Cooling U.S. economy may not fall off a cliff

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Weak December kickoff
Asia-Pacific markets started December on a weak note. Japan’s Nikkei 225 finished down 0.2% Friday, while Korea’s Kospi slid 1.2% to underperform Asia-Pacific benchmarks. China’s CSI300 Index, which tracks the largest blue chips listed in the mainland, slipped 0.4%, while Hong Kong’s Hang Seng Index fell 0.8% in mid-afternoon trade. The Dow Jones Industrial Average rallied Thursday to a new high for the year, with soft inflation data and strong Salesforce earnings capping the benchmark’s best month since October 2022.

Battle mode activated
Activist investor Nelson Peltz and his firm are seeking more than two seats on Disney’s board, according to a person familiar with the matter, setting the stage for a proxy fight. Disney, for its part, suggested the proxy fight stemmed from a personal grudge held by one of Peltz’s allies, former Marvel boss Ike Perlmutter. The news came the morning after Disney added Morgan Stanley CEO James Gorman and former Sky TV boss Jeremy Darroch to its board, a move widely seen as a bid to fend off a potential challenge from Peltz. Former Illumina CEO Francis deSouza will not seek reelection to the board.

OpenAI tender offer
The tender offer, which would allow OpenAI’s employees to sell shares in the start-up to outside investors, remains on track despite the leadership tumult and board shuffle, two people familiar with the matter told CNBC. The tender offer will value OpenAI at around $86 billion, the same level as reported in October, and is being led by Josh Kushner’s Thrive Capital, according to the sources.

Clearer brand messaging
New Gap CEO Richard Dickson said the apparel firm’s products had got “lost in the message” in its discount-heavy online communication. “Copy, font, typography, every detail of a brand needs to be communicated with precision … and what you’re going to start to see is the evolution of that journey unfold in every one of our brands,” Dickson said.

[PRO] Top holiday pick
The Dow is nearing a major milestone — and certain members may lead the blue-chip average over the finish line. CNBC Pro screened for the Dow members with the largest upsides to average price targets among Wall Street analysts.

The U.S. economy is cooling.

The core personal consumption expenditures price index, excluding food and energy prices, rose 0.2% for the month and 3.5% on a year-over-year basis in October, in line with expectations and down from respective readings of 0.3% and 3.7% in September.

Personal income and spending both rose 0.2% in October, slower than in September. The latest continuing jobless claims were at their highest in about two years.

Pending home sales, a gauge for signed contracts on existing homes, dropped 1.5% in October from September to hit their lowest level since the National Association of Realtors began tracking this metric in 2001, meaning it’s even worse than readings during the financial crisis more than a decade ago. Sales were down 8.5% from October of last year.

So, not surprisingly, investors are betting the Federal Reserve will cut rates soon — and fast. But, maybe they should be a little more careful in what they wish for.

After all, interest rate cuts don’t quite happen during good times. If the Fed meets market expectations and starts cutting aggressively in 2024, it will likely be against a backdrop of a sharply slowing economy and rising unemployment.

But a slowing economy does not mean it will end up falling off a cliff into a recession. The Fed may still decide to ease policy, but not as aggressively.

It might be profitable betting on extremities and playing the volatility game, but one has to factor in the chances of getting burnt in the process.

— CNBC’s Jeff Cox contributed to this report.