Good morning. Happy Thursday.
The Asian/Pacific markets leaned up. Japan, China and Hong Kong did well. South Korea was weak. The Europe, Africa and the Middle East markets are doing well. France, Germany, South Africa, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Austria and Saudi Arabia are up; Poland, Russia and Greece are down. Futures in the States point towards a negative open for the cash market.
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The dollar is up slightly. Oil and copper are down. Gold and silver are down. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Inflation surcharges
Holiday reminder: Wall Street Breakfast won’t be published tomorrow with markets closed for Good Friday.
As inflation continues to soar nationwide, Amazon (NASDAQ:AMZN) is attempting to offset some of its newfound costs by passing fees on to sellers. Fuel and inflation surcharges will be tacked on to the existing ~5% fee currently leveled on U.S. third-party vendors who use the company’s fulfillment services. The new costs will go into effect on April 2, adding $0.24 per unit to the services offered by FBA, or Fulfillment by Amazon.
Quote: “In 2022, we expected a return to normalcy as COVID-19 restrictions around the world eased, but fuel and inflation have presented further challenges,” an Amazon spokesperson told CNBC. “It is still unclear if these inflationary costs will go up or down, or for how long they will persist, so rather than a permanent fee change, we will be employing a fuel and inflation surcharge for the first time – a mechanism broadly used across supply chain providers. The surcharge will apply to all product types, such as non-apparel, apparel, dangerous goods, and Small and Light items.”
According to Jungle Scout, which creates market analytics for Amazon sellers, nearly 90% of the e-commerce giant’s 2M+ sellers used Fulfillment by Amazon in 2021, which provides services like storing, packing and shipping products. Last year, sellers even shelled out a total of $103B in fees, making up around 22% of Amazon’s revenue. “Costs inevitably have to be shared across the economy, customers included,” said Jon Elder, CEO of consulting firm Black Label Advisor. “FBA sellers can only handle so much margin compression before customers are affected.”
Go deeper: Amazon was quick to highlight that despite the addition of the surcharge, its fulfillment rates will remain lower than other carriers. As of March 21, UPS (UPS) implemented a fuel surcharge of $0.42 and FedEx (FDX) applied a fee of $0.49. Several other companies have announced surcharges in recent weeks, including ride-hailing giant Uber Technologies (UBER). (4 comments)
Musk wants Twitter
Tesla (TSLA) founder Elon Musk is offering to buy Twitter (NYSE:TWTR) for $54.20 per share in cash after a drama-filled two weeks. TWTR shares are moving on the latest news, up 12% to $51.30 in premarket trading. The deal would value the company at about $43B and is what Musk called his “best and final offer.”
Quote: “Twitter has extraordinary potential. I will unlock it,” the Tesla (TSLA) CEO said in an amended 13-D filing. “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”
Musk was expected to join the board of Twitter after disclosing a 9.2% stake in the company, but then turned down the offer, leading to speculation he could go hostile. The latest offer represents an 18% premium over Twitter’s closing price on Thursday, or a 54% premium over the day before Musk began investing in the social media company.
Between the lines: The number $54.20 is notable as Musk likes to make reference to “420” – a well known time in cannabis culture. His infamous tweet to take Tesla private (which ran him afoul with the SEC) was for $420 per share. (155 comments)
Costly metaverse
Many have been critical about Apple’s (AAPL) hefty 30% App Store fee, but things are looking even costlier in the metaverse. Sales of digital assets and experiences made inside Facebook parent Meta Platforms’ (FB) Horizon Worlds will set sellers back around 47.5%. That’s made up of the 30% fee for sales made through Meta Quest Store, and another 17.5% in Horizon platform fees.
Bigger picture: Earlier this week, the company said it was testing monetization tools for the metaverse, similar to competitors like Roblox (RBLX), which already allows creators to offer in-world purchases of virtual items. The initiative is beginning with a “handful” of creators, who can sell everything from access to a VIP section of their world to virtual items like jewelry or a special basketball. Compensation under a goal-oriented bonus program will also be available to creators that are “doing awesome work in setting up worlds,” announced Vivek Sharma, Meta’s VP of Horizon.
Horizon Worlds, developed for the Oculus Rift S and Oculus Quest 2 VR headsets, was released in the U.S. and Canada in December 2021. Two months ahead of the release, Meta announced the creation of a $10M Horizon Creators Fund, which included cash prizes and grants to encourage developers to build in the metaverse.
It’s getting competitive: “Meta has repeatedly taken aim at Apple for charging developers a 30% commission for in-app purchases in the App Store – and have used small businesses and creators as a scapegoat at every turn,” Apple spokesman Fred Sainz said in an email. “Now – Meta seeks to charge those same creators significantly more than any other platform. [Meta’s] announcement lays bare Meta’s hypocrisy. It goes to show that while they seek to use Apple’s platform for free, they happily take from the creators and small businesses that use their own.” (48 comments)
JPMorgan leads off
Shares of JPMorgan Chase (JPM) slipped 3.2% on Wednesday as the bank kicked off the Q1 earnings season, which traditionally begins with the largest U.S. lenders. The results reflected increased downside risks, like widening losses from funding spreads, adjustments for commodities exposures and markdowns of derivatives receivables from Russia-associated counterparties. The results from America’s largest bank are often looked at as a bellwether for the broader economy, as well as the financial health of the average U.S. consumer.
Quote: “We remain optimistic on the economy, at least for the short term – consumer and business balance sheets remain at healthy levels – but see significant geopolitical and economic challenges ahead due to high inflation supply chain issues and the war in Ukraine,” Chairman and CEO Jamie Dimon said on a conference call. A recession is far from a sure thing, he added, but “is it possible? Absolutely.”
In terms of the bank’s numbers, profit for Q1 came in at $8.28B, down from $14.3B a year ago, while revenue fell 5% Y/Y to $30.7B. Both numbers missed analyst expectations. There were “A LOT of moving pieces” in the results, “but the credit reserve build is the standout (and a modest negative),” wrote Vital Knowledge’s Adam Crisafulli. “JPM caused a lot of consternation back in January with its 2022 expense outlook, and the credit/provision news will likely cause a bit of anxiety for the whole group.” On the positive side, net interest income/net interest margin performance was solid “thanks to a more favorable rate backdrop and healthy loan demand.”
Outlook: Profits are expected to decline across the entire banking industry this season. According to FactSet, banks in the S&P 500 are expected to report Q1 earnings of around $27B, down 37% from a year ago. Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS) and Wells Fargo (WFC) will publish earnings this morning, while Bank of America (BAC) discloses its Q1 results on Monday. (22 comments)
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Retail Sales
8:30 Import/Export Prices
10:00 Business Inventories
10:00 Consumer Sentiment
10:30 EIA Natural Gas Inventory
1:00 PM Baker-Hughes Rig Count
2:30 PM Fed’s Mester Speech
4:30 PM Fed Balance Sheet
6:00 PM Fed’s Parker Speech
What else is happening…
Delta (DAL) earnings tip off potential boom in summer travel.
Federal mask mandate for public transit extended another two weeks.
Permian drilling permits hit record, signaling more production ahead.
Google (GOOGL) pledges $9.5B for U.S. offices and data centers.
Microsoft (MSFT) could face antitrust scrutiny over cloud practices.
GSK (GSK) acquires Sierra Oncology (SRRA) to bolster specialty meds.
Mastercard (MA) partners on ‘world first’ crypto-backed payment card.
IEA sees deficit oil market, tight refined product balances.
Biden announces $800M in additional U.S. military aid for Ukraine.
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Good morning. Happy Wednesday.
The Asian/Pacific markets closed mostly up. China was weak, but Japan, Hong Kong, South Korea, Taiwan, Indonesia the Philippines did well. The Europe, Africa and the Middle East markets lean down. Norway, Hungary and the Czech Republic are up; France, Germany, Russia, South Africa, Sweden and Saudi Arabia are down. Futures in the States point towards a positive open for the cash market.
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The dollar is up. Oil is up; copper is down. Gold and silver are up. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Banks in the spotlight
Investors will digest a slew of bank results over the next several sessions, with JPMorgan (JPM) kicking off the Q1 earnings season this morning. Keep an eye on where the strong and weak spots are in the financial system, as well as the knock-on effects of escalating geopolitical tensions. Another wild card is trading activity, which could benefit or suffer in the current volatile environment.
Upside: Consumer and business banking should provide some lift as consumers continued to spend despite red-hot inflation. Banks are also expecting to see some improvements on the loan front, as interest rates began climbing in the quarter despite a Fed that has only started to embark on a tightening cycle. “Fundamentals are holding up well near term with better loan growth, rising net interest margins (NIMs), and continued strong credit quality,” J.P. Morgan analyst Vivek Juneja wrote in a note.
Downside: The good old days of serious deal-making are no longer, with banks blaming Russia’s invasion of Ukraine and related instability dampening appetite for transactions. A steep drop in investment banking fees will likely be seen due to the pace of new deals slowing significantly, bringing an end to the pandemic boom seen on Wall Street. In fact, the number of M&A deals in North America fell 16.7% Y/Y in February and the value of those deals fell 30% in the same month, according to S&P Global Market Intelligence data.
On watch: When the economy outperforms, banks do as well, so the biggest item to watch will be the sector’s outlook for 2022. Many are already fearing slowing economic growth in the quarters ahead as the risk of a potential recession rises in the U.S. Banks have also waited a long time for the Federal Reserve to start hiking interest rates, so keep an eye on figures the lenders tout regarding how much they expect to earn from their loans. (30 comments)
Military aid
The Pentagon is set to host a meeting today with eight of the largest U.S. defense contractors, including Lockheed Martin (NYSE:LMT), Raytheon (NYSE:RTX) and L3Harris Technologies (NYSE:LHX). According to Reuters, the gathering will center on the industry’s capacity to meet Ukraine’s weapons needs if a war with Russia turns into a years-long protracted conflict. The U.S. has already provided Kyiv with more than $2.4B in military assistance since Biden took office, of which more than $1.7B was delivered following the start of Russian invasion on Feb. 24.
Snapshot: Hundreds of millions of dollars of the assistance has been approved under “presidential drawdown authority,” which allows President Biden to transfer equipment from U.S. stocks without congressional approval or budgetary appropriations. The orders are permitted to respond to unforeseen emergencies that include peacekeeping operations and anti-terrorism assistance. As the name implies, drawdowns are taken out of existing American inventories, meaning the government is not going to market to purchase new items.
The U.S. had already sent over 5,000, or about a third, of its Javelin anti-tank missiles to Ukraine, which would take three or four years to replace, according to the Center for Strategic and International Studies. It has also given over more than 1,400, or about a quarter, of its Stinger anti-aircraft missiles, which would take at least five years to replenish at current production levels. Raytheon and Lockheed Martin jointly produce the Javelin, while Raytheon is the sole supplier of the Stinger.
Outlook: While Javelins and Stingers were effective in protecting Kyiv, Ukraine will likely need a more sophisticated mix of equipment to hold back the coming Russian offensive in the Donbas. As a result, the Biden administration is preparing another military assistance package of around $750M, which may include longer-range anti-aircraft systems or heavy ground artillery systems. Other top American weapons makers include Boeing (BA), General Dynamics (GD) and Northrop Grumman (NOC). (8 comments)
‘Like New’
Following a successful pilot program in 2021, Lululemon (LULU) will debut its “Like New” program later this month. The service allows consumers to trade in “pre-loved” LULU clothing in exchange for an e-gift card at one of the more than 390 participating U.S. stores. They can also buy from a selection of used gear on a separate page located on the company’s website.
Backdrop: Lululemon dipped into resale in May of last year, testing its so-called re-commerce platform across Texas and California. “Lululemon is actively working to help create a healthier future,” CEO Calvin McDonald declared at the time. The new expansion of the program is said to include a “robust” assortment of gently used Lululemon items, ranging from leggings, tops, shorts and jackets, with new items added every day.
“We’ll refresh your gently worn pieces for someone else to make active again,” Lululemon said in a statement. “We’re not accepting items with visible wear (no damage, pilling, rips, or discoloration) or accessories, yoga props, intimates, collaborations, swimsuits, ivivva, and self-care products.”
Go deeper: The nationwide debut comes as consumers see higher prices on everything, including items in the clothing and apparel sector. Sites like Poshmark (POSH) and Depop are taking notice, while retailers like Levi Strauss (LEVI) and Nike (NKE) have previously announced buyback programs. Others that have dipped into the secondhand market include Gap (GPS), Macy’s (M), and Nordstrom (JWN), which have partnered with marketplaces like ThredUp (TDUP). (2 comments)
Border trade
Remember the Freedom Convoys at the start of 2022? Well, the border disruption are back, but this time for a different reason. Since Monday, Mexican truckers have been blocking the Pharr-Reynosa International Bridge in protest of Texas Governor Greg Abbott’s enhanced security operation targeting “illicit contraband and smuggling people across our southern border.” The order requires extra inspections of commercial trucks, which have slowed the crossing times for freight dramatically, even as much as a third of normal levels.
Bigger picture: More than $440B in trade flow through the Texas-Mexico border each year, with the Pharr crossing serving as one of the most important ports of entry (an estimated 3,000 trucks cross the bridge on a normal day). It’s also the largest land port for produce, including avocados, tomatoes and leafy green vegetables. An estimated $30M of fresh produce has not been able to reach the U.S. side since Friday, according to the Texas International Produce Association.
The delays are also spreading beyond Texas as border officials confirmed another blockade at the Santa Teresa port of entry in southern New Mexico. “Everybody down here is on a just-in-time inventory system,” said Jerry Pacheco, President of the Border Industrial Association. “It’s going to affect all of us, all of in the United States. Your car parts are going to be delivered late, your computer- if you order a Dell (DELL) or HP (HPQ) tablet – those are going to be disrupted.”
At play? Abbott has made the border operation a cornerstone of his administration as he seeks a third term as governor in the November elections. Democratic nominee Beto O’Rourke, who will run against him, has said the inspections will do nothing to stop the flow of illegal immigration, but will rather worsen existing supply chain problems.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Producer Price Index
10:00 Atlanta Fed’s Business Inflation Expectations
10:30 EIA Petroleum Inventories
12:30 PM Fed’s Barkin: “Economic and Regulatory Outlook”
1:00 PM Results of $20B, 30-Year Note Auction
What else is happening…
Inflation soars by the most since 1981, increasing 8.5% Y/Y in March.
Looking to ease prices, Biden waives 10% ethanol blending cap on gasoline.
DoubleLine’s Gundlach: Inflation is peaking, Fed rate target is ‘laughable.’
$9B offer… Franchise Group reportedly enters bidding war for Kohl’s (KSS).
Walmart (WMT) taps PayPal’s (PYPL) finance chief Rainey as new CFO.
Musk said to be sued over delay in disclosing Twitter (TWTR) holdings.
ETF talk: Fidelity is the latest asset manager to enter the metaverse.
Telecoms equipment maker Nokia (NOK) joins Ericsson in exiting Russia.
Report… Fox News (FOX) is joining Trump’s Truth Social (DWAC) platform.
Delta (DAL) leads off earnings season for the airline sector.
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Good morning. Happy Tuesday.
The Asian/Pacific markets closed mostly down. China did well, but Japan, South Korea, India, Spain and the Philippines were weak. The Europe, Africa and the Middle East markets lean down. Saudi Arabia is up is up, but Denmark, Russia, the UAE, Switzerland, Portugal ans Sweden are down. Futures in the States point towards a moderate gap up open for the cash market.
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The dollar is up. Oil and copper are up. Gold and silver are up. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
CPI Day
Inflation watchers this morning will be eyeing the Labor Department’s Consumer Price Index, which will be released at 8:30 a.m. ET. The CPI is expected to come in at a whopping 8.4% Y/Y for March and the White House has already warned that the headline figure (which includes volatile food and energy) will be “extraordinarily elevated.” America hasn’t witnessed inflation levels above 8% since 1981, and the number would mark the thirteenth month it has hit above the Fed’s longstanding targeted range of 2%.
Commentary: “It’s going to be ugly,” said Mark Zandi, chief economist at Moody’s Analytics. “It’s a perfect storm – Russian invasion, surging oil prices, China locking down, further disruptions to supply chains, wage growth accelerating, unfilled positions. Just a kind of scrambled mess leading to painfully high inflation.”
In terms of how traders will react to the report, some feel the figure is priced in, though others say it can confirm a worrisome underlying trend. Recently, there has been a pickup of services inflation, which will be harder to reverse than the pressures seen in the goods sector (that were largely the result of supply and demand mismatches). Those factors are fueling concerns that inflation will become more embedded in the U.S. economy, prompting the Fed to embark on a quantitative tightening cycle and triggering fears of a coming recession.
Signs of a top? There is another cohort of the investing community that sees inflation moving down from here, with oil pulling back from near records and used vehicle prices starting to drop off. “The swing from tight supply to a goods glut could be rapid and dramatic, essentially because the lagged response from the supply chain to the COVID-driven surge in demand is coming on-stream just as consumers want fewer goods,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “This will be the peak, because the anniversary of a sequence of big increases in the spring and early summer of last year creates a hugely favorable base effect.” (32 comments)
Metaverse in the making
The development of the metaverse, or the online worlds where avatars interact, play and transact, is heating up among the world’s biggest entertainment giants. The latest news from the sector has seen Epic Games, the developer of popular title Fortnite, secure $2B in new funding from Sony (SONY) and Kirkbi, the family-owned group behind the Lego franchise. Until now, Epic’s “metaverse” has largely taken place within Fortnite, where third parties have collaborated on items like themed skins or staged virtual events.
Flashback: It was only a week ago that Epic and Lego announced a partnership to co-develop a “family-friendly” metaverse for kids, empowering them to become “confident creators” while delivering amazing play opportunities in a “safe and positive space.” In January, Microsoft (MSFT) also agreed to acquire Activision Blizzard (ATVI) for $75B, with CEO Satya Nadella saying the deal would allow it to get a foothold in the “metaverse.” Facebook kicked off the trend by renaming itself Meta Platforms (FB) last November, with Google (GOOG, GOOGL), Nvidia (NVDA) and Qualcomm (QCOM) also investing in the technology.
“As we reimagine the future of entertainment and play we need partners who share our vision. We have found this in our partnership with Sony and Kirkbi,” said Epic founder and CEO Tim Sweeney. “This investment will accelerate our work to build the metaverse and create spaces where players can have fun with friends, brands can build creative and immersive experiences and creators can build a community and thrive.”
By the numbers: The deal values Epic at $31.5B. Following the transaction, Sony will hold a 4.9% stake in the company and Kirkbi will own 3%, though it will remain in control of Tim Sweeney. For some time, China’s Tencent (OTCPK:TCEHY) has also held 40% ownership of the North Carolina-based developer. (9 comments)
Masks are back
As COVID-19 cases rise across the country, Philadelphia is bringing back its indoor mask mandate for schools, day cares, businesses, restaurants and government buildings. Under the new rules, there will be no vaccine or testing requirements for places that serve food or drink, meaning everyone will be subject to the new order that kicks in on April 18. Most U.S. states and cities that still imposed indoor mask mandates dropped the requirements back in February and early March following new guidelines from the CDC.
Snapshot: While there was only an average of 142 daily new cases in Philly in recent days – with 44 people currently hospitalized with COVID – the city’s threshold for an indoor mask mandate (known as Level 2) kicked in as new cases rose by more than 50% over 10 days. “I sincerely wish we didn’t have to do this again,” announced Health Commissioner Cheryl Bettigole. “But I am very worried about our vulnerable neighbors and loved ones. This is our chance to get ahead of the pandemic, to put our masks on until we have more information about the severity of this new variant.”
Many in the hospitality industry are pushing back against the new restrictions, with the Pennsylvania Restaurant & Lodging Association even calling the reinstated mandate “counterproductive” and taken without “input from the mitigated community.” “This announcement is a major blow to thousands of small businesses and other operators in the city who were hoping this spring would be the start of recovery. Restaurant workers have suffered severe backlash when enforcing these rules in the past and, unfortunately, this time will be no different.”
Response: “Our city remains open,” Philly Mayor Jim Kenney said in a statement. “We can still go about our daily lives and visit the people and places we love while masking in indoor public spaces. I’m optimistic that this step will help us control the case rate.”
Employment picture
As Americans continue to quit their jobs by the millions, a term called “The Great Resignation” has been trending in the economic lexicon. In fact, 48M people left their jobs voluntarily in 2021, marking an annual record, while a monthly high of 4.5M quits was seen in November 2021. According to the latest data from the Bureau of Labor Statistics, another 4.4M workers decided to leave their jobs in February 2022, and while that figure could be eye-popping, it doesn’t factor in the 6.7M people who were hired during that same month.
Quote: “Yes, lots of people are quitting, but they’re going someplace else. They’re not sitting on their couches,” explained Professor Jay Zagorsky of Boston University’s Questrom School of Business. “Instead, lots of people are quitting, but they’re getting rehired someplace else. They’re switching jobs. I would call it not the ‘Great Resignation’ but the ‘Great Job Switch.'”
New research from the San Francisco Federal Reserve also shows that the high rate of “quits” during the pandemic isn’t that unusual. Resignations were “driven by young and less-educated workers in industries and occupations that were most adversely affected by the pandemic. This is also where payroll employment growth has been high recently, offsetting the job losses incurred in 2020.” Moreover, the resignations were highest in the leisure and hospitality industries, and did not affect all sectors equally.
Be aware: A recent Harris/USA Today poll found 1 in 5 people who quit their jobs over the past two years now regret doing so, while 25% said they miss the job culture at their prior place of employment. A third are already searching for new roles with better working conditions and benefits, and less than 4 in 10 quitters feel valued, successful or happy or in their current positions.
Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
8:30 Consumer Price Index
1:00 PM Results of $34B, 10-Year Bond Auction
2:00 PM Treasury Statement
5:30 PM Fed’s Barkin Speech
What else is happening…
Musk vs. Twitter (TWTR) could mean ‘Game of Thrones’ battle – Wedbush.
Charlie Munger’s Daily Journal (DJCO) cuts Alibaba (BABA) stake in half.
$64B on R&D: Honda (HMC) eyes 2M electric vehicles annually by 2030.
Looking to diversify, Apple (AAPL) to start making iPhone 13 in India.
Walgreens (WBA) goes to trial in Florida over its role in opioid crisis.
Lumber slumps to four-month low as inflation curbs DIY renovation market.
Meta Platforms (FB) is testing new metaverse monetization tools.
Ukraine War Update: West monitoring reports of chemical weapons attack.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets closed mostly down. China, Hong Kong, Taiwan and New Zealand suffered big losses. The Europe, Africa and the Middle East markets lean down. Poland, Turkey, the UAE and Greece are down; the UK, Denmark, Germany, Finland, Israel and Sweden are weak. Futures in the States point towards a moderate down open for the cash market.
————— Masterclass Overview –>> here —————
The dollar is up. Oil and copper are down. Gold and silver are up. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Overboard
Elon Musk will no longer be joining Twitter’s (NYSE:TWTR) board of directors, according to CEO Parag Agrawal, who tweeted the update overnight. TWTR slid 7% premarket on the news, marking the latest bout of volatility to hit the stock. Shares had skyrocketed 30% in the two sessions since Musk disclosed his stake last Monday, but have since lost 9% into Friday’s close.
Cold feet? Agrawal gave more of a timeline than a reason for the abrupt departure, saying Musk informed the board as his appointment went into effect on April 9. “I believe this is for the best,” Agrawal wrote. “We have and will always have input from our shareholders whether they are on the Board or not. Elon is our biggest shareholder and we will remain open to his input.”
Musk has been throwing out many ideas for the platform since taking a 9.2% stake in Twitter last Monday. Over the weekend, he suggested that “everyone who signs up for Twitter Blue (ie pays $3/month) should get an authentication checkmark” and “no ads. The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.” Musk has also conducted several polls, including “delete the w in twitter?” and “Convert Twitter SF HQ to homeless shelter since no one shows up anyway.”
From the SA comments section: “Does it mean the SEC was going to come down on him? Or that he wants more than 14.9%? Or that he’d have been gagged from commenting about the company while seated? Was the offer of a seat a clever way to control him?” asked Seriol. “Hopefully this means Elon is going the hostile takeover route,” added user asm12345. “Pump and dump,” countered grewalg87, while Frank30 remarked, “Lol. Bizarre is an understatement describing this guy.” (70 comments)
Cost of living
In a replay of the 2017 presidential election, French voters have advanced incumbent Emmanuel Macron and candidate Marine Le Pen to the second round of a runoff election. The two-round system has been in place since a 1962 referendum, and while it is costly, many cite benefits like the prevention of vote splitting or giving the opportunity to elect candidates with the most winning potential. French elections only proceed to a second round if in the first no candidate received more than 50% of vote, which is rare for presidential elections but sometimes occurs in local ballots.
Results: Macron landed 28.2% of the estimated vote ahead of Le Pen with 22.9%. The two will now face each other in an April 24 rematch that will decide whether Macron will stay in power. In recent surveys, Macron led Le Pen in the runoff by just 2 percentage points, down from a double-digit lead a month ago.
The two differ heavily on political policy, like immigration and France’s role in Europe, and are both wrangling over the cost of living and the economy. Record high inflation has seen Macron order a cap on electricity and natural gas prices, though the measures haven’t stopped Le Pen from climbing in the polls. “I’ll put money back in your pockets,” she declared, promising to cut taxes on fuel and other essentials, while giving businesses incentives to raise wages.
Outlook: Eurozone inflation soared to 7.5% Y/Y in March, hitting a record high for the fifth straight month. A big part of that number has been driven by energy and food prices, with Russia accounting for about 40% of the EU’s imports of natural gas and Ukraine being known as the “Breadbasket of Europe.” “Inflation keeps on coming in stronger than we’ve expected and all the other forecasters have expected,” noted Jack Allen-Reynolds, economist at Capital Economics. “So that implies there will be an even bigger hit to household incomes and possibly a bigger hit to consumption.” (1 comment)
Flight disruption
Been on a flight recently? There have likely been delays, and that’s if you even get on a plane (cancellations have been through the roof). The developments have prompted “camping out at the airport” to trend across the country, while hours-long waits for customer service have left many passengers with a sour taste of the whole traveling experience. Severe storms have not made things any better, while COVID-19 still looms large as many employees call out sick.
Case in point: JetBlue (NASDAQ:JBLU) scrapped more than 300 flights over the weekend, with nearly a fifth of all its flights canceled on Saturday. That’s on top of hiring 2,500 workers this year and perks to keep staff on the job. It’s now offering a $1,000 bonus to flight attendants who don’t call out of work through May 31, as well as an extra $100 per trip for attendants who pick up open flights on days off.
“We’ve already reduced May capacity 8-10% and you can expect to see a similar size capacity pull for the remainder of the summer,” JetBlue COO Joanna Geraghty declared. “Despite these challenges and, based on your feedback that the schedule is wound too tight, we know the best plan is to reduce capacity now. I think everyone recognizes that the industry still remains very much in recovery mode, so we believe this proactive step is the right decision.”
Go deeper: It’s not the only carrier facing heat. Last week, Alaska Airlines (NYSE:ALK) said it would trim its flight schedule through the end of June to catch up on pilot training. “We’ve recently let down some of our valued guests by canceling an unusual number of flights. The primary cause of cancellations is the shortage of pilots available to fly versus what was planned when we built our April schedule in January.” (5 comments)
Talk of the market
Ahead of bank earnings and inflation data later in the week, investors are keeping their eyes on the 10-year Treasury yield, which continues to spike to multi-year highs. Early Monday, the rate climbed 5 basis points to 2.76%, notching a level last seen in 2019. The momentum gathered pace last week after Fed Vice Chair Lael Brainard said the central bank’s balance sheet would be reduced “at a rapid pace” as soon as May, only to be followed up by similar sentiment during the release of FOMC minutes.
Commentary: “Fed tightening is the single biggest theme in global markets right now,” said Nomura rates strategist Andrew Ticehurst. “Yields are making fresh highs, so we are likely seeing stops and technical trading contributing to this move.”
The tightening cycle in the U.S. is also making way for some interesting shifts as policy diverges across the globe. The yield on China’s 10-year government bond fell to 2.75% overnight, marking the first time it has been below the rate of its U.S counterpart in 12 years. The fading premium comes as Beijing sticks to an accommodative monetary stance as prolonged COVID-19 lockdowns – like the one in Shanghai – weigh on its economy.
Ominous signs? While 5-year and 30-year U.S. Treasury yields remain inverted, the 2s10s curve has steepened since the beginning of April after briefly inverting for the first time since 2019. That was followed by the COVID downturn of 2020, though the last persistent inversion of the Treasury curve occurred in 2006-2007.
Today’s Economic Calendar
9:30 Fed’s Bostic Speech
12:00 PM Fed’s Williams Speech
12:40 PM Fed’s Evans Speech
1:00 PM Results of $46B, 3-Year Note Auction
What else is happening…
Earnings season: Banks to reflect strong consumer, weak capital markets.
Shopify (SHOP) sets stock split, updates governance structure.
Cyber firm SailPoint (SAIL) to be acquired by Thoma Bravo for $6.9B.
Turning Red picks up streaming ratings leadership for Disney+ (DIS).
Demand for COVID-19 shots falls amid reluctance to boosters.
China’s producer inflation goes on a rip as lockdowns bite.
Rising material costs: NIO (NIO) follows other EV makers in hiking prices.
Shell (SHEL) joins forces for EV charging across China and Europe.
Tesla (TSLA) bull Ron Baron sees 3x-5x on his investment in 10 years.
Default looms? Russia halts bond sales for the rest of 2022.
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