• Bonds: 10-year Treasury yields reached a 24-year high, although a solid auction this afternoon saw yields back off by day’s end. Meanwhile, new data pushed mortgage rates to their highest level in nearly three years.
• Stocks: All three major indexes fell as pressure continued to build in the bond market.
• Macro: Newly released Federal Reserve minutes signaled that another rate hike is likely this year, though perhaps not until December.

Retail

Illustration: Morning Brew Inc., Photos: Adobe Stock

You’ve already heard about AI’s appetite for electricity and water. But here’s a new one: It’s coming for Big Macs, too.

McDonald’s is currently facing a federal class-action lawsuit that accuses the fast food giant’s AI-powered pricing system of violating antitrust law. Its chief problem: The AI tool, which uses daily transactions and local data to suggest menu prices across its 14,000 US restaurants, shares nonpublic information between franchisees that would otherwise compete. “The result is algorithmic price-fixing aimed at customers who are already stretched thin,” the suit alleges.

McDonald’s responded that the lawsuit mischaracterizes how the pricing system actually works. AI recommendations are optional, and franchisees still make the final call, it says—though some store owners say they feel pressured to follow the bots’ business advice.

However the case ends, McDonald’s isn’t the first to experiment with personalized algorithmic targeting of customers—and odds are it won’t be the last.

Pricing bots are popping up everywhere

DraftKings is facing similar allegations about predatory algorithms in a proposed class action filed in Massachusetts. Citing a New York Times investigation, the lawsuit claims that the sportsbetting company used machine learning to flag users most likely to lose the most money, then targeted them with more promotions. Plaintiff Daniel Vest says he lost thousands of dollars and received at least 70 emails, texts, and app notifications encouraging him to keep betting in a single month.

“DraftKings does not use AI to target customers based on losses, nor do we use AI to target customers based on indicators of potential problem gaming,” a DraftKings spokesperson wrote in a statement.

While that’s a lot of algorithmic meddling, from burgers to sports bets, at least your Great Value groceries appear safe for now: After scrutiny over whether Walmart’s digital shelf labels and AI tools would be used to create targeted pricing, CEO John Furner drew a clear line. “We price the product, not the person,” he said.

The other side of the story

The muted reaction on Wall Street suggests that investors don’t yet see these lawsuits as a major earnings threat. If that sentiment holds, companies may have little financial incentive to stop experimenting with algorithmic pricing, especially if the upside shows in the margins before the legal risk shows up in earnings.

But proponents of algorithmic pricing argue that smarter systems can simply help businesses do a better job matching prices to local demand.

Research from economists Stefano DellaVigna and Matthew Gentzkow found that large retail chains often charge nearly identical prices across very different markets, leaving millions in potential profit on the table. The same study also found that uniform pricing can also leave poorer households paying relatively more than richer ones, suggesting that more flexible pricing could sometimes benefit both businesses and consumers.

If that’s where pricing is headed, maybe it’s worth an audible gasp at every price tag within earshot of your phone.—SY

      

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Stocks

🟢 What’s up

• Micron rallied 4.03% on a D.A. Davidson price-target hike, despite a potential semiconductor-industry strike in Taiwan.
• Constellation Brands gained 2.33% thanks to strong quarterly results.
• HPE climbed 2.31% after unveiling a new line of enterprise servers powered by AMD’s latest processors.
• Spotify rose 5.08% as the company expanded its audiobook service to more than 180 markets worldwide.
• Penguin Solutions jumped 13.08% on fiscal fourth-quarter results that beat Wall Street expectations.

🔴 What’s down

• Caterpillar lost 5.75% and Deere dropped 3.80% as federal regulators launched an inquiry into competition in the farm equipment industry.
• Webull sank 19.09% following a congressional committee report claiming that the brokerage’s ties to China pose a national security risk.
• Neogen slipped 2.34% despite raising its fiscal 2027 revenue outlook.
• Worthington Steel fell 7.08% as fiscal first-quarter earnings came in sharply below year-ago levels.
• Fair Isaac dropped 2.01% on plans to cut 15% of its workforce as it shifts toward “AI-driven product development.”

Stock of the day

SpaceX shoots for the moon on debt

Illustration: Morning Brew Inc., Photos: Adobe Stock

SpaceX may know how to launch rockets into space, but can it get a $40 billion AI deal off the ground?

Elon Musk is angling to raise this lofty sum—split between $10 billion in bank loans and $30 billion in investment-grade debt—to buy Nvidia chips to fuel his AI buildout ambitions. If he secures the bag, that would place the deal among the biggest-ever debt financings for an AI buildout. Apollo is leading the financing, while bond-fund giant PIMCO is weighing whether to pony up, with the deal potentially closing in 2027.

Musk may feel bullish about ramping up business with buddy Jensen Huang, but investors didn’t share the good vibes: SpaceX slid today by 2.51%, while Nvidia stock also dropped 0.74%.

Astronomical expectations

Wall Street’s wary for good reason: SpaceX is looking to borrow as much as the company is expected to generate in revenue this year, projected at $44.5 billion. It also doesn’t bode well that SpaceX has been shopping the deal around with no takers, reportedly passing out a half-baked two-page memo featuring a picture of outer space with an arrow pointing to it, indicating plans to build data centers “somewhere in the universe.” Nothing says $40 billion investment opportunity like ‘Location: TBD.’

Still, SpaceX’s two Memphis data centers—Colossus 1 and 2—are firing on all cylinders. The company’s AI business, soon to be renamed “Super Intelligence,” is expected to generate $60 billion in sales in 2027, up sharply from July’s $38 billion estimate.

Plus, Musk has weathered plenty of doubters before. Now we’ll see whether this latest moonshot reaches orbit, or stays stuck on the tarmac.—JD

RETIREMENT

Illustration: Morning Brew Inc., Photos: Adobe Stock

Whether your retirement plans involve a lake house, a beach chair, or simply never opening Slack again, you might want to take a peek inside your 401(k). Wall Street has been trying to sneak some private credit into the mix, and it may soon have a wider path in.

There’s plenty of money to chase: Americans held $15 trillion in defined-contribution retirement plans at the end of June, including $10.8 trillion in 401(k)s. But one major obstacle has kept many employers on the sidelines: If those investments go south, companies could face class-action lawsuits from workers who say their retirement savings were put into imprudent investments.

That’s why the Anderson v. Intel case now before the Supreme Court matters to investors. It stems from Intel’s decision after the financial crisis to put portions of employee retirement funds into risky options like private equity, hedge funds, and commodities. A former employee argued that those investments underperformed conventional alternatives and that Intel breached its fiduciary duty.

But several justices appeared skeptical Tuesday that underperformance alone should be enough to keep such a lawsuit alive—which could raise the bar for similar cases.

Wall Street has been building the on-ramp

Private-market firms haven’t been waiting for the courts to greenlight their path into retirement portfolios. Empower has already teamed up with Apollo, Blackstone, Goldman Sachs, PIMCO, and others to offer retirement plans access to private assets. BlackRock and Great Gray have built target-date products with private equity and private credit, while Capital Group and KKR are developing similar offerings.

The policy backdrop has moved their way, too. Last year, the Trump administration directed regulators to expand access to alternative assets in defined-contribution plans, and the Labor Department withdrew guidance that had taken a more cautious approach to private equity in 401(k)s.

Private credit’s credibility problem

The timing is awkward. Private credit has spent the past year lurching from one concern to the next, from Jamie Dimon’s “cockroach” warning about hidden credit problems to AI fears hitting software borrowers and, more recently, a rush to finance the massive data-center buildout.

Last week, Blue Owl Capital once again limited redemptions from two of its private credit funds at 5%, as fears around AI kept requests at its flagship technology fund well above industry peers.

Together, those episodes have sharpened concerns about private credit’s opaque valuations, limited liquidity, lending standards, and how borrowers hold up under stress.

For retirement savers, that makes the Supreme Court case more than a Wall Street story. Private credit can offer additional income and diversification, but those benefits may increasingly come bundled inside the target-date funds and managed portfolios workers already contribute to every paycheck.

In other words, watch out: The next private-credit investor might not be a Wall Street pro—it could be you, on autopilot.—HC

      

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News

• Michael Burry says stocks are still in the “denial” stage of a major downturn—and that it could last another six to nine months.
• New research by BlackRock finds that affluent women are on track to control $34 trillion in US investable assets by 2030—but that nearly half of them have no financial advisor.
• Nvidia director Mark Stevens sold nearly $947 million of Nvidia stock in Q3, leading a list of major insider sellers including Jeff Bezos and other tech execs.
• Porsche is targeting a break-even point below 200,000 annual vehicles and cutting thousands of jobs as its China business shrinks.
• A cybersecurity consultant was convicted of stealing nearly $55 million of crypto and spending part of it on Pokémon cards.

Calendar

We’ll get earnings reports from PepsiCo, NovaGold Resources, and Nurix Therapeutics. Plus, markets will check in on economic data with weekly initial jobless claims and monthly wholesale trade for August.

recs

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🏥 Medical bills are giving more Americans agita. A new class of influencers tells people why they shouldn’t pay them.

👋 Most ETFs these days are managed by computers. But this old-school option offers a human touch—and top performance.

🖥️ AI out, quant in? One quantum computing stock has some analysts predicting that share values could more than double.

📝 If you think you’re ready to retire, this quick checklist helps make sure your finances are good to go.

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