Put aside for a moment all that nutritional advice about eating fruits and vegetables, whole grains and lean proteins. Could one key to good health actually be a diet rich in … ice cream?
That’s the tantalizing question raised by a new story in the Atlantic, which states, “Studies show a mysterious health benefit to ice cream. Scientists don’t want to talk about it.”
The…
Stocks ended a choppy session slightly higher Friday, with major indexes suffering small weekly declines as investors weighed corporate earnings and the economic outlook. The Dow Jones Industrial Average DJIA rose around 22 points, or 0.1%, to close near 33,809, according to preliminary figures. The S&P 500 SPX and Nasdaq Composite COMP each eked out a rise of 0.1%. That left the Dow down 0.2% for the week, while the S&P 500 lost 0.1% and the Nasdaq declined 0.4%.
…
Federal prosecutors have leveled a legal dropkick on former pro wrestler Ted DiBiase Jr., charging him with stealing millions of dollars meant to feed needy kids in a Mississippi scandal that has also tarnished the reputation of NFL hall of famer Brett Favre.
From the archives (September 2022): NFL star Brett Favre and Gov. Phil Bryant texted about how to use $5 million of welfare funds to build a new volleyball stadium
DiBiase,…
European stocks finished higher Friday, with the Stoxx Europe 600 index STOXX Europe 600 Index rising 0.34% to 469.00.
The German DAX DAX increased 0.54% to 15,881.66, the French CAC 40 index CAC 40 Index increased 0.51% to 7,577.00 and the FTSE 100 index FTSE 100 Index increased 0.15% to 7,914.13.
Among Stoxx Europe 600 constituents, health…
The next generation of telecom may be years away, but the Biden administration is starting to plan for 6G wireless telecommunication. On Friday, the White House is scheduled to meet with corporate, government and academic experts to begin developing goals and strategies for the new 6G communications technology, according to a Wall Street Journal article https://www.wsj.com/articles/u-s-begins-planning-for-6g-wireless-communications-246868d0. The technology would ostensibly take cloud computing and the mobile internet to new levels of use.
…
As Silicon Valley Bank was wobbling last month, large account holders with balances exceeding the federal deposit insurance limits panicked, sparked a bank run that ultimately prompted the federal government to step in with a rescue plan, and triggered widespread debate about potential reforms to the federal deposit insurance system.
All that drama, however, was at odds with federal data showing that bank failures stretching back to the start of the 2007-2009 global financial crisis have in aggregate done very little harm…
The numbers: An early reading of the U.S. economy in April from S&P Global showed that business activity has escaped the doldrums after struggling over the fall and winter months.
The S&P Global U.S. service sector purchasing managers index rose to 53.7 in April from 52.6 in the prior month. This is a 12-month high.
The flash U.S. manufacturing…
BlackRock Inc.
BLK,
Chief Executive Larry Fink sold 35,799 BlackRock shares on Tuesday, according to a regulatory filing, garnering about $25 million in proceeds. That’s equal to about 7% of Fink’s stake in the company. The deal was executed in three trades at prices ranging from $694.00 to $696.35, according to the filing. The stock is down 1.7% in the year to date, while the S&P 500
SPX,
has gained 8%.
LONDON (AP) — U.K. Deputy Prime Minister Dominic Raab resigned Friday after an independent investigation into complaints that he bullied civil servants.
Raab’s announcement on Friday came the day after Prime Minister Rishi Sunak received findings into eight formal complaints that Raab, who is also justice secretary, had been abusive toward staff during a previous stint in that office and while serving as foreign secretary and Brexit secretary.
Raab, 49, denied claims he belittled and demeaned his staff and said he “behaved professionally at all times,” but had said he would resign if the bullying complaints were upheld.
Sunak received the report Thursday morning and was carefully considering the findings but didn’t immediately make a decision, spokesperson Max Blain said.
Long-term investors who can manage a 10-fund equity portfolio, as I described last week, have what I consider the absolute best shot at attractive returns no matter what happens in the stock market.
This time, in Part 2 of a series for do-it-yourself investors, I’ll tell you how to get much of that benefit with fewer funds.
The Merriman Financial Education Foundation has created seven additional equity portfolios that handily outperformed the S&P 500 over the past 53 calendar years, from 1970 through 2022.
Each requires only one to five funds. If you’re looking for action without too much angst, one of these seven could be for you.
First, let’s get the baseline comparison on the table.
From 1970 through 2022, $10,000 invested in the S&P 500
SPX,
would have grown to $1.89 million. In the same period, a portfolio made up of equal parts of that index and nine other U.S. and international asset classes would have grown to $3.74 million.
Those additional asset classes made a mighty big difference.
The other asset classes are U.S. large-cap value stocks (US LCV), U.S. small-cap blend stocks (including both value and growth) (US SCB), U.S. small-cap value stocks (US SCV), real-estate investment trusts (REIT), international large-cap blend stocks (Intl LCB), international large-cap value stocks (Intl LCV), international small-cap blend stocks (Intl SCB), international small-cap value stocks (Intl SCV), and emerging markets stocks (Em Mrkt).
That’s a lot to keep track of, more than most people are willing to do.
A few years ago, I challenged Chris Pedersen, research director of our foundation, to find a way to achieve similar returns with no more than four funds.
Here are seven additional portfolios. In this table below (and available on my foundation’s website), you can see the breakdown of each fund and the asset classes that make up each one.
1. Chris came through, creating what we call the Worldwide Four-Fund portfolio. From 1970 through 2022, $10,000 would have grown to $3.92 million.
2. Of course, many people are skittish about owning funds with companies based outside the United States. For them, we created the U.S. Four-Fund combo. In this one, $10,000 grew to $4.09 million from 1970 through 2022.
If you’re wondering where these higher returns come from, the answer is simple: value stocks.
3. In our five-fund Worldwide All Value portfolio, $10,000 invested in 1970 would have grown to $5.34 million, nearly three times as much as the same investment in the S&P 500 alone.
4. For investors who want to stick with U.S. companies, there’s the U.S. All Value portfolio. In this simple but powerful combination, $10,000 would have grown to $6.43 million.
Compared with just the S&P 500, that seems pretty astounding. But hang onto your hat for a moment.
5. Both internationally and in the United States, small-cap value stocks have been the most productive of these asset classes. In our two-fund Worldwide All Small-Cap Value portfolio, $10,000 would have grown to an astonishing $9.14 million from 1970 through 2022.
That’s $7.25 million more than the S&P 500 alone.
6. The all-U.S. variation is the ultrasimple U.S. All Small-Cap Value portfolio. The 1970-2022 growth of $10,000 in this one-fund variation would have been $8.65 million.
U.S. small-cap value stocks have such a highly productive track record that they are part of every single suggested portfolio except the S&P 500 by itself.
By now, you might be thinking you’d like some of that small-cap value horsepower, but also some of the “safety” and familiarity of the good old S&P 500. That seems reasonable.
7. To meet that need, we created the U.S. Two Fund portfolio: equal parts of the S&P 500 and U.S. small-cap value stocks. From 1970 through 2022, an initial $10,000 would have grown to $4.48 million, more than twice as much as the S&P 500 by itself.
In Table 1, you can find these variations along with their 1970-2022 results.
Table 1
The far-right column, standard deviation, represent a common measure of risk. But in this case, I don’t think they are the best indicator. For many investors, a better measure involves the number of years in which they lose money.
Table 2
As you can see, the numbers in the far-right column aren’t that different from one another.
If you could accept a worst year of 36.8% (as in the bottom two rows), you could perhaps also live with a one-year loss of 42.2%, especially since it came bundled with the fewest losing years.
Of these alternative portfolios, the U.S. Two-Fund might be the most intriguing:
To elaborate on ways investors can use these interesting portfolios, I have recorded a video and a separate podcast.
Richard Buck contributed to this article.
Paul Merriman and Richard Buck are the authors of We’re Talking Millions! 12 Simple Ways to Supercharge Your Retirement. Get your free copy.
U.S. stocks finished lower on Thursday as Tesla Inc.’s earnings report weighed on shares of the electric-vehicle giant. The S&P 500
SPX,
fell by 24.64 points, or 0.6%, to 4,129.88, according to preliminary data from FactSet. The Dow Jones Industrial Average
DJIA,
declined by 110.13 points, or 0.3%, to 33,786.88. The Nasdaq Composite
COMP,
shed 97.67 points, or 0.8%, to 12,059.56.
It was a two-week trading period like few had ever seen in the $24 trillion Treasury market.
In a span of roughly nine trading sessions between March 7 and 17, the yield on 2-year Treasury notes — a gauge of where U.S. central bankers are most likely to take interest rates over the next two years — sank a full percentage point to 3.85% from an almost 16-year closing high above 5%, with wide swings in both directions on the way down.
The 2-year yield’s yearlong upward trajectory made a sudden and dramatic descent, as investors swung from a view that interest rates would remain higher for longer to a scenario in which the Federal Reserve might need to cut borrowing costs to avert a deep recession and repeated bank failures. The wild swing in sentiment turned the 2-year Treasury rate
TMUBMUSD02Y,
into a roller-coaster ride and made it the most exciting space to watch in the traditionally staid government-debt market.
For traders like David Petrosinelli of InspereX in New York, a 25-year veteran of markets, March’s daily volatility was akin to “getting on an elevator with no buttons,” he said. He recalls telling people at his firm, who were worried about the positions they held at the time, that “a lot of this is a knee-jerk reaction to the unknown” — even if it felt both “eerily reminiscent” of rates volatility seen ahead of the 2007-2008 financial crisis, and “distinctly different’’ because it was driven by rapidly changing market expectations for the Fed and contained within the U.S. regional-banking system.
Read: What ‘unprecedented’ volatility in the $24 trillion Treasury market looks like
For more than a decade, there wasn’t much to say about the 2-year Treasury yield because the U.S. was mired in mostly low interest rates and “no one knew how to trade it,” according to Petrosinelli, 54, who began his career in the late 1990s as a as a portfolio manager focused on asset-backed and residential mortgage-backed securities. It was an overlooked rate in a sleepy corner of the market and nobody paid it much attention. That changed beginning in 2022, when monetary policy makers finally undertook the most aggressive rate-hike campaign in four decades to combat inflation — reinforcing the 2-year yield’s role as the best proxy for where the market thinks interest rates will end up. The 2-year yield rocketed to above 5% in early March from 0.15% in April 2021.
Suddenly, the 2-year Treasury became the most watched financial indicator on Wall Street, influencing the trajectories of stocks and the U.S. dollar throughout much of 2022. “This thing is relentless,” declared market commentator Jim Cramer on CNBC last year. He told viewers he was buying 2-year notes, not meme stocks. “The run to 4 is probably the most punishing one I can recall for the 2-year.” Other prominent names like Mohamed El-Erian, the former chief executive of PIMCO, and Jeffrey Gundlach, founder of DoubleLine Capital, wanted to talk about it. “If you want to know what’s going to happen in the year, follow the 2-year yield at this point,” El-Erian said on CNBC. “That’s the market indicator that has the most information.” More hedge funds and macro private-equity firms jumped on board and started trading it, said InspereX’s Petrosinelli. And head trader John Farawell of Roosevelt & Cross in New York, said family and friends who never showed much interest in fixed income before began regularly asking him if it was the right time to buy the 2-year Treasury note.
“Once we started to hit 4% on the 2-year yield last September for the first time since 2007, everyone got interested,” said Farawell, 66, a trader for the past 41 years. He estimates that interest in the 2-year yield among his firm’s clients has gone up about 30% in the past 12 months. “We have seen retail customers suddenly saying they want to put their money to work in the 2-year note because of an interest rate that we have not seen in years.”
From his office in Midtown Manhattan, Nicholas Colas noticed an abrupt and unexpected shift over the past year and it had to do with the 2-year Treasury. As the co-founder of DataTrek Research, a Wall Street research firm, Colas realized that the 2-year Treasury yield was influencing trading in the stock market. When the 2-year Treasury yield shot higher in 2022, the equity market would become volatile and often drop. In fact, the 2-year Treasury seemed to influence equity-market volatility in both directions. Whenever the 2-year yield briefly stabilized, Colas said, stocks tended to rally since equity investors took the stabilization in the 2-year rate to mean that Fed policy was “no longer as much of a wild card.”
To Colas, equity markets appeared to be taking any selloff in the 2-year note, and thus a rise in its corresponding yield, as a sign that the Fed would have to increase interest rates by more than expected and keep them higher for longer. With stocks and U.S. government debt both getting trounced regularly in last year’s selloffs, Colas said his first thought was that “all of a sudden, Treasurys were no longer a safe haven — something that has rarely happened since I started my career in 1983.”
Trading in government debt, like elsewhere in financial markets, is a two-way street of buyers and sellers. When yields are moving higher, that means the price of the corresponding Treasury security is dropping — and vice versa. The 2-year Treasury note pays out a fixed interest rate every six months until it matures. The trick to trading it, as opposed to buying and holding, is to either sell it before its underlying value gets destroyed by higher interest rates, or to buy it before the Fed starts cutting rates — which would, theoretically, produce a lower yield and make the government note more expensive.
Throughout the yield’s march higher, investors sold off the underlying 2-year note — a move which diminished the note’s value for existing holders like banks, pension funds, credit unions, foreign central banks, and U.S. corporations. Two-year Treasury notes also constitute about 1% to 2% of the total holdings at the 10 largest actively managed money-market funds, according to Ben Emons, senior portfolio manager and head of fixed income at NewEdge Wealth in New York.
“Policy expectations are what really drive the 2-year yield,” said Thomas Simons, a U.S. economist at Jefferies, one of the two dozen primary dealers that serve as trading counterparties of the Fed’s New York branch and help to implement monetary policy. “We had a major paradigm shift in terms of what investors’ expectations were for the sustainability of higher inflation and what the Fed would do in response. The impact on markets has been far less appetite for risk than there otherwise would be,” with stocks putting in a dismal performance in 2022, though generating somewhat better 2023 returns.
Tucked into the note’s selloff, though, was plenty of interest from prospective government-debt buyers, which helped temper the magnitude of the 2-year yield’s rise once the rate got to 4%. Many looking to buy were individual investors hoping to benefit from higher yields and to diversify away from stocks, said traders like Tom di Galoma, a managing director for financial services firm BTIG.
Historically, banks, mutual funds, hedge funds, foreign investors and even the Fed have been the biggest buyers of Treasurys across the board; some of those players, particularly foreign central banks and money-market mutual funds, are mandated to buy and hold government debt. All two dozen primary dealers are involved as market makers for the 2-year security, stepping in to buy it in the absence of either direct or indirect buyers.
The 2-year note remains a reliable source of funding for the U.S. government, given the consistent demand for the maturity, which enables the U.S. Treasury Department to “raise a lot of cash quickly, if needed,” said Simons of Jefferies. In 2020, for example, when the government authorized $2.4 trillion in Covid-related spending and relief programs, the amount of 2-year notes sold at auction was one of the biggest of any maturity — far exceeding the 10- and 30-year counterparts — “because it had the capacity to handle that.’’
Currently, the Treasury has $1.421 trillion in total outstanding 2-year notes, representing about 13% of all the debt issued out to 10 years, according to Treasurydirect.gov. The most recent 2-year note auction in March was for $42 billion — more than the 10-year note sale.
Fallout from the banking sector and worries about a potential recession altered the trajectory of the 2-year starting in March, triggering concerns that the Fed’s rate-hike cycle had gone too far. Fresh buyers poured into the 2-year space and pushed the yield below 4% — driven by the view that rates weren’t likely to go much higher from here and that policy makers might cut them by year-end.
Substantial downside volatility in the 2-year Treasury yield has actually helped to stabilize stock prices this year, in Colas’ estimation, because it’s been interpreted as the bond market’s sign that the Fed is approaching the end of its rate-hiking cycle. Like InspereX’s Petrosinelli, Colas says he had visions of the 2007-2008 financial crisis during March’s flight-to-quality trade, which occurred amid regional bank failures and “significantly more stress than the market was expecting.”
As of Thursday morning, the 2-year rate was at 4.17%, below the Fed’s benchmark interest-rate target range — implying that traders still believe policy makers will follow through with rate cuts. That’s a turnabout from the thinking that prevailed over most of 2022 through early last month, when the 2-year rate had been on an aggressive march toward 5% as the Fed continued to hike rates to combat inflation.
Meanwhile, poor liquidity continues to plague the Treasury market broadly, based on Bloomberg’s U.S. Government Securities Liquidity Index, which measures prevailing conditions. According to the New York Fed, the Treasury market was relatively illiquid throughout last year — making it more difficult to trade. As a result, there was a widening in the bid-ask spread — or difference between the highest price a buyer is willing to pay versus the lowest price a seller is willing to accept — of the 2-year note relative to its average.
“The volatility we’re seeing in the 2-year, we think, is largely a function of uncertain Fed rate hiking expectations coupled with poor liquidity,” said Lawrence Gillum, the Charlotte, N.C.-based chief fixed income strategist at LPL Financial.
“The 2-year is the most sensitive to changing policy expectations and since this Fed is ‘data dependent,’ any and all new data that could potentially change the inflation/economic growth narrative has increased volatility substantially,” Gillum said in an email. “As the Fed’s rate hiking campaign comes to an end (we think there is one more hike and then they’ll be done), we would expect the volatility to decline. Moreover, the Treasury and Fed are looking at ways to improve liquidity, but so far nothing has happened. Hopefully, they will do something, though, since the Treasury market is arguably the most important market in the world.”
At InspereX, Petrosinelli regards the 2-year note as an “anchor” to any short-term portfolio, and says that “it’s not a bad place for investors to hide out for at least a year.’’ That’s because even if the yield does come down, “investors wouldn’t be getting too hurt price-wise,” he said. “We think the Fed will leave rates elevated for some time.”
However, the 2-year could continue to dip below the fed-funds rate on soft economic data, especially related to consumption, later this year, Petrosinelli said. In order for the 2-year rate to go above the Fed’s main interest-rate target — now between 4.75% and 5% — “people would have to think the Fed is behind the curve again on inflation.”
For Farawell of Roosevelt & Cross, which was founded in 1946 and is one of Wall Street’s oldest independently owned municipal-bond underwriters, the 2-year note “has become such an attractive asset class for us’’ that “you almost can’t go wrong with putting money in it.” Friends and family “ask me about this 2-year and say, ‘It sounds good.’ I say, ‘It’s a great rate, you should buy it — until the Fed starts to change course.’”
BuzzFeed Inc. said Thursday it is shutting down BuzzFeed News and laying off about 15% of its workforce as founder and Chief Executive Jonah Peretti said it has faced “more challenges than I can count.”
BuzzFeed stock
BZFD,
initially fell as much as 25% after the news. HuffPost and BuzzFeed.com will open “a number of select roles for members of BuzzFeed News,” Peretti said in a memo to staff. HuffPost, which is profitable and enjoys a “loyal direct front page audience,” will be BuzzFeed’s single news brand.
“We’ve faced more challenges than I can count in the past few years: a pandemic, a fading SPAC market that yielded less capital, a tech recession, a tough economy, a declining stock market, a decelerating digital advertising market and ongoing audience and platform shifts,” Peretti said in the memo.
“Dealing with all of these obstacles at once is part of why we’ve needed to make the difficult decisions to eliminate more jobs and reduce spending.”
The CEO also said he and executives could have “managed these changes better.” The integration of BuzzFeed and Complex, which BuzzFeed bought in 2021 for $300 million, “should have been executed faster and better.”
BuzzFeed went public in December 2021 through a merger with a special-purpose acquisition company, or SPAC. The deal valued BuzzFeed at $1.5 billion.
The acquisition of Complex, then a joint venture between Hearst and Verizon Communications Inc. that catered to millennials and Gen Zers, was a bid to open up other revenue streams and rely less on advertising.
BuzzFeed Inc. bought HuffPost from an unit of Verizon in November 2020.
Peretti said he decided to “overinvest” in BuzzFeed News “because I love their work and mission so much,” which made him slow “to accept that the big platforms wouldn’t provide the distribution or financial support required to support premium, free journalism purpose-built for social media.”
Chief Revenue Officer Edgar Hernandez and Chief Operating Officer Christian Baesler are leaving as well. The focus going forward is on reducing layers in the organization, streamlining the product mix, “doubling down” on social-media creators, and bringing AI to the sales process, Peretti said in the memo.
BuzzFeed has about 1,200 employees as of December. It had 1,368 employees across seven countries that month, and announced layoffs hitting about 12% of its workforce.
Also Thursday, Insider, the news site formerly known as Business Insider, said it was cutting 10% of its workforce due to “economic headwinds.”
BuzzFeed shares have lost 85% in the past 12 months, compared with losses of around 7% for the S&P 500 index.
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Some clarity is emerging regarding statements from Biden administration officials that no one making less than $400,000 will see higher audit rates by the Internal Revenue Service, which is about to step up its scrutiny of wealthy taxpayers.
The Inflation Reduction Act — the tax and climate package enacted last summer — earmarked $80 billion for the IRS over the next decade and a half. The money is intended in part to facilitate more audits of corporations and wealthier individuals.
Ahead of the bill’s passage, Treasury Secretary Janet Yellen pledged that there would be no increase in the audit rate for households and small businesses with annual incomes below $400,000 “relative to historical levels.”
But Republican critics and other observers have asked what “historical levels” might actually mean.
The audit rate on returns for tax year 2018 is the reference point to keep in mind, IRS Commissioner Danny Werfel told senators on Wednesday. He emphasized that “there’s no surge coming for workers, retirees and others.”
The IRS audited fewer than 1% of 2018 returns with total positive incomes — the sum of all positive amounts shown for various sources of income reported on an individual income-tax return, which excludes losses — of between $1 and $500,000, according to statistics that the tax agency released last week.
The agency has three years to start an audit from the time it receives a return.
Also read: The IRS wants more people working in tax enforcement. Now it has to find them.
The numbers show that 0.4% of returns for taxpayers earning up to $25,000 were audited. That figure was 0.3% for returns between $200,000 and $500,000 and more than 9% for returns over $10 million, the IRS data show. Six years earlier, more than 13% of returns over $10 million were scrutinized, according to the IRS.
“Help us with understanding what the words ‘historic level’ means,” Sen. James Lankford, a Republican from Oklahoma, asked Werfel during a Wednesday budget hearing.
“We will take the most recent final audit rate, and it’s historically low … and we allow that to be the marker for least several years, and then we’re revisit it,” Werfel said. The 2018 audit rates were the newest final rates, he added.
“So the 2018 number is what it’s going to be?” Lankford asked.
“Yes,” Werfel replied.
“Werfel’s explanation that 2018 audit levels will be the reference point is the most detail I’ve heard so far,” Erica York, s senior economist at the Tax Foundation, told MarketWatch. “He did seem to leave open the possibility of revisiting the reference year for ‘historical’ in the future,” she added.
Another open question has been how the $400,000 income threshold will be determined. Months after the Inflation Reduction Act passed, IRS and Treasury officials still hadn’t finalized what counted as $400,000 in income, according to a January Treasury Department watchdog report.
“How are you arriving at this number?” asked Sen. Marsha Blackburn, a Republican from Tennessee. Blackburn’s state has many self-employed entrepreneurs who might appear richer on paper than they actually are, she said. “While they may have a higher gross, their net is very low,” she added.
“We’re going to look at total positive income as our metric,” Werfel said. He later added that “there would be no increased likelihood of an audit if they have less than $400,000 in total positive income.”
The IRS description of total positive income as “the sum of all positive amounts shown for the various sources of income reported on an individual income tax return and, thus, excludes losses” represents, effectively, a tally of income before taxpayers subtract their losses.
Total positive income is a metric the IRS usually applies to categorize audits, the Tax Foundation’s York noted. But one challenge of strict thresholds for more audits, she said, “is that it creates incentives for underreporting income” to stay under the line.
Compared with recent years, there are now more specifics about how the IRS will implement additional audits of higher-income taxpayers, said Janet Holtzblatt, a senior fellow at the Tax Policy Center.
“But still there are questions,” she noted, about how the agency will treat situations when taxpayers don’t provide full picture of their income.
Read on: Make sure the tax breaks you’re taking now won’t hammer you in retirement
Also: ‘This was a test’: IRS has handled more than 100 million returns already — Tax Day by the numbers
The numbers: The number of Americans who applied for unemployment benefits last week rose by 5,000 to 245,000 and pointed to a small erosion in a robust U.S. labor market.
New jobless claims increased from a revised 240,000 in the prior week, the Labor Department said Thursday. The figures are seasonally adjusted.
The number of people applying for unemployment benefits is one of the best barometers of whether the economy is getting better or worse.
New jobless claims are still very low, but they have risen from less than 200,000 in January in a sign the labor market has cooled slightly as higher interest rates dampen U.S. growth.
Key details: Thirty-five of the 53 U.S. states and territories that report jobless claims showed a decrease last week. Eighteen posted an increase.
Most of the increase in new jobless claims were in New York, where new filings typically rise during school breaks and fall immediately afterward.
Other states reported little change.
The number of people collecting unemployment benefits in the U.S., meanwhile, jumped by 61,000 to 1.87 million in the week ended April 8. That’s the highest level since November 2021.
The gradual increase in these so-called continuing claims suggests it’s taking longer for people who lose their jobs to find new ones.
Big picture: Wall Street is watching jobless benefits closely because it’s one of the first indicators to start blinking red when the U.S. is headed toward recession.
New jobless claims have crept higher this year after touching a 54-year low, pointing to some cooling in a hot labor market. But the labor market is still quite strong
The Federal Reserve wants the labor market to cool even further to temper a sharp increase in wages and help the bank combat high inflation. A series of interest-rate increases by the central bank have slowed the economy and eventually should curb the appetite for workers.
Looking ahead: “With talk of deteriorating economic conditions and in the wake of the recent bank failures, businesses may turn more cautious in their hiring practices,” said senior economic advisor Stuart Hoffman of PNC Financial Services.
“Our view remains that layoffs will rise less dramatically than normally might occur as companies do all they can to avoid shedding workers who have been incredibly difficult to recruit and retain,” said chief economist Joshua Shapiro of MFR Inc.
Market reaction: The Dow Jones Industrial Average
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and S&P 500
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were set to open lower in Thursday trades.
Treasury Secretary Janet Yellen on Thursday criticized China’s aid to companies as she set out how the U.S. wants to act versus the world’s number two-economy.
In excerpts of remarks for a speech to be delivered Thursday morning at the Johns Hopkins University’s School of Advanced International Studies, Yellen said China has acted illegally.
China in recent years has expanded support for its state-owned enterprises and domestic private firms to “dominate foreign competitors,” she said. “This strategy has been coupled with aggressive efforts to acquire new technological know-how and intellectual property – including through IP theft and other illicit means.”
Yellen also said the U.S. will prioritize national security interests even at the expense of the economy. “As in all of our foreign relations, national security is of paramount importance in our relationship with China. For example, we have made clear that safeguarding certain technologies from the PRC’s military and security apparatus is of vital national interest,” she said. She stressed that the U.S. will not just protects its own national security interests but also those “of our allies and partners” — likely an allusion to Taiwan — as well as human rights, she said.
Yellen also said the U.S. was seeking cooperation on global challenges, such as climate and debt distress. “We call on China to follow through on its promise to work with us on these issues – not as a favor to us, but out of our joint duty and obligation to the world. Tackling these issues together will also advance the national interests of both of our countries.”
Yellen made no mention of the tariffs imposed on China by the Trump administration that have been left in place by the Biden administration in the released excerpts. According to the Peterson Institute for International Economics, tariffs of 19% apply on roughly two-thirds of China’s exports. Chinese tariffs of 21% apply on 58% of U.S. exports.
A spokesperson for China’s commerce ministry said U.S. and Chinese officials met last week, discussing trade and communication, as a report said Commerce Secretary Gina Raimondo may visit Beijing and Shanghai.
By Dominic Chopping
Nokia Corp. on Thursday posted a lower-than-expected first-quarter net profit and cautioned that it is seeing some early signs of the economic environment impacting customer spending.
“Given the ongoing need to invest in 5G and fiber, we see this primarily as a question of timing,” Chief Executive Pekka Lundmark said.
The Finnish telecommunications company said its mobile networks unit delivered 13% sales growth in the quarter, while margins declined due to changes in regional mix. Margins are expected to remain under pressure in the first half of the year before then improving in the second half, it said.
Mobile networks had strong sales growth in Europe, Middle East and Africa, while North America declined and it saw customer inventory depletion in the quarter.
Comparable net profit for the quarter fell to 332 million euros ($363.7 million) from EUR409 million a year earlier as sales rose 9.6% to EUR5.86 billion, it said.
Analysts polled by FactSet had expected comparable net profit of EUR386 million on sales of EUR5.73 billion.
Nokia backed full-year guidance in constant currency.
“We remain on track to deliver another year of growth in 2023 so our outlook is unchanged with the expectation that profitability in the second half of the year will be stronger than the first half,” Mr. Lundmark added.
Write to Dominic Chopping at dominic.chopping@wsj.com
If you used Facebook between May 2007 and December 2022, the social-media giant may owe you some money.
A California judge preliminarily approved a $725 million settlement between Facebook parent Meta Platforms
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and users who say the company allowed their data to be viewed or shared by third parties, notably Cambridge Analytica, without their consent.
The judge’s approval was a precursor to the final approval hearing, which will take place in September, but people can begin submitting claims now to potentially get a cash payment.
The $725 million settlement applies to anybody who was a Facebook user in the U.S. between May 24, 2007 and Dec. 22, 2022. The class-action form simply states that people who were Facebook users during that period are eligible. It does not mention any required level of activity on the account.
It’s unclear if someone with multiple Facebook accounts would be entitled to more money than a person with a single account. To find out if you are included in the settlement group, you can email info@FacebookUserPrivacySettlement.com
The claim form must be submitted no later than Aug. 25, 2023.
The form can be completed online or downloaded and mailed to the settlement administrator at the following address: Facebook Consumer Privacy User Profile Litigation, c/o Settlement Administrator, 1650 Arch St., Suite 2210, Philadelphia, PA 19103.
As is typical with class-action lawsuits, the amount an individual will receive is dependent on a variety of factors.
The settlement form says the payment will vary based on how many people submit claims. Additionally, administrative costs and attorneys’ fees will be deducted from the settlement fund prior to its release.
See also: Mark Zuckerberg’s total 2022 pay rose because of the increased use of private aircraft
“Settlement payments will be distributed as soon as possible if the Court grants Final Approval of the Settlement and after any appeals are resolved,” the claim website notes.
Because Facebook has so many users and because of the 16-year time frame for this settlement, there are millions of people who could submit a claim.
According to data compiled by Statista, total Facebook users in the U.S. numbered roughly 240 million in 2022.
In December 2022, Meta agreed in principle to pay the settlement. At the time, a Meta spokesman said settling the class-action suit was “in the best interest of our community and shareholders.” The company added that it had revamped its privacy approach and “implemented a comprehensive privacy program.”
Despite agreeing to pay the settlement, “Meta expressly denies any liability or wrongdoing,” according to the lawsuit website.
Representatives for Meta didn’t immediately respond to MarketWatch’s request for comment on this story.
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The settlement comes as Meta is set to announce another round of layoffs this week.
Meta shares were down 0.95% in the early afternoon on Wednesday and have gained nearly 80% year to date, compared with the S&P 500’s
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8.11% gain in 2023.
Tesla Inc. stock dropped more than 6% in the extended session Wednesday after the electric-vehicle maker narrowly missed quarterly expectations for its revenue and saw adjusted profit margins drop as it cut its EV prices.
Tesla
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earned $2.5 billion, or 73 cents a share, in the first quarter, compared with $3.3 billion, or 95 cents a share, in the year-ago period. Adjusted for one-time items, the company earned 85 cents a share.
Revenue rose 24% to $23.3 billion. Ebitda profit margins dropped to 18.3%, from nearly 27% in the year-ago quarter, while operating margins dropped to 11%.
“We are taking a view that we want to keep making as many cars as we can,” Chief Executive Elon Musk said on a call with analysts after the results. “It’s a good time to increase our lead further.”
Analysts polled by FactSet expected Tesla to report adjusted earnings of 85 cents a share on sales of $23.6 billion. Adjusted profit margins were seen at around 20%.
Tesla’s margins “are still among the best in the industry,” Musk said on the call, adding that Tesla is betting that going for higher volumes and a larger EV fleet, one that in the future would be fully autonomous, are the right choices at the moment.
Later on in the call, Musk said he expects Teslas to be capable of being fully autonomous vehicles later this year. Musk has made similar, and ultimately unrealized, predictions on numerous other occasions.
The CEO also deflected a few follow-up questions around demand, commodity prices and other aspects of the business, saying in several instances that he lacked a “crystal ball” to peer through the future.
In a letter to shareholders accompanying results, Tesla said it expects “ongoing cost reduction of our vehicles, including improved production efficiency at our newest factories and lower logistics costs, and remain focused on operating leverage as we scale.”
The company unveiled a fresh round of U.S. price cuts earlier Wednesday in a bid to boost demand amid concerns of a weakening economy, but that are also bound to cut into its profit margins.
Pricing will continue to “evolve upwards or downwards, depending on a number of factors,” the company said in the letter.
The drop in Ebitda profit margin to 18.3% “doesn’t concern me at this point in time,” since it was reasonably close to expectations, Bill Selesky at Argus Research said after the results. “I don’t see it as a huge miss.”
Profit margins are “still very healthy” compared with others in the auto industry and taking into consideration the economy, said Jeff Windau, an analyst at Edward Jones.
Even as profit margins take a hit, Tesla “will find a way to grow and grow profitably based on past performance and the fact that the business is already EV-ready,” said Alyssa Altman, a consultant at Publicis Sapient who looks into transportation and mobility issues.
“The company has a strong advantage against most other competitors who are either building their presence or recreating their business models to be focused on the EV customer and software product development,” Altman said.
Tesla said it expects to “remain ahead” of its long-term goal of increasing its production rate by 50% annually, producing 1.8 million vehicles in 2023. Tesla has “a shot at 2 million, but that’s the upside case,” Musk said on the call.
The Cybertruck, Tesla’s electric pickup truck, is on track to begin production later in the year at the Texas plant and Tesla continues to “make progress” on its next-generation EV platform, it said in the letter.
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The company ended the quarter with cash and equivalents as well as investments of $22.4 billion, $217 million more than at the end of the fourth quarter.
The economy presents a “unique opportunity” for the company, Tesla said in the letter.
Tesla is aiming “to leverage our position as a cost leader. We are focused on rapidly growing production, investments in autonomy and vehicle software, and remaining on track with our growth investments.”
See also: Here’s how much Tesla short sellers have lost so far this year
In January, Tesla reported operating margins of 16% for the fourth quarter and 16.8% for all of 2022. First-quarter 2022 margins were “over 19%,” Tesla said last April.
Tesla pinned the drop in first-quarter operating margins in part to higher commodities, logistics and warranty prices, lower credit revenue, and increases in ramping up production of new battery cells.
Tesla stock has fallen about 46% in the past 12 months, compared with losses of around 7% for the S&P 500 index
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So far this year, however, the stock is up 49%, compared with an advance of 8% for the S&P 500.
The U.S. Supreme Court on Wednesday extended access to an abortion pill through Friday. Abortion opponents are seeking to roll back federal government approval of the drug, mifepristone. The Biden administration and drug maker Danco Laboratories want the high court to reject limits on the drug’s use. In an order last Friday, the Supreme Court put restrictions on hold through today to consider an emergency appeal.