Good morning. Happy Friday.
The Asian/Pacific markets mostly did well. Hong Kong, Taiwan, Australia, New Zealand, Malaysia and Thailand posted solid gains; India and the Philippines were weak. Europe, Africa and the Middle East are mostly up. The UK, France, Germany, South Africa, Finland, Switzerland, Norway, the Netherlands, Austria and Sweden are up; Denmark and the Czech Repubulic are down. Futures in the States point to a relatively big gap up open for the cash market.
————— VIDEO: Quant Studies to Guide Us —————
The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Job market resilience
The domestic labor market remains tight, with April’s nonfarm payrolls report expected to show that more than 200K jobs were added to the U.S. economy for the fourth straight month. The unemployment rate is also forecast to remain at 3.8%, resulting in the 27th consecutive month that joblessness has stayed under 4% and marking the longest such stretch since the 1960s. It’s a peculiar dynamic, as interest rates have remained relatively high over much of the past two years, and conventional thinking has suggested that this would have made some dent in the job market by now.
Are rates high enough? Jay Powell says they are and has telegraphed that the Fed’s next move will be down and not up. That’s despite inflation remaining sticky around the 3% level and persistent price pressures in the first quarter of the year. Those forces have also led many investors to consider wage growth to be the most important indicator in today’s NFP report, which will be released at 8:30 AM ET.
Average hourly earnings likely rose 0.3% M/M in April, unchanged from March. On a Y/Y basis, a 4.0% increase is expected (compared with 4.1% in the previous month), but higher-than-expected wage increases may fan the fears of resurgent inflation. The labor force participation rate, which measures the share of the working-age population employed or seeking employment, is also anticipated to stay unchanged at 62.7%.
Commentary: SA analyst Damir Tokic will be focusing on changes in temporary jobs, which is a leading indicator of a recession, as well as declines in full-time jobs and increases in part-time ones. A rise in immigration is one reason why the U.S. economy may not be in a recession now, while excess savings from COVID, although largely depleted, may also still be playing a part. “Thus, in my view, these variables have provided only a temporary boost to the economy,” he writes, explaining what effects those might have on the stock market. (29 comments)
Record buyback
Apple (AAPL) shares jumped 6% AH to $183.46/share on Thursday as the tech giant’s Q2 results were better than expected despite iPhone fears in China. Sales weakness was also seen in categories including the iPad, Mac, and Wearables, but investors cheered its updated capital return plan that added a record $110B to its buyback program and raised its quarterly dividend by 4% to $0.25 per share. “We view Apple’s continued employment of generous share buybacks as a critical tool for the stock in weathering the near-term headwinds facing its underlying fundamental outlook,” said Investing Group Leader Livy Investment Research. (196 comments)
Gamblification
Dave & Buster’s (PLAY) has unveiled plans to let customers 18 and older bet on arcade games, but the move has raised concerns over potential addiction risks among youth. D&B will integrate Lucra’s gamification software into its app, which will allow loyalty members to bet $5-$10 on arcade games such as Skee-Ball and Hot Shots. “Providing ‘social’ gambling at youth-oriented locations like Dave & Buster’s raises concerns about youth exposure to and participation in gambling,” declared Keith Whyte, executive director of the National Council on Problem Gambling. (1 comment)
Another bid
Sony (SONY) and Apollo Global (APO) have reportedly gotten a bit more formal in their approach for Paramount Global (PARA, PARAA) via a letter detailing their all-cash $26B offer. Paramount shares, which have been volatile of late, were back in the green following the news. The nonbinding offer marks a starting point for more formal talks as the exclusive negotiating window Skydance Media has to discuss its merger proposal expires later today. Skydance had sweetened its bid, offering some concessions to frustrated Paramount shareholders, although there still appears to be a gap between the companies. (140 comments)
Today’s Economic Calendar
8:30 Non-farm payrolls
9:45 PMI Composite Final
10:00 ISM Service Index
1:00 PM Baker Hughes Rig Count
7:45 PM Fed’s Williams and Goolsbee Panel
What else is happening…
Peloton (PTON) CEO exits; free cash flow push cuts into R&D.
Second Boeing whistleblower dies after two weeks in critical condition.
Coinbase (COIN) scores big beat, reflecting crypto trading surge.
Block (SQ) issues strong 2024 guidance following set of Q1 toppers.
Google allegedly paid Apple (AAPL) $20B to be default search engine.
Weak diesel market adds to concerns about global oil demand growth.
Rivian (RIVN) lands $827M in funding from Illinois for plant expansion.
Big rally for Amgen (AMGN) on weight-loss drug updates and guidance.
Moderna (MRNA) to seek parity for RSV vaccine as rivals lead in market.
Marijuana opposition group raises money to fight cannabis rescheduling.
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Good morning. Happy Thursday.
The Asian/Pacific markets were mixed. Hong Kong and India did well; Taiwan, Indonesia and the Philippines were weak. Europe, Africa and the Middle East lean to the upside. The UK, Poland, Turkey, Russia, Greece, Finland, South Africa, Portugal, Israel and Austria are up; Denmark, France, Norway and Sweden are down. Futures in the States point to a relatively big gap up open for the cash market.
————— VIDEO: Quant Studies to Guide Us —————
The dollar is down. Oil is up; copper is down. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
As it may
There’s a famous adage on Wall Street called “Sell in May and go away,” but investors are analyzing if the strategy still holds any merit. The investment approach posits that stocks tend to underperform in the six months through October, so investors should convert to cash at the start of May and then buy into a dip later in the fall. The origins of the saying go back quite a while, with reasons ranging from vacation cycles to bonus allocations, and others noting that the worst market crashes of 1929 and Black Monday in 1987 occurred during this period.
Thought bubble: Many academic papers and market research have been written on the subject, with breakdowns by stock class or time periods. While seasonal patterns do exist, and equities could face some increased risk in the summer months, they still tend to go up over the long term despite additional volatility. Staying fully invested could prove safer than trying to time the market in any given year, and there are countless indicators out there for better portfolio decisions, such as earnings, valuations, and the direction of interest rates.
“The ‘Sell in May and go away’ adage has a weak track record over the past 40 years, with the S&P 500 having positive returns in over 75% of summer periods,” writes Lawrence Fuller, Investing Group Leader of The Portfolio Architect. “The S&P 500 has historically finished the year higher when the first four months posted a gain, supporting a continuation of the bull market.”
Unconvinced? If anything, bears have been pointing to the outsized market gains seen since late October and the latest top hit in late March. In only five months, the S&P 500 Index (SP500) soared nearly 28% to hit a peak of 5,264, before slumping 4% in April. Dip buyers may still be waiting for the too-far, too-fast rally to fizzle before inching back into the market, especially given a new period of inflation uncertainty, slowing consumer spending and GDP, and signs of waning risk appetite. (5 comments)
Lack of progress
Recent data showing higher-than-desired inflation means it will take more time for the Fed to gain confidence that price pressures are sustainably easing. That was the main message coming out of Jay Powell’s FOMC presser on Wednesday, where he dismissed talk of stagflation after the central bank maintained its key interest rate at 5.25%-5.50% for the sixth consecutive meeting. The FOMC also decided to ease quantitative tightening by slowing the pace of its balance sheet runoff, pushing Treasury yields lower. “Powell adopted a more dovish tone,” noted SA analyst Christopher Robb, but also “expressed confidence that long-term inflation expectations are anchored.” (35 comments)
Industry heavyweight
It’s hard to trade earnings. Shares of Novo Nordisk (NVO) fell more than 3% in premarket trading despite an outlook boost on the back of strong Q1 results. The performance was driven by increased demand for Novo’s blockbuster GLP-1 weight-loss drugs Ozempic and Wegovy, which have taken the industry by storm and sent the stock flying. The Danish drugmaker still faces stiff competition in the weight-loss drug market from Eli Lilly (LLY), which has seen surging demand for its GLP-1s. Novo also warned of continued pricing pressures on its diabetes and obesity drugs, as well as supply constraints and shortages. (9 comments)
Big Oil gets bigger
M&A activity in the Permian Basin is progressing, with the FTC poised to approve Exxon Mobil’s (XOM) $60B purchase of Pioneer Natural Resources (PXD) after the companies agreed to minor concessions. The approval is likely within days, but it will reportedly be conditioned on Pioneer founder and former CEO Scott Sheffield not joining Exxon’s board as planned. The all-stock deal was announced in October and would make Exxon the most dominant producer in the region. Pioneer is the Permian’s largest operator at 9% of gross production, while Exxon is no. 5 at 6% of gross production. (14 comments)
Today’s Economic Calendar
Auto Sales
7:30 Challenger Job-Cut Report
8:30 International Trade in Goods and Services
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:00 Factory Orders
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
What else is happening…
Big Tech earnings wind down with Apple (AAPL): Looking for GenAI.
IPOs on watch as Viking (VIK) debuts 10% above IPO pricing level.
UnitedHealth (UNH) CEO confirms $22M ransomware payment.
Earnings miss, but NYCB (NYCB) soars on new financial targets.
Tesla (TSLA) pulls back on gigacasting ambitions after cost cuts.
Embraer (ERJ) explores making planes to rival Boeing and Airbus.
Shorts may be put to the test as Carvana’s (CVNA) stock drives higher.
More chip earnings: Qualcomm (QCOM) beats, gives strong outlook.
Pfizer (PFE) raises full-year guidance amid major cost savings push.
J&J (JNJ) seeks $6B settlement to resolve talc-related cancer claims.
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Good morning. Happy Wednesday. Happy FOMC Day.
Most Asian/Pacific markets were closed. Japan, Australia and New Zealand were down. Most Europe, Africa and the Middle East markets are closed. Denmark, the UAE and Indonesia are down. Futures in the States point towards a moderate gap down open for the cash market.
————— VIDEO: Quant Studies to Guide Us —————
The dollar is up. Oil and copper are down. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Higher for (much) longer?
Federal Reserve officials have been saying that the path to achieving 2% inflation would be a bumpy one. Indeed. Inflation has come in hotter than desired for the first three months of 2024, meaning that “higher for longer” will continue to be priced in by investors. As such, don’t expect any change when the FOMC announces its monetary policy decision later today, and the expectation for a June rate cut, once the predominant view among market participants, also looks out of reach.
What it means: Policy will likely remain steady for the sixth and seventh straight Fed meeting – with the central bank holding the federal funds rate target range at 5.25% to 5.5%. In fact, over half of WSB subscribers don’t see any rate cuts in 2024, according to the most recent Survey Monday. The sentiment follows comments from Fed Chair Jay Powell earlier this month, which outlined that the Fed’s restrictive policy needed more time to work as the labor market remains strong and disinflationary dynamics have stalled.
U.S. stocks ended lower on the last day of April, dragged down by some disappointing earnings reports and economic data. Market participants were also being cautious a day ahead of the FOMC’s latest monetary policy decision. Since January, Fed officials have said they want to see more evidence that inflation is on a sustainable path to reach the central bank’s goal of 2% before they reduce rates, and so far, they haven’t received that evidence. See SA Analyst Roundtable: When will the Fed cut rates?
The balance sheet: There will also be a focus on the Federal Reserve’s plans to slow quantitative tightening during Powell’s afternoon presser. After the last FOMC meeting, Powell said the policymakers expected to reduce the rate of its balance sheet runoff “fairly soon,” which was backed up in the FOMC minutes released three weeks later. On average, securities have runoff at a rate of around $75B per month, less than its current cap of $95B per month, with the Fed’s total asset portfolio recently declining to $7.4T from about $9T in June 2022. (8 comments)
Cloud lift
Amazon (AMZN) climbed 1.3% AH to $177.20/share on Tuesday after posting better-than-expected Q1 results, including a beat from Amazon Web Services. However, gains were curbed by the e-commerce giant’s sales guidance. On the earnings call, CFO Brian Olsavsky shot down speculation that Amazon would join other tech powerhouses in initiating a dividend, but would instead stick with its philosophy of investing in growth initiatives, like going all in on generative AI. Investing Group Leaders Jonathan Weber and Ahan Vashi both applauded the strong quarter, but they have different takes on AMZN’s valuation. (17 comments)
AI content
OpenAI and Microsoft (MSFT) have been sued by a conglomerate of newspapers owned by investment fund Alden Global Capital for alleged AI infringement. Eight dailies were part of the lawsuit, including New York Daily News, Chicago Tribune and The Mercury News. The development comes a day after OpenAI signed a deal with the Financial Times to use its content to train AI models. Google (GOOG, GOOGL) has also reportedly closed a deal with News Corp. (NWSA) to pay the media company $5M-$6M per year to develop AI-related content and products. (17 comments)
Cannabis rescheduling
Pot stocks rose sharply late Tuesday on reports that the DOJ would reclassify marijuana as a less dangerous drug. Moving marijuana to the Schedule III category would make pot federally obtainable with a prescription, and pave the way for significant tax benefits for cannabis companies. Marijuana ETFs like YOLO and MJ soared over 20%, while shares of Canopy Growth (CGC) and Tilray (TLRY) surged 80% and 40%, respectively. The move might have also surprised WSB subscribers, who weighed in on the likelihood of rescheduling just two weeks ago. (39 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Treasury Refunding Announcement
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:00 Job Openings and Labor Turnover Survey
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:30 PM Chairman Press Conference
What else is happening…
Binance founder CZ is sentenced to four months in prison.
Consumer confidence slips to lowest level since mid-2022.
Pinterest (PINS) soars after topping half a billion monthly users.
PG&E nears deal with KKR for stake in power business spinoff.
Chip disappointment: AMD (AMD) reports latest quarterly results.
Super Micro Computer (SMCI) also slumps despite profit beat.
Report: Cruise operator Viking (VIK) prices IPO near top of range.
Mideast boycotts hit sales at McDonald’s. Chain talks value pricing.
Starbucks (SBUX) drops to 52-week low on slashed guidance.
Novo, TEVA, AstraZeneca issued FTC warnings over ‘bogus’ patents.
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Good morning. Happy Tuesday.
The strong>Asian/Pacific markets were mixed. Japan, Indonesia and Thailand did well; China, Taiwan and the Philippines were weak. Europe, Africa and the Middle East currently lean up. The UK, Denmark, Norway, Hunary and Israel are up; Poland, Spain and Portugal are down. Futures in the States point towards a moderate gap down open for the cash market.
————— Free Online Course: Mini Masterclass in Trading —————
The dollar is up. Oil is up; copper is down. Gold and silver are down Bonds are mixed and little changed.
Stories/News from Seeking Alpha…
Merger mayhem
On a momentous day for Paramount Global (PARAA), its lead suitor Skydance Media has come up with a deal sweetener in the guise of $3B more in cash for debt retirement or buybacks. That’s meant to mollify holders of Paramount’s nonvoting stock (PARA), who increasingly pushed back against the original deal that would’ve favored controlling shareholder Shari Redstone and her family company National Amusements by awarding her a hefty premium compared to common shareholders.
Merger fallout: Skydance’s original offer caused major pushback from Paramount shareholders, as well as its CEO Bob Bakish, as the proposed merger would’ve benefited Redstone at their expense. Bakish was ousted on Monday, and has been replaced by an “Office of the CEO” – consisting of CBS CEO George Cheeks; Chris McCarthy, CEO of Showtime/MTV Entertainment Studios and Paramount Media Networks; and Brian Robbins, CEO of Paramount Pictures and Nickelodeon. Barclays called the new management structure “unusual,” saying it would likely “complicate execution further in an already challenged environment.” PP Foresight analyst Paolo Pescatore said the new arrangement “looks like a car crash with clear divisions among key stakeholders.”
Earnings review: Paramount’s shares initially gained AH on Monday as the company slashed losses and boosted adjusted operating income despite reporting revenue just short of expectations. However, its class A stock (PARAA) later reversed course to trade 4.5% lower, while its class B shares (PARA) pared gains to rise 0.4%. This was likely a result of the company dampening hopes of updates on its merger talks by saying it wouldn’t take questions on the earnings call.
What’s next? Paramount’s special committee has likely shifted its focus to how $3B in cash in the sweetened deal should be spent – with non-voting shareholders naturally preferring stock buybacks, while Skydance would love for it to be spent retiring debt. Paramount will be engaged in exclusive talks with Skydance until May 3, though a rival deal from Apollo Global (APO) joined by Sony (SONY) – reportedly $26B in cash – is waiting in the wings. Investing Group Leader Stone Fox Capital earlier this month had warned of the risks of Paramount’s controlling shareholders pushing for a sub-par deal. (37 comments)
Coal phaseout
Energy ministers from the G7 countries have reportedly reached an agreement to set a target date of 2035 for shutting down their coal-fired power plants. Andrew Bowie, the U.K.’s minister for nuclear and renewables, described the agreement reached at this week’s G7 ministers meeting in Turin, Italy, as “historic.” While the outlines of a deal were reached on Monday, details are expected to be formally announced by ministers after the final day of meetings on Tuesday. An agreement on coal would mark a significant step in the direction indicated in last year’s COP28 summit to phase out fossil fuels. Last week, the U.S. issued sweeping new rules to crack down on power plant pollution. (45 comments)
Illegal data sharing
The Federal Communications Commission has fined the largest U.S. wireless carriers – T-Mobile (TMUS), Sprint, AT&T (T), and Verizon (VZ) – nearly $200M for illegally sharing access to customers’ location data. The fines were first proposed by the FCC in February 2020 over the companies’ failure to protect consumers’ location information. According to the FCC’s investigation, each carrier sold access to its customers’ location information to aggregators, which then resold access to this data to third-party location-based service providers. All of the wireless carriers are expected to appeal the regulator’s decision. (24 comments)
NBC pitch
Comcast’s (CMCSA) NBCUniversal has pitched paying an average of around $2.5B a year to air National Basketball Association games, as the firm contends with Warner Bros. Discovery’s (WBD) TNT for the broadcasting rights. Warner paid an average of $1.2B under its current NBA broadcast deal, but failed to finalize a new contract before an exclusive negotiating window expired, allowing NBC to make an offer. Disney (DIS), the NBA’s other major TV partner, is expected to pay an average of around $2.6B to renew its deal, up from about $1.5B a year currently. Meanwhile, Amazon (AMZN) has reached a framework for an NBA streaming deal similar to the one it has with NFL. (12 comments)
Today’s Economic Calendar
FOMC meeting begins
8:30 Employment Cost Index
9:00 S&P CoreLogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
9:45 Chicago PMI
10:00 Consumer Confidence
3:00 PM Farm Prices
What else is happening…
WSB survey results: More than half don’t expect rate cuts this year.
Tesla (TSLA) job cuts: More senior execs quit, Supercharger team laid off.
Amazon (AMZN) earnings on deck. Could a dividend be part of the mix?
Southern’s Vogtle: Largest nuclear power plant in U.S. is finally complete.
HSBC (HSBC) profit dips, CEO Noel Quinn announces surprise retirement.
Meta (META) to be probed by European Commission over disinformation.
Oil falls on Middle East ceasefire talks, Trans Mountain pipeline expansion.
MicroStrategy (MSTR) falls as impairment drives wider-than-expected loss.
FAA bill: Marijuana banking measure loses potential avenue to passage.
Biden administration eyes Russian uranium import ban as legislation stalls.
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Good morning. Happy Monday. Hope you had a good weekend.
The strong>Asian/Pacific markets posted big gains. China, Hong Kong, South Korea, India, Taiwan, Australia, New Zealand, Malaysia, Indonesia and the Philippines all participated. Europe, Africa and the Middle East are currently mostly up. The UK, Turkey, South Africa, Finland, Hungary, the Netherlands, Portugal and Saudi Arabia are leading; Greece and Spain are down. Futures in the States point towards a big gap up open for the cash market.
————— Free Online Course: Mini Masterclass in Trading —————
The dollar is down. Oil is down; copper is up. Gold is down; silver is up. Bonds are up.
Stories/News from Seeking Alpha…
Self-driving push
Tesla (TSLA) is steadily moving ahead with its plan to roll out its self-driving technology in China, reportedly reaching a deal with Baidu (BIDU) to access the local search giant’s mapping license for data collection on Chinese roads. Baidu is expected to also provide its lane-level navigation system to Tesla. The news sent shares of Tesla jumping around 8% before the bell on Monday, while Baidu’s ADRs soared close to 6%. To note, both companies already have a partnership, under which the automaker’s vehicles use the Chinese company’s navigation map in China.
Musk in China: The latest agreement was a result of Tesla CEO Elon Musk’s trip to China, where he met with Chinese Premier Li Qiang and other officials, just over a week after the billionaire cancelled his planned India visit citing “very heavy Tesla obligations.” Musk also reportedly sought approvals for the launch of Tesla’s driver assistance system – Full Self Driving – in China and permissions to transfer local data abroad. Transferring data is an important part of training Tesla’s algorithms for self-driving. Since 2021, Tesla has kept data collected in China on servers in Beijing and hasn’t sent it to the U.S. to comply with Chinese regulation.
Dig deeper: China requires that all driving assistance systems get a mapping service license before operating on public roads in the country. For this, foreign companies need to partner with any of the dozen local firms that are licensed. Baidu is among the Chinese companies that have this license. The license would legally allow Tesla to operate its FSD software on Chinese roads, and gather data on road layouts and nearby buildings. It is not immediately clear if the collected data will belong to Tesla or Baidu.
FSD hopes: In the backdrop of slowing demand and growing competition, Tesla last week slashed FSD prices by a third to $8,000 in the U.S. Launching FSD in China would be a significant step as Chinese EV makers pose a real threat to Tesla’s market share. Musk recently said Tesla may bring the software to China very soon. “While the company has yet to have successes that justify its valuation, a breakthrough with FSD or something else, could turn that around,” Investing Group Leader The Value Portfolio recently said. (18 comments)
Yen intervention?
The Japanese yen strengthened against the U.S. dollar on Monday, a public holiday, with traders speculating that it’s likely due to intervention by authorities to support the currency after it hit its lowest level in over three decades last week. The yen strengthened to trade around 155 against the dollar (USD:JPY), from as high as 160 earlier today. “… these moves have all the standard characteristics of currency intervention: the ‘line in the sand’ at 160, the sharp increase in volume and the size of the move,” said Francesco Pesole, FX strategist, ING. It remains unclear if this was a one-off move or part of an intervention campaign. (1 comment)
AI-powered iPhone
Apple (AAPL) and OpenAI resumed talks on integrating the startup’s generative AI capabilities into the new iPhone, expected later this year. The discussions mark a renewed attempt by the tech giant to add the AI features to iOS 18, the next iPhone operating system. Talks with Microsoft (MSFT)-backed OpenAI about a potential deal began earlier this year, following similar discussions with Alphabet (GOOG, GOOGL) to add Gemini to the iPhone. Apple may opt for a deal with both OpenAI and Alphabet, or prefer one over another. Apple’s Q2 results are due on Thursday, and traders will closely watch for comments on its strategy to integrate genAI functionality into the iPhone. (46 comments)
Final offer
Skydance Media reportedly made its “best and final” offer in its bid to merge the company with Paramount Global (PARA), whose shareholders have opposed the deal and called for the consideration of other offers. The Redstone family and David Ellison made concessions to make a change in control at Paramount more amenable to smaller investors. The company’s CEO Bob Bakish is also expected to be fired as early as this morning over his reported opposition to the merger. Paramount’s special committee is still undecided about agreeing to a deal with Ellison. The media giant is scheduled to report Q1 earnings after the close on Monday. (49 comments)
Today’s Economic Calendar
10:30 Dallas Fed Manufacturing Survey
What else is happening…
Biden administration imposes sweeping regulations on power plants.
U.S. to rush Patriot missiles to Ukraine as part of $6B aid package.
BHP may improve Anglo American (OTCQX:AAUKF) bid after rejection.
Republic First Bank (OTC:FRBK) shut in 2024’s first bank failure.
Disney (DIS) character workers in California move to unionize.
WHO picks dominant variant JN.1 for next set of COVID vaccines.
Turkey, Exxon (XOM) in talks for multibillion dollar LNG supply deal.
Elliott Management builds big stake in Warren Buffett-backed Sumitomo.
Credit card delinquency rates fall in March as consumers keep spending.
Cannabis retailer MedMen (OTC:MMNFF) files for bankruptcy in Canada.
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