In partnership with

Markets

Stocks appeared to be on track for a positive day but took a downturn late in the session as the tech sell-off, fueled by long-term concerns over AI, extended for another day. The biggest decline, however, came from an automaker: Ford's stock dropped over 18% following a significant Q2 profit miss.

In Partnership with Bill.com

Take Control of Your Expense Reports Below👇

Take a demo, get a Blackstone Griddle

Financial operations heating up? BILL Spend & Expense can help you take control. Automate expense reports, set budgets across teams, and get real-time insights into company spend. Take a demo to learn how and we'll give you a 28" Blackstone Omnivore Griddle—so you can take control of your next barbecue, too.

Request a demo

Economy

Soft Landing is very possible after GDP reports

The American economy is performing impressively: A robust commerce report released yesterday suggests that the US is on track to achieve the elusive "soft landing," successfully avoiding a recession for the first time since the 1990s.

Economic growth: Gross domestic product (GDP), a comprehensive measure of US goods and services, grew at an annual rate of 2.8% from April through June. This surpassed forecasts of 2.1% and doubled the growth rate from the first quarter, according to the Commerce Department.

Key drivers:

• Increased household spending, which accounts for two-thirds of GDP, despite rising unemployment and cost-conscious behavior.

• Corporate and government spending, with business investment reaching its fastest pace in nearly a year and increased defense budgeting contributing to GDP growth.

Slowing inflation: The Fed's preferred inflation measure, excluding volatile food and energy prices, rose at a 2.9% annual rate last quarter. This is a significant decrease from the 3.7% rate in Q1, although slightly higher than expected.

Looking ahead: One economist described this as "a perfect report for the Fed," which is widely anticipated to begin cutting interest rates in September following months of positive economic indicators.

Airlines

Southwest ends his era of open seating

Southwest Airlines, known for its unique approach to air travel, is reversing a 50-year tradition. Yesterday, the airline announced it would eliminate open seating, a signature feature, in response to declining profits.

Southwest’s decision is driven by two main factors:

1. The airline can charge more for premium seats with amenities like extra legroom.

2. Customers reportedly prefer assigned seating. According to a survey by Southwest, 80% of its flyers favored assigned seats, and the top reason for switching to competitors was seating arrangements.

While transitioning to the new seating system, Southwest will retain its current model—where passengers choose their seats upon boarding—until the planes are retrofitted and regulatory approval, expected next year, is obtained. Additionally, Southwest plans to introduce red-eye flights in 2025 but will maintain its policy of free checked bags for now.

Embracing change

Southwest's strategic shift comes amid disappointing financial results, with Q2 profits dropping 46% to $367 million despite record revenue. The company attributed the decline to selling too many summer tickets too early, missing out on last-minute bookings.

Other airlines are also experiencing challenges. Delta and American reported weak Q2 profits despite strong revenue and demand. However, their premium ticket offerings, such as first-class and economy plus, help offset higher labor and fuel costs.

Adding to the pressure, Southwest is dealing with activist investor Elliott Investment Management, which is pushing for a strategic overhaul. Despite this, Southwest CEO Bob Jordan stated that the change in seating policy was not influenced by Elliott's demands.

Retail

No popping bottles at LVMH

Decreasing demand for luxury lifestyles is impacting the high-end conglomerate LVMH.

The French luxury empire, which owns brands like Louis Vuitton and Hennessy, reported that consumers are spending less on its luxury handbags and cutting back on its upscale cognac and champagne.

Tightening LV belts

LVMH’s stock fell over 4% on the London Stock Exchange after the company announced a slowdown in sales.

• The downturn was particularly severe in Asia (excluding Japan), where sales dropped 14% last quarter compared to Q2 2023. Japan, however, was a bright spot, with sales growth driven by a weaker yen, attracting Chinese tourists to its boutiques.

• Operating profit fell 8% in the first half of the year compared to the same period in 2023.

• LVMH noted that more modestly priced products performed worse than upscale items, indicating economic challenges for the middle class. The decline in high-end purchases signals the end of the conspicuous consumption boom of 2022 and 2023 that benefited the luxury industry, with competitors like Burberry and Gucci also facing difficulties.

Publicity splurge

Despite these challenges, LVMH's brands continue to wield significant cultural influence. Even if your wardrobe is mostly Target, you’ll be seeing a lot of LVMH soon. The company invested over $160 million to become a major sponsor of the Paris Olympics, featuring bespoke items from its subsidiary brands throughout the event.

• The Olympic torch has been transported in a Louis Vuitton trunk.

• Medals for the athletes are designed by the jeweler Chaumet.

• Berluti collaborated with French fashion guru Carine Roitfeld to design the uniforms for the French team at the opening ceremony, expected to be watched by 1.5 billion people worldwide.

In another bold sports venture, LVMH is negotiating with Formula 1 to have its luxury watch brand Tag Heuer replace Rolex as the timekeeping sponsor of the world’s most popular motorsport, which would be a significant publicity coup.