• Bonds: Thanks to new inflationary economic readings this morning, the 10-year Treasury yield officially hit a 19-year high. Meanwhile, an auction of 5-year Treasury notes went terribly, which also pushed the shorter-term bond’s yield above 5% for the first time since 2007.
• Commodities: Crude reversed a five-day losing streak after President Trump hinted that he’s considering a diesel export ban.
• Stocks: The combination of higher yields and higher oil prices sent stocks tumbling lower, which has become the theme of the last few weeks.

Travel

Illustration: Morning Brew Inc., Photos: Adobe Stock

Great news for lazy brides-to-be planning that bachelorette: Royal Caribbean may soon have you covered from the cruise ship to the all-inclusive resort.

Today the cruising company announced it will pay $3 billion for a 50% stake in Sandals and Beaches Resorts, the Caribbean all-inclusive vacation business behind adults-only Sandals and family-focused Beaches. The deal values the business at roughly $6 billion and marks Royal’s biggest push yet from the sea onto land.

The deal is expected to close in early 2027, and the company says it should start adding to earnings next year.

All-inclusive ambitions

Sandals gives Royal a big cross-selling opportunity: Royal can market Sandals stays to its cruise customers, Sandals can introduce resort guests to cruises, and some beachfront properties could eventually be worked into Royal’s destination network through shore excursions.

That diversification could also come in handy at a tough moment for cruising. Higher fuel costs and geopolitical disruptions tied to the Iran war have weighed on the industry, while weaker demand led Royal to trim its annual revenue-growth forecast this summer from 10% to about 9%. Sandals gives the company an alternative revenue stream while expanding its reach into the $2 trillion global vacation market.

Wall Street gets seasick

That all sounds pretty alluring. So why did shares sink 6% yesterday, and about 2% today?

“Clearly the market doesn’t like this type of transaction,” Stifel analyst Steven Wieczynski wrote in a note. “We think it’s fair to say that for the most part, when we have seen a company diversify away from their core competency, it typically hasn’t worked out in the long-term.” He also questioned the strategic fit: Sandals is adults-only, while Royal Caribbean’s namesake brand has leaned into family-oriented vacations.

The fact that Royal is funding the deal with debt doesn’t help, either. Goldman estimates that the transaction would increase Royal’s net leverage by about 0.3 times, leaving investors to weigh whether the potential cross-selling and expansion opportunities are worth taking on more debt for a business outside Royal’s traditional specialty.

That said, both Goldman and Stifel reiterated Buy ratings—so investors may not want to abandon ship just yet.—SY

      

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Stocks

🟢 What’s up

• IonQ jumped 4.42% after its quantum computer was selected as the first system for Nvidia’s new quantum research center.
• Palantir gained 3.68% as the FAA began using its AI software for air traffic control at three major Washington-area airports.
• Cracker Barrel climbed 4.49% on an earnings beat, helped by improving customer traffic.
• Worthington Enterprises rallied 1.05% on stronger-than-expected earnings, fueled by growing demand for its data center cooling products.
• Securitize jumped 10.38% on a Cantor Fitzgerald Overweight rating that pointed to growing demand for tokenized securities.

🔴 What’s down

• Amazon sank 2.24% and Netflix fell 1.11% after losing out to YouTube on a four-year deal to livestream Coachella.
• Novo Nordisk and Eli Lilly dropped 3.12% and 1.64%, respectively, amid lawsuits alleging their GLP-1 weight loss drugs can cause sudden vision loss.
• Hasbro slipped 0.45% despite teaming up with McDonald’s to bring back its Monopoly promotion.
• Astrana Health sank 2.19% after disclosing a significant data breach.
• Alibaba fell 4.75% on reports that Beijing is investigating rival AI firms DeepSeek and Moonshot AI, raising concerns about tighter regulation of the industry.
• Maplebear dropped 3.27% despite announcing a partnership that will bring Instacart shopping to Meta’s Muse AI assistant.

Stock of the day

Don’t call it a McComeback

Illustration: Morning Brew Inc., Photos: Adobe Stock

The Big Mac is supersizing its investments. Today McDonald’s announced it’s dedicating $8.5 billion to a turnaround strategy for its fast-food franchisees, aimed at boosting food quality and service.

Served up on the Golden Arches’ investor day, the news comes as McDonald’s faces a slowdown in its US business. The restaurant has spent years contending with inflation-weary consumers, especially low-income ones; same-store sales rose just 0.8% last quarter, the lowest rate in a year.

Filet-o-fresh

So what’s in the McPlans? The company says its initiative, called NEXT, will disburse the money over a decade as it looks to make its restaurants more tech-forward, efficient, and friendly.

New ideas on the menu include:

• Service with a smile. A focus on staff training will teach employees how to welcome customers who step through the door.
• Better tang for your buck. New food options and improvements will include a pilot of hand-breaded and marinated chicken.
• Robo-drive-throughs. The company will expand ArchIQ, the AI system it’s been testing to take orders and chat, to more drive-throughs and kitchen operations.
• A gamble with Monopoly. The chain is also reintroducing the Monopoly promotion, where customers can win Jeep Cherokees, Carnival cruises, or a grand prize of a crisp $1 million cash.

But will the strategy work? Investors haven’t indicated they’re McLovin’ it: The stock dropped 4.81% today to a new 52-week low after the announcement. Less-than-optimistic comments from company leadership didn’t help.

“One of the things I’ve talked to our team about is we need to stop talking about [flat traffic and higher inflation] being a difficult environment, and just say that is the environment,” CEO Chris Kempczinski told CNBC. “Because I think, as we look out forward, we’re not expecting things to change.”—GR

TECH

Illustration: Morning Brew Inc., Photo: Facebook

Mark Zuckerberg will probably be grinning ear to ear during Meta’s annual Connect conference today, and it’s easy to see why: His Muse AI assistant has surpassed ChatGPT downloads to claim the top spot on the App Store, Meta’s shares have soared more than 30% since the beginning of the month, and Zuck’s the focus of a new Aaron Sorkin movie coming next month.

Okay, he may not be thrilled about that last one, but it’s unlikely to dampen Zuckerberg’s spirits. After years of Wall Street bemoaning Meta’s massive AI spending spree (around $241 billion over the last three years) and fretting that there’s nothing to show for it, Meta’s finally got a smash hit on its hands.

Customer service, beware

Users love Muse’s ability to take the reins of their digital lives, including booking appointments, making purchases, and writing emails. Companies are sprinting to get on board: Over the last three days, PayPal, Shopify, Instacart, and Expedia have all announced partnerships with Meta that will allow them to integrate their platforms with Muse.

But not everybody is thrilled. Goldman Sachs just released a list of companies that benefit from “consumer inertia,” which is a fancy way of saying “laziness.” Analysts warn that industries with high switching costs, recurring bills, or those that make cancelling their services annoyingly difficult will suffer as agents streamline customers’ ability to shop for alternatives.

In other words, AI is willing to sit on the phone with customer service for hours just to save you a few bucks on your bill, even if you’re not—and that’s bad news for telecom carriers, home or auto insurers, and utility companies. Streaming services, travel agencies, and even financial services could all take a beating from AI agents happy to jump ship to the competition.

Perhaps the biggest loser from the debut of AI agents: Planet Fitness. The gym chain is notorious for making life miserable for customers trying to get out of their membership, but shares are down 18% over the last five days as investors realize that AI removes the headache that keeps customers locked in.

A world without transactional friction

Muse is great news for Meta shareholders who have been waiting for the company to finally have something to show for all its AI investments. And if you’re a PayPal or Shopify shareholder, the tech giant has already provided a boost this week, as investors anticipate the benefits of frictionless AI shopping.

But the companies that depend on that friction seem set for some serious upheaval—and according to Citrini Research, investors should think long and hard about whether those business models will be able to endure this new phase of AI disruption. “Tactics that worked when consumer behavior was dictated by human psychology will fall by the wayside,” the firm wrote on X. “And those that fail to adapt will be left behind.”—MR

      

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News

• Fat Bear Week has begun, plopping down a hefty counterweight to a bull market.
• Kraft Heinz’s clean-label ketchup was such a hit, it’s making way for clean Jell-O and clean Kool-Aid.
• Disney+ is boosting the price of its streaming service tiers across the board.
• Speaking of streaming services, Wall Street can’t stop kicking Netflix while it’s down.
• Federal Reserve governor Michael Barr said we need more rate hikes to keep inflation down.
• That’s a lot of rockets: A new report finds that investments in space companies more than doubled to $23 billion in the first six months of the year.
• $5 billion of nearly identical trades, all at almost exactly $5,500? Kalshi says there’s nothing to see here.

Calendar

Earnings announcements: BlackBerry and Olive Garden operator Darden Restaurants kick the day off, while Costco and Scholastic report after the market close.

Economic reports: Keep an eye on weekly initial jobless claims, as well as a report from the Census Bureau about new home sales in August.

Everything else: Geopolitics remains in the spotlight when Presidents Trump and Xi Jinping meet in Washington for their second summit this year. Here are three things to watch as the world leaders try to reset trade tensions.

recs

💉 Just what the doctor ordered: These six biotech stock picks may be risky, but could give your investments a shot in the arm.

🌴 Never mind moneymaxxing, nearly three-quarters of Americans say they’d slow their financial progress to enjoy life more now.

🧗 Need a new thrill? Here’s how the world’s best free solo climber takes an unusual risk with his money.

🥇 If you want to invest in gold, this seven-step plan can help you gild your portfolio.

🤖 More robots, more problems. This handy chart reveals how high-income countries have bigger AI worries.

🐶 Try barking up this tree: These underdog stocks are worth watching, according to a hedge fund manager focused on small companies with big potential.

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