Daily News Snapshots; Less than 300 words & link to full article
Stock Futures Gain After Selloff Sends Indexes to 2022 Lows: https://www.wsj.com/articles/global-stocks-markets-dow-update-05-10-2022-11652161103?mod=hp_lead_pos1
U.S. stock futures rebounded Tuesday, putting major indexes on course to halt three days of consecutive declines which have amounted to the S&P 500’s worst rout since the coronavirus first struck.
Futures tied to the S&P 500 rose 1%, a day after the broad index slumped 3.2% to its lowest level for the year. Technology-heavy Nasdaq-100 futures rose 1.5% while contracts tied to the Dow Jones Industrial Average rose 0.9%.
A cocktail of geopolitical risks and economic headwinds is posing the biggest threat to global growth in years and rattling markets. In the U.S., soaring inflation has prompted the Federal Reserve to begin raising interest rates and investors fear the move could tip the economy into recession.
Global markets are looking equally troubled. In China, resurgent Covid-19 outbreaks and Beijing’s strict approach to fighting them threaten to revive the supply chain bottlenecks which first drove inflation higher. In Europe, the war in Ukraine threatens to keep energy prices elevated and is weighing on the region’s growth.
“By 2023 you are very likely to see growth slowing very significantly, and the specter of recessions is really starting to loom,” said Seema Shah, chief strategist at Principal Global Investors. “What we are seeing is the realization that it is going to be very tough for the Fed to get that soft landing just right. It is not impossible, but it will be a very difficult balancing act.”
Pensions’ Bad Year Poised to Get Worse https://www.wsj.com/articles/pensions-bad-year-poised-to-get-worse-11652175002?mod=hp_lead_pos2
State and local government retirement funds started the year with their worst quarterly returns since the beginning of the pandemic. Things have only gone downhill since.
Losses across both stock and bond markets delivered a double blow to the funds that manage more than $4.5 trillion in retirement savings for America’s teachers, firefighters and other public workers. These retirement plans returned a median minus 4.01% in the first quarter, according to data from the Wilshire Trust Universe Comparison Service expected to be released Tuesday. Recent losses have further eroded their holdings.
“It’s a tough period,” said Jay Bowen, manager of the Tampa Firefighters and Police Officers Pension Fund. “Nobody is immune.”
The simultaneous declines in stocks and bonds are inflicting pain on household and institutional investors alike in 2022. The S&P 500 has returned minus 13.5% year to date through Friday, while the Bloomberg U.S. Aggregate bond index—largely U.S. Treasurys, highly rated corporate bonds and mortgage-backed securities—returned minus 10.5%.
Elon Musk Says His Twitter Plans Align With EU’s New Social-Media Rules https://www.wsj.com/articles/elon-musk-says-his-twitter-plans-align-with-eus-new-social-media-rules-11652145055?mod=hp_lead_pos3
Americans Planning Summer Travel Face a New Hurdle: High Inflation https://www.wsj.com/articles/americans-planning-summer-travel-face-a-new-hurdle-high-inflation-11652175001?mod=hp_lead_pos5
Americans itching to travel this summer after navigating Covid-19 for the past two years face a new disruption to plans: the rising cost of travel.
Inflation rose to 8.5% in March compared with the same month a year earlier, according to the Labor Department’s consumer-price index—the highest rate in four decades. Gas prices are up about 50% from a year ago. Hotel costs jumped nearly 30%, and airline fares rose 24%, while vehicle-rental costs jumped nearly 14%.
While inflation hasn’t stopped people from spending more so far this year, some Americans are rethinking summer vacation plans. That could dent the economic outlook this summer since spending on services such as entertainment, travel and dining makes up more than 40% of gross domestic product. A Bankrate survey in late March found nearly 70% of more than 2,600 respondents said they are changing their summer travel plans due to inflation.
In April’s consumer-confidence survey by the Conference Board, a private research group, the share of respondents who said they intended to take a vacation in the next six months dropped to its lowest level since last spring when vaccinations were just becoming widely available. The overall consumer-sentiment index decreased slightly in April, with concerns about inflation ranking high among people’s worries.
Tech Industry Warns That More Remote-Work Jobs Are Headed Out of U.S. https://www.wsj.com/articles/tech-industry-warns-that-more-remote-work-jobs-are-headed-out-of-u-s-11652175000?mod=hp_lead_pos6
Tech-industry representatives are coming to Capitol Hill this week to warn that the remote-work trend will lead to more offshoring of software developer and other technology jobs unless the U.S. admits more high-skilled immigrants.
Remote jobs in tech jumped by more than 420% between January 2020 and last month, growth that was intensified by the pandemic, according to a jobs data review by Tecna, a trade group for regional tech councils. In February, more than 22% of all tech jobs were listed as remote, compared with 4.4% in January 2020.
The U.S. allows 65,000 skilled-worker visas annually under its H1-B program, plus another 20,000 for people who hold graduate degrees from American universities. Those numbers haven’t budged since 2005 despite the sharp rise in tech jobs.
In contrast, Canada, which has been courting tech workers for years, has no cap on visas for immigrating tech workers and entrepreneurs, making it an attractive destination for Indian, Chinese and Eastern European computer coders and software engineers who have had a hard time obtaining U.S. visas.
Toronto added more than 81,000 tech jobs since 2016, more than any other city in North America, according to a report published last year by CBRE Group, a U.S. commercial real estate services and investment firm.
EU Struggles to Convince Hungary on Russia Oil Sanctions https://www.wsj.com/articles/eus-von-der-leyen-heads-to-hungary-to-try-to-unblock-oil-embargo-against-russia-11652118279?mod=hp_lead_pos8
European Commission President Ursula von der Leyen failed to reach agreement with Hungary on Monday to secure the country’s backing for an oil embargo on Russia, setting back hopes of a quick deal on Brussels’ energy sanctions proposals.
Ms. von der Leyen’s trip to see Hungarian Prime Minister Viktor Orban came after days of negotiations between Hungary and the commission, the European Union’s executive body, over the help Brussels would provide to reboot Hungary’s energy system so that it no longer needs Russian oil.
Slovakia, the Czech Republic, Bulgaria and Croatia are also making their acceptance of an oil embargo conditional on assistance from Brussels.
EU officials and diplomats say they remain confident a deal to phase in a ban on Russian oil will eventually come together but hopes of wrapping it up quickly are receding.
Schumer’s Radical Abortion Bill https://www.wsj.com/articles/chuck-schumers-radical-abortion-bill-senate-democrats-roe-v-wade-womens-health-protection-act-11652133702?mod=hp_opin_pos_1
Protesters marched on the homes of conservative Supreme Court Justices over the weekend, an ugly attempt to scare them into saving Roe v. Wade. This week the drama moves to the Senate, where Democratic Leader Chuck Schumer plans a vote on a sweeping bill to override state laws and set a national abortion policy.
House Democrats passed the Women’s Health Protection Act (WHPA) last year, but it stalled in the Senate. It’s expected to fail again this week. But that isn’t stopping Mr. Schumer, who is refusing to take up a bill by GOP Sens. Susan Collins and Lisa Murkowski, who have their own proposal to codify Roe v. Wade. “I have long supported a woman’s right to choose,” Ms. Murkowski said, “but my position is not without limits, and this partisan Women’s Health Protection Act simply goes too far.”
AMC Revenue Quintuples as Moviegoers Return to Theaters https://www.wsj.com/articles/amc-revenue-quintuples-as-moviegoers-return-to-theaters-11652133823?mod=hp_lista_pos1
AMC Entertainment Holdings Inc. reported first-quarter sales more than five times higher than the year-ago period as moviegoers continue to return to theaters amid the Covid-19 pandemic.
The Leawood, Kan.-based company logged $785.7 million in sales, up from $148.3 million a year earlier. Analysts were expecting $743.4 million, according to FactSet.
Chief Executive Adam Aron said the results were the company’s strongest in two years. The quarter was boosted by highly anticipated releases such as “Spider-Man: No Way Home” and “The Batman.”
The success last weekend of “Doctor Strange in the Multiverse of Madness,” a superhero thriller, has created optimism for the summer movie season. The film raked in $450 million at the global box office on its opening weekend.
The outlook for the rest of the year is exciting, Mr. Aron said, citing coming releases such as “Top Gun: Maverick,” “Jurassic World Dominion,” and “Lightyear.”
In the years before Covid-19, the summer movie season could account for about 40% of the domestic annual box office.
Uber Plans to Cut Costs as Investors’ Tech Optimism Recedes https://www.wsj.com/articles/uber-to-cut-back-on-spending-treat-hiring-as-a-privilege-11652107357?mod=hp_lista_pos2
Uber Technologies Inc. will cut its spending on marketing and scale back on hiring as it focuses on turning a profit, its chief executive told staff, the latest example of corporate caution in the tech sector.
CEO Dara Khosrowshahi said that investors have become less tolerant of companies gaining market share at the expense of their bottom lines.
“We are serving multi-trillion dollar markets, but market size is irrelevant if it doesn’t translate into profit,” he said in an email late Sunday that talked about his recent discussions with investors. “We need to show them the money.”
To do so, he said, the company will reduce its marketing expenses and rein in spending on human resources. “We will treat hiring as a privilege and be deliberate about when and where we add headcount,” Mr. Khosrowshahi said. “We will be even more hardcore about costs across the board.”
Uber shares fell close to 12% Monday after CNBC first reported on the email. The shares have fallen more than 40% so far this year, outpacing the 25% decline in the Nasdaq Composite Index.
Economy Week Ahead: U.S. Inflation, China’s Exports in Focus https://www.wsj.com/articles/economy-week-ahead-u-s-inflation-chinas-exports-in-focus-11652036400?mod=hp_major_pos2#cxrecs_s
Tuesday
Federal Reserve Bank of New York President John Williams delivers a keynote address on U.S. monetary policy at a symposium hosted by the National Association for Business Economics and Deutsche Bundesbank, kicking off a full week for central bank speakers. Markets will be looking for more context and clarity on policy a week after the Fed executed its biggest interest-rate increase since 2000.
Inflation, Sharp Rise in Interest Rates Pose Financial Risks, Fed Says https://www.wsj.com/articles/inflation-sharp-rise-in-interest-rates-pose-financial-risks-fed-says-11652126737?mod=hp_major_pos1#cxrecs_s
Elevated and persistent inflation, coupled with a sharp rise in interest rates, are among the greatest near-term risks to the U.S. economic system, the Federal Reserve said Monday, while warning that Russia’s invasion of Ukraine could also affect financial stability.
“Further adverse surprises in inflation and interest rates, particularly if accompanied by a decline in economic activity, could negatively affect the financial system,” the central bank said in its latest semiannual Financial Stability Report.
Near-term risks highlighted in the report reflect a survey by staff from the Federal Reserve Bank of New York with a range of contacts, including academics, community groups and domestic and international policy- makers, the Fed said.
A combination of higher inflation and rising interest rates could weaken the balance sheets of households and businesses, leading to an increase in delinquencies, bankruptcies, and other forms of financial distress, the Fed said. Households could be affected by job losses, higher interest payments, and a reduction in house prices caused by higher mortgage rates and decreased housing demand.
Sri Lankan Prime Minister Resigns Amid Economic Crisis
Sri Lankan Prime Minister Mahinda Rajapaksa resigned after months of mass protests against his government’s handling of an economic crisis that has led to double-digit inflation, rolling blackouts and acute shortages in fuel and medicines. The war in Ukraine and the pandemic have heaped pressure on one of the world’s most vulnerable economies. Rising commodity prices and the loss of tourism revenue have proven too much to bear for a country that was already hobbled financially from high levels of foreign debt and sweeping tax cuts that decimated revenues. The result has been the country’s worst economic crisis since it gained independence in 1948, Philip Wen and Alexander Saeedy report.
Shanghai Lockdown Intensifies
Shanghai authorities are again tightening Covid-19 restrictions amid a renewed push by central-government officials to eradicate the virus. Residents say authorities have begun forcing more people into centralized quarantine facilities while cutting off deliveries of nonessentials to swaths of the city. The tightened measures in Shanghai come as daily Covid-19 cases in the city have dropped after six weeks of severe restrictions on people’s movement, Cao Li reports.
Before the pandemic, Apple sent hundreds of U.S. engineers each month to China to oversee the contract manufacturers that build most of its products. Now, in a shift, the global technology giant relies more on local engineers after most U.S.-based Apple engineers have been shut out of China by rigid border controls intended to keep the Covid-19 virus at bay. The transfer of power underscores the growing technical expertise of China’s workforce, honed over decades as Apple and other foreign companies trained generations of engineers and technicians, Yoko Kubota reports.
Calendar Events Today:
6:00am NFIB Small-business index
11:00am Real household debt
Commentary:
Economics Calendar:
Consumer 1-year inflation expectation reported at 6.3% yesterday, slightly improved compared to prior month at 6.6%. Meanwhile consumer 3-year inflation reported at 3.9% compared to prior month at 3.7%. The two duration inflation data are showing signs of convergence. If the trend persists, it could suggest that while consumers expect inflation to last for prolonged period, peak fear for elevated price level has passed.
Equity Market:
Nasdaq continues to trade lower and closed at 12,187 yesterday. Futures traded gap higher during Asia hours. All eyes on consumer earnings and economic data.
Rates Market:
Nm. Sell long durations.