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Why a strong jobs report could shake markets

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Economists and market participants are deeply divided over Friday’s salary report — expected at 8:30 a.m. Eastern time — and what it could mean for the Fed’s rate policy and the likelihood of a recession this year.

The numbers to watch: Economists polled by Bloomberg estimate that employers 225,000 jobs added in June, which would mean a slight cooling of the labor market. But economists have underestimated the strength of job growth in 14 of the past 17 months, including a big miss last month.

The Fed will keep a close eye on wage data. Average hourly wages are expected to have increased month over month, keeping pressure on Fed officials to raise interest rates further in an effort to curb inflation. On Thursday, Lorie Logan, the president of the Dallas Fed, became the last voting member of the tariff committee to say more increments were needed.

The picture on jobs is confusing. There are far fewer job openings than a year ago and the ‘big layoff’ seems to be a thing of the past, signs that wage growth should start to slow down.

Elsewhere, the job market appears to be heating up. On Thursday, data from payroll processor ADP again showed an increase in hiring, particularly in the leisure and hospitality sector. One possible reason: “pleasure inflation,” where restaurants remain full and demand for getaways and vacations is brisk despite rising prices. And so-called JOLTS jobless claims fell to a four-month low, according to data released Thursday by the Labor Department.

Those numbers suggest a large number on Friday. Jeffrey Roach, chief economist at LPL Financial, wrote in a note to investors on Thursday that signs pointed to “another healthy jobs report.”

Wall Street appears to be bracing for bad news. The futures market had priced in a 0.25 percentage point increase this morning at the Fed’s rate-setting meeting this month, raising the likelihood of a second hike in September. Stocks and bonds fell on Thursday after the ADP numbers were released, as investors worried that further steps from the Fed could hurt economic growth.

The Fed’s own economists predict a mild recession by the fourth quarter. But that call could also change depending on Friday’s job numbers. “Given the continued strong labor market situation and the resilience of consumer spending, staff saw the possibility that the economy could continue to grow slowly and avoid a downturn that is almost as likely as the baseline of a mild recession,” the statement said. declaration. minutes from the Fed’s most recent rate-setting meeting said.

Samsung is issuing a profit warning as demand for chips slumps. The Korean tech giant estimated its second-quarter earnings down 96 percent year on year, as a global slump in computer and smartphone sales continued to undercut demand for memory chips. It is a sign that the recent boom in AI-related spending has failed to overcome other weaknesses in the semiconductor market.

Beijing is reportedly planning to end the crackdown on Ant Group. Chinese regulators will prima Ant, the Alibaba-affiliated fintech giant, at least $1.1 billion, one of the largest fines for an Internet company in that country, according to Reuters. That is expected to conclude a years-long investigation into Ant after government officials blocked the company’s plans to go public.

Ford reports strong sales. New vehicle purchases rose 10 percent in the April quarter as truck demand picked up again. But shares of Ford fell Thursday as sales of electric cars fell over the same period, underperforming its biggest rival, Tesla. Analysts generally see car sales growing year over year, but the pace is still well below pre-pandemic levels.

Food delivery giants complain about new minimum wage rule in New York City. DoorDash, Grubhub and Uber state that the law states that drivers are required paid at least $18 an hour, would unfairly harm their industry and lead to higher prices for consumers. The regulation, which takes effect on July 12, has drawn support and opposition from drivers themselves.

The fight between Elon Musk and Mark Zuckerberg came to a head on Thursday, when Twitter threatened to sue Meta for stealing trade secrets to build its rival messaging platform Threads.

But some thought the legal accusation, which contained few details, was a sign that Twitter was upset by the new platform’s roaring success: Threads was downloaded more than 30 million times within a day of its release, the fastest rate for any app in history.

Twitter accused Meta of using its former employees to build the new company. Alex Spiro, a lawyer for the company and longtime counsel for Mr. Musk, sent a letter to Meta on Wednesday accusing him of intellectual property theft, hiring former employees to access confidential information and scraping Twitter accounts. information in violation of the terms of the company. employ. The letter was first reported by Semaphore.

“Competition is fine, cheating is not” Musk said on Thursday. Meanwhile, Linda Yaccarino, Twitter’s new CEO, downplayed the new competition. “We are often imitated, but the Twitter community can never be duplicated,” she says tweeted.

Mr. Zuckerberg was not too upset. “This is as good a start as we could have hoped for!” he wrote on Threads. Investors agreed: Meta’s stock flirted with a 52-week high on Thursday. Andy Stone, a Meta spokesperson, said on Threads that there were no former Twitter engineers working on the new platform.

Intellectual property lawsuits are Ordinary between major technology companies, especially given the frequent movement of workers between them. But to win, companies must meet a high bar and prove that a “trade secret” that provides a real competitive advantage has been stolen. More often, the two parties come to a settlement through a settlement mediation.

It is not clear what Twitter is actual are accusations. The letter is vague about which trade secrets were stolen and doesn’t say the employees breached confidentiality, only that they have “ongoing obligations” to the company.

“If I wrote a letter like this and knew they were covered by an express confidentiality agreement, I would say so,” Sharon Sandeen, a law professor who specializes in trade secrets at the Mitchell Hamline School of Law, told DealBook .

Orly Lobel, a law professor at the University of San Diego, added: “The idea of ​​a social media platform with short news/updates is no secret – and I don’t see much that could be secret about the format and the use of the platform.”

During a four-day visit to China, Treasury Secretary Janet Yellen faces a high wire: a crackdown on China’s often aggressive attempts to grow as she tries to moderate tensions between the two countries. Within the Biden administration, she is known for advocating less belligerent stances on China, including when it comes to restrictions on exports and investment.

But in some of her first public remarks of the trip, Ms Yellen took an unusually aggressive stance, opposing what she said were China’s unfair attacks on companies with foreign links, writes Alan Rappeport of The Times:

“In meetings with my colleagues, I communicate the concerns I’ve heard from corporate America — including China’s use of non-market tools such as extensive subsidies for its state-owned and domestic companies, as well as barriers to market entry for foreign firms,” ​​Ms. Yellen said at a press conference. roundtable discussion against members of the American Chamber of Commerce in China. “I am particularly troubled by the punitive measures taken against American companies in recent months.” Those in attendance included representatives from Boeing, Bank of America and agricultural giant Cargill.

Ms Yellen said those actions, along with new Chinese measures restrict exports of some semiconductor-related minerals, justified the Biden administration’s efforts to build non-Chinese supply chains.

Six years ago, BlackRock’s Larry Fink dismissed Bitcoin as “an index of money laundering.” Now Fink, the CEO of the world’s largest asset manager, drives Bitcoin prices hit 13-month high, as BlackRock joins a long line of companies seeking SEC approval for a Bitcoin-bound exchange traded fund. Such a fund allows individual investors to bet on the price of Bitcoin through the stock market.

But it’s unclear that even Mr. Fink, one of Wall Street’s most influential leaders, will succeed where dozens of smaller crypto players have failed.

BlackRock aims for the holy grail of crypto, a spot Bitcoin ETF The SEC has approved Bitcoin futures ETFs, which, because they fall under the scope of the regulated CME commodity exchange, are considered less susceptible to fraud.

But the agency has repeatedly rejected applications for such ETFs. One of the concerns is that such funds – which would directly hold Bitcoin – could be more subject to market manipulation.

Fink’s company is trying to address those concerns. BlackRock’s application contains a supervision sharing agreement with Nasdaq and the crypto exchange Coinbase which aims to prevent fraud and manipulation of the ETF. The measure has since been adopted by other fund managers seeking approval for their own assets.

Michael Sonnenshein, the CEO of the crypto asset management giant Grayscale, told DealBook that BlackRock’s move was encouraging. But he cautioned that the surveillance-sharing proposal is unlikely to be a “silver bullet.”

However, the ultimate fate of these funds may not be up to the SEC. Grayscale sued the agency last year over the rejection of an application to convert its Bitcoin trust into an ETF. The company has argued that the denial was arbitrary as the SEC has approved Bitcoin futures funds; Mr Sonnenshein said he expected a federal appeals court to rule on the matter soon.

Much is at stake, According to Matthew Sigel, the head of digital asset research at wealth management firm VanEck, “Which ETF gets approved first can get a hard-to-conquer edge among investors. (BlackRock declined to comment.)

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