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Daily Market Report | July 8, 2022

US FINANCIAL MARKET

Stocks Turn Higher as Jobs Growth Remains Strong – Wall Street Journal, 7/8/2022

  • U.S. stocks pared early losses and edged higher after the monthly jobs report beat expectations, heading toward strong weekly gains.
  • The S&P 500 added 0.3% in recent trading, a day after the benchmark index jumped 1.5% to log a fourth consecutive gain, its longest winning streak since March.
  • The Dow Jones Industrial Average added around 0.3%. The tech-focused Nasdaq Composite rose 0.5%.
  • The June jobs report showed that rising interest rates and high inflation are so far not affecting hiring, which remains strong.
  • The U.S. economy added 372,000 jobs in June, well above the 250,000 expected by economists surveyed by The Wall Street Journal.
  • Some analysts said that the strong jobs report increased chances that the Fed would proceed with a 0.75-percentage-point increase at its next meeting.
  • The Fed in June raised interest rates by that much, marking its largest interest-rate increase since 1994.
  • Throughout the week, many investors returned to a familiar trade: Buying shares of tech companies. The S&P 500’s technology and communication services groups have been among the biggest winners.
  • The ARK Innovation ETF has soared almost 16% this week.
  •  Still, many expect the release of inflation data and the start of second-quarter earnings season next week to bring more choppiness.
  • Fears of a recession on the horizon have rippled through stock, bond and metals markets lately.
  • Economists surveyed by The Wall Street Journal have dramatically raised the probability of a recession recently and the prospect of one has sent copper prices sharply lower while spurring a rare inversion in the bond market.
  • A closely watched recession predictor, the yield curve, remained inverted Friday, with the yield on two-year government bonds trading higher than the 10-year equivalent.
  • The yield on the benchmark 10-year Treasury note rose after the monthly jobs report to trade at 3.092%, up from 3.007% Thursday.
  • The yield on two-year government bonds traded at 3.121%, up from 3.039% in the previous session. Yields fall when bond prices rise.
  • Elsewhere in markets, Brent crude, the international benchmark for oil prices, ticked up. Earlier this week, oil prices plunged. Brent most recently gained 0.3% to $104.88 a barrel.
  • Overseas, the pan-continental Stoxx Europe 600 edged up 0.5%. In Asia, trading was mixed. Hong Kong’s Hang Seng rose 0.4%, while the Shanghai Composite fell 0.2%.
  • In Japan, the Nikkei 225 finished up 0.1%, paring earlier gains following news that former Prime Minister Shinzo Abe was shot during a speech. Mr. Abe later died.

Levi Strauss results thrive as comfy styles stay in vogue – Reuters, 7/8/2022

  • Levi Strauss & Co’s denim jeans and jackets were swept off the racks in the second quarter as people returning to work and social events stuck to the comfortable styles that had dominated during lockdowns.
  • That, along with higher prices, helped Levi’s trump results estimates and raise its quarterly dividend, sending its shares about 4% higher in extended trading.
  • In the quarter ended May 29, the Dockers and Denizen owner’s total revenue rose 15% to $1.47 billion, above analysts’ expectation of $1.43 billion, according to IBES data from Refinitiv.
  • Net income fell 23% though, as the jeans maker recorded $60 million in charges related to the suspension of its operations in Russia.
  • Excluding items, the 169-year-old company earned 29 cents per share, beating estimates of 23 cents.
  • Levi’s also reaffirmed its revenue and profit forecasts for 2022 and bumped up its quarterly dividend by 20% to 12 cents per share.

Twitter Lays Off Third of Recruiting Team – Wall Street Journal, 7/8/2022

  • Twitter on Thursday said it laid off 30% of its talent acquisition team, as the company deals with increasing business pressures and a potential takeover from Elon Musk.
  • The layoffs come after the company in May announced that it would be pausing hiring and looking to cut costs. As a result of the revised business needs, the company is restructuring and reducing its talent acquisition team.
  • The layoffs are expected to affect fewer than 100 people and are limited to the talent acquisition team, the company said.

Gas Prices Have Fallen for 24 Straight Days. The Relief Might Only Be Temporary. – Wall Street Journal, 7/8/2022

  • The price of gasoline in the U.S. has fallen for 24 consecutive days after hitting a record last month. But analysts said prices might rise again if demand from drivers increases and supplies are constrained.
  • The average cost of a gallon of unleaded gas was $4.72 on Friday. That is down about 6% since prices hit their highest point, $5.02, on June 14, according to data from OPIS, an energy-data and analytics provider.
  • Gasoline sales leading up to Independence Day trailed previous years. Same-store gasoline demand by volume fell about 7% for the week ending July 2, compared with the same period last year, according to OPIS data.
  • Demand that week was down about 13% compared with the same period in 2019.
  • In mid-to-late May, gasoline demand fell to its lowest levels in nearly a decade, according to government data.
  • Tom Kloza, global head of energy analysis for OPIS, said he expects demand to pick up later this month, bolstered by lower gasoline prices and recent disruptions in domestic air travel.
  • Summer hurricanes and power outages knocking refineries around the Gulf of Mexico offline could decrease already-tight supply, Mr. Kloza said.

Tesla China Shipments Soar to Record as Plant Fires Back Up – Bloomberg, 7/8/2022

  • Tesla’s shipments from its Shanghai car plant surged to a record last month, a dramatic recovery from lockdown measures that stunted output for weeks.
  • The electric-car maker delivered 78,906 vehicles in June, more than double its total a year ago and up 145% from May, according to China’s Passenger Car Association.
  • Tesla shipped 77,938 of those cars to the local market and just 968 units went abroad.
  • Overall passenger vehicle sales in China increased 22% from a year ago to 1.97 million units in June, the PCA said. New-energy vehicle retail sales came in at 532,000, up around 131%.

U.S. opens special probe into fatal Tesla pedestrian crash in California – Reuters, 7/8/2022

  • U.S. auto safety regulators have opened a special investigation into a fatal pedestrian crash in California involving a 2018 Tesla Model 3 where an advanced driver assistance system is suspected of use.
  • The San Diego Union-Tribune reported on June 7 that a Tesla went airborne and struck and killed a woman. NBC-7 in San Diego said a 39-year-old man was charged with vehicular manslaughter and driving under the influence of drugs in the incident.
  • Separately, NHTSA told Reuters it was aware of “and in discussions with Tesla” regarding a Florida crash on Wednesday that killed a 66-year-old Tesla driver and a 67-year-old passenger.

U.S. agency probing self-driving Cruise car crash in California – Reuters, 7/8/2022

  • The National Highway Traffic Safety Administration has opened a special investigation into a recent crash of a Cruise self-driving vehicle in California that resulted in minor injuries, the agency said on Thursday.
  • The auto safety agency did not identify the specific crash, but a Cruise vehicle operating in driverless autonomous mode was involved in a crash involving minor injuries on June 3 in San Francisco, according to a report filed with the California Department of Motor Vehicles.
  • In the report filed on the June 3 crash, Cruise said its vehicle entered a left-hand-turn lane and signaled for a turn, and then initiated a left turn on the green light.
  • At the same time, a 2016 Toyota Prius approached the intersection in the right-turn lane from the opposite direction traveling about 40 miles per hour in a 25 mph speed zone.

Boeing CEO says planemaker could be forced to cancel 737 MAX 10 -Aviation Week – Reuters, 7/8/2022

  • Boeing Chief Executive Dave Calhoun told Aviation Week in an interview that the planemaker could be forced to cancel the 737 Max 10 over potential regulatory issues.
  • Boeing has a December deadline to win approval for the 737 MAX 10 – the largest member of its best-selling single-aisle airplane family. Otherwise, it must meet new cockpit alerting requirements under a 2020 law, unless Congress waives it. Calhoun’s comments could put more pressure on Congress.
  • “If you go through the things we’ve been through, the debts that we’ve had to accumulate, our ability to respond, or willingness to see things through even a world without the -10 is not that threatening,” Calhoun told Aviation Week, adding that he does not expect to cancel the 737 MAX 10 but said “it’s just a risk.”

Chicken Industry Officials Acquitted in Price-Fixing Case – Wall Street Journal, 7/8/2022

  • Federal prosecutors failed for a third time to convict five chicken-company officials of allegedly conspiring to fix prices, dealing a blow to the Justice Department’s antitrust division and its efforts to rein in the meat industry.
  • Jurors in a Denver federal court on Thursday evening acquitted all five defendants, who had been accused of illicitly coordinating among themselves what their companies would charge restaurant buyers.
  • It was the third trial attempt by the Justice Department in its high-profile case against current and former executives of large chicken processors, including Pilgrim’s Pride and Claxton Poultry Farms.
  • The defendants included Jayson Penn and Bill Lovette, both former chief executives of Pilgrim’s, the second-largest U.S. chicken supplier by volume.

US ECONOMY & POLITICS

US Job Gains Top Estimates; Jobless Rate Holds at 3.6% – Bloomberg, 7/8/2022

  • US employers added more jobs in June than forecast and the unemployment rate held near a five-decade low, signs of both strong demand and a tight labor market that will keep Federal Reserve officials tilted toward another jumbo interest-rate hike.
  • Nonfarm payrolls rose 372,000 last month following a revised 384,000 in May, a Labor Department report showed Friday. The unemployment rate was unchanged at 3.6% as the pool of available workers shrank, and wage growth remained firm.
  • The labor force participation rate — the share of the population that is working or looking for work — slipped to 62.2%, and the rate for workers ages 25-54 declined to a four-month low of 82.3%.
  • The number of Americans not in the labor force rose by about half a million to the highest level this year.
  • Friday’s report showed that average hourly earnings rose 0.3% from the prior month, in line with projections. Earnings advanced by a still-elevated 5.1% from a year earlier after an upwardly revised 5.3% gain in May.

More Americans Are Self-Employed Than Any Time Since 2008 Crisis – Bloomberg, 7/8/2022

  • The share of the US workforce that’s self-employed has climbed to the highest level since the Great Recession, as the pandemic jobs shake-up spurred many Americans to try working for themselves.
  • About 16.8 million people were classified as self-employed in June, according to Bloomberg calculations based on the latest data from the Bureau of Labor Statistics. That’s an increase of 1.4 million workers over the past two years, representing more than one-third of the expansion in the labor force during that period.
  • The construction industry is where the largest number of self-employed Americans work, and their ranks continued to grow in the pandemic, according to data from the Federal Reserve Bank of St. Louis. There’s also been an increase in the real-estate and transportation industries.

U.S. wholesale inventories revised lower in May – Reuters, 7/8/2022

  • U.S. wholesale inventories increased less than initially thought in May, suggesting that inventory investment could subtract from gross domestic product in the second quarter.
  • The Commerce Department said on Friday that wholesale inventories rose 1.8%, instead of 2.0% as reported last month. Stocks at wholesalers advanced 2.3% in April.
  • Economists polled by Reuters had expected May inventories would be unrevised. Wholesale inventories increased 24.7% in May on a year-on-year basis.
  • Wholesale motor vehicle inventories gained 1.8% after rising 2.2% in April. Wholesale inventories, excluding autos, increased 1.8% in May.
  • Sales at wholesalers rose 0.5% in May after increasing 0.8% in April. At May’s sales pace it would take wholesalers 1.26 months to clear shelves, up from 1.25 months in April.

Fed Hawks Back 75 Basis-Point July Hike, Still See Soft Landing – Bloomberg, 7/8/2022

  • Two of the Federal Reserve’s most hawkish policy makers backed raising interest rates another 75 basis points this month to curb inflation, while playing down fears the US economy was headed for recession.
  • Governor Christopher Waller and James Bullard, president of the St. Louis Fed, both stressed the need to get policy into restrictive territory to confront the hottest price pressures in 40 years, even if this meant slowing growth. Both are voting members of the Federal Open Market Committee this year.
  • While Waller and Bullard are viewed as being part of the Fed’s hawkish wing, their case for front-loading rate hikes has broad support.
  • Minutes from the June FOMC meeting released on Wednesday showed central bankers were prepared, if necessary, to combat inflation by tightening policy even further than anticipated in their latest forecasts.
  • Those projections, which were updated last month, see the Fed’s benchmark lending rate reaching 3.4% by December and peaking in a target range of 3.75% to 4% next year, versus a current range of 1.5% to 1.75%.

Fed’s Bostic calls for 75 basis point interest rate hike in July – Reuters, 7/8/2022

  • Atlanta Federal Reserve Bank President Raphael Bostic, until recently among the central bank’s most dovish policymakers, on Friday said he “fully” supports another three quarters of a percentage point interest rate rise at the Fed’s next policy meeting later this month.
  • “We can move by 75 basis points at the next meeting and not see a lot of protracted damage to the economy,” Bostic said in an interview with CNBC.
  • Bostic said a report out earlier Friday showing U.S. job growth increased more than expected and the unemployment rate remained at 3.6% in June “reaffirms that the economy is strong and there is still a lot of momentum in the labor market and that is a good thing.”

Housing-Affordability Index Drops to Lowest Level Since 2006 – Wall Street Journal, 7/8/2022

  • Record home prices and higher mortgage rates in May made it the most expensive month since 2006 to buy a home, prompting more buyers to give up and pressuring sellers to cut asking prices.
  • The National Association of Realtors’ housing-affordability index fell to 102.5 in May, the association said Friday, the lowest level since the index fell to 100.5 in July 2006. It was close to the lowest level since July 1990, when the index stood at 100.2.
  • The sudden drop in demand is expected to lead to slower home-price growth by the end of the year, and some economists are forecasting price declines.
  • Nationwide, however, many economists say home prices can keep rising because the inventory of homes for sale generally remains low.
  • The number of active listings in June was down 34% from June 2020 and down 53% from June 2019, according to Realtor.com.

Calls for TikTok Probe Widen, Adding to Pressure on Biden to Weigh In – Wall Street Journal, 7/8/2022

  • Calls for an investigation into the security risks posed by the video app TikTok are widening, adding to pressure on President Biden to make good on his year-old promise to get tough on apps that could share Americans’ personal data with foreign adversaries.
  • The Democratic chairman of the Senate Intelligence Committee and the panel’s top Republican sent a joint letter to the Federal Trade Commission this week urging an investigation of TikTok’s data-handling and other practices.
  • The letter from Sens. Mark Warner (D., Va.) and Marco Rubio (R., Fla.) followed reports by BuzzFeed that ByteDance’s employees in China have repeatedly accessed U.S. users’ personal data.
  • TikTok recently acknowledged that its engineers in locations outside the U.S., including China, can be granted access to U.S. user data, but only as needed and under strict controls.

US-China Talks Over Delisting Stocks Hinge on Redacted Audits – Bloomberg, 7/8/2022

  • US and Chinese officials have held calls in the past week to further negotiations aimed at keeping about 200 Chinese stocks from losing their listings on New York exchanges, and redactions in auditors’ documents are a key barrier.
  • Talks are reaching a critical point as a deadline to resolve the matter closes in. While regulators from the two countries and their staff are continuing to refine a draft agreement  — between the US Public Company Accounting Oversight Board and the China Securities Regulatory Commission and Ministry of Finance — sticking points remain, according to people familiar with the matter.
  • The Securities and Exchange Commission, also involved in the negotiations, has long been eyeing some New York-traded firms with parent companies based in China and Hong Kong because the jurisdictions refuse to allow audit inspections by American officials.
  • A deadline of 2024 looms for kicking businesses off the New York Stock Exchange and Nasdaq Stock Market unless China acquiesces, but it could be moved up if US lawmakers pass legislation before the end of the year.

EUROPE & WORLD

Japan’s Shinzo Abe, Former Prime Minister, Is Assassinated – Wall Street Journal, 7/8/2022

  • Shinzo Abe, a former Japanese prime minister, died after being shot Friday during an election campaign rally, sending shock waves through a country unaccustomed to gun violence.
  • Police arrested a 41-year-old man who they said approached Mr. Abe from behind as he gave a speech in the city of Nara and fired twice with what appeared to be an improvised firearm.
  • Mr. Abe, 67, was the longest-serving prime minister in Japanese history and remained powerful even after stepping down in 2020.
  • During his term in office, he pushed to strengthen the nation’s military, beefed up cooperation with U.S. forces and made Tokyo a more muscular force in international diplomacy.

Germans Face ‘Enormous Wave’ of Energy Price Hikes, Uniper Says – Bloomberg, 7/8/2022

  • German households and industries should brace for an “enormous wave” of higher energy prices that will begin to hit bills next year, utility Uniper SE warned.
  • Most customers lock in prices for a year and aren’t yet feeling the impact of surging wholesale costs, according to Uniper Chief Executive Officer Klaus-Dieter Maubach. The gas giant on Friday sought a government bailout amid the energy crunch.
  • “An enormous increase will happen, it’s what German consumers must expect and it’s up to everyone of us now to do something about it,” he told reporters on Friday. The only way to avoid higher bills is to use less gas, he said.
  • German year-ahead power prices rose 19% this week and have almost tripled this year. Benchmark European gas costs have also surged.

Surging Fuel Costs Pressure African States as Protests Build – Bloomberg, 7/8/2022

  • Protests are building in Africa over surging fuel costs that have governments scrambling over how to respond.
  • Demonstrators blocked a key supply route in South Africa this week, tying up the delivery of commodities, over an increase in the regulated pump price.
  • That followed a protest in Mozambique, the world’s third-poorest country, where bus drivers paralyzed the capital Maputo after diesel prices jumped.
  • The effect of fuel shortages throughout Africa in the wake of Russia’s invasion of Ukraine is especially pronounced for populations whose transportation costs account for a disproportionately high percentage of monthly budgets.
  • Though the continent includes a number of significant producers of oil, there is limited capacity to refine it into fuel for cars, trucks and planes. That means countries need dollars to buy imported diesel and gasoline.
  • One person died during protests against rising fuel prices in Guinea last month, while butane distributors in Morocco held a two-day strike as diesel costs surged.
  • In Kenya and Nigeria, both heading to elections in the coming months, the governments are burdened with costly fuel subsidies, as they struggle to finance gaping budget deficits.

Food Insecurity Hits Rich Countries as Inflation Makes Basics Unaffordable for Many – Wall Street Journal, 7/8/2022

  • Rampant food inflation is roiling the world’s least-developed nations. It is also hitting poor people in rich countries.
  • Last month, the average price of cheddar cheese, a U.K. staple, was up by 59% from last June, according to the Agriculture and Horticulture Development Board, a trade body. Milk was up 27% in April over last year, according to government data.
  • Some 44% of adults polled by the U.K.’s Office of National Statistics in May said they were buying less food because of the higher prices. Food banks are seeing a third more traffic since the start of the pandemic, according to the Trussell Trust, a food-bank provider.
  • The Food Foundation, a food and nutrition lobby group, found food poverty, or food insecurity, had affected 15.5% of Britons in the six months to April, up from 7.6% pre-Covid.
  • In a survey published in May, it found a 57% jump in the proportion of U.K. households cutting back on food or missing meals altogether. The survey found 7.3 million adults in April were living in households that said they had gone without food or couldn’t physically get it in the past month. That compared with 4.7 million adults in January.

Factmonster – TODAY in HISTORY

  • The first public reading of the Declaration of Independence was given in Philadelphia, Pa. (1776)
  • Vermont became the first colony to abolish slavery. (1777)
  • The Wall Street Journal began publication. (1189)
  • General Douglas MacArthur was named commander-in-chief of the United Nations forces in Korea. (1950)
  • The Recording Industry Association of America (RIAA) awarded the first official gold album. It was for the Oklahoma soundtrack. (1958)

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