. The Federal Reserve raised interest rates again this week as it works to tame inflation and says it won’t quit until the job is done. How much did it raise its benchmark rate this time?

a. 0.50%

b. 0.75%

c. 1.00%

d. 1.25%

4. Logistics giant FedEx is raising shipping rates across most of its services starting in January as it copes with a global slowdown in business. By how much is it raising rates, on average?

a. 6.3%

b. 6.9%

c. 7.5%

d. 8.1%

5. New York’s Attorney General filed a civil lawsuit in state court against former President Donald Trump, his three oldest children and executives of Trump Organization, alleging he inflated the values of which properties for economic gain?

a. His triplex in Trump Tower

b. Mar-a-Lago

c. 40 Wall Street

d. All of the above

Answers: 1(a); 2(d); 3(b); 4(b); 5(d)

—Barron’s Staff

***

—Newsletter edited by Liz Moyer, Rupert Steiner, Steve Goldstein and Brian Swint