Wall Street Breakfast Podcast: Renewed Shutdown Concerns

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Kevin McCarthy's historic ouster revives government shutdown fears. (00:27) Intel announces plans to separate Programmable Solutions Group as standalone biz. (01:36) Amazon allegedly used algorithm to boost prices - WSJ. (03:03)

This is an abridged transcript of the podcast.

The ouster of Kevin McCarthy as U.S. House speaker, a result of escalating infighting within the Republican majority, has renewed concerns that a federal government shutdown could happen next month.

The House of Representatives on Tuesday voted to oust McCarthy as speaker just three days after a bipartisan stopgap spending bill was passed to avert a government shutdown.

Representative Patrick McHenry has taken over as acting speaker, and the House will hold speaker elections on October 11.

The House will not conduct votes on pending FY2024 spending bills till a new speaker is chosen, although House committees can continue to conduct business.

This marks the first time in history that the House has removed its leader, and underscores the growing governance challenges that threaten the sovereign rating of the U.S.

Goldman Sachs said the ouster raises the risk of a government shutdown next month. It expects McCarthy's successor to face even more pressure to avoid a temporary spending package or additional funding for Ukraine.

Intel (NASDAQ:INTC) announced that it intends to separate its Programmable Solutions Group, or PSG, into a standalone operation.

This would be effective January 1 and is an effort to continue to simplify its larger business.

The PSG group, which is responsible for Intel's push into high-performance communications and data center applications, will be led by Sandra Rivera when it becomes an independent company. Shannon Poulin will become Chief Operating Officer.

Intel’s CEO said in a statement. “Our intention to establish PSG as a standalone business and pursue an IPO is another example of how we are consistently unlocking more value for our stakeholders."

Intel's PSG group generated record revenues for a third-consecutive quarter and has launched 11 of the 15 new products it said it would for 2023.

The divestiture of PSG follows Intel's (INTC) partial spin-off of Mobileye (MBLY), which occurred in October 2022.

Premarket Intel (INTC) is up more than 2%.

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In its lawsuit against Amazon (NASDAQ:AMZN), the FTC is accusing the e-commerce giant of secretly developing an algorithm that would examine how much it could raise prices so that competitors would follow.

The Wall Street Journal reported that the algorithm, code named Project Nessie, helped Amazon boost its profit. And because of Amazon's (AMZN) dominance, it led competitors to boost their prices as well.

The newspaper said that in cases where competitors didn't also raise their price for an item, the algorithm would then have the product price on Amazon (AMZN) reduced to its prior price.

The Journal, citing sources, added that Amazon (AMZN) stopped using the algorithm in 2019. The algorithm is mentioned in redacted portions of the lawsuit against the company.

Last month, the FTC and 17 state attorneys general sued Amazon (AMZN) alleging it is a monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.

Other headlines to look out for on Seeking Alpha:

Apple downgraded at KeyBanc on valuation, potentially slow US sales

Molson Coors plans to boost its beyond beer business, launch new buybacks

Meta said to lay off Reality Labs silicon unit

On our catalyst watch for the day,

• OPEC's Joint Ministerial Monitoring Committee will meet virtually. OPEC+, led by Saudi Arabia and Russia, has curtailed production by 1.3M barrels a day until the end of the year.

U.S. stocks on Tuesday ended in a sea of red.

The Nasdaq (COMP.IND) slumped 1.87%, its worst intraday performance in over a month. The S&P 500 (SP500) slid 1.37%, while the Dow (DJI) retreated 1.29%, posting its worst day since late March.

All 11 S&P sectors ended in negative territory, with the exception of Utilities. Consumer Discretionary and Real Estate were the top losers.

The 10-year yield (US10Y) hit a session high of 4.81%, a level not seen in more than 16 years. The 2-year yield (US2Y) was up 4 basis points to 5.15%.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are mixed. The Dow is up 0.06%, the S&P 500 is up 0.03% and the Nasdaq is down 0.07%. Crude oil is down 1% at more than $88 a barrel. Bitcoin is down 2.5%.

In the world markets, the FTSE 100 is up 0.2% and the DAX is up 0.2%.

The biggest stock movers for the day premarket: Cal-Maine Foods (NASDAQ:CALM) is down more than 12% following disappointing Q1 results. A10 Networks (NYSE:ATEN) is down nearly 12% after the cloud security software company said it expects Q3 revenue between $56.5M and $58.5M, below the consensus of $74.71M.

On today’s economic calendar, at 8:15am the ADP jobs report. At 10:25am the Fed’s Michelle Bowman speaks on "The Role of Research, Data and Analysis in Banking Reforms" before the 2023 Community Banking Conference hosted by the Federal Reserve Bank of St. Louis.