US FINANCIAL MARKET

U.S. Stocks Slide as Bond Yields Climb – Wall Street Journal, 4/11/2022

• U.S. stocks dropped and oil prices slid Monday as Covid-19 shutdowns in China added to the uncertainty investors face in a period of rising interest rates.
• The S&P 500 fell 0.8%, while the Dow Jones Industrial Average slipped 0.3%, or about 100 points.
• The tech-heavy Nasdaq Composite declined 1.2%.
• The Nasdaq fell 3.9% last week, when Federal Reserve officials signaled their intent to raise borrowing costs and shrink the central bank’s balance sheet to quell inflation.
• U.S. government bonds extended their selloff. The yield on 10-year Treasury notes rose to 2.757%, up from 2.713% Friday.
• Lockdowns in Shanghai that damp demand for commodities weighed on oil prices, sending benchmark Brent crude contracts down 4.1% to $98.59 a barrel.
• The physical oil market had been weakening for several weeks in response to the shutdowns as well a planned release from strategic reserves in the U.S. and elsewhere.
• AT&T, which on Friday completed the planned merger of its film-and-TV empire with Discovery, rose 5.7%.
• Shares of the new company, Warner Bros. Discovery (WBD), added 3.9%.
• Stock markets mostly dropped overseas. The Stoxx Europe 600 lost 0.4%, led by declines for technology companies.
• France’s CAC 40 was an outlier, rising 0.5% after President Emmanuel Macron garnered 28.2% of the estimated vote in the first round of the presidential election, ahead of far-right leader Marine Le Pen’s 22.9%.
• The two will face off in an April 24 rematch of the 2017 election.
• Stocks in China tumbled as the economic toll of Covid-19 lockdowns in Shanghai and supply-chain disruptions in the country continued to mount.
• The CSI 300 Index, which tracks the largest companies listed in Shanghai and Shenzhen, fell 3.1%, while Hong Kong’s Hang Seng Index dropped 3%.
• Chinese auto sales data on Monday showed that passenger-car sales fell 10.5% in March, after production was hampered by factory closures.
• Shanghai, the center of the Covid-19 outbreak, reported more than 25,000 asymptomatic carriers of coronavirus Sunday, according to the National Health Commission.
• Investors will parse results from some of the biggest financial institutions when first-quarter earnings season kicks off this week.
• JPMorgan Chase, BlackRock and Delta Air Lines are due to report Wednesday, followed by Goldman Sachs, Morgan Stanley and Citigroup Thursday.

Elon Musk Reverses Decision to Join Twitter’s Board – Wall Street Journal, 4/11/2022

• Elon Musk decided not to join Twitter’s board of directors, Chief Executive Parag Agrawal said, a dramatic reversal that cast new uncertainty over the relationship between the social-media platform and its largest shareholder.
• Mr. Agrawal didn’t provide a reason for Mr. Musk’s decision. “I believe this is for the best,” he said. “We have and will always value input from our shareholders whether they are on our Board or not. Elon is our biggest shareholder and we will remain open to his input.”
• The Tesla Inc. CEO didn’t respond to a request for comment late Sunday. He tweeted a “face with hand over mouth” emoji after Mr. Agrawal’s tweet.
• Mr. Musk appears to have deleted that tweet along with several others he posted over the weekend that included criticisms, suggestions and apparent jokes about Twitter.

Shopify Plans 10-for-1 Stock Split, Seeks to Protect CEO’s Voting Power – Wall Street Journal, 4/11/2022

• Shopify is asking investors to approve changes to its complex share structure to protect the voting power of the Canadian technology company’s leader. The company also is proposing a 10-for-1 stock split.
• Under the proposal, co-founder and Chief Executive Officer Tobi Lütke will receive a new “founder share” that, combined with his existing supervoting Class B shares, will increase his voting power to 40% from 34%.
• Mr. Lütke, who is 41 years old, will keep the founder share as long as he remains at Shopify as an executive, a board member or a consultant.
• With the founder share, Mr. Lütke will be able to hold the 40% voting control even if he sells a significant amount of his Class B shares. However, he can’t pass the founder share along to his family and will also lose his right to transfer the Class B shares.

Etsy Sellers Strike as Site Ramps Up to Battle Amazon – Wall Street Journal, 4/11/2022

• A battle over the future of Etsy is playing out in public this week as some sellers protest higher fees and changes the company says are needed to compete for shoppers.
• More than 15,000 sellers on the digital marketplace have signed a petition against Etsy’s move to raise the commission it charges on each transaction to 6.5% from 5%, according to Kristi Cassidy, an Etsy shop owner and one of the petition organizers.
• Some, including Ms. Cassidy, are also going as far as temporarily closing their shops in protest.
• Etsy executives say the fee hike effective Monday—the first such increase since 2018—is critical to increasing investments in marketing and expanding seller-support services.
• The tension between Etsy and parts of its seller base, which totals roughly 5.3 million businesses, comes as the company tries to evolve from a niche online marketplace to a major e-commerce player.

Bank Deposits Could Drop for First Time Since World War II – Wall Street Journal, 4/11/2022

• U.S. banks have a streak of increasing deposits as a group every year since at least World War II. This year could break it.
• Over the past two months, bank analysts have slashed their expectations for deposit levels at the biggest banks.
• The 24 institutions that make up the benchmark KBW Nasdaq Bank Index are now expected to see a 6% decline in deposits this year.
• While some analysts doubt the full-year decline will happen, even the possibility would have been unthinkable a few months ago. Bank deposits have grown sharply during the pandemic.
• A decline isn’t going to hurt the banks. The flood of deposits had become a headache as it had big banks nearing regulatory limits on their capital.
• Banks had already been pushing many depositors aside because they weren’t able to put the money to work as loans.
• The industry has $8.5 trillion more in deposits than loans, according to Barclays analysts.
• While loan demand is expected to increase, and the banks need deposits to fund the lending, that is more than enough.

Thoma Bravo to buy SailPoint for $6.1 bln in cybersecurity push – Reuters, 4/11/2022

• Private equity firm Thoma Bravo will acquire cybersecurity firm SailPoint Technologies for $6.12 billion, the latest deal that underscores the heightened interest in the security software market.
• With the newest buy, Thoma Bravo will bolster its strength in the security-focused space, where it already has key investments in firms like Barracuda Networks, Blue Coat Proofpoint, Sonicwall and Sophos.
• SailPoint shareholders will receive $65.25 per share in cash, the company said on Monday, which represents a premium of 31.6% as of Friday close. Including debt, the deal is valued at about $6.9 billion.
• Shares of Austin-Texas based SailPoint, founded in 2005, were trading about 30% higher in early trading on Monday. They had lost about 9.2% in 2021.

Muni Bond Boom Is Sputtering as Interest Rates Rise – Wall Street Journal, 4/11/2022

• Rising interest rates are threatening the municipal-bond boom on Wall Street, leaving governments less willing to borrow and households less willing to invest in the $4 trillion market.
• Bond issuance by state and local governments dropped 8% in the first quarter from a year earlier, with public officials calling off refinancings and spending down stimulus cash. At the same time, spooked investors yanked their money from municipal-bond funds, which suffered their biggest quarterly outflows since 2013.
• States and cities have been forced to cut prices to sell their bonds to banks and insurance companies because muni bond funds are no longer offering top dollar, dealers said.
• “2021 was a market where everybody wanted to buy because there was so much inflow and so much cash,” said Chris Lee, head of municipal sales at Wells Fargo, the fourth-largest muni-bond broker-dealer by volume last quarter. “This year it’s much more of a negotiation.”

Investors Turn Cautious on Consumer Debt – Wall Street Journal, 4/11/2022

• Investors are growing more skittish about bonds backed by consumer debt, worried that inflation and slowing growth will increase the number of low-income borrowers falling behind on car payments or credit-card bills.
• Buyers of bonds backed by subprime car loans or credit cards are demanding the highest premiums over interest-rate benchmarks since mid-2020. Meanwhile, investors have punished shares of some financial-technology companies that helped fuel a recent surge in consumer borrowing, such as Affirm Holdings and Upstart Holdings.
• About $900 billion of loans to individuals that were packaged into tradable bundles and sold to investors as bonds was outstanding last year, Moody’s data show, supporting record borrowing for homes, cars and even electronics.
• Debt owed by households topped $15 trillion for the first time last year, according to the New York Federal Reserve.
• Bond sales have become especially important for funding loans to lower- and middle-income consumers.
• New securitized car loans to subprime borrowers grew by 57% last year to $43.4 billion, according to Moody’s.
• Bond issuance backed by the type of loans made by Affirm and Upstart almost doubled to about $18 billion in 2021, according to Finsight.

Apple starts manufacturing iPhone 13 in India – Reuters, 4/11/2022

• Apple has started making the iPhone 13 in India, the company said on Monday, as the U.S tech giant tries to reduce reliance on its Chinese supply chain.
• The phone is being produced at a local plant of Apple’s Taiwanese contract manufacturer Foxconn, situated in the town of Sriperumbudur in Southern Tamil Nadu state, according to a source.
• Apple has been shifting some areas of iPhone production from China to other markets including India, the world’s second biggest smartphone market, and is also planning to assemble iPad tablets there.
• The iPhone 13 is the fourth model to be produced locally after Apple launched manufacturing operations in India in 2017 with the iPhone SE.

Fortnite Maker Epic Gets $2 Billion From Sony, Lego Owner – Bloomberg, 4/11/2022

• Sony Group and the owner of the Lego Group invested $2 billion in Epic Games, the maker of Fortnite.
• Epic is valued at $31.5 billion after the investment, the Cary, North Carolina-based company said Monday in a statement.
• Epic’s valuation about a year ago was $28.7 billion.
• In addition to producing Fortnite, which has hundreds of millions of registered users, Epic Games also makes one of the most popular game engines, Unreal Engine. Last week, Epic released Unreal Engine 5.
• Sony, which works with Epic on the PlayStation and already owned a stake in the company, and Kirkbi, the family-owned holding company behind the Lego toy brand, each invested $1 billion in the new deal. “All three companies highly value both creators and players, and aim to create new social entertainment exploring the connection between digital and physical worlds,” according to the statement.

Oil Falls to February Levels on Worsening China Demand Outlook – Bloomberg, 4/11/2022

• Oil resumed its decline as China’s largest Covid-19 outbreak in two years heightens concerns about demand from the world’s biggest crude importer.
• West Texas Intermediate futures dropped below $95 a barrel, touching the lowest level since late February.
• Virus cases are rising in Shanghai, with millions under lockdown and no clarity on when restrictions will be lifted.
• Russian crude oil shipments in the seven days to April 8 continued a rebound that began the previous week after consistently falling since the nation’s Feb. 24 invasion of Ukraine.
• Weekly shipments hit almost 4 million barrels a day in the first full week of April, the highest level seen so far this year.

Corn in Longest Rally Since Ukraine War Began on Supply Worries – Bloomberg, 4/11/2022

• Corn rose for a third day in Chicago, the longest rally since the war in Ukraine started, on sluggish sales from the country and further risks to future supply.
• Futures gained as much as 1.3%, moving nearer to the highest since 2012.
• Both the U.S. Department of Agriculture and United Nations cut their outlooks for Ukrainian corn shipments on Friday.
• The supply constraints are expected to persist into the 2022-23 season, with Ukraine’s grain association projecting the corn crop to sink 39% from last year.
• Focus is turning to the weather across the rest of the Northern Hemisphere as plantings kick off, at a time when pricey fertilizer could limit sowing.

Palladium Extends Gains After Suspension of Two Russian Refiners – Bloomberg, 4/11/2022

• Palladium extended gains after the suspension of two state-owned Russian refiners by bourses in London and Chicago added to concerns about supply disruptions from a key producing country.
• The precious metal’s latest rise, following an 8.7% surge on Friday, comes after the invasion of Ukraine and the sanctions that followed saw prices soar to a record last month.
• Russia produces about 40% of the world’s freshly mined palladium, which is mostly used in automobile catalytic converters.
• On Friday, the London Platinum & Palladium Market suspended Krastsvetmet and Prioksky Plant of Non-Ferrous Metals from its goods-delivery and sponge-accreditation lists.
• The LPPM’s announcement reverses its decision a month ago to continue letting the Russian plants supply precious metals to the trading hub. The CME then suspended the approved status for warranting and delivery of certain platinum and palladium brands from the two refiners until further notice.

Gas Price Surge Fuels Fights at FedEx, Uber Over Who Will Pay – Wall Street Journal, 4/11/2022

• Soaring gas prices are squeezing transportation businesses and setting off debates about who will foot the bill.
• FedEx, Uber Technologies and Lyft imposed new or higher fuel surcharges on customers after Russia’s invasion of Ukraine shocked energy markets.
• But local contractors who own the FedEx Ground delivery trucks and some U.S. drivers of the ride-share services are pleading with the companies for even more financial help.
• Uber and Lyft shifted some of the burden to riders by introducing a temporary fuel surcharge in mid-March.
• Riders now pay between 45 cents to 55 cents a trip based on their location.
• Lyft said its surcharge is based on data showing that drivers are spending on average 57 cents more on gas per hour than they were a year ago. Uber said that a per-mile surcharge would disadvantage drivers stuck in traffic.