Israel Pledges Restraint in Iran Counterattack
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To learn more, visit morganstanley.com slash why us. Investing involves risk. Morgan Stanley Smith Barney LLC. Israel gives the U.S. assurances ahead of a planned counterattack on Iran. Plus, Kamala Harris fights to counter Donald Trump's appeal with blackmail voters. And earnings season ramps up in the homestretch before Election Day. It's

It's certainly like a barometer for some in the electorate of how the country is doing. But half of Americans don't own the stock market, so what do they care if the market's at a record? It's Tuesday, October 15th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today.

U.S. officials say Israel has assured the Biden administration that it won't target Iran's oil or nuclear facilities in its planned retaliatory attack on the country.

The White House has been urging Israel to limit its counterattack to avoid further escalation in the Middle East and a spike in oil prices. Israel's response is likely to come before the U.S. presidential election and could look like an April counterattack that hit an Iranian military base. However, Israeli officials say their operation could hit unexpected targets, and analysts say it is likely to be more severe.

The National Security Council, Defense Department and the Israeli Embassy in Washington declined to comment on the Israeli assurances, which were first reported by The Washington Post. Oil prices are sharply lower this morning on the prospect of a more limited Israeli counterstrike against Iran. Meanwhile, Israeli Prime Minister Benjamin Netanyahu is weighing a plan to tell Palestinians to leave the northern part of the Gaza Strip and seal off humanitarian aid to the area.

The Israeli military most recently ordered evacuations in northern Gaza a few days ago when it launched a fresh offensive against Hamas militants there.

Louise Wateridge is a spokesperson for the United Nations Agency for Palestinian Refugees. She says the humanitarian situation there is already dire. There has been no food entering North Gaza since the 1st of October. That is a significant amount of time for a population of 400,000 people. So far, very few in northern Gaza have heeded the latest evacuation order. ♪

Back on the campaign trail with just three weeks to go until Election Day, Vice President Kamala Harris is making a push to shore up her standing with black men.

In Erie, Pennsylvania yesterday, Harris announced new policies as part of what her campaign is calling an "opportunity agenda for Black men," which includes offering a million forgivable business loans for Black entrepreneurs, creating more training and apprenticeship programs, and studying diseases that predominantly affect Black men.

The strategy is emerging less than a week after former President Barack Obama admonished black male voters who he said were reluctant to back Harris. Stern remarks that some in the party say risk making matters worse for the vice president. I've got a problem with that because because part of it makes me think I'm speaking to men directly.

Part of it makes me think that, well, you just aren't feeling the idea of having a woman as president. And you're coming up with other alternatives. Polling has shown Donald Trump receiving a higher percentage of support among Black voters, particularly among men, than in past campaigns.

And Google is going nuclear. In a first-of-its-kind deal, the company will back the construction of seven small nuclear power reactors in the U.S. that will help to feed A.I.'s growing energy needs.

Under the terms of the power purchase agreement startup Kairos Power plans to deliver the reactors between 2030 and 2035. The companies aim to add 500 megawatts of nuclear power starting at the end of the decade, about enough to power a mid-sized city or one AI data center campus. Financial terms weren't disclosed, and the companies haven't decided where the reactors would be built or the number of locations.

Coming up, we're joined by finance editor Alex Frangos to discuss market sentiment heading into earnings season. And columnist Carol Ryan runs down the big questions that are keeping luxury goods makers up at night. That's after the break.

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Well, earnings season is shifting into higher gear today as Goldman Sachs, Bank of America, Citigroup, Walgreens, Johnson & Johnson, and more are prepared to report results this morning. And while that's enough of a reason to talk to Journal of Finance editor Alex Frangos, the looming U.S. election is lending added importance to how markets read these latest quarterly results.

Alex, as our colleagues on the PM show reported back on Friday afternoon, we got some pretty strong earnings results from some of America's biggest banks last week. More financial institutions are reporting today, but a range of other companies as well. What is the sense among investors and analysts broadly here? Is the good news likely to continue? Well, that's the million-dollar question. The important thing is that the stock market is at or near a record high today.

Valuations are very high and companies need to not just deliver, but deliver and then promise or guide that in the coming quarters, earnings growth is going to continue to be really strong to justify the very high prices that people are paying for stocks.

And if they don't, the risk is that it's very easy to be disappointed when expectations are so high. High expectations already. And there might be even more riding on this earnings season, given the close proximity of the U.S. election. Just remind us, if you could, how the performance of the market in the run up to elections can matter for the outcome.

Well, it's certainly a barometer for some in the electorate of how the country is doing. But what we've clearly had over the last few months is the market doing pretty well. Certainly over the next few weeks, as long as the market doesn't have a big swoon, it probably is not going to be a major factor.

Yeah, you mentioned the market's doing pretty well over the last few months. It's certainly the case. The S&P 500 rose to a fresh record yesterday, continuing a run that stretches really all the way back to October 2022. I mean, the other important thing about the stock market is like half of Americans don't own the stock market.

So what do they care if the market's at a record? You know, a lot of people would probably look at a record market and say, well, great, rich people are getting richer. But what have you done for me? That's part of the lesson of the last couple of elections is that you got to pay attention to people who aren't invested in the stock market. Yeah, you don't need to watch too many campaign ads to kind of hear that sentiment coming up quite a bit.

And finally, Alex, before we let you go, what else could shape how markets are faring heading into these crucial few weeks before Election Day? There's more here than earnings to be watching. Well, there's always the possibility of some sort of geopolitical October surprise. But the only other major economic thing on the calendar is the jobs report on the Friday before the election, which will be the final take on how things are faring out there. It's not expected to be a major surprise, but the

But the jobs report is super important and people will be watching it in the context of the election. That was Journal of Finance editor Alex Frangos. Alex, thanks as always.

Thank you. And from a broad look at the market, let's zoom in now on one sector that's also coming into focus, luxury goods. Conglomerate LVMH, the owner of Louis Vuitton, Dior, Tiffany's, and other high-end brands, is set to report earnings later today, with a slew of its competitors following in the weeks to come. And as Journal heard on The Street columnist, Carol Ryan told me, a lot is at stake. The two really big things on people's minds are

is what's going on with the Chinese luxury consumer. Chinese consumers have been watching the value of their homes fall for the past three years. They're not really in the mood to go out and spend thousands of dollars on handbags, luxury watches the way they were a couple of years ago. And they're a really important group of consumers for the industry. If you go back to the year 2000, Chinese spending would have been about 1% of global luxury spending. Today, it's around 31%.

So any commentary from management about what's going on, how the Chinese consumer is feeling is going to be quite closely followed. And then also the division within LVMH, it's their fashion and leather goods unit.

So that's where a lot of the really big luxury brands that people will be familiar with sit, like Louis Vuitton and Christian Georges, Givenchy. It's about 50% of the profits. If that slowed down considerably in the third quarter, it's a bad sign for LVMH, but also it's a barometer for how the luxury consumer is feeling globally. It wouldn't be a good sign for the industry if that division has slowed quite a bit. And Carol, what are brands doing to make up for this lack of appetite from Chinese consumers?

Well, I think for a while American spending was strong enough that it kind of offset some of the weakness in China. But that story is really gone now. You might start seeing luxury brands

look for growth in potentially two new areas. And one is to be a bit nicer to middle class consumers because the industry has been pretty aggressive with price increases over the last four years. So your average luxury good is about 60% more expensive today than it was in 2019. And what that's done is you've basically cut out an entire layer of consumer that spends maybe $2,000 or $3,000 on

luxury handbag or a watch every year. And actually, that category of consumer is worth about 50% of the industry sales. So it's really critical to get them back in. And you might see brands start to introduce products in that price range to get them back in store spending. And the other thing is LVMate has done some quite intriguing moves this year. They sponsored the Paris Olympics, but they also just signed a big sponsorship deal with Formula One. So it's

There's a bit of a shift into sport and it makes me wonder if they're trying to find a new group of consumers, potentially try to encourage more men to buy luxury goods. It's traditionally been a very female category. So that's something to keep an eye on.

I mean, look, you can only consider sponsoring events like the Olympics if you've got relatively deep pockets, which would maybe suggest LVMH is not the biggest problem child of the luxury bunch at present. Are there companies, though, that are in a bit more trouble? And is that reflected in their stocks at all?

Oh yeah, absolutely. That's a really strong trend in the industry as well. You've got a couple of brands that are doing very, very well and a lot that are doing very, very badly. Some of the stocks look, if not cheap, they've come down a lot. Burby's lost over 50% of its value so far this year. Kering, which owns Gucci and Bottega Veneta, they're down about 45% this year.

Overall, if you look at European luxury stocks, they still look a little bit expensive compared to where they were 10 years ago, which is the last time we saw quite a big slowdown in Chinese demand. So if the third quarter is weak, we might see a further dip in some of the stocks. Carol Ryan, thank you so much. Thank you very much.

And that's it for What's News for Tuesday morning. Additional audio in this episode was from Reuters. Today's show was produced by Kate Bullivant and Daniel Bach with supervising producer Christina Rocca. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.

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