- Europe’s Natural-Gas Buyers Defuse Standoff
- Senior Executives Flee Russian Oil Giant Rosneft
- Canada to Ban 5G Equipment From China’s Huawei, ZTE
- China’s Central Bank Makes Unexpected Rate Cut
- The Inflation Japan Wanted
- Lower Deficits Offer Inflation Relief
- Cracks in US Economy Start to Show
- Recession Trade Is On as Market Pain Spreads Beyond Tech
- Stocks Have Been Falling. I’m Still Buying Steadily.
- Global Bond Funds Post Biggest Weekly Outflow
- Melvin Investors Irate Over Hedge Fund’s Shutdown
- Musk’s ESG Attack Spotlights
- Shows Risk of US Industry Concentration
- Kohl’s Sales Process Is A ‘Disaster’
- World’s Most Expensive Car for $142 Million
While stocks are trying to grab back some gains this morning, the S&P 500 fell even closer to a bear market on Thursday, now down 18.6% from its record closing high set in early January. If things turn around again this session, there is a good chance the benchmark could fall into bear territory for the first time since 2007 (barring the month-long freakout that occurred in March 2020). However, this time around, a small group of names account for much of the decline, prompting some discussion in the investing community about their influence and power.
Trillions in value erased: Only eight companies (of the 500 in the index) are responsible for nearly half of the weighted benchmark's year-to-date losses. Declines at Netflix (NFLX) have reached 70%, Meta (FB) and Nvidia (NVDA) are each down 43%, while Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) and Tesla (TSLA) have fallen between 23% and 36% YTD. Under a theoretical model, if S&P Dow Jones Indices (SPGI) (CME) designed an equal weighting to the entire S&P 500, the index would only be down 13% in 2022 (but investors would also not have experienced the massive gains they notched in previous years).
"They're taking a huge chunk out of the S&P return," noted Anne Wickland, senior analyst at Easterly Investment Partners. "It's really lopsided because of how many of those big names make up the top part of the S&P 500."
Outlook: Some say it's too early to call the end of Big Tech dominance, but value and energy stocks like Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP) have been supporting the S&P 500 this year. Commodities and related shares are being used as an inflation hedge, especially as Russia's war in Ukraine exacerbates energy prices globally. Dip buyers should also be on watch, according to Tony Roth, chief investment officer at Wilmington Trust, who feels Big Tech will continue to "provide the infrastructure or the backbone for the digital economy and do really well for many, many years going forward." (5 comments)
Besides running Tesla (NASDAQ:TSLA), SpaceX (SPACE), The Boring Company and Neuralink, as well as trying/not trying to take over Twitter (NYSE:TWTR), Elon Musk has another thing to deal with. Insider has reported that SpaceX shelled out $250,000 in severance to a flight attendant who had accused the billionaire of sexual misconduct. The alleged incident occurred in Musk's room aboard a SpaceX jet in late 2016 during an in-flight, full-body massage that is apparently not unusual among company executives.
The reports: In addition to exposing himself, Musk allegedly rubbed the flight attendant's thigh and offered to buy her a horse if she would "do more" during the in-flight massage. She rejected his proposition and went on to file a complaint with SpaceX's human resources department in 2018, claiming her career opportunities had been hurt by her refusal and she was being retaliated against when her shifts were cut back. SpaceX took the issue to a mediator, and the woman signed a restrictive non-disclosure and non-disparagement clause that included a promise to never discuss the severance payment or divulge any information of any kind about Musk and his businesses.
Insider said it contacted Musk for comment, but he emailed back to ask for more time to respond, saying there was "a lot more to this story." "If I were inclined to engage in sexual harassment, this is unlikely to be the first time in my entire 30-year career that it comes to light," he wrote, calling the story a "politically motivated hit piece." The account was leaked by the flight attendant's friend, who felt that "remaining silent would make her complicit."
Response via Twitter: "For the record, those wild accusations are utterly untrue. I have a challenge to this liar who claims their friend saw me "exposed" - describe just one thing, anything at all (scars, tattoos, ...) that isn't known by the public. She won't be able to do so, because it never happened. The attacks against me should be viewed through a political lens - this is their standard (despicable) playbook – but nothing will deter me from fighting for a good future and your right to free speech. Finally, we get to use Elongate as scandal name. It's kinda perfect." (95 comments)
Joining the rest of the Five Eyes intelligence-sharing network, Canada is banning China's Huawei Technologies and ZTE Corp (OTCPK:ZTCOY) from providing 5G (and even 4G) services in the country. Providers who have already installed the gear will also be required to remove it without compensation or reimbursement. With regards to deadlines, 5G machinery must be taken out by June 2024, while companies using related 4G equipment must clear them from their networks by the end of 2027.
Snapshot: The decision follows a nearly four-year national security review, prompted by the U.S. due to espionage concerns. Washington has cited fears over the potential use of 5G equipment as a backdoor for spying by the Chinese government, even warning allies it would limit intelligence sharing with countries that use Huawei equipment. "This is very much in line with what our allies have been doing in order to protect a critical piece of infrastructure," said François-Philippe Champagne, Canada's Minister of Innovation, Science and Industry.
Fearing an eventual ban, Bell Canada (NYSE:BCE) and Telus (NYSE:TU), two of the nation's largest wireless players, had already started to exclude Huawei from their network buildouts, opting for alternative gear from Sweden's Ericsson (NASDAQ:ERIC) and Finland's Nokia (NYSE:NOK). The Chinese embassy in Canada was quick to slam the announcement, calling it politically motivated and a violation of the principles of free trade and market economies. "China will take all necessary measures to protect the interests of Chinese companies," according to a spokesperson.
Go deeper: Huawei has sold over $700M worth of telecommunications equipment to Canada since the security review was first initiated in 2018. The firm has also "diversified its network by spending $300M/year on Canadian R&D and by selling consumer products, so this so-called 5G ban only targets one small and declining aspect of our business in Canada," said company executive Alykhan Velshi. "While we are disappointed by the decision, Huawei will still be part of Canada's telecommunications network, and even 5G, because of the software that we are currently in the process of deploying with our partners." (7 comments)
Western food diplomacy was one of the first things that flourished in Russia after the Iron Curtain fell in 1989. In fact, the opening of the first McDonald's (MCD) in Moscow's Pushkin Square the following year came to "symbolize the entire opening of the USSR to the West," according to Marc Carena, former managing director of the company's Russian operations. The fast food giant went on to plow millions of dollars into the country, eventually growing into a network of 850 restaurants and 62,000 employees.
Update: That's all coming to an end. Mickey D's is selling its entire Russian restaurant portfolio to Alexander Govor, who has served as a McDonald's licensee through his firm GiD LLC. Govor has been with the chain since 2015 and helped it expand into remote Siberia, where he currently operates 25 restaurants. Financial terms of the deal weren't disclosed, but McDonald's has said it would take a non-cash charge of up to $1.4B following a sale.
In early March, the Golden Arches temporarily closed all its locations in Russia, but continued to pay staff in the interim, spending about $55M per month on rent and wages for its local employees. While Russian operations only accounted for 3% of McDonald's operating income, they make up 9% of its annual revenues. Mickey D's also owned a large share of its restaurants in Russia (84%) and was the largest taxpayer to Russia in the food industry.
Other sales on the way? Soon after McDonald's suspended operations, other well-known food companies made similar announcements. Starbucks (SBUX) said it would close all of its locations in Russia, while Coca-Cola (KO) and PepsiCo (PEP) (which has even been there since the 1970s) said it was halting most sales there. Yum! Brands (YUM) additionally suspended operations at 70 company-owned KFCs and all 50 franchise-owned Pizza Huts in Russia, while consumer and food giant Unilever (UL) has paused all imports and exports into and out of the country. (28 comments)
In Asia, Japan +1.3%. Hong Kong +3%. China +1.6%. India +2.9%.
In Europe, at midday, London +1.8%. Paris +1.4%. Frankfurt +1.9%.
Futures at 6:20, Dow +1%. S&P +1.2%. Nasdaq +1.6%. Crude -0.1% to $109.75. Gold +0.1% to $1843.30. Bitcoin +3.9% to $30,248.
Ten-year Treasury Yield unchanged at 2.86%
Today's Economic Calendar
10:00 Quarterly Services Report
1:00 PM Baker-Hughes Rig Count