Why Shareholder Value Is No Longer The Main Objective For The CEOs Of Nearly 200 Companies

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Stocks rose sharply on the open Monday, with the Dow trading 230 points higher, or 0.9%. The S&P 500 jumped 1%, while the Nasdaq gained 1.1%.

“This week is an opportunity for, in particular, Chair Powell to straighten up the message and show that they are at one and that there is a clear view about where the economy is going,” Ann Anderson, head of fixed income in Sydney for UBS Asset Management Australia, told Bloomberg. “This fear needs to be arrested.”

This week is likely to be dominated by monetary speculation across three continents. The People’s Bank of China announced that new loans must be priced “mainly” to a revamped benchmark called the Loan Prime Rate starting tomorrow, in a move that is largely seen as an effort to shift to market-based interest rates. In Europe, weaker than expected inflation numbers from this morning will only further spur speculation around further easing at the European Central Bank’s September meeting. And in the U.S., Fed Chairman Jerome Powell will have no lack of material to choose from when he opens the central bank’s annual symposium in Jackson Hole on Friday. Powell will give a speech that day discussing the current challenges for monetary policy, and Fed watchers expect he will do nothing in that speech to disabuse investors of the perception that the central bank will issue another quarter-point cut at their meeting next month.

Commerce Secretary Wilbur Ross said this morning that the U.S. will extend its narrow set of exemptions for a ban on doing business with China’s Huawei Technologies for another 90 days. Ross said in an interview with Fox Business that some telecom companies are “dependent” on Huawei, and thus a further 90-day reprieve was appropriate. “We’re giving them a little more time to wean themselves off,” Ross added. President Trump said over the weekend that the U.S. was “doing very well with China, and talking,” while also suggesting he is not yet ready to sign a trade deal. 

Gold futures lost some ground Monday as optimism on the trade front and speculation of possible stimulus by global policy makers dulled investor appetite for the precious metal. Gold dropped 1% to $1,507.90 for December delivery. “If central banks prove they’re ready to act by delivering interest rate cuts and new quantitative easing programs, expect equity markets to resume their rally after their recent plunge,” wrote Hussein Sayed, chief market strategist at FXTM, in a note. “Otherwise, expect more money to pour into gold, and other safe havens such as the Japanese yen and Swiss franc.”

Shareholder value is no longer the top focus for some of America’s top business leaders. That’s according to a statement released Monday morning by the Business Roundtable, comprising a group of chief executive officers from major U.S. corporations. The statement—which was signed by 181 top CEOs—included a new “purpose of a corporation” definition which dropped the traditional notion that corporations function first and foremost to serve shareholders and maximize profits. Now, the statement says, investing in employees, delivering value to customers, dealing ethically with suppliers, and supporting outside communities are at the forefront of American business goals. “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans,” said signee and chairman of Business Roundtable, and chairman and CEO of JPMorgan, Jaime Dimon. Other signees included Amazon CEO Jeff Bezos, Apple CEO Tim Cook, Bank of America’s Brian Moynihan, Boeing’s Dennis A. Muilenburg, General Motors CEO Mary Barra, and many others.

In other corporate news, Estee Lauder jumped this morning after it forecast earnings that topped analysts’ estimates. The cosmetics company reported adjusted quarterly profits of $0.64 per share, $0.11 per share above estimates. Revenue also beat expectations and Estee Lauder issued a better than anticipated full-year outlook. EL was up 9.86% at the time of writing. Nvidia also jumped after Microsoft said it would use the chipmaker’s “ray tracing” technology to provide more realistic graphics for the classic video game, Minecraft. Nvidia shares were up more than 6% Monday morning. Meanwhile, shares of PG&E Corp sank after a judge ruled that a jury should determine whether it should pay as much as $18 billion in damages to California wildfire victims. PG&E stock is currently down -27.94%.

Stocks We’re Watching

Lattice Semiconductor (NASDAQ: LSCC): Shares of this $2 billion semiconductor company are up 16.55% in the last month after the company crushed earnings expectations on July 31. The company reported net income of $21.1 million, or $0.15 per share, compared to earnings of $14.6 million, or $0.11 per share, in the same period last year. Analysts had expected earnings of $0.11 per share. Revenue also beat forecasts coming in at $102.3 million, well above the $99.72 million analysts expected. Lattice is the third-largest manufacturer of field-programmable gate arrays (FPGAs) after Xilinx and Intel, and is one of the only remaining pure-play FPGA manufacturers.

Arrowhead Pharmaceuticals (NASDAQ: ARWR): This year has been a fantastic one for Arrowhead Pharmaceuticals, with the stock up more than 150% year-to-date. Shares have surged to new all-time highs recently after the company reported revenue soared to $42.7 million in its third quarter, representing a massive jump from revenue of $727,375 in the same quarter last year. But the big news out of Arrowhead’s third quarter was that the company achieved several notable achievements in its pipeline, including: clearance from the FDA to begin an adaptive design phase 2/3 clinical study of its ARO-AAT candidate being studied for the treatment of a rare genetic liver disease associated with alpha-1 antitrypsin deficiency and received regulatory clearance in the United Kingdom for a phase 2 study for the candidate, Fast Track designation from the FDA for ARO-AAT, and orphan drug designations from the FDA for ARO-APOC3 in treating familial chylomicronemia syndrome and for ARO-ANG3 in treating homozygous familial hypercholesterolemia. 

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