Daily Market Report | April 1, 2022
US FINANCIAL MARKET
Stocks, Bond Yields Rise After Jobs Report – Wall Street Journal, 4/1/2022
- U.S. stocks wobbled to start the second quarter following a solid employment report that showed the country’s jobless rate returning to pre-pandemic levels.
- The S&P 500 bounced around the flatline Friday, recently rising 0.1%, and the Dow Jones Industrial Average slipped less than 0.1%. The Nasdaq Composite rose 0.4% as biotechnology stocks climbed.
- The wobbly trading session came a day after the benchmark stocks gauge closed out its biggest quarterly decline since the start of 2020, falling about 5% for the first three months of the year.
- Employers added 431,000 jobs in March, marking 11 straight monthly gains above 400,000, the longest such stretch of growth in records dating back to 1939. The unemployment rate fell to 3.6% from 3.8%.
- GameStop shares rose 11% in early trading. The videogame retailer said Thursday that it would request shareholder approval to increase its share count to enable a stock split.
- Dell Technologies edged down 3.7% after analysts at Goldman Sachs cut their target price for the stock.
- In overseas markets, the Stoxx Europe 600 rose 0.5%, led higher by shares of oil, gas and auto companies.
- China’s Shanghai Composite Index rose 0.9%, Hong Kong’s Hang Seng edged up 0.2% and Japan’s Nikkei 225 slipped 0.6%.
- Underlining that inflationary pressures aren’t confined to the U.S., consumer prices in the eurozone rose 7.5% in March from a year earlier—the highest level since the formation of the currency bloc.
Meme stock GameStop jumps on stock split plans – Reuters, 4/1/2022
- Shares of GameStop jumped 15% in premarket trading on Friday after the video game retailer at the heart of last year’s retail trading frenzy said it would seek shareholder approval for a stock split.
- The plan comes as shares of GameStop and other so-called “meme” stocks including AMC Entertainment Holdings are seeing renewed interest from retail investors, who are piling into riskier assets emboldened by hopes of a resolution in Russia’s conflict with Ukraine.
- Shares of GameStop, which have nearly doubled in value in the past two weeks, rose another 15% to $192 on bets that a stock split, which makes shares of a company more affordable, would boost the value of the retailer by attracting more retail traders.
Treasury Yields Resume Climb to Start Quarter, Helped by Jobs Data – Wall Street Journal, 4/1/2022
- Yields on U.S. government bonds surged Friday, aided by a strong jobs report, after a burst of quarter-end buying had driven them lower in recent sessions.
- In recent trading, the yield on the benchmark 10-year U.S. Treasury note was at 2.430%, according to Tradeweb, compared with 2.324% Thursday.
- The two-year yield was up to 2.442%, according to Tradeweb, compared with 2.284% Thursday.
- Four U.S. senators sent a letter Thursday to the Federal Trade Commission citing concern about Microsoft’s proposed acquisition of Activision Blizzard, saying the deal could undermine employees’ calls for accountability over alleged misconduct at the videogame company.
- In the letter, viewed by The Wall Street Journal, Sens. Elizabeth Warren (D., Mass.), Bernie Sanders (I., Vt.), Cory Booker (D., N.J.) and Sheldon Whitehouse (D., R.I.) urge FTC Chairwoman Lina Khan to assess whether the planned transaction could exacerbate the flurry of sexual-abuse, harassment and retaliation allegations at Activision stemming from recent federal and state investigations.
- The senators note in their letter that the terms of the merger would enable Activision’s longtime chief executive, Bobby Kotick, to continue in his role until the transaction’s expected closing in 2023 and receive a potentially significant exit package upon his departure.
- Last summer more than 1,800 Activision employees signed a letter calling on Mr. Kotick to resign.
Judge Approves $18 Million Activision Settlement With EEOC – Wall Street Journal, 4/1/2022
- A California judge has approved an $18 million settlement between Activision Blizzard and the Equal Employment Opportunity Commission, marking a win over objections from a state department that sought to intervene.
- Activision previously agreed in September to settle with the EEOC, which had been investigating the videogame company for allegations of sexual harassment and retaliation.
- But the company and the federal agency became locked in a monthslong legal battle with the California Department of Fair Employment and Housing after the state agency sought to block the settlement, saying it could ruin the department’s lawsuit against Activision. A DFEH spokeswoman said the agency “will continue to vigorously prosecute its action against Activision in California state court.”
- California District Judge Dale S. Fischer late Tuesday ruled against the DFEH, saying any approved claimants must waive their right to recover any sexual harassment, pregnancy discrimination or related retaliation stemming from the agency’s case against Activision.
U.S. Probes Meeting Between Activision CEO and Option Buyer – Wall Street Journal, 4/1/2022
- Authorities investigating timely trading in Activision Blizzard securities are looking into at least one meeting between the videogame firm’s chief executive and one of three traders days before they placed a large bet on Activision shares, according to people familiar with the matter.
- Activision CEO Bobby Kotick met with Alexander von Furstenberg in the week before Mr. von Furstenberg and media moguls Barry Diller and David Geffen bought options to purchase Activision shares at $40 each on Jan. 14.
- The options trade, which has generated an unrealized profit of about $59 million, was arranged days before Activision agreed to be acquired for $95 a share by Microsoft, The Wall Street Journal has reported.
- The Justice Department is investigating whether the options trade violated insider-trading laws, the people familiar with the matter said. The Securities and Exchange Commission is separately conducting a civil insider-trading investigation, the people said.
Ford, GM to halt production at two Michigan plants due to parts shortage – Reuters, 4/1/2022
- Ford Motor and General Motors will each halt production next week at a Michigan plant due to parts shortages, the two companies said separately on Thursday.
- No. 2 U.S. automaker Ford said it would suspend production at its Flat Rock Assembly Plant next week, where it builds the Mustang, due to the global semiconductor shortage.
- GM said that because of a temporary part shortage it would cancel production next week at Lansing Grand River assembly, where it builds the Cadillac CT4, Cadillac CT5 and Chevrolet Camaro.
- GM said the production halt was not related to chips but provided no other specifics.
- Dearborn, Michigan-based Ford said that production at its other North American plants will continue as normal.
Ford recalls 737,000 U.S. vehicles over software and fire-risk issues – Reuters, 4/1/2022
- Ford Motor is recalling 737,000 vehicles in the United States over a part that could develop an oil leak and a software error that could hinder braking, it said on Friday.
- The automaker is recalling 345,451 of its 2020-2022 Ford Escape and 2021-2022 Ford Bronco Sport vehicles with 1.5L engines because the engine oil separator housing could crack and develop an oil leak that might cause an engine fire.
- Ford said it had reports of at least eight fires that may be related to the issue but no related injuries or crashes. Dealers will inspect the oil separator for damage or oil leaks, and replace the oil separator and seals, as necessary.
- Ford is also recalling 391,836 2021-2022 F-150, 2022 Ford Maverick, Expedition, Lincoln avigator, F-250, F-350, F-450 and F-550 vehicles because a towed trailer equipped with an electric or electric-over hydraulic brake system might not brake.
Car Sales Seen Sputtering as Supply-Chain Woes Hurt Production – Wall Street Journal, 4/1/2022
- Auto makers are expected to report weak vehicle sales for the quarter as chip shortages and supply-chain issues continue to limit vehicle production.
- Sales of new vehicles are projected to fall 16% in the first quarter from the year-ago period and represent the second-worst quarterly total in a decade, behind the pandemic-affected second quarter of 2020, according to Cox Automotive.
- The rate of sales is expected to slow in the first quarter to 12.7 million annually, according to J.D. Power.
- In comparison, auto makers last year sold just shy of 15 million vehicles in the U.S., the firm said, up slightly from 2020.
- For five straight years before the pandemic, the industry had eclipsed the mark of 17 million vehicles.
- Edmunds forecasts a 15.2% decrease in first-quarter sales from the same period in 2021, decreasing from 3.9 million to 3.3 million vehicles sold.
US ECONOMY & POLITICS
U.S. Hiring Stays Robust as Jobless Rate Falls, Wages Pick Up – Bloomberg, 4/1/2022
- The U.S. added close to half a million jobs in March and the unemployment rate fell by more than expected, highlighting a robust labor market that’s likely to support aggressive Federal Reserve tightening in the coming months.
- Nonfarm payrolls increased 431,000 last month after an upwardly revised 750,000 gain in February, a Labor Department report showed Friday.
- The unemployment rate fell to 3.6%, near its pre-pandemic low, and the labor force participation rate ticked up.
- The median estimate in a Bloomberg survey of economists called for a 490,000 advance in payrolls and for the unemployment rate to fall to 3.7%.
- Friday’s report showed average hourly earnings rose 0.4% from February and 5.6% from a year ago, the most since May 2020.
- Leisure and hospitality accounted for a quarter of the payroll gains.
- Professional and business services, retail trade and education and health services also posted solid advances.
- The labor force participation rate — the share of the population that is working or looking for work — edged higher to 62.4%, and the rate for so-called prime age workers, ages 25-54, rose to a two-year high.
U.S. Manufacturing Growth Loses Steam, Inflation Pressures Grow – Bloomberg, 4/1/2022
- A measure of U.S. manufacturing activity lost steam in March, falling to the lowest level since 2020 on slower growth in new orders and production.
- The Institute for Supply Management’s gauge of factory activity declined to 57.1 from 58.6 in February, according to data released Friday.
- Readings above 50 indicate expansion.
- The figure was weaker than most estimates in a Bloomberg survey of economists.
- ISM’s new orders measure slid nearly 8 points in March to 53.8, and the factory output gauge dropped 4 points to 54.5.
- The indexes — now both at their lowest levels since May 2020 — signal some softening in demand amid mounting price pressures and increased uncertainty.
- The group’s index of prices paid by producers jumped 11.5 points, the largest monthly advance since the end of 2020, to 87.1.
- The large increase points to worsening price pressures after Russia’s invasion of Ukraine further drove up the prices of petroleum and metals.
- An index of factory employment advanced to a one-year high of 56.3 in March. Order backlogs grew at a softer pace, and a measure of supplier delivery times eased.
Fed’s Evans Favors Quarter-Point Rate Hikes at Each 2022 Meeting – Bloomberg, 4/1/2022
- Federal Reserve Bank of Chicago President Charles Evans said his interest-rate outlook matches the median estimate of his colleagues for six more quarter-point increases this year amid high inflation and a hot labor market.
- Evans, who has been mostly dovish during his leadership of the Chicago Fed over more than a decade, said he agreed with the median forecast made by Federal Open Market Committee participants in March for rates to rise to 1.9% this year and 2.8% in 2023, which he said “represents a slightly restrictive policy stance.”
- Evans said he expected the U.S. economy to have solid growth, with the unemployment rate falling to around 3.5%.
- Russia’s invasion of Ukraine and the continuing Covid-19 pandemic pose upside risks for inflation and downside risks to growth, he said. Evans also stressed the need to make decisions on a meeting-by-meeting basis.
Biden Administration Orders 49 MPG Fuel-Economy Standard by 2026 – Bloomberg, 4/1/2022
- The Biden administration ordered carmakers to increase their average fuel economy to about 49 miles (78.8 kilometers) per gallon by 2026, in an ambitious effort to make up for progress stalled when President Donald Trump rolled back the efficiency program.
- The new fuel economy rules, issued Friday by the National Highway Traffic Safety Administration, require carmakers to heighten the fuel-efficiency of their fleets by 8% annually for the 2024 and 2025 model years, and 10% for 2026, according to a senior administration official.
- The agency was facing a March 31 deadline to finalize new rules for the 2024 model year.
- The administration had previously replaced a Trump fuel economy rule that called for automakers to make a 1.5% increase in fuel economy annually.
EUROPE & WORLD
Shanghai Hospital Harbors Unreported Covid-19 Outbreak, Deaths – Wall Street Journal, 4/1/2022
- Many patients have died in recent days at a large Shanghai elderly-care hospital that is battling a Covid-19 outbreak, according to people familiar with the situation, a sign that a new wave of infections is hitting China’s financial capital harder than authorities have publicly disclosed.
- Shanghai’s government hasn’t reported any Covid-related deaths or outbreaks in its hundreds of elderly-care centers since cases began climbing in the city in March.
- Six replacement orderlies at the city’s Donghai Elderly Care Hospital, brought in after previous caretakers were sent away to quarantine, told The Wall Street Journal that they had witnessed or heard of the recent removal of several bodies from the facility, where they said at least 100 patients had tested positive for Covid-19.
- More than half a dozen users on several of China’s major social-media platforms have also posted messages alleging unreported deaths at the hospital in recent days.
Eurozone Inflation Soars to 7.5%, Raising Pressure on ECB – Wall Street Journal, 4/1/2022
- The eurozone’s inflation rate jumped to another record high in March as Russia’s invasion of Ukraine pushed energy and food prices higher, increasing pressure on the European Central Bank to raise its key interest rate.
- The European Union’s statistics agency on Friday said consumer prices were 7.5% higher in March than a year earlier, a jump from the 5.9% rate of inflation recorded in February.
- It was the fifth straight month the inflation rate hit a new high in a data series that goes back to the start of 1997, two years before the euro was launched.
- Germany’s measure of inflation for March was the highest since 1981, while Spain’s was the highest since May 1985.
- Much of the pickup in inflation has been driven by energy prices, which were 44.7% higher than a year earlier, having been 32% higher in February. Food-price inflation also picked up, to 5% in March from 4.2% in February.
- Russia’s factories cut production and jobs in March after the U.S. and its allies adopted some of the most severe economic sanctions ever taken against a country following Moscow’s invasion of Ukraine, a new survey showed on Friday.
- The survey of purchasing managers at Russian manufacturing companies conducted by data firm S&P Global also recorded sharp rises in prices and a big decline in new orders. Western sanctions have effectively severed Russia from international finance and barred it from importing key technologies
- S&P Global said its Purchasing Managers Index for Russia’s manufacturing sector compiled from the answers to the survey had fallen to 44.1 in March from 48.6 in February.
Factmonster – TODAY in HISTORY
- Oliver Pollack created the dollar sign: $. (1778)
- The Nazi persecution of Jews began in Germany with a boycott of Jewish businesses. (1933)
- American forces landed on Okinawa during World War II. (1945)
- President Nixon signed a bill into law banning cigarette ads from radio and television. (1970)
- Steve Wozniak and Steve Jobs founded Apple Computer. (1976)
- Sweden becomes the fifth European country to legalize same-sex marriage. The other countries with the same rights are The Netherlands, Norway, Belgium and Spain. (2009)
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