WSJ What’s News - What’s News in Markets: Southwest Soars, AI Divergence, Costco’s Markdown

Episode Date: September 28, 2024

What did investors make of changes to Southwest’s famous seating strategy? And why did two big AI tech-stock names go in opposite directions? Plus, why did Costco shares get a markdown? Host Francesca Fontana discusses the biggest stock moves of the week and the news that drove them. Sign up for the WSJ's free Markets A.M. newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

It takes more than just AI to prepare your business for the future. Your people need the skills to unleash its potential. GILD's learning and skilling solutions prepare your workforce for business transformation. Find out how at gild.com. 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 Expenditure 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.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% 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% 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. Microsoft's 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. Last but not least, Costco wholesale. The retailer posted mixed results for its latest quarter. It beat expectations on earnings, but it just missed on revenue. And that's what traders seemed focused on going into Friday's session. Now keep in mind, the stock has been on a total tear for most of this year.

Friday though, was a different story. And Costco shares ended nearly 2% lower. And now you know what's news in markets this week. You can read about more stocks that moved on the week's news in The Score, my column in the Wall Street Journal's Exchange section. Today's show was produced by Anthony Fancy with supervising producer Tali Arbel. I'm Francesca Fontana. Have a great weekend, and see you next Saturday.