The US market experienced a series of important developments Tuesday. These included manufacturing data, restructurings, and changes in trade policy.
The most important headlines from the US today:
The manufacturing activity contracts again in August
The US manufacturing sector contracted in August for the sixth month running, highlighting ongoing difficulties for factories faced with import tariffs and low demand.
The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index climbed to 48.7 in August from 48.0.
The reading remained below 50, which indicates contraction. However, data indicated a mild moderation of the rate of decline.
Reuters surveyed economists who projected a reading of 49.0. This indicates a weaker than expected recovery. The manufacturing sector currently accounts for 10.2% of US GDP.
Kraft Heinz splits into two separate companies
Kraft Heinz, the packaged foods giant that merged with Kraft for $45 billion in 2007, announced its plans to separate into two publicly-traded companies.
This move is intended to improve performance and streamline the operations.
The first division, which will be called North American Grocery Co, will concentrate on condiments and spreads such as Heinz and Philadelphia. It is expected to generate sales of $15.4 billion by 2024. North American Grocery Co., a company that has not yet been named, is expected to oversee supermarket staples like Kraft Singles and Oscar Mayer, generating $10.4 billion annually.
Warren Buffett’s Berkshire Hathaway, which owns a 27,5% stake in Kraft Heinz has expressed dissatisfaction with the split.
He suggested that the decision was a reactive one, rather than an attempt at a strategic turn-around. Kraft Heinz’s shares are down nearly 15% since their high for the year, and they dropped 6% after Tuesday’s announcement.
Klarna revives IPO plans in New York
The Swedish fintech company Klarna Group Plc has revived its plans to launch an initial public offering in New York, hoping to raise up $1.27 billion.
The company plans to sell between 34.3 and 37 million shares, at a price of $35-$37 each. This will result in a value of approximately $14 billion.
This IPO is a follow-up to a previous attempt that was postponed earlier in the year because of market volatility.
Klarna’s valuation peaked at $46.5 Billion during the Pandemic, before settling to its current level.
Klarna, with 111 millions active users in 26 countries, aims to become more than just a lender. It will do this by expanding its lifestyle service offerings alongside retail partners.
Trump asks Supreme Court to review tariffs
Donald Trump, President of the United States said that his administration would seek an expedited Supreme Court decision to reverse a Federal Appeal Court’s ruling that many tariffs he imposed were illegally imposed.
Trump claimed that the removal of tariffs for the United States would cause “devastation”, but judges allowed them to stay in place until further legal proceedings.
Trump’s comments come on the heels of a ruling by the US Court of Appeals Federal Circuit that Trump had used an emergency law in a wrong way to impose tariffs against trading partners as well as on China, Canada and Mexico citing fentanyl.
US stocks decline as yields climb
US stocks fell on Tuesday due to renewed uncertainty over tariffs and higher bond yields.
The Dow Jones Industrial Average dropped 249.07 points or 0.55%. Meanwhile, the S&P 500 fell 0.69%, and the Nasdaq Composite was down 0.82%.
These declines were the first consecutive drop of 1% in Nasdaq, a tech-heavy stock, since April. Major technology stocks like Nvidia and Apple, as well as Amazon, also declined.
The 10-year Treasury note climbed to 4.27%, and the 30-year Treasury yield topped 4.97%.
Bond investors were worried that the US government would have to pay back revenue collected by tariffs if the court’s decision was upheld. This could worsen funding problems for the US government.
The post US digest: Trump expedites tariff appeal, Kraft Heinz Split, US Manufacturing Slump may be updated as new developments unfold
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