US FINANCIAL MARKET

Stocks Edge Down After ECB Sets Plan to Raise Rates – Wall Street Journal, 6/9/2022

• U.S. stock benchmarks wavered as investors digested the European Central Bank’s plan to begin increasing interest rates next month.
• The S&P 500 fell 0.6% in early trading Thursday and the Dow Jones Industrial Average slipped 0.5%. The technology-focused Nasdaq Composite Index also fell 0.5%. Earlier, the major indexes opened lower before briefly turning positive.
• The ECB said Thursday it would increase its key interest rate from minus 0.5% to zero or higher by September, and probably further after that. The central bank indicated that it plans to start with a quarter-percentage point increase in July.
• It also said it would end its large-scale bond-buying program on July 1.
• In both the U.S. and Europe, the announcement sent stocks falling. The pan-continental Stoxx Europe 600 lost about 1%. The euro advanced against the dollar, rising 0.3%, reversing earlier losses.
• Government bonds in Germany and the U.S. slid, sending yields higher.
• On Friday, investors will get a fresh picture of inflation in the U.S. when consumer-price index data for May are released.
• Economists surveyed by The Wall Street Journal expect the reading to show that inflation in the U.S. held steady at 8.3% in May, the same annual rate notched for April.
• Traders and strategists say the inflation data could heavily influence the next stretch of trading for markets, and help shape the Federal Reserve’s interest-rate decisions for later this year.
• The Fed’s June meeting will occur next week, and the central bank is widely expected to raise its key interest rate by a half-percentage point—a move it is expected to replicate in July.
• In the Treasury market, the yield on the benchmark 10-year Treasury advanced to 3.043%, from 3.028% Wednesday. Yields and bond prices move inversely.
• In energy markets, Brent crude, the international benchmark for oil prices, edged higher 0.03% to $123.62 a barrel, after notching a two-day rally Wednesday.
• Oil prices have moved higher recently amid China’s emergence from Covid-19 lockdowns and as traders continue to assess potential supply disruptions due to the war in Ukraine.
• U.S.-traded shares of Alibaba Group Holding lost 3.7% after the China Securities Regulatory Commission denied a report that it was working on a potential revival of Ant Group’s initial public offering.
• In Asia, China’s Shanghai Composite lost 0.8%, despite data showing that the country’s exports rebounded strongly in May. Hong Kong’s Hang Seng lost 0.7%, while Japan’s Nikkei 225 ended roughly flat.

IMF says expects to revise downward its forecast for global growth – Reuters, 6/9/2022

• The International Monetary Fund expects to further cut its forecast for global economic growth in 2022 next month, IMF spokesperson Gerry Rice said on Thursday, following moves by the World Bank and OECD to cut their own forecasts.
• That would be its third downgrade this year.
• In April, the IMF had already slashed its forecast for global economic growth by nearly a full percentage point to 3.6% in 2022 and 2023.
• Rice told a regular IMF briefing that the overall outlook still called for growth across the globe, albeit at a slower level, but a number of countries may be facing a recession.

Target Boosts Quarterly Dividend 20% – Wall Street Journal, 6/9/2022

• Target boosted its quarterly dividend by 20%, just days after the retailer cut its outlook as high inventories weigh on its profit.
• Target on Thursday said its board raised the quarterly dividend to $1.08 from 90 cents previously. The annual payout of $4.32 represents a yield of about 2.76% based on Wednesday’s closing price of $156.70, up from 2.3%.
• The Minneapolis company said the increased dividend is payable Sept. 10 to shareholders of record Aug. 17.

Intel Rethinks Near-Term Spending Plans Amid Economic Uncertainty – Wall Street Journal, 6/9/2022

• Intel is adjusting some near-term spending plans, joining other tech companies in reassessing priorities amid global economic uncertainty.
• Intel said Wednesday that “prioritization in our spending will help us weather macroeconomic uncertainty, execute on our strategy and meet our commitments to customers, shareholders, and employees.”
• America’s largest chip maker by sales also said that it sees itself at the start of a long-term growth cycle for the semiconductor industry.
• As part of its spending adjustments, the U.S. semiconductor powerhouse is imposing a temporary hiring freeze at its Client Computing Group as it assesses priorities, a person familiar with the matter said.
• The unit provides chips for products such as laptops that have suffered demand disruptions from factors including Covid-related lockdowns in China.
• Market-research firm International Data Corp. cut its outlook for personal computer shipments for this year by around 7% after the lockdowns. IDC now expects shipments of traditional PCs to fall 8.2% from last year’s level to around 321.2 million units.
• Before the lockdowns in China hit, IDC forecast a decline to 346 million units.

TSMC Sticks to Sales Growth Outlook Despite Economic Woes, Inflation – Wall Street Journal, 6/9/2022

• Taiwan Semiconductor Manufacturing Co. stuck with its strong revenue growth forecast for the current year despite economic troubles in its biggest markets including the U.S. and China, saying demand remains solid for its chips used in electric cars and high-performance computers.
• The world’s largest contract chip manufacturer expects its revenue to increase by about 30% this year from last year’s 24.9% in U.S. dollar terms, executives said, which was in line with what the company projected in April.
• That figure is higher than the expected 20% growth for the overall wafer fabrication industry, they said at the company’s annual shareholder meeting on Wednesday.
• Hsinchu-based TSMC also said it would continue to spend big on building new plants and developing advanced chips, capitalizing on the global chip shortage.
• It plans for more than $40 billion in capital expenditures next year, executives said, compared with the $40 billion to $44 billion it expects to spend this year.
• TSMC is currently building new chip plants in Arizona and in Kumamoto, Japan.

Supply Crunch Looms for World’s Most Cutting-Edge Chips – Wall Street Journal, 6/9/2022

• The two-year global semiconductor shortage is threatening to spread to some of the most advanced chips needed for next-generation smartphones and the data centers that power apps.
• Chips with the tiniest transistors and highest performance had largely escaped the drought that has hit the auto industry and other electronics.
• Now, problems ranging from production hitches to a shortage of manufacturing equipment have raised concerns over the ability of the world’s two highest-end chip manufacturers to meet delivery promises to customers.
• The challenges could ripple through the electronics supply chain as soon as next year, with one analyst warning of shortfalls as high as 20% for the most advanced chips by 2024 and beyond. Without improved chips, technologies such as high-performance computing, artificial intelligence and more evolved forms of autonomous driving might see a slowdown in deployment, industry analysts say.
• Part of the problem is that just two companies—Taiwan Semiconductor Manufacturing Co. and Samsung Electronics —are capable of building the industry’s most cutting-edge chips because of the high costs and technical barriers.
• Chip-manufacturing equipment is increasingly arriving later than expected, and lead times on new orders have stretched to in some cases two or three years, largely due to a dearth of less-advanced chips.

Lockheed expects to begin deliveries of F-16 combat jets in 2024 – Reuters, 6/9/2022

• Lockheed Martin expects to produce its new-build F-16 fighter jets next year and commence deliveries in 2024, its chief financial officer Jesus Malave said on Wednesday.
• The F-16 is considered a highly maneuverable aircraft proven in air-to-air combat and air-to-surface attack.
• In April, the U.S. State Department approved the potential sale of up to eight F-16 aircraft and related equipment to Bulgaria, in a deal valued at $1.673 billion, and said Lockheed will be the principal contractor.
• “There’s a lot of interest in the aircraft. I think an aspiration probably the next few years would be probably [production of] 3 per month,” Malave added.

European Gas Jumps as Fire in US Compounds Russia Supply Concern – Bloomberg, 6/9/2022

• Europe’s natural gas prices jumped after a fire at a large export terminal in the US wiped out deliveries to a market that’s on high alert over tight Russian supplies.
• Benchmark futures traded in Amsterdam snapped a six-day falling streak, while UK prices soared as much as 39% before paring gains.
• The Freeport liquefied natural gas facility in Texas — which makes up about a fifth of all US exports of the fuel — will remain closed for at least three weeks, resulting in at least 10 missed cargoes.
• The closure comes as pipeline supplies from Europe’s top providers are also capped. Key facilities in Norway are undergoing annual maintenance this week, while Russia’s supplies are below capacity after several European buyers were cut off for refusing to meet Moscow’s demands to be ultimately paid in rubles for its pipeline fuel.
• The US sent nearly 75% of all its LNG to Europe in the first four months of this year, which helped to calm the market after the wild price swings in spring.

Big Tech Has Spent $36 Million on Ads to Torpedo Antitrust Bill – Wall Street Journal, 6/9/2022

• Advocacy groups bankrolled by big technology companies have poured at least $36.4 million into TV and internet ads opposing antitrust legislation that would bar dominant tech platforms from favoring their own products and services, according to a Wall Street Journal analysis.
• By comparison, groups supporting the antitrust legislation have spent about $193,000, according to a Journal analysis of data collected by AdImpact, an ad-tracking service.
• Much of the tech industry spending—$13.7 million, or almost 40%—has come since May 1, ahead of a possible floor vote this summer on the bill, which has bipartisan support.
• The bill targets dominant tech platforms, including Amazon’s e-commerce site, Google’s search engine, Apple’s App Store and Facebook.
• “This is without question one of the most significant campaigns the association has embarked on in recent years, because it’s one of the most radical policy proposals to regulate a leading sector of the U.S. economy,” said Matt Schruers, president of the Computer and Communications Industry Association, which has spent more than $23 million, the most of any group.

Microsoft is bringing Xbox Game Pass cloud streaming to smart TVs, so users don’t need a console – CNBC, 6/9/2022

• Microsoft is releasing an Xbox app for smart TVs, enabling consumers to stream Xbox video games even if they don’t own consoles.
• Microsoft said Thursday that it will first bring the app to Samsung’s 2022 smart TVs and then expand distribution to other manufacturers.
• It’s a bold bet for Microsoft, after Xbox’s hardware revenue jumped 92% last year.
• The company said the app will be available starting June 30, in 27 countries.
• The move indicates Microsoft is focused on picking up revenue from gaming content and services, as opposed to just consoles, where the company is lagging behind Nintendo and Sony.
• Microsoft’s biggest splash in gaming came earlier this year, when the company announced plans to buy game publisher Activision Blizzard for $68.7 billion.