Key Takeaways
- JetBlue (JBLU) and United Airlines (UAL) have received U.S. Department of Transportation (DOT) approval for their "Blue Sky" partnership, which is projected to contribute $850 million to $950 million to JetBlue's earnings before interest and taxes by the end of 2027.
- U.S. crude oil inventories unexpectedly rose by 1.539 million barrels, significantly missing forecasts for a 2.5 million barrel draw and contrasting with the previous week's decline of 0.577 million barrels.
- Bond traders are increasing their bets on Federal Reserve interest rate cuts in the coming months, with futures markets implying a roughly 65% chance of a quarter-point reduction in September.
- Starbucks (SBUX) is strategically overhauling its operations, including phasing out pickup-only store formats by fiscal 2026 and piloting gluten-free and high-protein food options. The company is also exploring a potential stake sale in its China business, with over 20 parties expressing interest.
The U.S. Department of Transportation (DOT) has given the green light to the "Blue Sky" partnership between JetBlue (JBLU) and United Airlines (UAL). This collaboration is expected to generate significant financial benefits for JetBlue, with an estimated $850 million to $950 million in earnings before interest and taxes by the end of 2027. The partnership, which was announced in late May, will include reciprocal loyalty benefits, slot and flight timing trades in the New York area airports, and technology swaps. Benefits for customers, such as reciprocal mileage earning and redemption, priority boarding, and preferred seating, are anticipated to roll out in phases starting in autumn 2025. As part of the agreement, JetBlue will grant United access to up to seven daily round-trip flight slots at New York JFK Terminal 6 starting as early as 2027, while the airlines will exchange eight flight timings at Newark Liberty International Airport (EWR). Spirit Airlines had previously sought to block the partnership, arguing it would diminish competition.
In the energy markets, U.S. crude oil inventories saw an unexpected build of 1.539 million barrels, according to the American Petroleum Institute (API) data. This figure significantly deviates from the forecast of a 2.5 million barrel draw and the previous week's decline of 0.577 million barrels. An increase in crude inventories larger than expected typically signals weaker demand, which can be bearish for crude prices.
Meanwhile, bond traders are increasingly positioning for Federal Reserve interest rate cuts in the near future. Futures tracking the Fed's policy rate indicate a roughly 65% chance of a quarter-point rate reduction in September, with further cuts possible at the October or December meetings. This sentiment reflects a market view that the U.S. economy is in a "Goldilocks" moment, where conditions are not too hot or too cold, allowing the Fed to consider easing monetary policy after a period of holding rates steady. Traders are now pricing in approximately 44 basis points of easing in 2025, equivalent to just under two 25-basis-point rate declines.
In the retail sector, Starbucks (SBUX) is undergoing a significant strategic update. The company plans to phase out its pickup-only store format in fiscal 2026 and will begin piloting gluten-free and high-protein food options to expand its menu. Additionally, Starbucks is exploring strategic options for its China business, with over 20 parties having shown interest in a potential stake sale. While Starbucks intends to retain a meaningful stake in its China operations, the move comes as the company faces increased competition from local rivals and aims to renovate 1,000 stores by the end of 2026. Analysts have offered varying valuations for the China business, with some suggesting a range of $2.6 billion to $4.7 billion as more realistic, compared to earlier reports hinting at up to $10 billion.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.