A jobs report that could rock the markets
Economists and market participants are deeply divided over Friday’s payrolls report – due at 8:30 am Eastern – and what it may signal for the Fed’s interest rate policy and the chances of a recession this year.
The numbers to look at: Economists surveyed by Bloomberg estimated that employers added 225,000 jobs in June, which would represent a slight cooling of the labor market. But economists have underestimated the strength of job growth in 14 of the past 17 months, including a big miss last month.
The Fed will be watching wage data closely. Average hourly earnings are expected to have risen month-on-month, keeping the pressure on Fed officials to raise interest rates to tame inflation. On Thursday, Lorie Logan, the president of the Dallas Fed, became the latest voting member of the rates committee to say more increments were needed.
The jobs picture is confusing. There are far fewer vacancies than a year ago, and the “big resignation” seems to be a thing of the past, signs that wage growth should start to ease.
Elsewhere, the job market seems red hot. on Thursday, data from the payroll processor ADP showed another increase in employment, particularly in the leisure and hospitality sector. One possible reason: “fun deflation,” with restaurants remaining full and demand for getaways and vacations buoyant despite rising prices. And so-called JOLTS jobless claims fell to a four-month low, according to data released Thursday by the Labor Department.
Those numbers suggest a large number on Friday. Jeffrey Roach, chief economist at LPL Financial, wrote in a note to investors Thursday that signs pointed to “another healthy jobs report.”
Wall Street seems to be braced for bad news. The futures market this morning was pricing in a 0.25 percent increase at the Fed’s rate meeting this month and a growing probability for a second increase in September. Stocks and bonds fell on Thursday after the ADP numbers were released, as investors worried that further Fed moves could harm economic growth.
The Fed’s own economists are predicting a mild recession by the fourth quarter. But that call could change, too, depending on Friday’s job numbers. “Given the continued strength in labor market conditions and the resilience of consumer spending, the staff saw the possibility that the economy would continue to grow slowly and avoid a downturn as nearly as likely as the baseline of a mild recession,” the minutes from the Fed’s most recent rate meeting said
THIS IS WHAT IS HAPPENING
Samsung delivers profit warning as demand for chips declines. The Korean tech giant estimated that its second quarter earnings plunged 96 percent year after year, as a global slump in computer and smartphone sales continued to undermine demand for memory chips. It’s a sign that the recent boom in AI-related spending failed to overcome other weaknesses in the semiconductor market.
Beijing reportedly plans to end crackdown on Ant Group. Chinese regulators will good Ant, the fintech giant affiliated to Alibaba, at least $1.1 billion, one of the largest fines of an Internet company in that country, according to Reuters. That is expected to end a years-long investigation into Ant, after government officials blocked the company’s plans to go public.
Ford reports strong sales. New vehicle purchases rose 10 percent in the April quarter as truck demand rebounded. But Ford’s shares fell on Thursday as sales of its electric cars fell in the same period, underperforming its biggest rival, Tesla. Analysts see overall car sales growing year over year, but the pace is still well below pre-pandemic levels.
The food delivery giants are suing over New York’s new minimum wage rule. DoorDash, Grubhub and Uber argue that the law that requires drivers to be paid at least $18 an hour, would unfairly hurt their industry and lead to higher prices for consumers. The regulation, which goes into effect on July 12, has received support and opposition from drivers themselves.
Musk takes the fight to Zuckerberg
The battle between Elon Musk and Mark Zuckerberg went up a notch on Thursday, as Twitter threatened to sue Meta for stealing trade secrets to build its rival messaging platform Threads.
But some thought the legal charge, which was short on details, was a sign that Twitter was upset by the new platform’s roaring success: Threads was downloaded more than 30 million times within a day of release, the fastest pace for a program in history. .
Twitter accused Meta of using its former employees to build the new business. Alex Spiro, a lawyer for the company and a longtime adviser to Mr. Musk, sent a letter to Meta on Wednesday accusing it of stealing intellectual property, hiring former employees who had access to confidential information and scraping Twitter’s data in violation of its terms of service The letter was first reported by Semaphore.
“Competition is good, cheating is not,” Moss said Thursday. Meanwhile, Linda Yaccarino, the new CEO of Twitter, played down the new competition. “We are often imitated – but the Twitter community can never be duplicated,” she tweeted.
Mr. Zuckerberg wasn’t too upset. “This is as good a start as we could hope for!” he wrote on Threads. Investors agreed: Meta shares flirted with a 52-week high on Thursday. Andy Stone, a spokesperson for Meta, said in Threads that no former Twitter engineers worked on the new platform.
Intellectual property lawsuits are common among large technical firms, especially due to the frequent movement of workers between them. But to win, companies must meet a high bar, proving that a “trade secret” that provides a real competitive advantage has been stolen. More often, the two sides reach a compromise through mediation.
It is not clear what Twitter is actual accusations are The letter is vague about what trade secrets were stolen and does not say the employees breached confidentiality, only that they have “continuing obligations” to the company.
“If I were writing a letter like this, and knew they were under an express confidentiality agreement, I would say so,” Sharon Sandeen, a law professor specializing in trade secrets at Mitchell Hamline School of Law, told DealBook.
Orly Lobel, a law professor at the University of San Diego, added: “The idea of a social media platform with short news/updates is not a secret — and I don’t see much that could be a secret about the format and the dissemination of the platform .”
Yellen calls out Beijing’s pressure on US companies
During a four-day visit to China, Treasury Secretary Janet Yellen faces a high-wire act: taking a hard line against China’s often aggressive efforts to grow, while trying to ease tensions between the two countries. Within the Biden administration, she is known for advocating less bellicose attitudes toward China, including when it comes to limits on exports and investment.
But in some of her first public remarks of the trip, Ms. Yellen took an unusually hawkish stance, pushing back against what she said were unfair attacks by China on companies with foreign ties, Alan Rappeport of The Times writes:
“During meetings with my counterparts, I communicate the concerns I have heard from the American business community — including China’s use of non-market tools such as increased subsidies for its state-owned enterprises and domestic firms, as well as barriers to market access for foreign firms,” Ms. Yellen told members of the American Chamber of Commerce in China at a roundtable event. “I have been particularly disturbed by punitive actions that have been taken against American companies in recent months.” Representatives from Boeing, Bank of America and the agricultural giant Cargill was among those present.
Ms. Yellen said those actions, along with new Chinese measures to limit exports of some semiconductor-related minerals, vindicated the Biden administration’s efforts to build non-Chinese supply chains.
Can BlackRock Break Through Bitcoin?
Six years ago, BlackRock’s Larry Fink dismissed Bitcoin as “money laundering index.” Now Fink, the CEO of the world’s largest asset management firm, is driving Bitcoin prices to 13-month highs, as BlackRock joins a long line of companies seeking SEC approval for a Bitcoin-linked exchange traded fund. Such a fund would let individual investors bet on the price of Bitcoin through the stock market.
But it is unclear that even Mr. Fink, one of Wall Street’s most influential leaders, will succeed where dozens of smaller crypto players have failed.
BlackRock is chasing the holy grail of crypto, a spot Bitcoin ETF The SEC has approved Bitcoin futures ETFs, which, because they fall under the purview of the regulated CME commodities exchange, are considered less prone to fraud.
But the agency has repeatedly denied applications for such ETFs. Among its concerns is that such funds – which would directly hold Bitcoin – might be more subject to market manipulation.
Fink’s company is trying to address those concerns. BlackRock’s application includes a surveillance sharing agreement with Nasdaq and the crypto exchange Coinbase, which aims to prevent fraud and manipulation of the ETF The measure has since been adopted by other fund managers seeking approval of their own funds.
Michael Sonnenshein, the CEO of crypto asset management giant Grayscale, told DealBook that BlackRock’s move was encouraging. But he warned that the surveillance sharing proposal was unlikely to be a “silver bullet”.
The ultimate fate of these funds may not be up to the SEC, however. Grayscale sued the agency last year over its rejection of an application to convert its Bitcoin trust into an ETF. The company argued that the denial was arbitrary because the SEC approved Bitcoin futures funds; Mr. Sonnenshein said he expected a federal appeals court to rule on the matter soon.
much is at stake, according to Matthew Sigel, the head of digital asset research at investment management firm VanEck: Whichever ETF gets approved first can gain a hard-to-beat lead among investors. (BlackRock declined to comment.)
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