Finimize - 🚨 Intel's rescue mission

What’s going on here?

Legacy chipmaker Intel is planning to separate its manufacturing business from the rest, desperate to soften the impact of its biggest crisis in 50 years.

What does this mean?

Intel might’ve run the chip sector back in the day, but the old timer’s a relic in this modern market. Overshadowed by the competition, the firm’s foundry business – which makes chips for other companies – has been a $25 billion drag on the books for not just one year, but two. So after its rough August earnings report sparked the sharpest stock sell-off in half a century, Intel announced a rescue mission. While it’s keeping manufacturing and chip design under the same roof, the firm wants its manufacturing arm to operate like an independent company – crucially, with its own financing.

Why should I care?

For markets: Stop the bleeding.

Determined to save over $10 billion in costs next year, Intel’s also cutting thousands of jobs, scaling back global office locations by two-thirds, and pausing projects in Germany, Poland, and Malaysia. But it’s not just about stopping money from leaving the bank accounts. Intel has to bring more cash in, too – and lately, the firm has scored a couple of lucky breaks. A multi-billion-dollar deal with Amazon Web Services (AWS) to produce custom AI chips, for one, and a grant of up to $3 billion from the US government, for another.

The bigger picture: It could be worse, but it could be way better.

Intel’s government grant caught investors’ attention: they sent the stock up 6% after the news. And when word spread about the AWS deal and plans for the foundry business, Intel’s shares rose another 7%. But even after those boosts, the stock is still sitting almost 60% lower than last year’s peak. That’s a vulnerable spot: one more serious stumble could knock Intel out of the Dow Jones index, which tracks 30 heavy-hitting American firms.

What’s going on here?

Surprisingly strong retail sales suggested that the US economy is holding its own, but investors still think the Federal Reserve (Fed) will go the extra mile on Wednesday.

What does this mean?

Consumer spending makes up around 70% of the US economy. So it bodes well that despite high borrowing costs and prices, stateside shoppers are still splashing the cash. Retail sales were 0.1% higher in August than the month before, trumping economists’ predictions of a 0.2% drop. That comes on the heels of July’s even healthier 1.1% increase – and when you take cars and gas out of the equation, spending has increased for four months straight.

Why should I care?

For markets: Super size, super size, the American way.

Those hardy retail sales suggest that the US economy is handling high interest rates just fine. Yet, investors still seem concerned that the job market and broader economy might be headed toward a downturn – not least because the impact of high rates can take months to fully materialize. Combine that with the belief that inflation is finally under control, and investors think there’s a 60% chance that the Fed will cut interest rates by a chunky 0.5% on Wednesday, rather than the standard 0.25%.

The bigger picture: Land of the late fees.

America’s divided: while plenty of folk have been seriously affected by the higher cost of living and expensive loans, others have benefited from skyrocketing stock prices and pumped-up interest rates on savings accounts. That’s allowed wealthier Americans to keep spending, offsetting much of the cautious budgeting from lower-income households. But the cracks are starting to show: sales are stuttering at discount retailers, and more borrowers are falling behind on their car and credit card loan payments. If an interest rate cut doesn’t ease the burden, there could be more defaults to come.