Wall Street slides as investors brace for data gaps and Fed uncertainty

Good morning. Here's what happened overnight and what you need to know today.

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1.

Data drought: Tech shares dragged Wall Street lower after US President Donald Trump signed legislation to end the longest shutdown in US history, leaving investors contending with continued gaps in official economic data. The 43‑day shutdown delayed USD50 billion in federal spending and lowered GDP by 1.5 percentage points, according to estimates from the nonpartisan Congressional Budget Office, which also said up to USD14 billion in economic activity may not be recovered. Confirmation of missing economic data amid scepticism from several Fed officials reduced expectations of an interest rate cut, with CME data showing traders pricing just under a 50% chance of a December cut, down from 70% last week. The Nasdaq was down 2.5% and leading declines in afternoon trading in New York, with chip stocks such as Nvidia and Broadcom hit hard. Tesla was sliding 7% after Bloomberg reported it had begun internally testing Apple CarPlay support in a reversal from its long-standing resistance to the platform following weak sales. The S&P 500 was down 1.6% and the Dow 1.3% lower. Cisco was 4.3% higher after raising its outlook, while Disney was sinking 8.3% after reporting mixed results and flagging a potentially extended fight with YouTube TV. Elsewhere, Apple and Tencent reached a deal allowing Apple to take a 15% cut from WeChat mini app purchases. (Bloomberg)(WSJ)(Reuters)(Capital Brief)

2.

Epstein files: The release of more than 20,000 pages of documents from Jeffrey Epstein’s estate has reignited political and public scrutiny in Washington and intensified pressure for the full Epstein files to be made public. The fallout has spread beyond Donald Trump to Katherine Keating (daughter of former Australian prime minister Paul Keating), former US Treasury secretary Lawrence Summers, author Michael Wolff, former president Bill Clinton, Andrew Mountbatten-Windsor (formerly Prince Andrew), and others linked in the emails. Released by the Republican-led House Oversight Committee just hours after Democrats published selected emails implicating Trump, the full cache includes messages where Epstein claimed Trump “knew about the girls” and had spent “hours” with one of Epstein’s victims. Democrats say the emails raise “glaring questions” about what the White House is hiding and accuse Trump of trying to cover up the Epstein files. Republicans, meanwhile, say the initial email leak was politically motivated. As reported by Capital Brief, Epstein’s emails also show direct contact with Katherine Keating in 2011, including exchanges about her father’s book and social invitations in New York. Former US Treasury secretary Larry Summers also appears in the emails, including a 2017 exchange in which he complained to Epstein about what he described as harsh treatment of a man who “hit on a few women”. In another email, Epstein says former president Bill Clinton “was NEVER EVER” at his private island. The fallout is expected to intensify ahead of a planned committee vote on whether to depose key figures mentioned in the emails. Trump has denied all wrongdoing. (Capital Brief)(Bloomberg)(NYT)(AP)

3.

Rapid growth: AI coding tool startup, Cursor, hit a USD29.3 billion ($44.68 billion) valuation to reach almost 12 times the valuation it hit in January, the WSJ reported. The round co-led by existing investor Accel and new investor Coatue is the third round by the startup this year, after its latest June round valued the company at USD9.9 billion. Thrive Capital and DST Global also participated in the round, the WSJ reported, quoting CEO Michael Truell as saying that Alphabet’s Google and Nvidia among others were invited to the round “to deepen the partnership.” Google provides AI services and cloud computing to the startup, while Nvidia is an enterprise customer. Cursor’s tool, launched in 2023, learns a developer’s coding style to help autocomplete, edit and review lines of code. It allows users to switch between different AI models like OpenAI, Anthropic and Google. (WSJ)(Capital Brief)

4.

Bad rating: Fund ratings agencies are on high alert over conflict-of-interest concerns as the corporate watchdog takes on a first-of-its-kind case, suing SQM Research for misleading reports on the now-collapsed Shield Master Fund. Zenith group head of research Grant Kennaway said the ASIC proceedings against SQM mean that research houses “cannot fail to be aware of the great scrutiny being applied by not just regulators, but also the market”. FundMonitors chief executive Chris Gosselin told Capital Brief that ratings and research houses paid by fund managers were now on notice, given the irrevocable conflict of interest. An industry source told Capital Brief that ASIC’s action made SQM a “test case” for the sector. Morningstar head of research Matt Olsen said that regardless of a research house’s business model, it’s important they segregate the duties of research and business staff to manage conflicts, maintain well-documented conflict-of-interest policies, and ensure transparency in how their research process was conducted. (Capital Brief)

5.

Claude used: China-backed hackers used Anthropic’s Claude AI to carry out a highly automated hacking campaign in September targeting around 30 corporations and foreign governments, the company said. The campaign involved automation levels Anthropic’s cybersecurity team had not seen before, with 80% to 90% of the operation run by AI and only minimal human input at a few decision points, head of threat intelligence Jacob Klein told The Wall Street Journal. The hackers sidestepped Claude’s safeguards using so-called jailbreaking techniques, telling the model they were performing security audits for the organisations they were targeting. They structured the operation into discrete tasks, including scanning for vulnerabilities and exfiltrating data. Anthropic said it disrupted the campaign and blocked the accounts involved, but confirmed up to four intrusions were successful and in some cases resulted in sensitive data being stolen. The company said it was confident the attackers were linked to the Chinese state based on digital infrastructure and other indicators. (WSJ)

6.

Job cuts: US telecommunications giant Verizon Communications is reportedly planning its largest-ever workforce reduction, with around 15,000 job cuts to reduce costs amid sustained subscriber losses. According to reports in The Wall Street Journal and Bloomberg citing people familiar with the matter, most cuts are expected to come through layoffs in the coming days, excluding unionised employees. Verizon will also reportedly convert about 200 company-owned retail stores into franchises, shifting those staff off its payroll. The company had nearly 100,000 employees at the end of 2024. It comes after Verizon lost postpaid mobile subscribers for three straight quarters, including a net loss of 7,000 in the most recent quarter, compared to analysts’ forecast of a 19,000 gain. Rivals AT&T and T-Mobile both recorded subscriber growth. Dan Schulman, who became CEO last month, said during a recent earnings call that Verizon is at “a critical inflection point” and committed to “aggressively transform” the company’s culture, cost structure and financial profile. Verizon shares were trading 1.6% higher in afternoon trading. (WSJ)(Bloomberg)

7.

Retail therapy: Lendlease received an unsolicited offer for half-stakes in three shopping centres in its $2.8 billion Australian Prime Property Fund Retail by Hong Kong investor Link REIT. Sources told The Australian that the proposal for around $1.5 billion of Lendlease’s shopping centre assets covers the 50% interests of three of four remaining assets held in the fund; Sunshine Plaza in QLD, Macarthur Square in NSW and Lakeside Joondalup in WA. Lendlease’s fund is already selling down assets and is expected to use the proceeds from the sale of the Erina Fair shopping centre for $895 million last month to pay out upcoming redemption requests from investors. Sources told The Australian that should the deal come to fruition, it could unleash concurrent auctions as rights held by the malls’ co-owners could be triggered. Link REIT is one of the largest listed real estate investment trusts in Asia at HKD108 billion ($21.3 billion) market value. (The Australian)(AFR)(Capital Brief)

8.

Spam blocker: The European Commission is investigating whether Google’s search results rank news publishers unfairly, possibly impeding publishers from legitimately making money through third-party content. The Commission is concerned that under Google's ‘site reputation abuse policy' it may be demoting news media and other publishers’ websites and content in Google search results when those websites include content from commercial partners. According to Google, this policy aims to tackle practices that are allegedly meant to manipulate ranking in search results. Opened under the Digital Markets Act, the probe should run 12 months and could see Google face fines as high as 10% of the company’s global annual sales if any negative findings aren’t addressed. Fines can increase to 20% in cases of repeated infringement. Google Search’s chief scientist, Pandu Nayak, wrote in a blog post on Thursday: “The investigation announced today into our anti-spam efforts is misguided and risks harming millions of European users.” (Capital Brief)(European Commission)