⛳ Callaway to Spin Off Top Golf

MARKET UPDATE

Good Morning Investor! On Friday, shares of chip maker Broadcom ($AVGO) saw its share price plunged over 10% after providing forward guidance which missed expectations slightly, while its AI business lacked the clear upside momentum the Street was looking for.

TODAY’S BIG HEADLINES

How Realistic is a Texas Stock Exchange

The Latest Jobs Report Has Left Markets Unsure About the Next Rate Cut

Callaway to Spin Off Top Golf

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MARKETS & ECONOMICS

How Realistic is a Texas Stock Exchange🤔

Lone Star State's Financial Rodeo: Dallas, now affectionately dubbed Y'all Street, is in the midst of a financial renaissance that's hotter than a jalapeno in a Texas summer. The state's burgeoning financial sector, with its lower taxes and regulations looser than a cowboy's lasso, now hosts more financial professionals than the Big Apple itself.

• The crowning jewel is a new stock exchange slated to launch in 2025 that’s fixin’ to go toe-to-toe with current kingfish like the New York Stock Exchange and Nasdaq.

• Advocates say the new exchange isn’t all hat and no cattle either. The Texas Stock Exchange (TXSE) lassoed a whopping $120 million in funding from dozens of investors, including financial big shots like BlackRock and Citadel Securities, earlier this year. It's like they struck oil, but instead of black gold, they're pumping out greenbacks!

Small Potatoes First: But, can Texas' budding finance scene support an exchange that will likely have to compete with two of the largest on the planet? It's a tough ask, tougher than trying to wrangle a greased pig. But analysts say the well-funded exchange would likely vie over smaller domestic and foreign listings with boutique markets in Toronto or Boston, at least initially.

Everything's Bigger in Texas: Texas' economy ranks as the eighth-largest in the world, topping Canada and Russia, and leans heavily on the energy sector and its oil legacy. But it's also leading the Sun Belt resurgence, home to more Fortune 500 companies than any other state. Big Tech companies like Tesla, Oracle, and Hewlett Packard have already fallen for Texas' Southern charm faster than a tumbleweed in a tornado, as well as financial firms, like Charles Schwab.

• History hasn't been kind to upstart exchanges, treating them about as well as a vegetarian at a Texas BBQ. One of the most recent, The Long-Term Stock Exchange, was formed with the idea of creating long-term investments that result in sustainable capital. Formed in 2016, the firm started trading in 2020 after waiting years for regulatory approval. It now has just two companies listed on its exchange - talk about a lonely hearts club!

• In total, there are about a dozen exchanges in operation in the US today. The big two, NYSE and Nasdaq, make up about 42% of the global market cap.

MACROECONOMICS

The Latest Jobs Report Has Left Markets Unsure About the Next Rate Cut✂️

Economic Strip Tease: The US job market played it cooler than a cucumber in a polar vortex this August, producing data that left the market more confused than a chameleon in a bag of Skittles about the size of the Federal Reserve's next move.

• Nonfarm payrolls, the monthly peep show of US employment levels (excluding a few industries like farming because apparently, counting cows is too hard), put on quite a show.

When Good News Wears a Villain's Cape: This time, the numbers were decent – but only just, like a participation trophy at an adult spelling bee. The US created 142,000 new jobs, easily higher than July's pitiful 89,000 but lower than the 161,000 the number nerds had predicted. Plus, the US Labor Department revised July's numbers – which were already low enough to make investors consider a career in sheep herding – downward by 25,000 jobs.

• But unemployment figures softened the blow like a feather pillow in a brick fight, easing from July's 4.3% to 4.2% as predicted. Meanwhile, the average hourly wage was a better-than-expected 3.8% higher than last year.

The Market's Fifty Shades of Green: The Fed is most likely to cut interest rates if the economy is struggling while inflation is, for the most part, behaving itself like a well-trained puppy. So the US economy could soon feel the effects of lower interest rates, much like a jolt of caffeine to a sleep-deprived stock trader. Cheaper borrowing costs would spur on businesses and individual spenders faster than you can say "buy now, pay later." Plus, lower rates would make savings accounts about as exciting as watching paint dry, so Americans could be tempted to take their cash out of piggy banks and into the stock market.

SPORTS & LEISURE

Callaway to Spin Off Top Golf⛳

Fore! Gone Conclusion: Once riding high on the surge in golf's popularity like a caddie on a runaway golf cart, industry leader Callaway ($MODG) now finds itself in a sand trap deeper than a hedge fund manager's pockets. Their $2 billion acquisition of high-tech driving range Topgolf — initially seen as a hole-in-one strategy to cash in on the casual golf trend — has shanked its way into disappointment.

• With consumer spending slowing down, Topgolf’s once impressive growth has lost steam. But instead of reaching for the nine-iron, the sports equipment giant is pulling out a tool more commonly seen in B School — divestment.

When the Numbers Make You Want to Throw Your Putter: Since merging with Topgolf in Mar. 2021 to form Topgolf Callaway Brands, $MODG stock has dropped over 60%, and Topgolf's sales are down 11% year-over-year in July, a slump steeper than the slope on a black diamond ski run. Following a strategic review that probably involved more head-scratching than a lice outbreak, the leading brand in golf gear plans to spin off its driving range from its core golf equipment and lifestyle business — not even four years after the merger.

Swinging Solo: This decision has been brewing longer than the beer at the 19th hole — with whispers that Callaway had been considering selling its equipment business as early as March. Company leadership believes both firms can thrive separately, though their futures will remain as linked as a golfer and their favorite lucky ball. They'll navigate what golf looks like in a post-pandemic, hybrid working world that initially boosted their fortunes. In any case, the proposed spinoff is expected to take place by the second half of 2025, at which point Topgolf will have its own stock ticker.

MORE NEWS

Additional market-moving events🌎

Welcome to the Club: Dell and Palantir shares rose in extended trading after the announcement that they’re being added to the S&P 500. Their inclusion comes after tech companies Super Micro and CrowdStrike joined the index earlier this year. (CNBC)

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