UPS I did it again

MARKETS

• U.S. markets: The S&P industrials sector dropped 2.4% on scary-bad manufacturing data, and none of the 10 other sectors wanted to be left out. They all finished in the red.
• Brexit: The end game is here. Prime Minister Boris Johnson is set to deliver his “final offer” to the EU today.

INVESTING

Charlie Schwab’s Price War

Yesterday, Charles Schwab fired one of the loudest shots yet in the e-brokerage price war.

Starting October 7, commissions on online trades of U.S. stocks, exchange-traded funds (ETFs), and options will go the way of the iPod Shuffle. They currently cost $4.95 per trade...but that'll soon drop to zero.

• Options trades will continue to cost 65 cents per contract.

Schwab’s no small potatoes. The market leader, it holds about $3.75 trillion in client assets and had a market value of about $54.7 billion. Well, not anymore.

The industry just got booed out of the stadium

Schwab shares fell almost 10%, while rival TD Ameritrade stock plummeted more than 25% to its worst day since 2006. E-Trade shares dropped 16.4%, capping off a day in which the three companies together lost almost $13 billion in market value.

Zoom out: For years, firms have been slashing fees and commissions on their products to stay competitive with new, commission-free entrants. The leader of the rebel army? Robinhood, which popularized free stock trading in 2013.

• Since then, Schwab and TD Ameritrade shares have underperformed the S&P 500, returning an average of single digits a year.
• Not helping: slowing economic growth and the Fed’s rate-slashing.

The path forward

For Schwab, the goal is to attract new business to make up for the commission revenue lost. In February 2017, Schwab docked its commission fee and saw assets under management balloon from $2.92 trillion to the current $3.75 trillion.

• CFO Peter Crawford put quarterly revenue from commissions at about $90–$100 million, but the majority of the company’s revenue comes from net interest income ($1.6 billion in Q2).

Looking ahead...the move pressures competitors TD Ameritrade and E-Trade to drop commissions, too. But that would hurt them more than Schwab—commission revenue makes up a meatier portion of their top line.

+ Bonus: If you want to learn more about what's going on in the world of fintech, give Episode 2 of our podcast Business Casual a listen here. The esteemed guest? Betterment CEO Jon Stein.

DELIVERY

UPS They Did It Again

The FAA seems to have asked itself, “What’s the least creepy organization we could let operate a drone airline?”...and settled on UPS. The company’s drone subsidiary just got the official nod to take its delivery service nationwide, a first for the industry.

• Right now, it’s not even citywide. UPS (-3.35%) has been using drones to ship medical products and specimens on the WakeMed hospital campus in Raleigh, NC—mostly the cold, dead hearts of Duke fans.

That test has gone well, so with the FAA’s blessing the company wants to ramp up its drone operation and put some distance between itself and competitors like Alphabet's Wing, DHL, and Amazon.

• UPS said the FAA certification “has no limits on the size or scope of operations.”
• It’s aiming to work with over 100 hospital complexes in the first phase of expansion.

Reality check: If you live in a city, don’t expect a drone to drop off toilet paper for at least several years. But this is an important certification that moves the industry forward in rural and suburban areas.

+ Want more drone news? Sign up for our emerging tech newsletter here.

SOCIAL MEDIA

Zuck's Ready for a Wrestling Match

Yesterday, The Verge published a leaked recording of Facebook CEO Mark Zuckerberg holding open meetings with employees in July.

We’ve paraphrased Zuck’s musings on a wide range of topics for you...

On proposals to break up Facebook: If someone (aka Elizabeth Warren) tries, we’ll sue, and I think we’ll win. Am I dying to sue my own government? No. But look, at the end of the day, if someone’s going to try to threaten something that existential, you go to the mat and you fight.

• ^^ That last sentence is verbatim.

On skipping international governments’ hearings: I went to the ones in the U.S. and the EU. I’m just a busy guy, OK?

On criticism of content moderators’ working conditions: There are so many of them they’re bound to have a variety of experiences. But we should better support them.

On the threat of TikTok: We have plans to launch our competitor, Lasso, in countries where TikTok hasn’t yet conquered. Mexico seems like a good fit.

On Libra’s, um, subpar debut: The optics may not have been great, but they don’t account for private discussions with regulators.

TRADE

A Trade Forecast From Debbie Downer

Yesterday, the World Trade Organization (WTO) scaled back its growth forecast for global trade to 1.2% this year and 2.7% in 2020—the lowest growth rates in a decade. Just this spring, it was betting on 2.6% and 3%, respectively.

We blame the decline in Pokémon cards, but the WTO points to other factors: trade conflicts (especially U.S. vs. China and Japan vs. South Korea), Brexit uncertainty, and global shifts in monetary policy. Plus, the U.S. is reportedly readying tariffs on $7.5 billion worth of European goods (thank Airbus and Boeing for that one).

This is all bad news for manufacturing

Factories are an early victim of trade disputes, and yesterday we learned that U.S. manufacturing activity in September hit its lowest level since 2009.

What that means: Lower manufacturing readings mean companies have declining output. And down the line, the WTO thinks that trouble may spill over to job creation and business investments.

+ Surprise stat: U.K. manufacturing activity actually increased last month as businesses stockpiled ahead of Brexit.

CANNABIS

This Restaurant Wants You to Dine and Stash

Yesterday, the first U.S. restaurant that allows diners to smoke (or eat) marijuana opened in West Hollywood, CA.

Think of Lowell Cafe as a wine bar, just sub the wine for pot and the corkscrew for a lighter. As part of her chiefing, er...chefing responsibilities, Andrea Drummer has fashioned a seasonal food menu that complements various strains of cannabis, because the law prohibits the cafe from infusing cannabis into its own food. You can order edibles that were infused elsewhere, though.

And, surprise, it’ll be less smoky than the Mos Eisley cantina. Lowell Cafe (again, compelled by law) has installed an air-filtration system to clear up the haze.

Don’t forget to tip your budtenders.

TRAVEL

The Brew's Not Basic Fall Vacation Guide

Last week, we celebrated World Tourism Day by asking you about the best under-the-radar places you've been to. Don’t be surprised if you run into other Brew readers while visiting any of these locations...

1. Ljubljana, Slovenia: It's in the image above.
2. Highway 191 between West Yellowstone and Bozeman, Montana: “Around every turn was incredible beauty.”
3. Riverboat journey down the Nile in Egypt: “An insane amount of history exists at every stop and it is full of wonderful people. 10/10 recommend!”
4. Jasper National Park: “Banff's lesser-known and harder to get to cousin. Incredible views and easier to find a parking spot than Banff.
5. Uruguay: “If you are a wine enthusiast, you must go.”
6. Kraków, Poland: “a once in a lifetime experience.”
7. Mongolia: “Amazing vistas as you travel across the country, national parks unlike anything we see in the U.S., and Ulaanbaatar is a fascinating blend of old and new.”
8. El Nido, Palawan, Philippines
9. Quebec City: “Easy to get to and unexpectedly awesome in all ways, and in all seasons.”
10. The Azores: “The most beautiful place on earth.”

WHAT ELSE IS BREWING

• A federal appeals court mostly upheld the FCC’s rollback of net neutrality, but left the door open for states to make their own rules.
• GM (-3.66%) idled a plant in Mexico, indicating the UAW's strike has dented North American pickup production.
• Japan increased its national sales tax to 10% yesterday.
• Microsoft’s (-1.41%) Surface hardware event is today.
• Vice Media is in the final stages of a deal to acquire Refinery29, per the WSJ.

BREAKROOM

For the 'Gram
It’s Wednesday, so it’s time to brush up on your writing skills. Here are four slightly incorrect sentences from the WSJ editors. Can you figure out the grammar or style error in each?

1. He laid groaning on the floor for several anxious seconds before peeling himself up with an elbow that suddenly looked like a misshapen potato.
2. According to Ipsos Mori, their latest poll was carried out between June 21 and June 22.
3. The most telling drop-off: Wentz averaged 8.3 yards per attempt this season; Foles has averaged more than 2 yards fewer.
4. You stand a little further from your boss than your friend, and much closer to your lover.

Breakroom Answers

For the 'Gram
1. A bizarre sentence in general, but it should be he “lay” groaning on the floor, not “laid.”
2. You shouldn’t say between when there is nothing actually between June 21 and June 22. Better to say “from June 21 to June 22.”
3. 2 yards “less,” not fewer.
4. "Farther," nor further. Use farther for physical distance and further for metaphorical distance.